1
EXHIBIT 4.15
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PARTICIPATION AGREEMENT
dated as of April 1, 1995
among
SOUTHWEST AIRLINES CO.,
Lessee,
FORD MOTOR CREDIT COMPANY,
Owner Participant,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
Original Loan Participant,
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only
as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
__________________________
One Boeing Model ▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ TRUST N397SW
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TABLE OF CONTENTS
Page
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SECTION 1. Certain Definitions; Participations in Lessor's Cost of the Aircraft . . . . . . . . . . . . 2
SECTION 2. Lessee's Notice of Delivery Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee . . . . . . . . . . . . . . . . . . . 6
SECTION 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Conditions Precedent to the Participations in the Aircraft . . . . . . . . . . . . . . 6
(i) Notice; Delivery Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(ii) No Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(iii) Original Loan Participant's Commitment . . . . . . . . . . . . . . . . . . . 7
(iv) Owner Participant's Commitment . . . . . . . . . . . . . . . . . . . . . . . 7
(v) Authorization, Execution and Delivery of Documents . . . . . . . . . . . . . 7
(vi) UCC-1's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(vii) Proof of Corporate Action, Etc . . . . . . . . . . . . . . . . . . . . . . . 8
(viii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ix) Title, Registration, Airworthiness, Etc. . . . . . . . . . . . . . . . . . . 10
(x) Representations and Warranties Accurate; No Event of
Default; No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xi) Opinions of Lessee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 11
(xii) Opinion of Manufacturer's Counsel . . . . . . . . . . . . . . . . . . . . . . 11
(xiii) Opinion of Owner Trustee's Counsel . . . . . . . . . . . . . . . . . . . . . 11
(xiv) Opinions of Owner Participant's Counsel . . . . . . . . . . . . . . . . . . . 11
(xv) Opinion of Oklahoma City Counsel . . . . . . . . . . . . . . . . . . . . . . 11
(xvi) Opinion of Indenture Trustee's Counsel . . . . . . . . . . . . . . . . . . . 11
(xvii) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xviii) Lessee's Bringdown Certificate . . . . . . . . . . . . . . . . . . . . . . . 11
(xix) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxi) Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxii) No Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxiii) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxiv) Bringdown of Other Parties' Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxv) Opinion of Owner Participant's Tax Counsel . . . . . . . . . . . . . . . . . 12
(xxvi) No Tax Law Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxvii) Copy of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(xxviii) Withholding Tax Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Conditions Precedent to the Obligations of Lessee . . . . . . . . . . . . . . . . . . 13
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SECTION 5. Confidentiality of Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6. Extent of Interest of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7. Lessee's Representations and Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . 15
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Organization, Citizenship, Etc. . . . . . . . . . . . . . . . . . . . . . . . 15
(ii) Corporate Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 16
(iii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(iv) Valid Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(v) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(vi) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(vii) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(viii) Registration and Recordation . . . . . . . . . . . . . . . . . . . . . . . . 17
(ix) Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(x) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xi) No Misstatement or Omission . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xii) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xiii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xiv) Effective Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xv) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xvii) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xviii) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xix) No Federal Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xx) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(iii) Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(iv) Notice and Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(v) Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(iii) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(iv) Right to Defend; Subrogation; Fees and Expenses of
Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Owner Participant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Interest on Overdue Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(g) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8. Other Representations, Warranties, Covenants and Indemnities . . . . . . . . . . . . . . . . 30
(a) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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(c) Chief Executive Office of SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(f) Owner Participant's Representations and Warranties . . . . . . . . . . . . . . . . . . 31
(g) Lessor Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Indenture Trustee Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(i) Termination Instructions to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . 33
(j) Excess Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(k) Representations and Warranties of Indenture Trustee in Individual
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(l) Transfers of Equity Interests; Rights of Owner Participant and
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(m) Obligations of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(n) Compliance with Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(o) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(p) SBC's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 36
(q) Owner Participant's Lease Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(r) Lessee's Assumption of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(s) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(t) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(u) Lease Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(v) Revocation of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(w) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(x) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(y) Discharge of Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(z) Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(aa) Assumption on Exercise of Purchase Option With Installments. . . . . . . . . . . . . . 41
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(cc) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(dd) Deferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(ee) Lessee as Pricing Agent for Certificate . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9. Payments to Lessee of Trust Indenture Monies . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 10. Other Documents; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 11. Certain Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(c) FAA Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(e) Engine Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(f) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(g) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(h) Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(i) No Certificate Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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SECTION 12. Ownership of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 13. Notices; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 14. Change of Situs of Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(a) Consents under Lease and Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . 50
(b) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(c) Counterparts; Waivers; Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 50
(d) No Recourse Against Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(e) Duties Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(f) Binding on Parties and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(g) Enforceability Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(h) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 16. Transaction Costs; Invoices and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 51
SECTION 17. Optional Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 18. Interim Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 19. Section 1110 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
SCHEDULE III
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of April 1, 1995 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) FORD MOTOR CREDIT COMPANY, a Delaware corporation (the "Owner
Participant"), (iii) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association (the "Original Loan Participant"), (iv) SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, in its
individual capacity, only as expressly provided herein (in such capacity,
"SBC") and otherwise, solely as Owner Trustee under the Trust Agreement (in
such capacity, the "Owner Trustee"), and (v) WILMINGTON TRUST COMPANY, a
Delaware banking corporation, in its individual capacity and as Indenture
Trustee under the Trust Indenture (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (such capitalized
term and other capitalized terms used herein without definition being defined
in Section 1 hereof) between Lessee and the Manufacturer, the Manufacturer has
agreed to sell to Lessee, among other things, certain Boeing Model 737-3H4
aircraft, one of which, having U.S. Registration No. N397SW and Manufacturer's
serial number 27691, has been recently purchased by Lessee and is the subject
of this Agreement; and
WHEREAS, immediately prior to the execution and delivery of
this Agreement, the Owner Participant and the Owner Trustee have entered into
the Trust Agreement pursuant to which the Owner Trustee has agreed, among other
things, to hold the Trust Estate defined in Section 1.01 thereof (the "Trust
Estate") for the use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
(i) Lessee and the Owner Trustee are
entering into the Purchase Agreement Assignment whereby Lessee agrees
to assign to the Owner Trustee certain rights and interests of Lessee
under the Purchase Agreement with respect to the Aircraft; and
(ii) the Manufacturer has executed the
Manufacturer's Consent with respect to the Purchase Agreement
Assignment; and
WHEREAS, the Indenture Trustee and the Owner Trustee
concurrently with the execution and delivery of this Agreement are entering
into the Trust Indenture pursuant to which the Owner Trustee agrees, among
other things, to issue one or more Certificates as evidence of the Owner
Trustee's indebtedness to the Holders, which Certificates are to be secured by
the mortgage and security interest in, among other things, the Aircraft created
PARTICIPATION AGREEMENT [N397SW]
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pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
WHEREAS, as described in Section 2 hereof, concurrently with
the execution and delivery of this Agreement, the Owner Trustee and Lessee are
entering into the Lease whereby, subject to the terms and conditions set forth
therein, the Owner Trustee agrees to purchase the Aircraft from Lessee and to
lease the same back to Lessee, and Lessee agrees to sell the Aircraft to the
Owner Trustee and to lease the same back from the Owner Trustee;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft. (a) The terms "Lessee," "Owner Participant,"
"Original Loan Participant," "SBC," "Owner Trustee" and "Indenture Trustee"
shall have the further meanings attributed thereto in the Sale and Lease
Agreement dated as of the date hereof (the "Lease") between the Owner Trustee
and Lessee relating to the Aircraft referred to in the first recital herein,
and, except as otherwise defined in this Agreement, terms used herein in
capitalized form shall have the meanings attributed thereto in the Lease or, if
not defined therein, in the Trust Indenture. The term "Trust Supplement" has
the meaning attributed to the term "Indenture and Trust Supplement" in the
Lease and to the term "Trust Supplement" in the Trust Indenture. Unless the
context otherwise requires, any reference herein to any of the Operative
Agreements refers to such document as it may be amended from time to time in
accordance with its terms and the terms of each other agreement restricting the
amendment thereof. All rules of construction referred to in Section 1 of the
Lease shall apply to this Agreement likewise.
(b) Subject to the terms and conditions of this Agreement
(including Section 4), (i) the Original Loan Participant agrees to finance, in
part, the Owner Trustee's payment of Lessor's Cost for the Aircraft by making a
secured loan to the Owner Trustee (herein called the "Loan") on a date to be
designated pursuant to Section 2 hereof, in the amount in Dollars equal to the
lesser of (x) the percentage of Lessor's Cost and (y) the actual Dollar amount
set forth opposite its name on Schedule II hereto and (ii) the Owner
Participant hereby agrees, in connection with its equity investment in the
beneficial ownership of the Aircraft and the sale of the Aircraft by Lessee to
the Owner Trustee pursuant to the Lessee FAA ▇▇▇▇ of Sale and Lessee Warranty
▇▇▇▇ of Sale, as contemplated hereby, to make its equity investment in the
beneficial ownership of the Aircraft on a date to be designated pursuant to
Section 2 hereof, in an amount in Dollars equal to the lesser of (x) the
percentage of Lessor's Cost and (y) the actual Dollar amount set forth opposite
its name on Schedule II hereto. In the case of the Owner Participant, the
amount of such equity investment to be made as provided above in the payment of
Lessor's Cost and, in the case of the Original Loan Participant, the aggregate
principal amount of the Series SWA 1995 Trust N397SW-I Certificate to be
simultaneously issued to it, is hereinafter called such Participant's
"Commitment" for the Aircraft. In case either Participant shall default in its
obligation to make the amount of its Commitment available pursuant to Section 2
hereof in respect of the Aircraft, the other Participant shall have no
obligation to make any portion of such amount available or to increase
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the amount of its Commitment and the obligation of the nondefaulting
Participant shall remain subject to the terms and conditions set forth in this
Agreement.
(c) In the event that either Participant shall for any
reason fail or refuse to make the full amount of its Commitment available to
the Owner Trustee in accordance with the terms of paragraph (b) of this Section
1 (such Participant, for the purpose of this Agreement, being called a
"Defaulting Participant"), the Owner Trustee shall give, at the earliest
practicable time (which may be the next Business Day), each party hereto
telephonic notice (to be confirmed promptly in writing) of such failure or
refusal and any funds received by the Owner Trustee in connection with the
Aircraft will be held in accordance with the terms of, and for the period
provided in, paragraph (b) of Section 2. In such event the Defaulting
Participant will have no further right to participate in, or make a loan for,
as the case may be, the payment of Lessor's Cost for the Aircraft. Lessee
shall have the right to designate a financial institution (which term, as used
in this paragraph (c), shall mean any banking or financial institution,
institutional investor or fund which is not affiliated with Lessee or with
Owner Participant) to be substituted for the Defaulting Participant; provided,
however, that (i) such substituted financial institution shall sign and deliver
an amendment to this Agreement, in form and substance satisfactory to the Owner
Trustee, the Indenture Trustee and the remaining Participant (other than the
Defaulting Participant), whereby such financial institution agrees to be a
party to this Agreement, to be bound by all the terms hereof and to undertake
all the obligations of the Defaulting Participant contained herein, other than
obligations, if any, arising from the aforesaid failure or refusal by such
Defaulting Participant, (ii) if the Defaulting Participant is Owner Participant
(A) such substituted financial institution shall have been approved by all
Original Loan Participants, (B) each such substituted financial institution
shall be domiciled in the United States and shall be a citizen of the United
States within the meaning of the Act and shall have the requisite power and
authority to enter into and carry out the transactions contemplated by this
Agreement and the Trust Agreement, (C) such substituted financial institution
shall enter into amendments to the Trust Agreement, in form and substance
satisfactory to the Owner Trustee, the Indenture Trustee and the Original Loan
Participants, whereby such substituted financial institution agrees to be a
party to the Trust Agreement, to be bound by all the terms thereof and to
undertake all the obligations of the Defaulting Participant contained therein,
and (D) the substitution of such substituted financial institution as above
provided shall not violate any provisions of the Act or the regulations
promulgated thereunder, or create a relationship which would be in violation
thereof and such substituted financial institution shall so represent in
writing to each other party hereto, and (iii) if the Defaulting Participant is
an Original Loan Participant, such substituted financial institution shall be
approved in writing by Owner Participant and the Agent. No action by Lessee in
finding a financial institution to be substituted as above provided shall be
deemed to constitute a waiver or release of any right which Lessee may have
against the Defaulting Participant. Each financial institution substituted for
an Original Loan Participant pursuant to this paragraph (c) shall be deemed an
Original Loan Participant for all purposes of this Agreement and the other
Operative Agreements; and each financial institution substituted for the Owner
Participant pursuant to this paragraph (c) shall (collectively, if more than
one) be deemed the Owner Participant for all purposes of this Agreement and the
other Operative Agreements.
PARTICIPATION AGREEMENT [N397SW]
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SECTION 2. Lessee's Notice of Delivery Date. (a)
Lessee agrees to give the Owner Participant, the Owner Trustee, the Original
Loan Participant and the Indenture Trustee at least three (3) Business Days'
written notice of the Delivery Date for the Aircraft, which Delivery Date shall
be a Business Day not later than April 30, 1995. As to each Participant, the
making of its Commitment for such Aircraft available in the manner required by
this Section 2 shall constitute a waiver of such notice. The Owner Trustee and
the Indenture Trustee shall be deemed to have waived such notice if the Owner
Trustee shall have received from the Owner Participant funds in the full amount
of the Owner Participant's Commitment and the proceeds of the sale of the
Series SWA 1995 Trust N397SW-I Certificate in the full amount of the Original
Loan Participant's Commitment.
Subject to the terms and conditions of this Agreement
(including Section 4), and simultaneously with receipt by the parties hereto of
all amounts to be paid to them on the Delivery Date pursuant to this Section 2,
(x) Lessee shall transfer title to and deliver the Aircraft to the Owner
Trustee, the Owner Trustee shall purchase and take title to, and accept
delivery of, the Aircraft, the Owner Trustee shall lease the Aircraft to Lessee
and Lessee shall lease the Aircraft from the Owner Trustee, it being understood
that the transactions described in this Section 2 shall be simultaneous and
mutually dependent and (y) the Owner Trustee shall issue and the Indenture
Trustee shall authenticate the Series SWA 1995 Trust N397SW-I Certificate which
shall be delivered simultaneously to the Original Loan Participant. On the
Delivery Date, subject to the terms and conditions of this Agreement, and in
consideration for the transfer of title to the Aircraft to the Owner Trustee,
the Owner Trustee shall pay over the funds made available to it pursuant to the
succeeding paragraph to Lessee in an aggregate amount equal to Lessor's Cost to
Lessee's Account No. ▇▇▇▇▇▇▇▇ at Bank One, Dallas, N.A., ABA No. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇.
Subject to the terms and conditions of this Agreement
(including Section 4), the Original Loan Participant and the Owner Participant
each agree to make its Commitment available to Shawmut Bank Connecticut,
National Association, Hartford, Connecticut, Account No. 0067548290, ABA No.
▇▇▇-▇▇▇-▇▇▇, Reference: Southwest Airlines 1995 Trust N397SW, at or before
10:00 a.m. Dallas time, on the Delivery Date specified in Lessee's notice
referred to in the first paragraph of this Section 2 (such specified Delivery
Date, or the date on which the Commitments are made available as a waiver of
such notice, being herein called the "Scheduled Delivery Date").
(b) If for any reason whatsoever the closing of the
transactions contemplated hereby is not consummated on the Scheduled Delivery
Date, Lessee may by telephonic notice given by 4:30 p.m., New York City time,
on the Scheduled Delivery Date to each Participant, the Owner Trustee and the
Indenture Trustee designate a delayed date for such closing (the "Delayed
Delivery Date"), not later than the fifth Business Day after the Scheduled
Delivery Date and in no event later than April 30, 1995. In the event that no
Delayed Delivery Date is designated or, if designated, such closing does not
occur on the Delayed Delivery Date, or if any Participant shall so request,
such funds of each Participant shall be promptly returned to it by the Owner
Trustee or the Indenture Trustee, as the case may be.
PARTICIPATION AGREEMENT [N397SW]
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If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest on such funds at the Applicable Rate (as defined below) on the amount
made available for the period from and including the Scheduled Delivery Date to
but excluding the Delayed Delivery Date, or, as the case may be, to but
excluding the Business Day on which such Participant's funds are returned if
such return is made by 10:00 a.m. (New York City time) or to but excluding the
next following Business Day if such return is not made by such time and, in the
case of the Original Loan Participant, for the Break Amount, if any, applicable
to the Series SWA 1995 Trust N397SW-I Certificate.
"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Original
Loan Participant, the rate per annum borne by the Series SWA 1995 Trust
N397SW-I Certificate in respect of which such Original Loan Participant's
Commitment is made available. "Federal Funds Effective Rate" means, for any
period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for the day of such
transactions received by the Owner Participant from three federal funds brokers
of recognized standing selected by it; provided, that, subject to the
foregoing, the "Federal Funds Effective Rate" for any non-Business Day shall be
the "Federal Funds Effective Rate" for the previous Business Day.
SBC agrees that in the event it has received telephonic notice
(to be confirmed promptly in writing) from Lessee on the Scheduled Delivery
Date that the closing of the transactions contemplated hereby will not be
consummated on the Scheduled Delivery Date, it will, if instructed in the
notice from Lessee in regard to the funds received by it from the Participants,
use reasonable efforts to invest, at the risk, expense and direction of Lessee,
the funds received by it from the Participants in marketable direct obligations
of the United States of America or obligations of any of its agencies that are
guaranteed as to principal and interest by the United States of America, in any
such case having a stated maturity not later than 91 days from the date of
acquisition. Any such investment may be made through a repurchase agreement in
commercially reasonable form with SBC or a bank or other financial institution
having capital, surplus and undivided profits of at least $100,000,000;
provided, that title to the underlying obligations shall pass to SBC and that
such underlying securities shall be segregated in a custodial or trust account
of or for the benefit of the Owner Trustee. Any such obligations purchased by
SBC, whether directly or through a repurchase agreement, shall be held in trust
by SBC (but not as part of the Trust Estate or Trust Indenture Estate) for the
benefit of the respective Participants. Lessee shall, on the Delayed Delivery
Date or the date the funds furnished by the Participants are required to be
returned to the Participants, as the case may be, reimburse SBC for the benefit
of the respective Participant, for any losses incurred on such investments.
PARTICIPATION AGREEMENT [N397SW]
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All income and profits on the investment of such funds not in
excess of the Applicable Rate shall be for the respective accounts of the
Participants (such income and profits to be credited against Lessee's
obligation to reimburse the Participants for the loss of use of funds made
available to SBC) and all other income and profits and all losses on the
investment of such funds shall be for the account of Lessee; and SBC shall not
be liable for failure to invest such funds or for any losses incurred on such
investments except for its own willful misconduct or negligence. Any failure
by SBC to invest such funds shall not affect Lessee's obligations hereunder
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee. Subject to the terms and conditions of this Agreement, the
Owner Trustee, upon its receipt in full of the Owner Participant's and the
Original Loan Participant's Commitment for the Aircraft, as provided in Section
2 hereof, together with written instructions from such Participant or its
special counsel to release such funds to Lessee, shall transfer such funds to
Lessee and the Owner Trustee shall purchase the Aircraft from Lessee and lease
the Aircraft to Lessee and such action shall constitute, without further act,
authorization and direction by the Owner Participant to the Owner Trustee:
(a) to pay to Lessee (on behalf of the Owner Trustee) the
Lessor's Cost in the manner set forth in Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;
(c) to accept from Lessee the Lessee Warranty ▇▇▇▇ of
Sale and the Lessee FAA ▇▇▇▇ of Sale and the invoice with respect to the
Aircraft;
(d) to execute an aircraft registration application, a
Lease Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow the Loan from the Holders to finance a
portion of Lessor's Cost and to issue to the Original Loan Participant a Series
SWA 1995 Trust N397SW-I Certificate in a principal amount equal to the amount
borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be
taken by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
SECTION 4. Conditions. (a) Conditions
Precedent to the Participations in the Aircraft. It is agreed that the
respective obligations of the Participants to participate in the payments of
Lessor's Cost and the other transactions contemplated hereby are subject to the
satisfaction prior to or on the Delivery Date of the following conditions
precedent, except that paragraphs (iii), (xx), (xxiv) (insofar as it relates to
the Original Loan Participant), (xxv) and (xxvi) shall not be a condition
precedent to the obligation of the Original Loan Participant, and paragraphs
(iv), (x)(B) (insofar as it relates to an Indenture Event of Default
attributable to the
PARTICIPATION AGREEMENT [N397SW]
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Owner Participant), (xiv), (xxiv) (insofar as it relates to representations of
the Owner Participant) and (xxvii) shall not be a condition precedent to the
obligation of the Owner Participant:
(i) Notice; Delivery Date. Each Participant
shall have received due notice with respect to such participation
pursuant to Section 2 hereof (or shall have waived such notice either
in writing or as otherwise provided in Section 2). The Delivery Date
shall have occurred on or before April 30, 1995.
(ii) No Change in Law. No change shall have
occurred after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the
Original Loan Participant, as the case may be, would make it a
violation of law or regulations for (x) Lessee, the Indenture Trustee,
any Participant or the Owner Trustee to execute, deliver and perform
the Operative Agreements to which any of them is, or is to become, a
party or (y) the Original Loan Participant or the Owner Participant to
make its Commitment available or, in the case of the Original Loan
Participant, to acquire the Series SWA 1995 Trust N397SW-I Certificate
or to realize the benefits of the security afforded by the Trust
Indenture.
(iii) Original Loan Participant's Commitment.
In the case of the Owner Participant, the Original Loan Participant
shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(iv) Owner Participant's Commitment. In the
case of the Original Loan Participant, the Owner Participant shall
have made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(v) Authorization, Execution and Delivery of
Documents. The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto,
shall each be satisfactory in form and substance to the Participants
and shall be in full force and effect and executed counterparts shall
have been delivered to each Participant and its respective counsel;
provided, that only the Original Loan Participant shall receive an
executed original of the Series SWA 1995 Trust N397SW-I Certificate,
only the Indenture Trustee, acting on behalf of the Holders, shall
receive the original counterpart of the Lease and the initial Lease
Supplement, and only Lessee and the Owner Participant shall receive
copies of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering
the Aircraft and dated the Delivery Date;
(3) the Tax Indemnity Agreement;
PARTICIPATION AGREEMENT [N397SW]
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(4) the Trust Agreement;
(5) a Trust Supplement covering
the Aircraft and dated the Delivery Date;
(6) the Bills of Sale and an
invoice from Lessee specifying the Lessor's Cost and dated the
Delivery Date;
(7) the Purchase Agreement
Assignment;
(8) an acceptance certificate
covering the Aircraft in the form agreed to by the
Participants and Lessee (the "Acceptance Certificate") duly
completed and executed by the Owner Trustee or its agent,
which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
(10) the Series SWA 1995 Trust
N397SW-I Certificate; and
(11) the Manufacturer's Consent.
(vi) UCC-1's. Uniform Commercial Code
financing statement or statements covering all of the security
interests created by or pursuant to the Granting Clause of the Trust
Indenture and precautionary Uniform Commercial Code financing
statement or statements with respect to the Lease shall have been
executed and delivered, and all such financing statement or statements
shall have been duly filed in all places necessary or advisable, and
any additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Original Loan Participant
shall have been executed and delivered by Lessee, the Indenture
Trustee or the Owner Trustee and duly filed.
(vii) Proof of Corporate Action, Etc. Each
Participant and the Indenture Trustee shall have received the
following, in each case in form and substance satisfactory to it:
(1) a certified copy of the
Restated Articles of Incorporation and Bylaws of Lessee and a
copy of resolutions of the board of directors of Lessee or the
executive committee thereof, certified by the Secretary or an
Assistant Secretary of Lessee, duly authorizing the execution,
delivery and performance by Lessee of this Agreement, the
Lease, the Purchase Agreement Assignment, the Lessee Warranty
▇▇▇▇ of Sale, the Lessee FAA ▇▇▇▇ of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with
the provisions hereof and thereof;
PARTICIPATION AGREEMENT [N397SW]
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(2) such other documents and
evidence with respect to Lessee, the Manufacturer, the Owner
Trustee, the Indenture Trustee and the Participants, as the
Original Loan Participant or the Owner Participant, or their
respective counsel, may reasonably request in order to
establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the
compliance with the conditions herein set forth;
(3) a certificate of Lessee as
to the person or persons authorized to execute and deliver
this Agreement, the other Lessee Documents, and any other
documents to be executed on behalf of Lessee in connection
with the transactions contemplated hereby and as to the
signature of such person or persons;
(4) a copy of the Purchase
Agreement (to the Owner Participant and the Indenture Trustee
only) certified by the Treasurer, the Assistant Treasurer or
an Assistant Secretary of Lessee as being a true and accurate
copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations
or any right in such Agreement assigned by Lessee to the Owner
Trustee pursuant to the Purchase Agreement Assignment; and
(5) a copy of the general
authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of
authorization of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, certified as of the
Delivery Date by the Secretary or an Assistant Secretary of
the Indenture Trustee (in its individual capacity), SBC and
the Owner Participant, respectively, which authorize the
execution, delivery and performance by the Indenture Trustee
(in its individual capacity), SBC and the Owner Participant,
respectively, of all of the Operative Agreements to which it
is a party, together with such other documents and evidence
with respect to the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant as either the
Original Loan Participant (or its counsel) or the Owner
Participant (or its counsel) may reasonably request in order
to establish the consummation of the transactions contemplated
by this Agreement, the taking of all corporate proceedings in
connection therewith and compliance with the conditions herein
set forth; provided, this clause shall not be a condition
precedent as to any Participant as to documents to be provided
by that Participant.
(viii) Governmental Approvals. All appropriate
action required to have been taken by the Federal Aviation
Administration, or any other governmental or political agency,
subdivision or instrumentality of the United States, prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to
be in effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
orders,
PARTICIPATION AGREEMENT [N397SW]
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permits, waivers, authorizations, exemptions and approvals shall be in
full force and effect on the Delivery Date.
(ix) Title, Registration, Airworthiness, Etc.
On the Delivery Date, the following statements shall be true, and the
Participants, the Owner Trustee and the Indenture Trustee shall have
received evidence satisfactory to each of them to the effect that:
(1) the Owner Trustee has good
and marketable title (subject to filing and recording of the
Lessee FAA ▇▇▇▇ of Sale with the Federal Aviation
Administration in accordance with the Act) to the Aircraft,
free and clear of Liens other than the rights of Lessee under
the Lease and Lease Supplement covering the Aircraft, the
mortgage and security interest created by the Trust Indenture,
the rights of the Owner Participant under the Trust Agreement
and the Trust Supplement and Liens permitted by clause (d)
(solely for taxes not yet due) or (e) of Section 6 of the
Lease;
(2) application for registration
of the Aircraft in the name of the Owner Trustee (together
with any required affidavits), the FAA ▇▇▇▇ of Sale and the
Lessee FAA ▇▇▇▇ of Sale have been duly filed with the FAA;
(3) the Trust Agreement, the
Trust Indenture and the Trust Supplement and the Lease and the
Lease Supplement have been duly filed with the FAA for
recordation pursuant to the Act;
(4) each of the Owner Trustee,
as lessor under the Lease, and the Indenture Trustee, as
assignee thereof, is entitled to the protection of Section
1110 of the United States Bankruptcy Code in connection with
its right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor; and
(5) the Aircraft has been duly
certificated by the FAA as to type and airworthiness in
accordance with the terms of the Lease and has a current,
valid U.S. standard certificate of airworthiness issued by the
FAA.
(x) Representations and Warranties Accurate;
No Event of Default; No Adverse Change. On the Delivery Date, (A) the
representations and warranties of Lessee contained in Section 7 hereof
and in the Tax Indemnity Agreement shall be true and accurate as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties shall be true and
accurate on and as of such earlier date), (B) no event shall have
occurred and be continuing, or would result from the purchase, sale,
lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) a
Lease Event of Default or an Indenture Event of Default, and (C) no
material adverse change shall have occurred
PARTICIPATION AGREEMENT [N397SW]
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in the consolidated financial condition of Lessee and its subsidiaries
from that shown in the consolidated financial statements of Lessee and
its subsidiaries as of December 31, 1993.
(xi) Opinions of Lessee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee and the Owner Trustee from ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.,
special counsel to Lessee.
(xii) Opinion of Manufacturer's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee, the Indenture Trustee and Lessee from counsel to the
Manufacturer.
(xiii) Opinion of Owner Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, counsel for the Owner Trustee.
(xiv) Opinions of Owner Participant's Counsel.
The Original Loan Participant shall have received a favorable opinion,
in form and substance satisfactory to it, addressed to the Indenture
Trustee, the Original Loan Participant, the Owner Trustee and Lessee
from (a) White & Case, special New York counsel to the Owner
Participant and (b) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., senior counsel to USL
Capital Corporation, agent for the Owner Participant.
(xv) Opinion of Oklahoma City Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & Peregrin, special counsel in Oklahoma City, Oklahoma.
(xvi) Opinion of Indenture Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee and Lessee from Potter ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel for
the Indenture Trustee.
(xvii) [Intentionally Reserved].
(xviii) Lessee's Bringdown Certificate. Each
Participant and the Indenture Trustee shall have received a
certificate signed by the President, any Vice President, the Treasurer
or the Assistant Treasurer of Lessee, dated the Delivery Date,
certifying as to the fulfillment of all conditions in this Section
4(a) insofar as they relate to Lessee or the Aircraft.
(xix) [Intentionally Reserved].
PARTICIPATION AGREEMENT [N397SW]
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(xx) Appraisal. The Owner Participant shall
have received an opinion, in form and substance reasonably
satisfactory to the Owner Participant, from Aero Economics, Inc.,
independent aircraft appraisers, or such other recognized aircraft
appraiser selected by the Owner Participant, to the effect set forth
in Schedule III hereto and with respect to such other matters as the
Owner Participant shall request.
(xxi) Insurance Certificates. Each
Participant, the Owner Trustee and the Indenture Trustee shall have
received an independent insurance broker's report and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of
the Lease relating to insurance with respect to the Aircraft.
(xxii) No Event of Loss. On the Delivery Date,
it shall be true that no Event of Loss (or event which with the
passage of time would become an Event of Loss) with respect to the
Airframe or any Engine has occurred.
(xxiii) No Proceedings. No action or proceeding
shall have been instituted, nor shall action or proceeding be
threatened before any court or governmental agency, nor shall any
order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency at the time of the Delivery Date to
set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(xxiv) Bringdown of Other Parties'
Representations and Warranties. The respective representations and
warranties of each Participant, the Indenture Trustee and the Owner
Trustee contained in Section 8 hereof shall be true and accurate as of
the Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date), it being
understood and agreed that (a) each Participant shall, by making its
Commitment available as provided in Section 1(b) of this Agreement,
(b) the Indenture Trustee shall, by authenticating the Series SWA 1995
Trust N397SW-I Certificate issued on the Delivery Date, and (c) the
Owner Trustee shall, by accepting the Lessee Warranty ▇▇▇▇ of Sale and
the Lessee FAA ▇▇▇▇ of Sale, be respectively deemed to have reaffirmed
as of the Delivery Date the representations and warranties made by it
(individually or in its trust capacities, as the case may be) in
Section 8 of this Agreement.
(xxv) Opinion of Owner Participant's Tax
Counsel. The Owner Participant shall have received from White & Case,
special counsel to the Owner Participant, a favorable opinion, in form
and substance satisfactory to the Owner Participant, with respect to
income tax aspects of the transactions contemplated by the Operative
Agreements.
(xxvi) No Tax Law Change. In the opinion of
the Owner Participant and its special counsel, there shall have been,
since March 1, 1995, no amendment,
PARTICIPATION AGREEMENT [N397SW]
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modification, addition or change in or to the provisions of the Code
(including for this purpose, any non-Code provisions of legislation
affecting the Code such as transition rules or effective date
provisions), the regulations promulgated under the Code (including
temporary or proposed regulations), Internal Revenue Service Revenue
Procedures or Revenue Rulings, or other administrative
interpretations, applicable judicial precedents or Executive Orders of
the President of the United States which would adversely affect the
accuracy of the Tax Assumptions set forth in Section 2 of the Tax
Indemnity Agreement.
(xxvii) Copy of Appraisal. The Original Loan
Participant shall have received a copy of the opinion referred to in
paragraph (xx) above (without any tax-sensitive provisions) in form
and substance reasonably satisfactory to the Original Loan Participant
to the effect that the fair market value of the Aircraft on the
Delivery Date is at least equal to Lessor's Cost, and that the
assumptions made in reaching such conclusion are fair and reasonable,
but otherwise without regard to the form and substance thereof.
(xxviii) Withholding Tax Forms. If the Original
Loan Participant is required to execute any form or document in order
for payments to it to qualify for exemption from, or reduction of,
withholding tax imposed by the Government, in respect to such
payments, such Original Loan Participant shall have executed such form
or document (including, without limitation, United States Internal
Revenue Forms 1001, W-8 and/or 4224) and delivered it to the Indenture
Trustee and to the Owner Trustee in accordance with applicable
regulations to qualify for such exemption or reduction.
Promptly upon the registration of the Aircraft and the
recording of the Lessee FAA ▇▇▇▇ of Sale, the Lease, the Trust Indenture, the
Trust Agreement, the Lease Supplement and the Trust Supplement covering the
Aircraft pursuant to the Federal Aviation Act, Lessee will request ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, special counsel in Oklahoma City, Oklahoma, to deliver to
the Owner Participant, the Indenture Trustee, the Original Loan Participant,
the Owner Trustee and Lessee an opinion as to the due and valid registration of
the Aircraft in the name of the Owner Trustee, the due recording of the FAA
▇▇▇▇ of Sale, the Lessee FAA ▇▇▇▇ of Sale, the Trust Indenture, the Lease
Supplement, the Trust Supplement, the Lease and the Trust Agreement and the
lack of filing of any intervening documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee.
It is agreed that the obligations of Lessee (A) to participate in the sale of
the Aircraft to the Owner Trustee, (B) to accept delivery of the Aircraft under
the Lease, and (C) to enter into its other Operative Agreements, are all
subject to the fulfillment to the satisfaction of Lessee prior to or on the
Delivery Date of the following conditions precedent:
(i) The conditions specified in Sections
4(a)(iii), 4(a)(iv), 4(a)(viii), 4(a)(xxii), 4(a)(xxiii) and
4(a)(xxviii) hereof shall have been satisfied, unless such
nonsatisfaction is the result of the actions of, or other event
attributable to, Lessee.
PARTICIPATION AGREEMENT [N397SW]
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(ii) Those documents described in Section
4(a)(v) shall have been duly authorized, executed and delivered by the
respective party or parties thereto (other than Lessee) in the manner
specified in Section 4(a)(v), shall each be satisfactory in form and
substance to Lessee, shall be in full force and effect on the Delivery
Date, and an executed counterpart of each thereof (other than the
Series SWA 1995 Trust N397SW-I Certificate) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization
of the Indenture Trustee (in its individual capacity), SBC and the
Owner Participant, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the Indenture
Trustee (in its individual capacity), SBC and the Owner Participant,
respectively, of all the Operative Agreements to which it is a party,
together with such other documents and evidence with respect to the
Indenture Trustee (in its individual capacity), SBC and the Owner
Participant as Lessee or its counsel may reasonably request in order
to establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection
therewith and compliance with the conditions herein set forth.
(iv) The representations and warranties of
each Participant, the Indenture Trustee and the Owner Trustee
contained in Section 8 hereof shall be true and accurate as of the
Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date).
(v) Lessee shall have received the opinions
set forth in Sections 4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv) and
4(a)(xvi), in each case addressed to Lessee and dated the Delivery
Date.
(vi) No change shall have occurred after the
date of the execution and delivery of this Agreement in applicable law
or regulations thereunder or interpretations thereof by appropriate
regulatory or judicial authorities which, in the opinion of Lessee,
would make it a violation of law or regulations for Lessee to execute,
deliver or perform the Operative Agreements to which it is a party.
(vii) In the opinion of Lessee and its
counsel, there shall have been, since March 1, 1995, no amendment,
modification, addition or change in or to the Code (including for this
purpose, any non-Code provisions of legislation affecting the Code
such as transition rules or effective date provisions), the
regulations promulgated under the Code (including temporary or
proposed regulations), Internal Revenue Service Revenue Procedures or
Revenue Rulings, or other administrative interpretations, applicable
judicial precedents or Executive Orders of the President of the United
States which might give rise to an indemnity obligation under any of
the Operative Agreements,
PARTICIPATION AGREEMENT [N397SW]
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or as a result of which any adjustments to the Lease payments are
requested by the Owner Participant which would adversely affect the
accuracy of the Tax Assumptions set forth in Section 2 of the Tax
Indemnity Agreement.
SECTION 5. Confidentiality of Purchase Agreement.
The Owner Trustee, the Participants and the Indenture Trustee shall keep the
Purchase Agreement confidential and shall not disclose the same to any Person,
except (A) to prospective and permitted transferees of the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
interest who agree to hold such information confidential on the same terms as
set forth in this Section 5, (B) to the aforementioned prospective and
permitted transferees', the Owner Trustee's, the Original Loan Participant's,
the Owner Participant's or the Indenture Trustee's counsel or special counsel,
independent insurance brokers or other agents who agree to hold such
information confidential, (C) as may be required by any statute, court or
administrative order or decree or governmental ruling or regulation, including
federal or state banking examiners, tax auditors or taxing authorities, or (D)
as may be necessary or desirable for purposes of protecting the interest of any
such Person or for enforcement of any Operative Agreement by the Owner Trustee,
the Original Loan Participant, the Owner Participant or the Indenture Trustee;
provided, however, that any disclosures of any part of the Purchase Agreement
which are permitted by clause (C) or (D) above shall be made only to the extent
necessary to meet the specific requirements or needs of the Persons to whom
such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Holders. No
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
outstanding principal amount of, Break Amount, if any, Premium, if any, and
interest on all Certificates held by such Holder and all other sums payable to
such Holder hereunder, under the Trust Indenture and under such Certificates
shall have been paid in full. Each Holder, by its acceptance of a Certificate,
agrees that it will look solely to the income and proceeds from the Trust
Indenture Estate to the extent available for distribution to such Holder as
provided in Section 2.09 of the Trust Indenture and that neither the Owner
Participant nor the Owner Trustee shall be personally liable to any Holder for
any amounts payable under the Certificates, the Trust Indenture, hereunder, or
under any other Operative Agreement (including, without limitation, amounts
payable as Premium or Break Amount), except as expressly provided in this
Agreement or (in the case of the Owner Trustee) in the Trust Indenture, and
that neither the Owner Participant nor the Owner Trustee shall have any
liability to any Holder in respect of the Deferred Equity Amount or the Second
Payment Amount.
SECTION 7. Lessee's Representations and Warranties;
Indemnities.
(a) In General. Lessee represents warrants, covenants
and agrees that:
(i) Organization, Citizenship, Etc. Lessee
(A) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, (B) is a "citizen of
the United States" (as defined in Section 40102(a)(15)(C) of Title 49,
U.S.C.) holding an air carrier operating certificate issued by the
Secretary of
PARTICIPATION AGREEMENT [N397SW]
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Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo, (C) has the corporate power and authority to carry on
its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under this
Agreement and the other Operative Agreements to which Lessee is or
will be a party, and (D) is duly qualified to do business as a foreign
corporation in good standing in each state in which the nature of its
business makes such qualification necessary or the failure to be so
qualified or so to be in good standing would have a material adverse
effect on its business or operations or would impair its ability to
perform its obligations under the Operative Agreements.
(ii) Corporate Authorization, Etc. The
execution, delivery and performance of this Agreement and the other
Operative Agreements to which Lessee is or will be a party (A) have
been duly authorized by all necessary corporate action on the part of
Lessee, (B) do not require any shareholder approval, or approval or
consent of any trustee or holders of indebtedness or obligations of
Lessee or of any lessor under any lease to Lessee except such as have
been duly obtained, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order applicable to or
binding on Lessee or any of its subsidiaries or the articles of
incorporation or by-laws of Lessee (each as amended to date), or (2)
contravene or result in any breach of, or constitute any default
under, or result in the creation of any Lien (other than Permitted
Liens) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan, credit agreement or other
agreement to which Lessee is a party or by which it or its properties
may be bound or affected.
(iii) Governmental Approvals. Neither the
execution and delivery by Lessee of this Agreement or the other
Operative Agreements to which Lessee is or will be a party, nor the
consummation of any of the transactions by Lessee contemplated hereby
or thereby, requires the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency, except for (A)
routine filings of copies of such Operative Agreements with the SEC,
(B) the certification referred to in Section 4(a)(ix)(5), the
registration referred to in Section 4(a)(ix)(2) and the filings and
recordings referred to in Sections 4(a)(vi), 4(a)(ix)(1), 4(a)(ix)(2)
(other than the FAA ▇▇▇▇ of Sale) and 4(a)(ix)(3), and (C) such
federal and state securities law approvals or filings that will be
required in connection with the public offering, if any, of the
Certificates.
(iv) Valid Agreements. This Agreement and
the other Operative Agreements to which Lessee is or will be a party
constitute, or will constitute when entered into, assuming due
authorization, execution and delivery by the party or parties thereto
other than Lessee, legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the respective terms
hereof and thereof.
PARTICIPATION AGREEMENT [N397SW]
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(v) No Proceedings. There are no pending
or, to Lessee's knowledge, threatened actions or proceedings before
any court or administrative agency which, having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to materially adversely affect the consolidated financial
condition of Lessee and its subsidiaries, or the ability of Lessee to
perform its obligations under this Agreement and the other Operative
Agreements to which Lessee is or will be a party.
(vi) Taxes. Lessee and its subsidiaries have
filed or caused to be filed all federal, state, local and foreign tax
returns which are required to be filed and have paid or caused to be
paid all taxes shown to be due and payable on such returns or on any
assessment received by Lessee or any of its subsidiaries to the extent
that such taxes have become due and payable (except to the extent
being contested in good faith and by appropriate proceedings and for
the payment of which adequate provisions have been made).
(vii) Financial Condition. The audited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Annual Report to Shareholders for the year ended
December 31, 1993 and the unaudited consolidated financial statements
of Lessee and its subsidiaries contained in Lessee's Quarterly Report
on Form 10-Q for the period ended September 30, 1994 (copies of each
of which have been furnished to each Participant) have been prepared
in accordance with generally accepted accounting principles, present
fairly, in all material respects, the consolidated financial position
of Lessee and its subsidiaries as of such dates and the consolidated
results of their operations and their cash flows for the periods then
ended, and there has been no material adverse change in the
consolidated financial position of Lessee and its subsidiaries from
that reflected in such audited consolidated financial statements.
(viii) Registration and Recordation. Except
for (A) the registration of the Aircraft with the FAA pursuant to the
Act in the name of Owner Trustee, (B) the filing for recordation of
the instruments referred to in Section 4(a)(ix)(2) (other than the FAA
▇▇▇▇ of Sale) and (3) and this Agreement, if deemed necessary due to
the incorporation by reference in such other instruments of terms
defined herein, (C) the filing of the UCC financing statements
referred to in Section 4(a)(vi) and continuation statements at
periodic intervals, (D) the taking of possession by the Indenture
Trustee of the original counterparts of the Lease and the initial
Lease Supplement, and (E) the affixation of the nameplate referred to
in Section 7.1.2 of the Lease, no further action, including any filing
or recording of any document (including any financing statement in
respect thereof under Article 9 of the Uniform Commercial Code of any
applicable jurisdiction), is necessary or advisable in order to
establish and perfect, as against the interests or rights of any
Person, the right, title or interest of the Owner Trustee or Owner
Participant in the property constituting the Trust Estate, or of
Indenture Trustee in the property constituting the Trust Indenture
Estate, in any applicable jurisdiction within the United States of
America.
PARTICIPATION AGREEMENT [N397SW]
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(ix) Chief Executive Office. The chief
executive office (as such term is defined in Article 9 of the UCC) of
Lessee is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and Lessee
agrees to give the Participants, Owner Trustee and Indenture Trustee
10 days' prior written notice of any relocation of said chief
executive office from its present location.
(x) Securities Laws. Neither Lessee nor
anyone acting on behalf of Lessee has directly or indirectly offered
any beneficial interest or security relating to the ownership of the
Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, or any similar interest or
security, for sale to, or solicited any offer to acquire any such
interest or security from, or has sold any such interest or security
to, any Person other than the Participants and not more than 30 other
leasing companies or other institutional investors (in the case of
such beneficial interest or securities), or one other institutional
investor (in the case of the Certificates and other similar interests
and securities) or (assuming the accuracy of the representations in
Sections 8(a), 8(d), 8(k)(vi) and 8(p)(viii)) to any Person in
violation of the Securities Act or applicable state securities laws,
or both, and Lessee will take no action which would constitute or
cause such violation.
(xi) No Misstatement or Omission. Neither
the financial statements referred to in Section 7(a)(vii) nor any
other documents furnished by Lessee to Owner Trustee, Indenture
Trustee or any Participant in connection with the transactions
contemplated by this Agreement or the other Operative Agreements
contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein (in the case
of statements referred to in Section 7(a)(vii), as of the date made)
not misleading; there is no fact known by Lessee which Lessee has not
disclosed to such parties in writing which materially adversely
affects or, so far as Lessee can now reasonably foresee, will
materially adversely affect the ability of Lessee to carry on its
business and perform its obligations under this Agreement or the other
Operative Agreements to which it is a party.
(xii) Investment Company. Neither Lessee nor
any subsidiary of Lessee is an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) No Event of Default. No Lease Event of
Default or Lease Default has occurred and is continuing under the
Lease.
(xiv) Effective Sale. On the Delivery Date,
the Aircraft will be situated in Texas and the sale of the Aircraft by
Lessee to Owner Trustee shall be complete and effective and not
voidable or void.
(xv) ERISA. Lessee has never sponsored,
maintained or made contributions to any defined benefit plan subject
to the provisions of Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and (in
PARTICIPATION AGREEMENT [N397SW]
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reliance upon the Participants' representations in Section 8(o)) the
transactions contemplated by the Operative Agreements do not
constitute a "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975 of the Code for which an exemption is not
available by statute, regulation or class exemption. The execution and
delivery of this Agreement and the other Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will
not involve any non-exempt prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code (such
representation being made solely in reliance upon and subject to the
accuracy of the representations contained in Section 8(o)).
(xvi) Title to Aircraft, etc. Good and
marketable title to the Aircraft will be, immediately prior to the
time of delivery to Owner Trustee, vested in Lessee and, upon such
delivery and subject to the filing for recordation of the Lessee FAA
▇▇▇▇ of Sale in accordance with the Act, good and marketable title to
the Aircraft will have been duly conveyed by Lessee to Owner Trustee,
free and clear of all Liens other than the rights of Lessee under the
Lease and the Lease Supplement covering the Aircraft, the Lien of the
Trust Indenture, the beneficial interest of the Owner Participant in
the Aircraft, and the Liens permitted by clause (d) (solely for taxes
not yet due) or (e) of Section 6 of the Lease.
(xvii) Condition of Aircraft. The Aircraft has
been duly certificated by the FAA as to type and airworthiness, is
fully equipped to operate in commercial service and complies with all
material governmental requirements governing such service; the
Aircraft has been continuously operated and maintained by Lessee (in a
manner that would satisfy the provisions of Sections 7.1.3, 8.1 and
8.4 of the Lease) since its delivery to Lessee by Manufacturer, Lessee
is unaware of any material mechanical or structural defects in or
damage to the Aircraft since its delivery to Lessee by Manufacturer
and there has not occurred any event which constitutes or would, with
the passage of time or the giving of notice, or both, constitute an
Event of Loss.
(xviii) Use of Proceeds. None of the proceeds
from the issuance of the Certificates or from the acquisition by the
Owner Participant of its beneficial interest in the Trust Estate will
be used directly or indirectly by Lessee so as to result in a
violation of Regulation G or U of the Board of Governors of the
Federal Reserve System.
(xix) No Federal Approvals. No governmental
approval in the United States of any kind is required of the Owner
Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance
under this Agreement or any agreement contemplated hereby solely by
reason of any fact or circumstance peculiar to: (a) Lessee (as
contrasted to other airlines), (b) the nature of the Aircraft, or (c)
Lessee's proposed operations or use of the Aircraft, including as
contemplated in the Lease.
(xx) Section 1110. Owner Trustee and the
Indenture Trustee, as assignee thereof, are entitled to the protection
of Section 1110 of the United States
PARTICIPATION AGREEMENT [N397SW]
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Bankruptcy Code in connection with their right to take possession of
the Airframe and Engines in the event of a case under Chapter 11 of
the United States Bankruptcy Code in which Lessee is a debtor.
Southwest acquired the Aircraft new from the Manufacturer after
October 22, 1994, and Southwest first placed the Aircraft in service
after such date.
(b) General Tax Indemnity.
(i) Indemnity. Lessee hereby agrees to pay,
to indemnify, and, on written demand, reimburse and hold each
Indemnified Party (which, unless otherwise indicated herein, for
purposes of this Section 7(b) shall include any Affiliate of any
Participant, and all entities which are included in a consolidated,
combined or unitary return with such Indemnified Party) harmless from,
any and all license, documentation, recording and registration fees
and any and all taxes (including, without limitation, sales, use,
turnover, value-added, property (tangible and intangible), ad valorem,
consumption, rental, license, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature
whatsoever together with any and all penalties, fines, additions to
tax or interest thereon or computed with reference thereto
(collectively "Taxes"), howsoever imposed by any federal, state or
local government or governmental subdivision or taxing authority in or
of the United States of America (including any possession or territory
of the United States of America), or by any foreign government, taxing
authority or governmental subdivision of a foreign country, upon,
against, or with respect to any Indemnified Party, Lessee, the
Aircraft, Airframe, any Engine, any other engine installed on the
Airframe, Part or any other part thereof or interest therein or upon
or with respect to the purchase, acquisition, acceptance, rejection,
mortgaging, financing, refinancing, manufacture, sale, transfer of
title, ownership, delivery, nondelivery, insuring, inspection,
leasing, possession, use, registration, reregistration,
deregistration, operation, repair, replacement, abandonment,
redelivery, modification, rebuilding, importation, exportation, return
or other disposition thereof, or the imposition of any Lien (or the
occurrence of any liability to refund or pay over any amount as a
result of any Lien) thereon, or upon or with respect to the rentals,
receipts or earnings arising therefrom, or upon or with respect to
this Agreement, the Trust Agreement, the Trust Indenture, the Lease, a
Lease Supplement, the Purchase Agreement, the Purchase Agreement
Assignment, the Certificates or the issuance, reissuance, acquisition,
redemption, expiration or subsequent transfer thereof under the Trust
Indenture, or the beneficial interests in the Trust Estate or the
creation thereof, or any payment made pursuant to any such agreement
or instrument or upon or with respect to the property, held by Owner
Participant or by the Trust Estate or by Indenture Trustee under the
Trust Indenture, or otherwise with respect to or in connection with
the transactions contemplated by the Operative Agreements.
(ii) Exceptions. The indemnity set forth in
Section 7(b)(i) shall not extend in the case of any Indemnified Party
to Taxes (1) on, based on, or measured by, the receipts, gross or net
income, capital or net worth of such Indemnified Party (whether
denominated as franchise, excess profits, conduct of business, capital
gains, minimum and/or alternative minimum taxes) or accumulated
earnings, personal holding
PARTICIPATION AGREEMENT [N397SW]
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company, succession taxes and estate or franchise taxes (other than,
in any case referred to in this clause (1), taxes which are in the
nature of sales or use taxes, value-added taxes, rental taxes, license
taxes, consumption taxes, ad valorem taxes or property (tangible and
intangible) taxes) imposed by (A) the federal government of the United
States (including without limitation any taxes collected by
withholding) (but specifically excluding any excise taxes or penalties
imposed in connection with the occurrence of a "prohibited
transaction", within the meaning of Section 406 of ERISA or Section
4975 of the Code, for which an exemption is not available by statute,
regulation or class exemption) or (B) any state or local government or
governmental subdivision or state or local taxing authority in the
United States of America (including any possession or territory of the
United States of America) other than in the case of (B) any such tax
which is a Covered Income Tax, as defined below; (2) on, based on, or
measured by, any fees or compensation received by Owner Trustee or
Indenture Trustee in its individual capacity for services rendered in
connection with the transactions contemplated hereby; (3) relating to
the Aircraft for any period after the later of (A) the expiration or
early termination of the Lease and the return of the Aircraft in
connection therewith in accordance with the terms thereof and (B)
payment in full of Stipulated Loss Value or Termination Value, as the
case may be, and all Rent due and owing in accordance with the Lease;
(4) arising out of or caused by the wilful misconduct or gross
negligence of such Indemnified Party or the inaccuracy or breach of
any representation, warranty or covenant of such Indemnified Party
contained in any Operative Agreement; (5) imposed on the income of
such Indemnified Party by a foreign government or taxing authority,
except to the extent such Taxes are imposed by reason of the location,
operation, use or rental of the Aircraft or any Part thereof in such
jurisdiction or the presence of Lessee or Sublessee or other user in
such jurisdiction or the making of payments from such jurisdiction;
(6) which may become payable in connection with the occurrence of a
"prohibited transaction", within the meaning of Section 406(b) of
ERISA or Section 4975(c)(1)(E) or (F) of the Code, involving the
assets of any "employee benefit plan" within the meaning of Section
3(3) of ERISA, or of any "plan" within the meaning of Section
4975(e)(1) of the Code, with respect to which the Owner Participant is
the "plan sponsor" within the meaning of Section 3(16)(B) of ERISA;
and (7) which become payable as a result of any involuntary
disposition attributable to the bankruptcy of the Owner Participant or
Owner Trustee or any voluntary sale, transfer, mortgaging, pledging or
financing by such Indemnified Party of all or a portion of its
interest in the Aircraft, the Trust Estate, the Trust Indenture
Estate, the Lease, or any other Operative Agreement in a transaction
not contemplated by the Operative Agreements (it being understood that
any disposition of the Aircraft or any Part as a result of a
substitution, replacement or modification thereof or thereto by Lessee
shall not be treated as voluntary) unless, in each case, such transfer
shall occur (A) pursuant to the exercise of remedies under Section 15
of the Lease or (B) pursuant to Section 7, 8, 9, 10 or 18 thereof. As
used in clause (1)(B) of this Section 7(b)(ii), the term "Covered
Income Tax" means a Tax described in said clause (1)(B) imposed on an
Indemnified Party by any taxing authority (A) in whose jurisdiction
such Indemnified Party (including for this purpose all entities with
which it is combined, integrated or consolidated in such taxing
authority's jurisdiction) did not engage in business, did not maintain
an office or other place of business and was not otherwise located, if
such Tax resulted from the operation
PARTICIPATION AGREEMENT [N397SW]
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of the Aircraft or any Engine in such jurisdiction or the transactions
contemplated by the Operative Agreements, or (B) in whose jurisdiction
such Indemnified Party in fact is doing business, maintaining an
office or other place of business or is otherwise located, if such
circumstance was no factor in the imposition of such Tax.
(iii) Calculation. Lessee agrees that, with
respect to any payment or indemnity pursuant to Section 7(b)(i)
hereof, such payment or indemnity shall include an amount payable to
the Indemnified Party sufficient to hold such Indemnified Party
harmless on an after-tax basis from all Taxes required to be paid by
such Indemnified Party with respect to such payment or indemnity under
the laws of any federal, state or local government or governmental
subdivision or taxing authority in or of the United States of America,
including any possession or territory of the United States, or under
the laws of any foreign government, taxing authority or governmental
subdivision of a foreign country; provided, that if any Indemnified
Party realizes a reduction in Taxes not subject to indemnification
hereunder (a "tax benefit") by reason of such payment or indemnity
(whether such tax benefit shall be by means of investment tax credit,
foreign tax credit, depreciation deduction or otherwise), such
Indemnified Party shall, so long as no Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or Lease Event of
Default shall have occurred or be continuing, pay Lessee (but not
before Lessee shall have made all payments or indemnities to such
Indemnified Party then due under the Operative Agreements) an amount
equal to the sum of such tax benefit plus any other tax benefit
realized by such Indemnified Party as the result of any payment made
pursuant to this proviso; provided, however, that such payment by an
Indemnified Party shall not exceed the aggregate payments by Lessee to
such Indemnified Party under Section 7(b)(i) hereof (but any such
excess shall be carried forward and shall reduce Lessee's obligation
to make any subsequent payments to such Indemnified Party pursuant to
Section 7(b) or 7(c) hereof). Each such Indemnified Party shall in
good faith use reasonable efforts in filing its tax returns and in
dealing with taxing authorities to seek and claim any such tax benefit
of which it is actually aware or of which it has been given notice.
Any Taxes that are imposed on any Indemnified Party as a result of the
disallowance or reduction of such tax benefit referred to in the next
preceding sentence in a taxable year subsequent to the year of
allowance and utilization by such Indemnified Party (including the
expiration of any tax credit carryovers or carrybacks of such
Indemnified Party that would not otherwise have expired) shall be
indemnifiable pursuant to the provisions of Section 7(b)(i) without
regard to Section 7(b)(ii). In determining the amount of any net
reduction in Taxes which is attributable to more than one transaction,
an Indemnified Party shall be deemed to have utilized its deductions
and credits attributable first, to all transactions other than
leveraged equipment leasing transactions and then to this transaction
and all such other leveraged equipment leasing transactions on a pari
passu basis.
If as a result of any Advance (as hereinafter
defined) to an Indemnified Party the aggregate taxes paid or accrued
by such Indemnified Party for any taxable year shall be more than the
amount of such taxes which would have been payable by the Indemnified
Party had no such Advance been made, and if such increase in taxes was
not taken into account in determining the amount of the Advance, then
such increase
PARTICIPATION AGREEMENT [N397SW]
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in taxes will be treated as Taxes for which Lessee must indemnify the
Indemnified Party pursuant to this Section 7(b). Upon the final
determination of any contest pursuant to Section 7(b)(iv) hereof in
respect of any Taxes for which Lessee has made an Advance, the amount
of Lessee's obligation shall be determined under this Section
7(b)(iii) as if such Advance had not been made. Any obligation of
Lessee under this Section 7(b) and the Indemnified Party's obligation
to repay the Advance will be satisfied first by set off against each
other and any difference owing by either party will be paid within 10
days of such final determination.
(iv) Notice and Contest. If written claim is
received by an Indemnified Party for Taxes, which claim, if sustained,
would require the payment of an indemnity by Lessee pursuant to this
Section 7(b), such Indemnified Party shall notify Lessee of such claim
within 30 days after its receipt; provided, that failure to provide
such notice within 30 days will not relieve Lessee of any
indemnification obligation pursuant to this Section 7(b) if such
failure does not preclude Lessee from exercising its contest rights
hereunder. Payments due from Lessee to such Indemnified Party
pursuant to this Section 7(b) shall be made directly to such
Indemnified Party within 30 days of written demand by such Indemnified
Party to Lessee. If requested by Lessee in writing (provided, that
Lessee shall have furnished Indemnified Party with a written opinion
of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. or other independent counsel selected by
Lessee and reasonably satisfactory to Indemnified Party to the effect
that a reasonable basis in law and fact exists under ABA opinion
85-352), such Indemnified Party shall upon receipt of indemnity
reasonably satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal and
accountants' fees, and disbursements, penalties, interest incurred in
contesting such claim, and additions to tax) in good faith contest, in
the name of such Indemnified Party or, if requested by Lessee, in the
name of Lessee (or permit Lessee, if desired by Lessee, to contest in
the name of Lessee) if permissible under applicable laws, the
validity, applicability or amount of such Taxes by (i) resisting
payment thereof if practicable, (ii) not paying the same except under
protest, if protest shall be necessary and proper, (iii) if payment
shall be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings, and (iv) taking
such other action as is reasonably requested by Lessee from time to
time. The Indemnified Party shall determine the method of any contest
and (in good faith consultation with Lessee) control the conduct
thereof. Notwithstanding anything contained in this Section 7(b)(iv),
an Indemnified Party will not be required to contest, or to continue
to contest, the validity, applicability or amount of any Tax (or
portion thereof) (w) unless Lessee shall have acknowledged in writing
its obligation to indemnify the Indemnified Party hereunder in the
event the Indemnified Party does not prevail in such contest, (x) if
such contest would result in any material risk of criminal penalties
or any material risk of sale, forfeiture or loss (or loss of use) of
the Aircraft, the Airframe or any Engine or any Part or any interest
therein, (y) if a Lease Event of Default has occurred and is
continuing or (z) if the claim (when aggregated with related or
correlative adjustments with respect to such Indemnified Party) will
not exceed $10,000. The Owner Participant shall not be required to
appeal, or seek leave to appeal, an adverse judicial determination
with respect to such Taxes to the United States Supreme Court. If an
Indemnified Party contests a Tax by making a
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payment and seeking a refund thereof, then Lessee shall advance to
such Indemnified Party, on an interest-free basis, an amount equal to
the Taxes and any penalties, additions to tax, fines and interest
thereon (which shall collectively be known, only for the purpose of
this Section 7(b), as an "Advance") that are paid by such Indemnified
Party in connection with such contest. Such Advance shall be
repayable to Lessee at the time and in the manner specified in the
last paragraph of Section 7(b)(iii). If any Indemnified Party shall
obtain a refund of all or any part of such Taxes for which an
indemnity was paid by Lessee, such Indemnified Party shall pay Lessee
the amount of such refund as is attributable to the Taxes for which
such indemnity was paid; provided, however, that such amount shall not
be payable before such time as Lessee shall have made all payments or
indemnities to such Indemnified Party then due under this Section 7(b)
and under the Lease. If in addition to such refund such Indemnified
Party shall receive an amount representing interest on the amount of
such refund, Lessee shall be paid that proportion of such interest
which is fairly attributable to Taxes paid with an indemnity payment
or Advance by Lessee prior to the receipt of such refund, reduced by
taxes imposed on such Indemnified Party on receipt of such refund or
interest and increased by any taxes saved by reason of the
deductibility of such payment by the Indemnified Party. Any
subsequent determination that such Indemnified Party was not entitled
to all or any portion of any refund paid to Lessee shall be treated as
a Tax indemnifiable under Section 7(b)(i) without regard to Section
7(b)(ii). Lessee shall not be deemed to be in default under any of
the indemnification provisions under this Section 7(b) so long as it
or any Indemnified Party shall diligently prosecute such contest;
provided, that Lessee shall nonetheless be required to pay all
Advances and expenses required hereunder. In case any report or
return is required to be made with respect to any obligation of Lessee
under this Section 7(b) or arising out of this Section 7(b), Lessee
will either timely make such report or return in such manner as will
show the ownership of the Aircraft in Owner Trustee, and send a copy
of such report or return to Owner Trustee (except for any report or
return that an Indemnified Party has notified Lessee that the
Indemnified Party intends to file or that the Indemnified Party is
required by law to file), or will notify Owner Trustee of such
requirement and prepare and deliver such report or return to the
Indemnified Party in such manner as shall be satisfactory to such
Indemnified Party and Owner Trustee.
Notwithstanding the above provisions of this Section 7(b), any
Indemnified Party in its sole discretion (by written notice to Lessee) may
unconditionally waive its rights to the indemnities provided for in this
Section 7(b) with respect to any Taxes, and refrain from contesting, or
continuing the contest of such Taxes, in which event Lessee shall have no
liability to such Indemnified Party hereunder with respect to such Taxes. In
addition, if an Indemnified Party shall agree to a settlement of any contest
under this Section 7(b) without the prior written consent of Lessee, then the
Indemnified Party shall be deemed to have waived its rights to the indemnities
provided in this Section 7(b) with respect to the subject matter of such
settlement.
(v) Withholdings. Notwithstanding the exceptions in
Section 7(b)(ii), Lessee agrees that each payment of Rent and any amount
payable on the Certificates shall be free of all withholdings (other than a
U.S. withholding tax, except to the extent described in Section 15.05(d) of
the Trust Indenture) of any nature whatsoever except to the extent
PARTICIPATION AGREEMENT [N397SW]
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otherwise required by law, and in the event that any such withholding is so
required, Lessee shall pay an additional amount of Rent such that after the
deduction of all amounts required to be withheld, the net amount actually
received by each Indemnified Party will equal the amount that would be due
absent such withholding. In the event additional Rent is paid by Lessee to
provide for withholdings pursuant to the preceding sentence in respect of Taxes
that are excepted from indemnification hereunder pursuant to Section 7(b)(ii),
the Indemnified Party on whom the Tax is imposed by way of withholding on
payments to such person shall, promptly upon receipt of notice from Lessee,
reimburse Lessee for such additional Rent. As used in this Section 7(b)(v), a
"U.S. withholding tax" shall mean any withholding tax imposed by the United
States of America (A) with respect to interest payments under any Certificate
pursuant to treaty or federal law imposing withholding tax generally on
interest payments to Persons not resident in the United States or (B) in the
nature of backup withholding under section 3406 of the Code and the regulations
thereunder, or any successor or similar provision of the Code, federal tax law
or regulations thereunder. All U.S. withholding taxes with respect to interest
payments shall be borne by the Holder of the relevant Certificate and none of
Lessee, Owner Participant, Indenture Trustee or Owner Trustee shall be
responsible for any U.S. withholding tax with respect to interest payments on
such Certificate. Owner Trustee may (or, if Lessee is making any payment
directly to the Holder of any Certificate or to the Indenture Trustee, Lessee
shall) withhold any applicable U.S. withholding tax from the amount of the
interest payment then due and pay (and, if Lessee is making any payment to the
Holder or the Indenture Trustee, Lessee shall pay) any amount withheld to the
appropriate federal taxing authority; provided, that Lessee shall indemnify and
hold the Owner Trustee and the Owner Participant harmless on an after-tax basis
from and against any and all liability arising from any failure by any Person
to withhold any U.S. withholding taxes with respect to payments required to be
made with respect to the Certificates, and Lessee shall timely prepare and
file, or, if required by applicable law, present to the Owner Trustee for
filing, all information returns required to be prepared with respect to any
such withholding tax payments or otherwise with respect to payments under the
Certificates.
(c) General Indemnity.
(i) Indemnity. Lessee hereby agrees,
whether or not any of the transactions contemplated hereby shall be
consummated, to pay, assume liability for and indemnify, protect,
defend, save and keep harmless each Indemnified Party from and
against, on a net after-tax basis as provided in Section 7(b)(iii),
any and all liabilities, obligations, losses, damages, settlements,
claims, actions, suits, penalties, costs, expenses and disbursements
(including but not limited to reasonable legal and investigative fees
and expenses and Transaction Costs to the extent not required to be
paid by Owner Participant pursuant to Section 16 hereof, and all costs
and expenses relating to amendments, supplements, waivers and consents
to and under the Operative Agreements, but excluding internal overhead
costs and expenses such as salaries (other than a reasonable
allocation in respect of the Original Loan Participant's in-house
counsel)) of whatsoever kind and nature, including but not limited to
negligence, liability of an owner, strict or absolute liability,
liability without fault and liability in tort (any of the foregoing
being called a "Loss") which may from time to time be imposed on,
incurred by or asserted against any Indemnified Party or the Aircraft,
Airframe, any Engine or any Part or any portion of the Trust Estate or
the Trust Indenture Estate
PARTICIPATION AGREEMENT [N397SW]
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(whether or not any such Loss is also indemnified or insured against
by any other Person or such Indemnified Party has also indemnified any
other Person against such Loss) in any way relating to or arising out
of (a) any Operative Agreement, the enforcement thereof or any of the
transactions contemplated thereby (including, without limitation, the
performance or observance of all obligations and conditions of Lessee
thereunder, or the falsity of any representations or warranties of
Lessee therein or thereunder or in any document or certificate
delivered pursuant thereto), (b) the purchase, acceptance or rejection
of the Aircraft, (c) the Aircraft, the Airframe, any Engine, any
engine or any Part, any data or any other thing delivered or to be
delivered under an Operative Agreement, including without limitation,
the ownership, financing, refinancing, delivery, nondelivery, lease,
sublease, assignment, registration, reregistration, deregistration,
possession, use, non-use, presence, operation, condition, storage,
preparation, installation, testing, manufacture, design, fitness for
use, merchantability, modification, replacement, substitution,
alteration, maintenance, repair, re-lease, sale, return,
transportation, transfer, abandonment or other disposition thereof or
any portion thereof (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for patent,
trademark or copyright infringement, or arising under environmental
control, noise or pollution laws or regulations, and loss of or damage
to any property or the environment or death or injury to any person),
or (d) the offer, sale or delivery of the Certificates, whether before
or after the Delivery Date (the indemnity in this clause (d) to extend
also to any Person who controls an Indemnified Party, its successors,
assigns, employees, servants and agents within the meaning of Section
15 of the Securities Act).
(ii) Exceptions. The indemnity set forth in
Section 7(c)(i) shall not extend to any Loss with respect to a
particular Indemnified Party (A) to the extent that such Loss is
caused by acts, omissions or events which occur after full and final
compliance by Lessee with all the terms of the Operative Agreements,
(B) to the extent such Loss is caused by acts, omissions or events
which occur following the earlier of: (I) acceptance of possession of
the Airframe or any Engine or Part by Lessor or its designee in
accordance with the terms of the Lease (other than (x) pursuant to
Section 15 thereof, in which case Lessee's liability under this
Section 7(c) shall survive for so long as Lessor shall be entitled to
exercise remedies under such Section 15, or (y) in connection with the
initial delivery of the Aircraft to the Owner Trustee), (II) the
termination of the Term in accordance with Section 9 of the Lease, or
(III) the transfer of title to the Aircraft to Lessee (or its
designee) in accordance with Section 10.1.4 or Section 18.2 of the
Lease, (C) to the extent that such Loss is a Tax or a loss of tax
benefits, whether or not Lessee is required to indemnify therefor
pursuant to Section 7(b) hereof, (D) to the extent that such Loss is
caused by the willful misconduct or gross negligence of such
Indemnified Party (other than willful misconduct or gross negligence
imputed to such Indemnified Party solely by reason of its interest in
the Aircraft) or any material misrepresentation by or violation or
breach of any obligations of such Indemnified Party contained in the
Operative Agreements then in force unless such misrepresentation,
violation or breach is a result of Lessee's failure to comply with the
terms of any Operative Agreement to which it is a party, or (E) to the
extent such Loss results from a sale, assignment or transfer by such
Indemnified Party of its interest
PARTICIPATION AGREEMENT [N397SW]
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in the Aircraft, the Certificates or the transactions contemplated
hereby (other than (1) as required by the Operative Agreements or (2)
during the continuance of a Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or a Lease Event of Default or the
exercise of remedies under the Lease). This Section 7(c) does not
constitute a guarantee of the useful life or residual value of the
Aircraft or a guarantee that the Certificates will be paid.
(iii) Notice. If any Indemnified Party or
Lessee has knowledge of any Loss for which Lessee is obligated to
indemnify under this Section 7(c), it shall give prompt written notice
thereof to Lessee or each Indemnified Party, as the case may be, but
failure by any such Person to give such notice shall not relieve
Lessee of its obligations hereunder or from any other obligation that
Lessee may have to any Indemnified Party at law or in equity, and no
payment by Lessee to an Indemnified Party pursuant to this Section
7(c) shall be deemed to constitute a waiver or release of any right or
remedy which Lessee may have against such Indemnified Party for any
actual damages as a result of the failure by such indemnified Party to
give Lessee such notice.
(iv) Right to Defend; Subrogation; Fees and
Expenses of Trustees. Lessee shall be entitled (and, at the
Indemnified Party's election, shall be obligated), at its sole cost
and expense, acting through counsel selected by Lessee reasonably
acceptable to the respective Indemnified Party, (A) in any judicial or
administrative proceeding that involves solely a claim for which
payment or indemnity is sought under this Section 7(c), to assume
responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for which payment or
indemnity is sought under this Section 7(c), and other claims related
or unrelated to the transactions contemplated by the Operative
Agreements, to assume responsibility for and the control of such claim
for which payment or indemnity is sought under this Section 7(c) to
the extent that the same may be and is severed from such other claims
(and such Indemnified Party shall use its reasonable best efforts to
obtain such severance), and (C) in any other case, to be consulted by
such Indemnified Party with respect to judicial proceedings subject to
the control of such Indemnified Party. Notwithstanding any of the
foregoing to the contrary, Lessee shall not be entitled to assume
responsibility for and control of any such judicial or administrative
proceedings (1) while any Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or Lease Event of Default shall
have occurred and be continuing, (2) if such proceedings will involve
a material risk of the sale, forfeiture or loss of, or the creation of
any Lien (other than a Permitted Lien) on, the Aircraft or the Trust
Estate or the Trust Indenture Estate or any part thereof or the loss
or impairment of the Lien of the Trust Indenture on all or any part of
the Trust Indenture Estate, (3) if such proceedings could, in the good
faith opinion of the Indemnified Party, entail any risk of material
criminal liability or material civil penalty or (4) if in the written
opinion of counsel to such Indemnified Party an actual or potential
material conflict of interest exists making it advisable for such
Indemnified Party to be represented by separate counsel. The
Indemnified Party may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to
the preceding provisions.
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The Indemnified Party shall supply Lessee, at Lessee's
expense, with such information within its possession reasonably requested by
Lessee as is necessary or advisable for Lessee to control or participate in any
proceeding to the extent permitted by this Section 7(c) (other than the tax
records or returns or pricing or confidential information of or relating to the
Owner Participant or its Affiliates). Such Indemnified Party shall not enter
into a settlement or other compromise with respect to any Loss without the
prior written consent of Lessee (except during the continuance of a Lease
Default (of the type described in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default when such consent shall not be required if such Indemnified
Party gives 10 days' prior written notice to Lessee describing the proposed
settlement or other compromise), which consent shall not be unreasonably
withheld or delayed, unless such Indemnified Party waives its right to be
indemnified with respect to such Loss under this Section 7(c).
Lessee shall supply the Indemnified Party with such
information reasonably requested by the Indemnified Party as is necessary or
advisable for the Indemnified Party to control or participate in any proceeding
to the extent permitted by this Section 7(c).
Upon payment or indemnification of any amount pursuant to this
Section 7(c), Lessee, without any further action, shall be subrogated to any
claims the Indemnified Party may have relating thereto other than claims under
Section 5.03 or 7.01 of the Trust Agreement or Section 9.06 of the Trust
Indenture, comparable claims arising in favor of the Owner Trustee or the
Indenture Trustee as a matter of trust law and claims under any insurance
maintained by any Indemnified Party or any of its Affiliates. The Indemnified
Party agrees to give such further assurances or agreements and to cooperate in
all reasonable respects with Lessee and its insurers to permit Lessee to pursue
such claims.
In the event that Lessee shall have paid an amount to an
Indemnified Party pursuant to this Section 7(c), and such Indemnified Party
subsequently shall be reimbursed in respect of such indemnified amount by any
other Person, such Indemnified Party shall (provided no Lease Default or Lease
Event of Default shall have occurred and be continuing) promptly pay (but not
before Lessee shall have made all payments then due to such Indemnified Party
pursuant to this Section 7(c) and any other payments then due under the
Operative Agreements) an amount equal to the amount of such reimbursement
(adjusted for any net tax impact of such receipt and payment, but in no event
more than such indemnified amount previously paid to such Person) to Lessee.
Subject to the provisions of the preceding sentence, Lessee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor, whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of any other document or instrument,
and the Person seeking indemnification from Lessee pursuant to any provision of
this Agreement may proceed directly against Lessee without first seeking to
enforce any other right of indemnification.
Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee (including the reasonable fees and expenses
of its counsel and any agent appointed in accordance with Section 2.03 or
9.02(c) of the Trust Indenture) and the amounts payable to the Owner Trustee
pursuant to Section 6.07 of the Trust Agreement (including, but not limited to,
the reasonable fees and expenses of its counsel), without cost, on a net
after-tax
PARTICIPATION AGREEMENT [N397SW]
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basis, to the Owner Participant, for acting as such, other than such fees and
expenses which constitute Transaction Costs for which the Owner Participant is
obligated under Section 16. Lessee agrees that it will pay the reasonable fees
and expenses of any separate owner trustee or co-trustee appointed pursuant to
Section 9.02 of the Trust Agreement as a result of any requirement of law or if
otherwise required by any Operative Agreement or if requested, or consented to,
by Lessee.
Lessee hereby waives and releases any claim now or hereafter
existing against any Indemnified Party arising out of the death or personal
injury to personnel of Lessee, loss or damage to the property or business of
Lessee, or the loss of use of any property or business of Lessee, which results
from or arises out of the condition, use or operation of the Aircraft,
including, without limitation, any latent or patent defect whether or not
discoverable unless, in any such case, such claim would, if asserted against
Lessee, be excluded from Lessee's indemnification obligations hereunder by
reason of Section 7(c)(ii).
(d) Owner Participant's Indemnity. Owner Participant
covenants and agrees that if (i) Lessee has elected pursuant to Section 9.1 of
the Lease to terminate the Lease by causing the Aircraft to be sold pursuant to
Section 9.2 of the Lease and (ii) Owner Trustee has, pursuant to Section 9.3 of
the Lease, given to Lessee written notice of Lessor's election to retain title
to the Aircraft, and (iii) Owner Trustee has failed to make, on or before the
proposed termination date, any payment required to be made by Owner Trustee
pursuant to Section 9.3 in connection with its retention of title to the
Aircraft, Owner Participant will indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any excess of the highest bid received
on or before the proposed termination date from a Person that is not a
Prohibited Person over the price for which the Aircraft may subsequently be
sold (but disregarding any portion of such bid or such price in excess of the
applicable Termination Value), any additional Rent paid by Lessee (less an
amount representing the fair value to Lessee of its use of the Aircraft for the
period of time in respect of which such Rent was paid) and any reasonable fees
and expenses of lawyers, appraisers, brokers or accountants) incurred as a
consequence of such failure by Owner Trustee.
(e) Payments. Any payments made pursuant to this Section
7 shall be made directly to the Person entitled thereto within 10 Business Days
of demand therefor in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the
order of the payee and mailed to the payee by certified mail, postage prepaid
at its address as set forth in this Agreement.
(f) Interest on Overdue Amounts. If any amount payable
by Lessee or any Indemnified Party, as the case may be, under this Section 7 is
not paid when due, Lessee or such Indemnified Party, as the case may be, shall
pay an additional amount equal to interest at the Overdue Rate on the overdue
amount for the period from and including the due date for the overdue payment
to but excluding the date of payment of the overdue amount.
(g) Survival. All indemnities, obligations, adjustments
and payments provided for in this Section 7 shall survive, and remain in full
force and effect, notwithstanding the
PARTICIPATION AGREEMENT [N397SW]
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expiration or other termination of this Agreement, the Lease or any other
Operative Agreement. The obligations of Lessee in respect of all such
indemnities, obligations, adjustments and payments are expressly made for the
benefit of, and shall be enforceable by, each Indemnified Party or other
indemnitee entitled thereto, without taking any action under the Lease.
SECTION 8. Other Representations, Warranties,
Covenants and Indemnities. (a) Securities Laws. The Owner Participant
represents that it is acquiring its interest in the Trust Estate for investment
purposes only and not with a present intent as to any resale or distribution
thereof (subject nonetheless to any requirement of law that the disposition of
its properties shall at all times be and remain within its control) and that
neither it nor anyone acting on its behalf has directly or indirectly offered
any interest in the Trust Estate or any Certificates or any similar securities
for sale to, or solicited any offer to acquire any of the same from, anyone in
a manner which would result (assuming the accuracy of the representations in
Sections 7(a)(x), 8(d), 8(k)(vi) and 8(p)(viii)) in a violation of the
Securities Act or the securities laws, rules and regulations of any state.
(b) Citizenship. Each of the Owner Participant and SBC,
in its individual capacity, severally represents and warrants to the other
parties to this Agreement that it is a "citizen of the United States" as
defined in the Act. The Owner Participant agrees, solely for the benefit of
Lessee, the Indenture Trustee and the Holders, that if at any time (i) it shall
not be a "citizen of the United States" within the meaning of the Act and (ii)
thereby the Aircraft shall be, or would become, ineligible for registration in
the name of the Owner Trustee under the Act and regulations then applicable
thereunder (it being understood that the effect of any such status shall be
determined without giving consideration to any provision of the Act (or any
superseding statute) which permits United States registration of an aircraft
based on conditions which impose restrictions on the location and use of such
aircraft or otherwise restrict the ability of an air carrier to operate an
aircraft in the ordinary course of its business), then the Owner Participant
shall (at its own expense and without any reimbursement or indemnification from
Lessee) as soon as is reasonably practicable but in any event within 30 days
after obtaining actual knowledge of such loss of citizenship (A) effect voting
trust or other similar arrangements or take any other action as may be
necessary to prevent any deregistration or to maintain the United States
registration of the Aircraft and (to the extent such recordation is dependent
on the U.S. registration of the Aircraft) the recordation with the FAA of the
Trust Indenture and the Lease, or (B) transfer its beneficial interest in the
Trust Estate in accordance with Section 8(l) hereof. Each of the Original Loan
Participant, the Owner Trustee and the Indenture Trustee agrees, upon the
request and at the sole expense of the Owner Participant, to take all
reasonable acts requested by the Owner Participant in complying with its
obligations under clause (A) or (B) of the second sentence of this Section
8(b). SBC, in its individual capacity, agrees that if at any time a
responsible officer of SBC shall obtain actual knowledge that SBC has ceased to
be a "citizen of the United States" within the meaning of the Act, it will
promptly resign as Owner Trustee (if and so long as such citizenship is
necessary under the Act as in effect at such time or, if it is not necessary,
if and so long as the Owner Trustee's citizenship would have any adverse effect
on a Holder, Lessee, a Sublessee or the Owner Participant), effective upon the
appointment of a successor Owner Trustee in accordance with Section 9.01 of the
Trust Agreement.
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(c) Chief Executive Office of SBC. SBC in its individual
capacity represents and warrants that both the principal place of business of
the Owner Trustee and the place where its records concerning the Aircraft and
all of its interest in, to and under the Operative Agreements to which it is a
party are or will be kept is Hartford, Connecticut (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture)
and has its chief executive office (as such term is used in Article 9 of the
Uniform Commercial Code) in Hartford, Connecticut. SBC in its individual
capacity agrees that it will not change the location of such office to a
location outside of Hartford, Connecticut, without 10 days' prior written
notice to Lessee, Indenture Trustee and the Owner Participant.
(d) Securities Laws. The Original Loan Participant
represents and warrants that the Series SWA 1995 Trust N397SW-I Certificate to
be issued to it pursuant to the Trust Indenture is being acquired by it with no
present intent to make any resale or distribution thereof which would require
registration under the Securities Act and it will not offer or sell any
Certificate in violation of the Securities Act; provided, that the disposition
of its property shall at all times be and remain within its control, and that
neither it nor anyone acting on its behalf has offered any Certificates or any
similar securities relating to the Aircraft for sale to, or solicited any offer
to buy any Certificates or any similar securities relating to the Aircraft
from, any person or entity other than in a manner required by the Securities
Act and the rules and regulations thereunder and the securities laws, rules and
regulations of any state.
(e) [Intentionally Reserved].
(f) Owner Participant's Representations and Warranties.
The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation
duly organized and validly existing in good standing under the laws of
the State of Delaware and has the corporate power and authority to
carry on its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under the
Owner Participant Agreements;
(ii) the Owner Participant Agreements have
been duly authorized by all necessary corporate action on the part of
the Owner Participant, do not require any approval not already
obtained of stockholders of the Owner Participant or any approval or
consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been
duly executed and delivered by the Owner Participant or USL Capital
Corporation as its agent, and, subject to and in reliance upon the
representations made by the Original Loan Participant and Lessee in
Sections 8(o) and 7(a)(xv), respectively, neither the execution and
delivery thereof by the Owner Participant, nor the consummation of the
transactions contemplated thereby by the Owner Participant, nor
compliance by the Owner Participant with any of the terms and
provisions thereof will contravene any United States federal or state
law, judgment, governmental rule, regulation or order applicable to or
binding on the Owner Participant (it being understood that no
representation or warranty is made with respect to laws, rules or
regulations relating to (x) aviation or the nature of the equipment
owned by the
PARTICIPATION AGREEMENT [N397SW]
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Owner Trustee, except to the extent expressly made by the Owner
Participant in the first sentence of Section 8(b) or (y) any
securities laws, except as expressly provided in Section 8(a)) or
contravene or result in any breach of or constitute any default under,
or result in the creation of any Lien (other than Permitted Liens of
the type described in clause (a) of the definition thereof) upon the
Trust Estate under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement,
corporate charter, by-law or other agreement or instrument to which
the Owner Participant is a party or by which it or its properties may
be bound or affected;
(iii) assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, each
of the Owner Participant Agreements constitutes a legal, valid and
binding obligation of the Owner Participant enforceable against the
Owner Participant in accordance with the terms thereof;
(iv) there are no pending or, to the
knowledge of the Owner Participant, threatened actions or proceedings
against the Owner Participant before any court or administrative
agency which, if determined adversely to the Owner Participant, would
materially adversely affect the financial condition of the Owner
Participant or the ability of the Owner Participant to perform its
obligations under the Owner Participant Agreements;
(v) on the Delivery Date, there will be no
Lessor Liens attributable to the Owner Participant;
(vi) the Owner Participant's net worth (as
defined in Section 8(l)) is at least $75,000,000; and
(vii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to the Owner
Participant and which is presently continuing.
(g) Lessor Liens. Each of SBC in its individual capacity
and the Owner Participant severally covenants and agrees (i) that it shall not
cause or permit to exist a Lessor Lien attributable to it with respect to the
Aircraft or any other portion of the Trust Estate, (ii) that it will promptly,
at its own expense, take such action as may be necessary duly to discharge such
Lessor Lien attributable to it, and (iii) that it will make restitution to the
Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it.
(h) Indenture Trustee Liens. Wilmington Trust Company in
its individual capacity covenants and agrees that it shall not cause or permit
to exist any Lien, arising as a result of (i) claims against the Indenture
Trustee not related to its interest in the Aircraft or the administration of
the Trust Estate pursuant to the Trust Indenture, (ii) acts of the Indenture
Trustee not permitted by, or failure of the Indenture Trustee to take any
action required by, the Operative Agreements to the extent such acts arise or
such failure arises from or constitutes
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gross negligence or willful misconduct, (iii) claims against the Indenture
Trustee relating to Taxes or Losses which are excluded from the indemnification
provided by Section 7 hereof pursuant to said Section 7, or (iv) claims against
the Indenture Trustee arising out of the transfer by the Indenture Trustee of
all or any portion of its interest in the Aircraft, the Trust Estate, the Trust
Indenture Estate or the Operative Agreements other than (A) a transfer of the
Aircraft pursuant to Section 9, 10 or 18 of the Lease or Article 5 or 8 of the
Trust Indenture, (B) any borrowing pursuant to Section 17 hereof, or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while a Lease
Event of Default is continuing and prior to the time that the Indenture Trustee
has received all amounts due pursuant to the Trust Indenture.
(i) Termination Instructions to Owner Trustee. The Owner
Participant will not instruct the Owner Trustee to terminate any Operative
Agreement in violation of the terms thereof.
(j) Excess Payment. If (i) all or any part of the Trust
Estate becomes the property of, or the Owner Participant becomes, a debtor
subject to the reorganization provisions of the Bankruptcy Reform Act of 1978
or any successor provision, (ii) pursuant to such reorganization provisions the
Owner Trustee (in its individual capacity) or the Owner Participant is
required, by reason of the Owner Trustee (in its individual capacity) or the
Owner Participant being held to have recourse liability to any Holder or the
Indenture Trustee, directly or indirectly, to make payment on account of any
amount payable as principal, Break Amount, if any, Premium, if any, or interest
on the Certificates, and (iii) any such Holder or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects
any payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Holder or the Indenture
Trustee shall promptly refund to the Owner Trustee or the Owner Participant
(whichever shall have made such payment) such Excess Payment. For purposes of
this Section 8(j), "Excess Payment" means the amount by which any payment
exceeds the amount which would have been received by such Holder or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the
Owner Participant had not become subject to the recourse liability referred to
in clause (ii) above. Nothing contained in this Section 8(j) shall prevent
such Holder or the Indenture Trustee from enforcing any personal recourse
obligation (and retaining the proceeds thereof) of the Owner Trustee (in its
individual capacity) or the Owner Participant under this Agreement or the Trust
Indenture (and any exhibits or annexes thereto), it being understood that the
foregoing shall not be construed so as to permit the Indenture Trustee or any
Holder to enforce the Owner Participant's or Owner Trustee's obligation to the
Lessee with respect to the Deferred Equity Amount or the Second Payment Amount.
(k) Representations and Warranties of Indenture Trustee
in Individual Capacity. The Indenture Trustee represents and warrants, in its
individual capacity, as follows:
(i) it is a "citizen of the United States"
as defined in the Act, that it will notify promptly all parties to
this Agreement if in its reasonable opinion its status as a "citizen
of the United States" is likely to change and that it will resign as
Indenture Trustee as provided in Section 9.07 of the Trust Indenture
if it should cease to be a "citizen of the United States";
PARTICIPATION AGREEMENT [N397SW]
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(ii) it is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter
into and perform its obligations under the Trust Indenture and this
Agreement and to authenticate the Certificates;
(iii) the Indenture Trustee Agreements, and
the authentication of the Certificates have been duly authorized by
all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and
provisions thereof will violate any federal or Delaware law or
regulation governing its banking or trust powers or any judgment or
order binding on it or contravene or result in any breach of, or
constitute any default under its charter or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it or its properties may be bound or affected;
(iv) each of the Indenture Trustee Agreements
has been duly executed and delivered by it and, assuming that each
such agreement is the legal, valid and binding obligation of each
other party thereto, is the legal, valid and binding obligation of the
Indenture Trustee, enforceable against it in accordance with its
terms;
(v) neither the execution and delivery by
it, in its individual capacity or as Indenture Trustee, as the case
may be, of this Agreement or the Trust Indenture nor the consummation
of any of the transactions contemplated hereby or thereby requires the
consent or approval of, the giving of notice to, or the registration
with, any governmental authority or agency pursuant to any law of the
State of Delaware or the United States governing the banking or trust
powers of the Indenture Trustee; and
(vi) neither it nor anyone authorized to act
on its behalf has directly or indirectly offered any beneficial
interest or security relating to the ownership of the Aircraft or the
Lease or any interest in the Trust Estate or the Trust Indenture
Estate, or any of the Certificates or any other interest in or
security under the Trust Indenture, for sale to, or solicited any
offer to acquire any such interest or security from, or has sold any
interest or security to, any Person, and it will not directly or
indirectly make any such offer, solicitation or sale.
(l) Transfers of Equity Interests; Rights of Owner
Participant and Owner Trustee. So long as the Aircraft shall be leased to
Lessee under the Lease and so long as the Certificates are outstanding, the
Owner Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust Estate or the
Trust Agreement to any Person unless (i) the proposed transferee is a
"Transferee" (as defined below) and (ii) the Owner Participant shall have
delivered to the Owner Trustee, Lessee and the Indenture Trustee an opinion of
counsel (who shall be reasonably satisfactory to the Indenture Trustee and
Lessee) to the effect that the agreement referred to in clause (O) below and
any guaranty required by clause (B) or (C) below, are the legal, valid, binding
and enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital and surplus
PARTICIPATION AGREEMENT [N397SW]
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of at least $75,000,000 or a limited partnership or corporation whose net worth
is at least $75,000,000, (B) any subsidiary of such a bank, financial
institution, limited partnership or corporation; provided, that such bank,
financial institution, limited partnership or corporation furnishes to the
Owner Trustee, the Indenture Trustee and Lessee a guaranty reasonably
satisfactory to them with respect to the Owner Participant's obligations, in
the case of the Owner Trustee, under the Trust Agreement and, in the case of
the Indenture Trustee and Lessee, the Owner Participant's obligations
hereunder, or (C) any other corporation or limited partnership, provided such
obligations are guaranteed by the transferor Owner Participant; provided,
however, that unless otherwise consented to by Lessee any Transferee shall not
be an air carrier, an air freight forwarder or other similar Person or a
corporation controlling, controlled by or under common control with such an air
carrier, an air freight forwarder or other similar Person. Each such transfer
to a Transferee shall be subject to the conditions that (M) upon giving effect
to such transfer, the Transferee is a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) or the Transferee, at its sole
cost and expense on an after-tax basis (including any continuing costs of any
voting trust), shall have entered into a voting trust or other arrangement
which permits the registration of the Aircraft under the Act in the name of the
Owner Trustee without any restriction on the operation of the Aircraft, (N) the
Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
or agreements whereby the Transferee confirms that it shall be deemed a party
to this Agreement and a party to the Trust Agreement and agrees to be bound by
all of the terms of, and to undertake all of the obligations of the transferor
Owner Participant contained in the Owner Participant Agreements and makes
representations of the scope provided for as to the Owner Participant in each
of the Operative Agreements, (P) such transfer does not result in a nonexempt
prohibited transaction under Section 4975 of the Code or Section 406 of ERISA
with respect to such Holders about which the Owner Participant shall have
received, within ten Business Days of its request to the Indenture Trustee
therefor, such information as may be reasonably necessary in making such
determination (and Owner Participant shall request such information and each of
Lessee, the Original Loan Participant and the Indenture Trustee shall cooperate
in providing such information as may be available), (Q) such transfer does not
violate any applicable law including, without limitation, the Act, or any rules
or regulations promulgated thereunder, the Securities Act or the Trust
Indenture Act of 1939, (R) after giving effect to such transfer, there shall be
no more than one Owner Participant of record at that time and (S) such transfer
will not, in and of itself, give rise to an Indenture Default or Indenture
Event of Default; and Lessee or the Indenture Trustee may request such
Transferee to provide an opinion of counsel (who shall be reasonably
satisfactory to Lessee and the Indenture Trustee) as to the non-violation of
the Act or the registration requirements of the Securities Act by reason of
such transfer. Upon any such transfer by the Owner Participant as above
provided, the Transferee shall be deemed the Owner Participant for all purposes
hereof and of the other Operative Agreements and each reference herein to the
transferor Owner Participant shall be deemed for all purposes, with respect to
circumstances existing and requirements arising thereafter, to be to the
Transferee and the transferor Owner Participant shall be relieved of all
obligations of the transferring Owner Participant under the Owner Participant
Agreements assumed by the transferee Owner Participant. If the Owner
Participant intends to transfer its interests hereunder, it shall give prior
written notice thereof as soon as practicable, but in no event less than ten
(10) Business Days prior thereto, to the Indenture Trustee, the Owner
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Trustee and Lessee, specifying the name and address of the proposed Transferee
and the facts necessary to determine whether or not the requirements for a
Transferee, as set forth herein, are satisfied. The Owner Participant shall
pay, or shall cause the transferee Owner Participant to pay, all of the
reasonable costs and expenses (including, without limitation, legal fees and
expenses) of the other parties hereto (except if such transfer is effected
during the continuance of a Lease Default (of the type described in Section
14.1 or 14.5 of the Lease) or a Lease Event of Default or in connection with
the exercise of remedies under the Lease), on a net after-tax basis, of any
such transfer. For purposes of this Agreement, "net worth" shall mean the
excess of total tangible assets over total liabilities, each to be determined
in accordance with generally accepted accounting principles consistently
applied.
(m) Obligations of Trustees. The Indenture Trustee shall
be responsible for the payment, performance and discharge of, and shall fully
and completely pay, perform and discharge, all of its obligations under the
Trust Indenture in accordance with the terms thereof. Subject to the terms and
provisions of the Operative Agreements, the Owner Trustee shall be responsible
for the performance and discharge of, and shall fully and completely perform
and discharge, all of its obligations under the Lease in accordance with the
terms thereof.
(n) Compliance with Trust Indenture. SBC and Wilmington
Trust Company, each in its individual capacity, agrees for the benefit of
Lessee to comply with the terms of the Trust Indenture which it is required to
comply with in its individual capacity.
(o) ERISA. The Owner Participant represents and warrants
that no part of the funds used by it to acquire its interest in the Trust
Estate constitutes "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4975(e)(1) of
the Code, as interpreted by the Department of Labor. The Original Loan
Participant represents and warrants that no part of the funds used by it to
acquire the Certificates or any interest therein (including any participation
in such Certificates) constitutes "plan assets" of any "employee benefit plan"
within the meaning of ERISA or any "plan" within the meaning of Section
4975(e)(1) of the Code.
(p) SBC's Representations and Warranties. SBC, in its
individual capacity, represents, warrants and covenants that:
(i) each of the Owner Trustee Documents has
been duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such instruments on behalf of the
Owner Trustee or SBC, as the case may be;
(ii) the Trust Estate is free and clear of
Lessor Liens attributable to SBC in its individual capacity, and there
are no Liens affecting the title of the Owner Trustee to the Aircraft
or resulting from any act or claim against SBC in its individual
capacity arising out of any event or condition not related to the
ownership, leasing, use or operation of the Aircraft or to any other
transaction contemplated by this Agreement or any of the other
Operative Agreements, including any Lien resulting from the nonpayment
by SBC in its individual capacity of any Taxes imposed or measured by
its net income;
PARTICIPATION AGREEMENT [N397SW]
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(iii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to SBC in its
individual capacity and which is presently continuing;
(iv) it is a national banking association
duly organized, validly existing and in good standing under the laws
of the United States and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has the
corporate power and authority to enter into and perform its
obligations under the Trust Agreement and this Agreement (in its
individual capacity), and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has full
right, power and authority to enter into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the
other Owner Trustee Documents;
(v) each of the Trust Agreement and this
Agreement (in its individual capacity) and the Owner Trustee Documents
(in its trust capacity) has been duly authorized by all necessary
corporate action on its part, and neither the execution and delivery
thereof nor its performance of any of the terms and provisions thereof
will violate any federal or Connecticut law or regulation relating to
its banking or trust powers or contravene or result in any breach of,
or constitute any default under, its charter or by-laws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(vi) assuming due authorization, execution
and delivery of the Trust Agreement by the Owner Participant, each of
the Owner Trustee Documents has been duly executed and delivered by it
and, each of the Trust Agreement and this Agreement (to the extent
executed by the Owner Trustee in its individual capacity), assuming
due authorization, execution and delivery thereof by the other party
or parties thereto, is a legal, valid and binding obligation of SBC in
its individual capacity and as Owner Trustee, as the case may be,
enforceable against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee
shall have received whatever title to the Aircraft as was conveyed to
it by Lessee;
(viii) neither it nor anyone acting on its
behalf has offered any interest in the Trust Estate or any
Certificates or any similar securities for sale to, or solicited any
offer to acquire the same from, anyone other than the Participants,
and no responsible officer or responsible employee of SBC has
knowledge of any such offer or solicitation, except as set forth in
Section 7(a)(x) hereof;
(ix) assuming due authorization, execution
and delivery of each of the Owner Trustee Documents by each of the
parties thereto (other than the Owner Trustee), each of the Owner
Trustee Documents is a legal, valid and binding obligation
PARTICIPATION AGREEMENT [N397SW]
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of the Owner Trustee, enforceable against the Owner Trustee in
accordance with its respective terms;
(x) there are no proceedings pending or, to
the best knowledge of SBC, threatened, against SBC in any court or
before any governmental authority or arbitration board or tribunal
which, if adversely determined, would materially and adversely affect
the right, power and authority of SBC to enter into or perform its
obligations under the Owner Trustee Documents;
(xi) neither the due execution and delivery
of the Owner Trustee Documents by SBC, in its individual capacity or
as Owner Trustee under the Trust Agreement, as the case may be, nor
the consummation by it of any of the transactions contemplated thereby
require the consent or approval of, the giving of notice to, or the
registration with, any federal or Connecticut governmental authority
or agency pursuant to any federal or Connecticut law governing the
banking or trust powers of SBC; and
(xii) no later than sixty (60) days after
Lessee shall so request, Owner Trustee shall execute and deliver to
Lessee (on a form to be supplied by Lessee) a Texas Sales and Use Tax
Certificate of Resale reflecting Owner Trustee's Texas or Connecticut
sales tax permit number and Owner Trustee's purchase of the Aircraft
pursuant to the Lease for lease to Lessee thereunder, and, if
necessary to permit Owner Trustee to issue such Certificate, Owner
Trustee shall apply for (on a form to be supplied by Lessee) a Texas
sales tax permit.
(q) Owner Participant's Lease Expenses. The Owner
Participant covenants and agrees to pay or cause the Owner Trustee to pay any
costs and expenses specified to be paid by the Owner Participant pursuant to
the Lease.
(r) Lessee's Assumption of Debt. Subject to compliance
by Lessee with all of its obligations under the Operative Agreements and
provided that the Series SWA 1995 Trust N397SW-I Certificate is no longer
outstanding, each of the Owner Trustee, the Indenture Trustee and the Owner
Participant covenants and agrees that, at Lessee's expense on a net after-tax
basis (including, without limitation, reasonable attorneys' fees and expenses
of each of such parties), (i) if Lessee elects to terminate the Lease and to
purchase the Aircraft pursuant to Section 18.2(b) of the Lease, each of such
parties will, subject to due compliance by Lessee with the provisions of said
Section 18.2(b) and the other Operative Agreements, execute and deliver
appropriate documentation to Transfer to Lessee the Aircraft, and (ii) Lessee,
in connection with such purchase, may (if no Lease Event of Default shall have
occurred and be continuing, unless such Lease Event of Default is waived by the
Indenture Trustee) assume (and, as set forth in Section 18.2(c) of the Lease,
receive a credit in an amount equal to the principal amount of the debt
assumed, against the purchase price payable by Lessee pursuant to Section
18.2(b) of the Lease) the obligations of the Owner Trustee pursuant to Section
7.03 of the Trust Indenture and the Certificates (and the Lease, to the extent
that the Owner Trustee's obligations thereunder are incorporated into the Trust
Indenture or the Certificates), and in such event each of the parties shall
execute and deliver appropriate documentation as contemplated by Section 7.03
of the Trust Indenture.
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(s) [Intentionally Reserved].
(t) [Intentionally Reserved].
(u) Lease Adjustments. Section 3.7 of the Lease
contemplates that, under certain circumstances, the Owner Participant will make
certain recalculations and the Owner Participant hereby agrees to promptly take
such actions as may be necessary or desirable to give effect to and to cause
the Owner Trustee to give effect to the provisions of Section 3.7 of the Lease.
(v) Revocation of Trust Agreement. The Owner Participant
agrees, notwithstanding anything to the contrary contained in the Trust
Agreement, (i) solely for the benefit of the Indenture Trustee that it will not
revoke or otherwise terminate the Trust Agreement as long as the lien of the
Trust Indenture is in effect, and (ii) solely for the benefit of Lessee that it
will not revoke or otherwise terminate the Trust Agreement during the Term
without the prior written consent of Lessee, except that, notwithstanding the
foregoing clauses (i) and (ii), or any other provision of the Operative
Agreements to the contrary, the Owner Participant shall have the right to
terminate the trusts set forth in the Trust Agreement without the consent of
any other party to the Operative Agreements, at any time, if in connection
therewith the Owner Participant shall simultaneously create a new trust upon
substantially the same terms and conditions as the trusts so terminated and
shall cause the Trust Estate to be vested in the Owner Trustee under the new
trust upon the same terms and conditions so applied to such terminated trust;
provided, however, that in connection with any such termination (A) none of the
creation of such new trust, the termination of the trust set forth in the Trust
Agreement or the transactions consummated in connection therewith will have any
adverse impact on any of Lessee's rights or the Indenture Trustee's rights
under the Operative Agreements (including the first priority lien status of the
Lien of the Trust Indenture), (B) Lessee shall have no responsibility to
indemnify any Indemnified Party under any provision of any Operative Agreement
for any Taxes or other consequences that in either case would not have been
incurred but for such termination and transfer, (C) the Owner Participant shall
indemnify Lessee and the Indenture Trustee for any costs, expenses, taxes or
other consequences that in either case would not have been incurred but for
such termination and transfer, (D) the Owner Participant shall provide Lessee
and the Indenture Trustee with an opinion in form and substance reasonably
satisfactory to them as to the validity of such termination and transfer, and
(E) immediately after such transfer, the beneficiary of the new trust shall be
the same as the beneficiary of the trust set forth in the Trust Agreement,
unless the Owner Participant makes a transfer complying with Section 8(l). The
Owner Participant further agrees (x) promptly to provide instructions to the
Owner Trustee, upon the request of the Owner Trustee and as otherwise required
or permitted under the Trust Agreement, so as to enable the Owner Trustee to
perform its duties and obligations under the Operative Agreements in accordance
with the terms and provisions thereof and (y) not to remove the institution
acting as Owner Trustee, and not to replace the institution acting as Owner
Trustee in the event that such institution resigns as Owner Trustee, unless the
Owner Participant shall have consulted in good faith with Lessee prior to such
removal or replacement; provided, that no such consultation shall be required
if a Lease Event of Default shall have occurred and be continuing.
PARTICIPATION AGREEMENT [N397SW]
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(w) [Intentionally Reserved].
(x) Withholding Taxes. The Original Loan Participant
represents that it is exempt from United States withholding taxes, and
covenants that, if required to obtain or renew such exemption, it will properly
prepare and promptly furnish to each of the Owner Trustee, the Indenture
Trustee and Lessee Internal Revenue Service Form 1001, Form 4224 (with respect
to each tax year) or Form W-8, whichever is applicable. The Original Loan
Participant represents, warrants and covenants that it will promptly notify the
Owner Trustee, the Indenture Trustee and Lessee if it transfers any interest in
its Series SWA 1995 Trust N397SW-I Certificate to any Person, other than
pursuant to Section 17 or 18 hereof or Section 8.03(e)(ii) of the Indenture.
The Original Loan Participant shall indemnify (on an after-tax
basis) and hold harmless the Indenture Trustee, the Owner Trustee, Lessee and
the Owner Participant against any United States withholding taxes (and related
interest and penalties) which the Indenture Trustee fails to withhold on
payments to it as a result of its failure to provide the required certificate
or form or the invalidity of any certificate or form provided by it pursuant to
this Section 8(x) or as a result of any inaccuracy of the representations set
forth in the immediately preceding paragraph. Any amount payable hereunder
shall be paid within 30 days after receipt by the Original Loan Participant of
a written demand therefor and shall include interest at the Overdue Rate from
the date any withholding tax has been paid by such party until the date
indemnified by the Original Loan Participant.
(y) Discharge of Trust Indenture. The Owner Participant
agrees that, at Lessee's expense (including, without limitation, reasonable
attorneys' fees and other out-of-pocket expenses of the Owner Trustee and Owner
Participant), upon request of Lessee, the Owner Participant will negotiate
promptly in good faith with respect to any arrangements pursuant to which the
Trust Indenture may be satisfied and discharged in respect of the Certificates
in accordance with subsection (ii) or (iii) of Section 10.01(a) of the Trust
Indenture, and the Owner Trustee agrees to act upon the instructions of the
Owner Participant in connection therewith; provided, however, that the
determination whether to so satisfy and discharge the Certificates shall be in
the Owner Participant's sole discretion. The Owner Trustee agrees that during
such time as a Lease Event of Default has not occurred it will not, and the
Owner Participant agrees that during such time as a Lease Event of Default has
not occurred it will not cause the Owner Trustee to, take any action to effect
such satisfaction and discharge except upon the request of Lessee made pursuant
to this Section 8(y).
(z) Permitted Investments. The Owner Trustee and the
Indenture Trustee agree that (i) so long as the Trust Indenture has not been
duly discharged, any profit, income, interest, dividend or gain realized upon
the maturity, sale or other disposition of any Permitted Investment made by the
Indenture Trustee pursuant to Section 9.04 of the Trust Indenture, and paid to
Lessee on behalf of the Owner Trustee by the Indenture Trustee in accordance
with the terms of such Section 9.04, shall be entirely for the account of, and
the sole property of, Lessee who, for such purposes, shall not be deemed to be
acting as agent of the Owner Trustee, and Lessee shall have no obligation to
pay over such profit, income, interest, dividend or gain to the Owner Trustee,
(ii) any such profit, income, interest, dividend or gain not theretofore
PARTICIPATION AGREEMENT [N397SW]
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distributed shall, upon discharge of the Trust Indenture, be paid by the
Indenture Trustee to Lessee, unless instructed by the Owner Participant to
distribute such funds to the Owner Participant or the Owner Trustee to the
extent the Owner Participant or the Owner Trustee is owed any amounts under the
Operative Agreements that have not been paid when due, and (iii) to the extent
the Owner Trustee or Owner Participant is owed any amounts under the Operative
Agreements by Lessee and such amounts are not paid when due, the Owner
Participant may cause the Indenture Trustee to distribute and apply such
profit, income, interest, dividend or gain realized upon the maturity, sale or
other disposition of investment of funds in satisfaction or partial
satisfaction of the amounts so due.
(aa) Assumption on Exercise of Purchase Option With
Installments. If Lessee shall have elected both (i) to assume all of the
rights and obligations of Lessor under the Trust Indenture in accordance with
Section 7.03 of the Trust Indenture and (ii) to pay to Lessor the installments
specified in the proviso to Section 18.2(c) of the Lease, then the consummation
of such assumption shall be subject to the following additional conditions:
(i) in addition to the
provisions contemplated by clauses (a) and (b) of Section 7.03 of the
Trust Indenture, the Trust Indenture shall be amended (1) to provide
for an additional series of loan certificates (the "EBO Certificates")
to be issued to the Owner Participant on the Special Purchase Option
Date to evidence the aggregate amount calculated pursuant to Section
18.2(c) of the Lease payable after the first EBO Installment Payment
Date, (2) to provide for distribution of payments in respect of the
EBO Certificates to be made to the Owner Participant on the payment
date therefor out of funds available therefor after all amounts then
due to the other Holders and the Indenture Trustee have been paid, (3)
to include the failure to pay any installment of EBO Certificates
within seven Business Days of when due as an Indenture Event of
Default, (4) to include a right so long as the EBO Certificates shall
be outstanding for the Owner Participant or the Owner Trustee to (x)
purchase the other Certificates under circumstances similar to, and on
the same terms as provided in, clause (e)(ii) of Section 8.03 of the
Trust Indenture, and (y) cure Indenture Events of Default
substantially as provided in clause (e)(i) of Section 8.03 of the
Trust Indenture (it being understood that upon any assumption pursuant
to Section 7.03 of the Trust Indenture the other provisions of the
Trust Indenture intended for the benefit of the Owner Participant or
Owner Trustee, other than as to Excluded Payments or Section 9
thereof, shall be of no further force and effect), (5) to provide that
the Owner Participant and the Owner Trustee shall have no voting or
consent rights under the Trust Indenture by reason of being the holder
of the EBO Certificates or otherwise until all other Certificates have
either been paid in full or been purchased by the Owner Participant or
the Owner Trustee (pursuant to the provisions contemplated by
clause(i)(4) of this Section 8(aa) by the reference therein to clause
(e)(ii) of Section 8.03 of the Trust Indenture), except that without
the consent of the Owner Participant the Trust Indenture may not be
amended, modified or supplemented to reduce the amount or extend the
time of payment of any amount owing or payable under the EBO
Certificates, and (6) to confirm that, although the Owner Participant
cannot participate in the exercise of remedies under the Trust
Indenture, it shall not be precluded from
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demanding, collecting, suing for or otherwise receiving and enforcing
payment of the EBO Certificates;
(ii) for purposes of satisfaction of
the conditions of Section 7.03 of the Trust Indenture, (1) the EBO
Certificates shall be treated separately from the other Certificates
such that matters required to be satisfactory to the Holders (or the
Indenture Trustee) must be satisfactory both to the Owner Participant
and to the holders of the other Certificates, (2) the EBO Certificates
shall be obligations assumed by the Lessee under the Assumption
Agreement (as defined in Section 7.03 of the Trust Indenture), and (3)
references in said Section 7.03 to the transactions contemplated by
said Section 7.03 shall also include the transactions contemplated by
this Section 8(aa);
(iii) upon the Lessee's payment in
full of all amounts due on or prior to the Special Purchase Option
Date in accordance with clauses (i) and (ii) of Section 18.2(c) of the
Lease and compliance with all of the conditions to such assumption in
accordance with Section 7.03 of the Trust Indenture and clause (i) of
this Section 8(aa), (1) the Owner Trustee shall assign the right to
the remaining installments of the Special Purchase Price to the Owner
Participant, (2) the EBO Certificates shall be issued to the Owner
Participant in the aggregate amount of such remaining installments of
the Special Purchase Price, and (3) the Owner Trustee shall Transfer
to the Lessee all right, title, and interest of the Owner Trustee in
and to the Aircraft; and
(iv) the Owner Participant shall
have received such additional security with respect to the EBO
Certificates as it may reasonably request, it being understood that
the Lessee's taking out an irrevocable direct-pay letter of credit
issued by a Qualified Issuing Bank for the account of the Owner
Participant in an aggregate amount at any time equal to the remaining
installments of the Special Purchase Price plus an amount equal to 20
days of interest thereon calculated at the Past Due Rate shall be
deemed to be acceptable additional security.
(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or Section 8.03(e)(ii)
of the Indenture, the Original Loan Participant covenants that it will not (i)
transfer or (ii) grant participations in, its Certificate to any Person unless
such Person represents, warrants and covenants in writing to the Original Loan
Participant and, in the case of a transfer, to the Owner Participant and
Lessee, (A) to the effect set forth in Section 8(x) hereof and (B) further
represents and warrants to the Original Loan Participant and, in the case of a
transfer, to the Owner Participant and Lessee either that (a) no part of the
funds used by it to acquire its Series SWA 1995 Trust N397SW-I Certificate or
participation constitutes "plan assets" of any "employee benefit plan" within
the meaning of ERISA or any "plan" within the meaning of Section 4975(e)(1) of
the Code, or (b) its purchase or acquisition of such Series SWA 1995 Trust
N397SW-I Certificate or participation will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of ERISA. Any such
Person shall require any transferee of its interest to make the
representations, warranties and covenants in the preceding sentence.
(cc) [Intentionally Reserved].
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(dd) Deferred Equity. The Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and not with or for
the benefit of any other party to this Agreement or the Holders of any
Certificates), that, so long as no Lease Event of Default or Lease Default (of
the type described in Section 14.1 or 14.5 of the Lease) shall have occurred
and be continuing and no refunding or refinancing of the Certificates shall
have occurred prior to the Deferred Equity Date, it will pay or cause to be
paid to the Indenture Trustee on the Deferred Equity Date sufficient funds to
effect the payment of an amount (the "Deferred Equity Amount") equal to the
amount due on such date in respect of principal together with accrued interest
on the Certificates from their date of issuance to and including the Deferred
Equity Date. The Owner Participant and the Owner Trustee hereby direct the
Indenture Trustee, and the Indenture Trustee hereby agrees, to apply the
Deferred Equity Amount to the payment of principal and interest on the
Certificates which may be due and payable pursuant to the provisions of the
Trust Indenture on the Deferred Equity Date. The Owner Participant agrees to
make payment of the Deferred Equity Amount in immediately available funds on or
before 11:00 a.m., New York City time, on the Deferred Equity Date; provided,
that the Owner Participant agrees to give Lessee notice by 11:00 a.m., New York
City time, on the second Business Day prior to the Deferred Equity Date if it
shall not make such payment. The Indenture Trustee agrees to give Lessee
prompt notice if it shall not have received such payment by noon, New York City
time, on the Deferred Equity Date. The Owner Participant further agrees with
Lessee, and only with Lessee (and not with or for the benefit of any other
party to this Agreement or the Holders of any Certificates), to fund the
obligations of the Owner Trustee arising pursuant to clause (5) of Section
18(a) (the "Second Payment Amount"). In the event the Owner Participant fails
to make any payment in respect of the Deferred Equity Amount or the Second
Payment Amount when required, or if the Owner Trustee shall fail to make any
such payment when required, in any such case no Indenture Default or Indenture
Event of Default shall arise solely by virtue of such failure. Further, if in
any such case Lessee shall make an Advance as required by Section 3.8 of the
Lease in circumstances where the Owner Participant was required to pay the
Deferred Equity Amount or the Second Payment Amount but failed to do so, Lessee
may to the extent of such failure obtain reimbursement in the manner and to the
extent provided in Section 3.8 of the Lease for the Advance, together with
interest on such amount at the rate described below from (and including) the
date of the making of such Advance to (but excluding) the date of reimbursement
by the Owner Participant or the date Lessee deducts such Advance from other
payments to the extent and as provided in Section 3.8 of the Lease. Interest
shall accrue on the amount of the Advance at an annual rate equal to 5% in
excess of the Base Rate, unless the Advance is made when any Lease Event of
Default or Lease Default (of the type described in Section 14.1 or 14.5 of the
Lease) shall have occurred and be continuing, in which event interest shall
accrue on the amount of the Advance at the Base Rate, but in each case not to
exceed the maximum rate permitted by applicable law. All amounts paid to
Lessee by the Owner Participant in respect of the Advance or deducted by Lessee
pursuant to Section 3.8 of the Lease shall be applied first to payment to
Lessee of interest and then to payment to Lessee of amounts equal to the
Advance. Notwithstanding anything to the contrary contained in the Operative
Agreements, the Owner Participant shall have no obligation to pay or fund any
amount under this Section 8(dd) in excess of $2,600,000. Nothing in this
Section 8(dd) or in clause (5) of Section 18(a) shall be deemed to alter the
non-recourse nature of the Owner Trustee's borrowings under the Trust Indenture
or limit the provisions of Section 2.09 thereof.
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(ee) Lessee as Pricing Agent for Certificate. The Owner
Trustee hereby appoints Lessee as its agent to select the pricing provisions
and related Interest Periods in respect of the Series SWA 1995 Trust N397SW-I
Certificate, such appointment to be effective so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing.
SECTION 9. Payments to Lessee of Trust Indenture
Monies. The Owner Participant hereby agrees to instruct the Owner Trustee to
promptly distribute any money received by it pursuant to Section 7.01 or 10.04
of the Trust Indenture to Lessee to the extent such amounts were paid by Lessee
or on behalf of Lessee and the Owner Trustee or the Owner Participant is not
owed any amounts under any of the Operative Agreements by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and reinvest all money
so held by it in such Permitted Investments as Lessee deems appropriate.
Lessee will apply such money to the payment of previously unclaimed payments
with respect to the Certificates when and as claims for payment are made by the
Holders of such Certificates. As compensation for its services pursuant to
this Section 9, Lessee shall be entitled to an annual fee from the Owner
Participant in an amount to be agreed to at the time by Lessee and the Owner
Participant but in no event shall such fee exceed at any time the amount of
earnings on the monies so held in trust and, subject to the netting provisions
of the second succeeding sentence, distributed at such time to the Owner
Participant. Any net losses on such investment shall be for the account of
Lessee. Any net earnings on such investment shall be distributed from time to
time by Lessee to the Owner Participant after deducting therefrom any portion
of such fee then due and unpaid. Upon the date required by applicable law
dealing with unclaimed property, Lessee will distribute to the Owner
Participant any amount held by it pursuant to this Section 9 and not previously
applied to the payment of the Certificates, after deducting therefrom any
portion of such fee then due and unpaid.
SECTION 10. Other Documents; Amendment. Lessee
acknowledges receipt of executed copies of the Trust Agreement and Trust
Indenture and hereby consents in all respects to the execution and delivery of
the Trust Agreement and Trust Indenture and to all the terms thereunder,
including, without limitation, the assignment under the Trust Indenture of
Lessor's rights under the Lease. Each of the Owner Participant and the Owner
Trustee hereby (A) agrees with Lessee and the Indenture Trustee to comply with
all of the terms of the Trust Agreement and, to the extent the same purports or
is stated to bind the Owner Participant, the Trust Indenture (each as the same
may hereafter be amended or supplemented from time to time in accordance with
the terms thereof) applicable to it, to the extent such non-compliance would be
adverse to such party; and (B) subject to Section 8(v), agrees with Lessee and
the Indenture Trustee not to amend, supplement or otherwise modify any
provision of the Trust Agreement in a manner adversely affecting such party
without the prior written consent of such party. In addition, unless a Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing, the Indenture Trustee
and the Owner Trustee hereby agree for the benefit of Lessee that without the
consent of Lessee they will not (and the Owner Participant agrees that it will
not cause the Owner Trustee to) amend, supplement or otherwise modify any
provision of the
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Trust Indenture in a manner adversely affecting Lessee. The Indenture Trustee
and the Owner Trustee agree to promptly furnish to Lessee copies of any
supplement, amendment, waiver or modification of any of the Operative
Agreements to which Lessee is not a party. Each Holder agrees that it will not
take any action in respect of the Trust Indenture Estate except through the
Indenture Trustee pursuant to the Trust Indenture or as otherwise permitted by
the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee
covenants and agrees with the Participants, the Indenture Trustee and the Owner
Trustee, in its capacity as such and in its individual capacity, as follows:
(a) Further Assurances. Lessee will cause to be done,
executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in the name
of the Owner Trustee, and shall furnish to the Owner Trustee such information
as may be required to enable the Owner Trustee to make application for such
registration (at the expense of Lessee, including, without limitation,
reasonable attorneys' fees and expenses), and shall promptly furnish to the
Owner Trustee such information as may be required to enable the Owner Trustee
to timely file any reports required to be filed by it as the lessor under the
Lease or as the owner of the Aircraft with any governmental authority
(including tax authorities), it being understood that Lessee shall not be
required to comply with this covenant to the extent that SBC's or the Owner
Participant's failure to comply with its covenant in Section 8(b) with regard
to its citizenship makes such compliance by Lessee impossible.
(b) Filing and Recording, Etc. Lessee, at its expense,
will, at the request of any party hereto, take, or cause to be taken, such
action with respect to the recording, filing, rerecording and refiling of the
Lessee FAA ▇▇▇▇ of Sale, the Trust Agreement, the Lease, all Lease Supplements,
the Trust Indenture, all Trust Supplements and any financing statements or
other instruments as are necessary to create or maintain, so long as the Trust
Indenture or the Lease is in effect, the perfection of the security interests
created by the Trust Indenture and any security interest that may be claimed to
have been created by the Lease and the ownership interest of the Owner Trustee
in the Aircraft. Lessee agrees, upon the request and at the sole expense of
the Owner Participant, to take all reasonable acts requested by the Owner
Participant in complying with its obligations under clause (A) or (B) of the
second sentence of Section 8(b).
(c) FAA Filings. Upon execution and delivery, the
following documents shall be filed for recording with the FAA in the following
order of priority: first, the Lessee FAA ▇▇▇▇ of Sale; second, the FAA
registration application referred to in Section 4(a)(ix)(2) (together with any
required affidavits); third, the Trust Indenture, with the Trust Agreement and
the Trust Supplement covering the Aircraft attached; and fourth, the Lease,
with the Lease Supplement covering the Aircraft, the Trust Indenture and the
Trust Supplement covering the Aircraft attached. Lessee agrees to furnish the
Participants and the Indenture Trustee with
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copies of the foregoing documents with recording data as promptly as
practicable following the issuance of same by the FAA.
(d) Annual Compliance Opinions. Lessee will furnish to
Owner Trustee and Indenture Trustee annually after the execution hereof (but
not later than December 1 of each year), commencing with the year 1996,
opinions of counsel for Lessee selected by Lessee and reasonably satisfactory
to Owner Trustee and Indenture Trustee stating that, in the opinion of such
counsel, either (a) such action has been taken (or specifying any action which
must be taken) with respect to the recording, filing, rerecording and refiling
of (i) the appropriate Operative Agreements and any supplements and amendments
thereto, (ii) UCC financing statements, and (iii) such other filings or
recordings as are necessary to maintain for the 15-month period succeeding the
date of such opinion the perfection of Owner Trustee's and Indenture Trustee's
title to and interest in the Aircraft and the Operative Agreements and the
ownership interest of Owner Trustee in the Aircraft, reciting the details of
such actions, or (b) no such action is necessary to maintain for the 15-month
period succeeding the date of such opinion the perfection of such title and
interest.
(e) Engine Purchase Agreement. Lessee agrees to furnish
the Owner Trustee and the Indenture Trustee, promptly upon demand therefor, an
agreement (the "Engine Purchase Agreement Assignment") assigning the rights of
Lessee under the purchase agreement pursuant to which Lessee originally
acquired the Engines (the "Engine Purchase Agreement") to the Owner Trustee
(which rights are collaterally assigned to the Indenture Trustee under the
Trust Indenture), substantially in the form of the Purchase Agreement
Assignment, and to use its best efforts to obtain from the Engine Manufacturer
a consent and agreement in substantially the form of the Manufacturer's
Consent.
(f) Merger. Lessee will not consolidate with or merge
into any other Person or convey, transfer or lease all or substantially all of
its assets to any Person unless:
(i) the Person formed by such consolidation
or into which Lessee is merged or the Person which acquires by
conveyance, transfer or lease all or substantially all of the assets
of Lessee as an entirety, as the case may be (the "Successor") shall
be (i) a Person organized and existing under the laws of the United
States of America or any state thereof or the District of Columbia,
(ii) a "citizen of the United States" as defined in the Act, and (iii)
a United States certificated air carrier;
(ii) the Successor shall execute and deliver
to the Owner Trustee, the Indenture Trustee and the Participants an
agreement in form reasonably satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant containing an assumption by the
Successor of the due and punctual performance and observance of each
covenant and condition of the Operative Agreements to be performed or
observed by Lessee;
(iii) immediately after giving effect to such
transaction and as a result of giving effect to such transaction, no
Lease Default or Lease Event of Default shall have occurred and be
continuing;
PARTICIPATION AGREEMENT [N397SW]
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(iv) Lessee shall have delivered to the Owner
Trustee, the Indenture Trustee and each Participant an Officer's
Certificate and an opinion of counsel to the Successor reasonably
satisfactory to the Owner Trustee, the Indenture Trustee and each
Participant, each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement mentioned in
subparagraph (ii) above comply with this Section 11(f) (except that
such opinion need not refer to subparagraph (iii) above), that the
agreements entered into to effect such consolidation, merger,
conveyance, transfer or lease and such assumption agreement are legal,
valid and binding obligations of the Successor, enforceable against
the Successor in accordance with their respective terms (subject to
applicable bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and to general principles
of equity), and that all conditions precedent herein provided for
relating to such transaction have been complied with; and
(v) the Successor shall make such filings
and recordings (including those with the FAA pursuant to the Act) as
shall be necessary or desirable to evidence such consolidation,
merger, conveyance, transfer or lease with or to such Successor.
Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements with
the same effect as if the Successor had been named as Lessee therein. No such
conveyance, transfer or lease of all or substantially all of the assets of
Lessee as an entirety shall have the effect of releasing Lessee or any
successor Person which shall theretofore have become such in the manner
prescribed in this Section 11(f) from its liability in respect of any Operative
Agreement to which it is a party. Nothing contained herein shall permit any
lease, sublease or other arrangement for the use, operation or possession of
the Aircraft except in compliance with the applicable provisions of the Lease
(or any assignment by Lessee of its rights under the Lease, except in
connection with a transaction in compliance with the express provisions of this
Section 11(f)).
(g) Corporate Existence. Except as permitted by Section
11(f) hereof, Lessee shall at all times maintain its corporate existence.
Lessee covenants and agrees that it will at all times be a "citizen of the
United States" within the meaning of the Act.
(h) Certificate Schedule. Lessee will provide on behalf
of the Owner Trustee the amortization schedule for the Certificate to be issued
to the Original Loan Participant at least two days before the Delivery Date.
(i) No Certificate Ownership. Except as permitted by
Section 7.03 of the Trust Indenture, Lessee agrees that it will not, at any
time, hold any Certificates or any interest (including through another Person)
in any Certificates or any security secured by, in whole or in part, such
Certificates.
SECTION 12. Ownership of Aircraft. It is hereby
agreed among Lessee, the Owner Participant and the Owner Trustee that for all
purposes the Owner Trustee will be the owner of the Aircraft (except that the
Owner Participant will be the owner for income tax
PARTICIPATION AGREEMENT [N397SW]
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purposes and except to the extent and under the circumstances contemplated by
the proviso to Section 18.2(d) of the Lease) and Lessee will be the lessee
thereof, and each party hereto agrees to characterize the Lease as a lease for
income tax purposes and all other relevant purposes (subject to the election
referred to above).
SECTION 13. Notices; Consent to Jurisdiction. (a)
Except as otherwise provided in this Agreement respecting telephone notices,
all notices, demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be in writing and
shall be personally delivered or sent by registered or certified mail, postage
prepaid, or by prepaid telex, TWX or telegram (with messenger delivery
specified in the case of a telegram), or by telecopier, or by prepaid courier
service, and shall be deemed to be given for purposes of this Agreement on the
day that such writing is delivered or, if given by certified mail, three (3)
Business Days after being deposited in the mails, in accordance with the
provisions of this Section 13(a). Unless otherwise specified in a notice sent
or delivered in accordance with the foregoing provisions of this Section 13(a),
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telex, TWX or telecopier numbers) as follows:
(A) if to Lessee, the Owner Trustee, the Original Loan Participant, the
Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I hereto (and in the case of Owner Trustee a copy shall be
sent to the Owner Participant) or (B) if to a subsequent Owner Participant,
addressed to such subsequent Owner Participant at such address as such
subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Holder, addressed to such Holder at its
address set forth in the Register maintained pursuant to Section 2.03 of the
Trust Indenture.
(b) Each party to this Agreement (individually a "Party"
and collectively "Parties") irrevocably agrees that any legal suit, action or
proceeding brought by any other Party, which arises solely out of or relates
solely to the Operative Agreements or any of the transactions contemplated
hereby or thereby or any document referred to herein or therein, may be
instituted in the competent courts of the State of New York in New York County
or the United States District Court for the Southern District of New York and
that they, to the maximum extent permitted by law, hereby waive the right to
trial by jury in any such proceeding; provided, however, that the foregoing
provisions shall not apply to third party tort claims (but shall apply to an
indemnity claim with respect to such tort claim) and that the foregoing shall
not apply to any right a party may have to seek removal of such legal suit,
action or proceeding to federal court or to seek consolidation of any separate
legal suits, actions or proceedings brought by any one or more of the other
parties in the same or different jurisdictions. The agreement set forth in
this Section 13(b) is given solely for the benefit of the Parties, and such
agreement is not intended to and shall not (i) confer exclusive jurisdiction on
any court or (ii) inure to the benefit of any other Person.
SECTION 14. Change of Situs of Owner Trust. The
Owner Participant agrees that if, at any time, the Trust Estate becomes subject
to any Taxes for which it is indemnified pursuant to Section 7(b) hereof and
if, as a consequence thereof, Lessee should request that the situs of the trust
be moved to another state in the United States from the state in which it is
then located, the situs of the trust may be moved and the Owner Participant
will
PARTICIPATION AGREEMENT [N397SW]
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take whatever action may be reasonably necessary to accomplish such removal;
provided, that (A) Lessee shall provide such additional tax or other
indemnification as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Agreements of the Owner Participant shall
not be adversely altered as a result of the taking of such action, or the Owner
Participant shall be indemnified by Lessee to the former's reasonable
satisfaction for any such alteration, (C) the lien of the Trust Indenture on
the Trust Indenture Estate shall not be adversely affected by such action, and
Lessee shall execute and deliver such documents as may be requested by the
Indenture Trustee to continue the perfection and priority of the lien on the
Trust Indenture Estate, (D) the Owner Participant shall have received an
opinion or opinions of counsel (reasonably satisfactory to the Owner
Participant) in scope, form and substance reasonably satisfactory to the Owner
Participant to the effect that (I) the trust, as thus removed, shall remain a
validly established trust and the Trust Agreement and other Operative
Agreements shall remain valid, binding and enforceable in accordance with their
terms, (II) any amendments to the Trust Agreement necessitated by such removal
shall have been duly authorized, executed and delivered by the parties thereto
and shall constitute the legal, valid and binding obligations of such parties,
enforceable in accordance with their terms, (III) such removal will not result
in the imposition of, or increase in the amount of, any Tax or other expense,
cost or liability for which Lessee is not required to indemnify the Owner
Participant, the Owner Trustee or the Trust Estate pursuant to Section 7(b)
hereof (taking into account any additional indemnification provided by Lessee
pursuant to clause (A) of this sentence), (IV) such removal will not result in
any Loss of MACRS Deductions, Transaction Expense Deductions, Interest
Deductions or an Inclusion (as defined in the Tax Indemnity Agreement) with
respect to which Lessee is not required to indemnify the Owner Participant
pursuant to Section 6 of the Tax Indemnity Agreement (taking into account any
additional indemnification provided by Lessee pursuant to clause (A) of this
sentence), and (V) covering such other matters as the Owner Participant may
reasonably request, (E) if such removal involves the replacement of the Owner
Trustee, the Owner Participant shall have received an opinion of counsel to
such successor Owner Trustee in form and substance reasonably satisfactory to
the Owner Participant covering the matters addressed by the opinion delivered
pursuant to Section 4(a)(xiii) hereof, (F) Lessee shall indemnify and hold
harmless the Owner Participant on a net after-tax basis against any and all
reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees incurred by the Owner
Trustee or Owner Participant, in connection with such change of situs and (G)
no Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease)
or Lease Event of Default shall exist.
SECTION 15. Miscellaneous.
(a) Consents under Lease and Trust Indenture. Each of
the Owner Participant and each Holder covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of the Owner
Trustee, as Lessor, or the Indenture Trustee under the terms of the Lease,
which by its terms is not to be unreasonably withheld by the Owner Trustee, as
Lessor, or by the Indenture Trustee. Each Holder covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Indenture Trustee under the terms hereof or in the Trust Indenture, which by
its terms is not to be unreasonably withheld by the Indenture Trustee.
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(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, the Owner Trustee, the Indenture Trustee,
the Owner Participant and the Original Loan Participant provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, the
Original Loan Participant's and the Owner Participant's obligations under any
and all thereof, shall survive the making available of the respective
Commitments by the Participants, the delivery or return of the Aircraft, the
transfer of any interest of the Owner Participant in the Trust Estate or the
Aircraft or any Engine or the transfer of any interest by any Holder in any
Certificate or the Trust Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Agreement, except as
otherwise expressly provided herein or therein.
(c) Counterparts; Waivers; Governing Law. This Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument. Neither this
Agreement nor any of the terms hereof may be terminated, amended, supplemented,
waived or modified, except by an instrument in writing signed by the party
against which the enforcement of the termination, amendment, supplement, waiver
or modification is sought; and no such termination, amendment, supplement,
waiver or modification shall be effective unless a signed copy thereof shall
have been delivered to Lessee, the Owner Participant, the Indenture Trustee and
the Owner Trustee. The terms of this Agreement shall be binding upon, and
inure to the benefit of and shall be enforceable by, Lessee, the Participants,
the Indenture Trustee and the Owner Trustee. THIS AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(d) No Recourse Against Owner Trustee. The parties
hereto agree that all of the statements, representations, covenants and
agreements made by the Owner Trustee (when made in such capacity) contained in
this Agreement and any agreement referred to herein other than the Trust
Agreement, unless expressly otherwise stated, are made and intended only for
the purpose of binding the Trust Estate and establishing the existence of
rights and remedies which can be exercised and enforced against the Trust
Estate. Therefore, anything contained in this Agreement or such other
agreements to the contrary notwithstanding (except for any express provisions
that the Owner Trustee is responsible for or is acting in or making
representations or agreements in its individual capacity), no recourse shall be
had with respect to this Agreement or such other agreements against the Owner
Trustee in its individual capacity or against any institution or person which
becomes a successor trustee or co-trustee or any officer, director, trustee,
servant or direct or indirect parent or controlling person or persons of any of
them; provided, however, that this Section 15(d) shall not be construed to
prohibit any action or proceeding against any party hereto for its own willful
misconduct or grossly negligent conduct; and provided, further, that nothing
contained in this Section 15(d) shall be construed to limit the exercise and
enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement and the other Operative Agreements.
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(e) Duties Limited. No Participant shall have any
obligation or duty to Lessee, to any other Participant or to others with
respect to the transactions contemplated hereby except those obligations or
duties of such Participant expressly set forth in this Agreement and the other
Operative Agreements, and no Participant shall be liable for performance by any
other party hereto of such other party's obligations or duties hereunder.
Without limitation of the generality of the foregoing, under no circumstances
whatsoever shall any Participant be liable to Lessee, nor shall any Participant
be liable to any other Participant, for any action or inaction on the part of
the Indenture Trustee or the Owner Trustee in connection with the transactions
contemplated herein, whether or not such action or inaction is caused by the
willful misconduct or gross negligence of the Indenture Trustee or the Owner
Trustee.
(f) Binding on Parties and Successors. This Agreement
shall be binding upon and shall inure to the benefit of and shall be
enforceable against, the parties hereto and their respective successors and
permitted assigns including each successive holder of any Certificate issued
and delivered pursuant to this Agreement or the Trust Indenture whether or not
an express assignment to such holder of rights and obligations under this
Agreement has been made.
(g) Enforceability Representations. Every representation
or warranty contained herein as to the enforceability of any Operative
Agreement shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity.
(h) Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred and be continuing during the Term, none of the
Participants, the Indenture Trustee or the Owner Trustee will, through its own
actions or breaches of any of its obligations under the Operative Agreements,
interfere in the quiet enjoyment of the Aircraft by Lessee or any Permitted
Sublessee.
SECTION 16. Transaction Costs; Invoices and Payment
of Expenses. (a) The parties hereto agree that the term "Transaction Costs"
shall mean (i) with respect to the closing on the Delivery Date and the
subsequent placement of the permanent debt pursuant to Section 18 hereof, the
reasonable and actual fees, expenses and disbursements of (1) Potter ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, special counsel for the Indenture Trustee, (2) ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
counsel for the Owner Trustee, (3) ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, special
counsel in Oklahoma City, Oklahoma, (4) Shearman & Sterling, special counsel
for the underwriters in a potential refinancing transaction pursuant to Section
18 hereof (to the extent not payable by the underwriters, if any), (5) ▇▇▇▇▇▇ &
▇▇▇▇▇▇ L.L.P., special counsel for Lessee, but only to the extent of their
expenses and disbursements and (6) Office of the General Counsel of the
Original Loan Participant, (ii) all fees, taxes and other charges payable in
connection with the recording or filing of instruments and financing statements
in respect of the transactions contemplated hereby, (iii) the initial fee and
initial reasonable and actual disbursements of the Owner Trustee under the
Trust Agreement, (iv) the initial fee and initial reasonable and actual
disbursements of the Indenture Trustee under the Trust Indenture, (v) the fee
and expenses of Aero Economics, Inc. (or of such other appraiser as shall be
acceptable to Lessee and the
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Owner Participant) with respect to the appraisal of the Aircraft required on or
before the Delivery Date pursuant to Section 4(a) hereof, (vi) the advisory
fees and expenses of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ Financial Corporation in respect of the
transactions contemplated hereby on the Delivery Date, (vii) the reasonable
out-of-pocket disbursements, costs and expenses of the Original Loan
Participant relating to the transactions contemplated hereby, (viii) the
reasonable out-of-pocket expenses of the Owner Participant relating to the
transactions contemplated hereby (excluding the fees, expenses and
disbursements of its counsel), (ix) the initial fee, if any, of the Original
Loan Participant in respect of the transactions contemplated hereby, (x) the
placement or underwriting fees, commissions and expenses, if any, in placing
the permanent debt pursuant to Section 18 hereof and all costs and expenses
associated with a public offering, if any, pursuant thereto, and (xi) printing
and distribution costs in respect of the transactions contemplated hereby.
(b) Each of the Owner Trustee, the Indenture Trustee,
Lessee and the Participants shall promptly submit to the Owner Participant
copies of invoices of the Transaction Costs as they are received. Lessee shall
also be provided with a copy of any ▇▇▇▇ for legal expenses, with an
opportunity to review and approve it (such approval not to be unreasonably
withheld or delayed). Provided the transactions contemplated hereby are
consummated and the Owner Participant receives invoices and any required
approvals for Transaction Costs within six months of the relevant closing date
and no Lease Default (of the type referred to in Section 14.1 or 14.5 of the
Lease) or Lease Event of Default shall then exist, the Owner Participant agrees
to pay such Transaction Costs incurred in connection with the closing of this
transaction on the Delivery Date (up to a maximum amount of $200,000) and
incurred in connection with the refinancing or refunding of the Certificates
pursuant to Section 18 (up to a maximum amount of $300,000), either directly or
by transferring to the Owner Trustee from time to time such amount as shall be
necessary in order to enable the Owner Trustee to pay such Transaction Costs.
To the extent of funds received by it, the Owner Trustee agrees to pay all
invoices of Transaction Costs that have been so approved promptly upon receipt
thereof. Notwithstanding the foregoing, Lessee, (x) at its option, may pay
directly any Transaction Costs in excess of (i) 0.365% of Lessor's Cost
incurred in connection with the closing of this transaction on the Delivery
Date and (ii) 0.625% of Lessor's Cost incurred in connection with the
refinancing or refunding of the Certificates pursuant to Section 18, (y) shall
pay the fees of its special counsel and all Transaction Costs not required to
be paid by the Owner Participant hereunder and (z) in the event that the
transactions contemplated hereby shall not be consummated, Lessee shall pay all
Transaction Costs plus the reasonable fees, expenses and disbursements of the
Owner Participant's special counsel, White & Case, except that the fees,
expenses and disbursements of the Owner Participant (including those relating
to its counsel) shall be borne by the Owner Participant if such failure to
consummate the transactions results from the failure of the Owner Participant
to close after all conditions precedent to the Owner Participant's funding
(other than those conditions within the control of the Owner Participant) of
its Commitment set forth herein have been satisfied. In any and all events,
Lessee agrees to pay on a net after-tax basis the reasonable out-of-pocket
costs and expenses (including counsel fees) of each Indemnified Party incurred
in connection with the entering into or giving or withholding of any future
waiver, modification, supplement, consent, amendment or other action with
respect to any Operative Agreement which (a) is requested by Lessee, (b)
results from any adjustment pursuant to Section 3.7 of the Lease, or (c) is
necessary
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to effectuate the intent of any Operative Agreement. In addition, upon such
failure to consummate, Lessee shall pay the Original Loan Participant any
applicable Break Amount.
SECTION 17. Optional Redemption of Certificates.
(a) Subject to paragraph (d) below, in the event that Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant requesting that there be effected a voluntary redemption of all or
part of the Outstanding Certificates by the Owner Trustee as part of a
refunding or refinancing transaction, the Owner Participant agrees to negotiate
promptly in good faith to conclude an agreement with Lessee as to the terms of
such refunding or refinancing transaction (including the terms of any debt to
be issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Refinancing Certificate") setting forth (i) the
proposed date on which the Outstanding Certificates will be redeemed,
describing the new debt to be issued and the other aspects of such
refunding or refinancing transaction to be consummated (such date, the
"Refinancing Date", which date shall be determined so as to comply
with Section 6.03(a) of the Trust Indenture) and (ii) the following
information: (A) subject to the limitations set forth in this Section
17, any proposed adjusted ratio of debt evidenced by the Certificates
to the Owner Participant's investment in the beneficial ownership of
the Aircraft (such ratio, the "Debt/Equity Ratio"), (B) the principal
amount of debt to be issued by the Owner Trustee on the Refinancing
Date and, if such amount is less than the aggregate principal amount
of the Outstanding Certificates (as the Owner Participant may agree in
its sole discretion) the amount of any additional contribution to the
Trust Estate to be made by the Owner Participant on the Refinancing
Date, and (C) any proposed revised debt amortization and schedules of
Basic Rent, Stipulated Loss Value percentages and Termination Value
percentages and any revised Special Purchase Price (including any
installments thereof). The Refinancing Certificate shall not provide
for a Debt/Equity ratio of more than 4:1. Within ten (10) Business
Days of its receipt of the Refinancing Certificate, Lessee may demand
a verification of the information set forth in the Refinancing
Certificate in the manner described in Section 3.7 of the Lease. Upon
the acceptance by Lessee of the accuracy of the information set forth
in the Refinancing Certificate or the determination of such
information pursuant to such verification procedures (such
information, the "Refinancing Information") the appropriate parties
will take the actions specified in subparagraphs (2) through (6)
below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to the Owner Participant, the Owner Trustee and Lessee
(which may involve an underwriting agreement in connection with a
public offering of such debt or the purchase of such debt by a
publicly funded entity (or entities) or the sale of the Owner
Trustee's interest in the Trust Estate and/or the Aircraft and its
simultaneous resale to the Owner Trustee) with the institution or
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institutions to be named therein (A) providing for (i) the issuance
and sale by the Owner Trustee to such institution or institutions on
the Refinancing Date of debt securities (the "New Debt") in an
aggregate principal amount specified in the Refinancing Information,
(ii) the application of the proceeds of the sale of the New Debt, plus
any additional contribution to the Trust Estate, to the redemption of
all such Certificates on the Refinancing Date and the payment of any
other amounts payable to the Holders under the Operative Agreements on
the Refinancing Date, and (iii) the payment of the excess, if any, of
such proceeds over the amount necessary to effect such redemption to
the Owner Trustee for payment to the Owner Participant and (B)
pursuant to which the parties to the refinancing transaction
(including the Owner Participant and Lessee but excluding any public
holders of debt) make such representations, warranties and covenants
as the Owner Participant or Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Basic Rent payable in respect of the
period from and after the Refinancing Date shall be as provided in the
Refinancing Information (and shall take into account any variation of
the Deferred Equity Amount paid by or on behalf of the Owner
Participant pursuant to Section 8(dd), if applicable, from the
corresponding Assumed Interest Amount with respect to the Deferred
Equity Date), (ii) amounts payable in respect of Stipulated Loss Value
and Termination Value from and after the Refinancing Date shall be as
provided in the Refinancing Information, and (iii) in the event that
the Series SWA 1995 Trust N397SW Certificates shall have been publicly
issued, the early termination notice revocation and payment provisions
shall be modified to comport with the applicable notice and payment
requirements of The Depository Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing of the New Debt in like manner
as the Certificates and will enter into such amendments and
supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) unless otherwise agreed to by the Owner
Participant (acting in its sole discretion) and whether or not such
refunding or refinancing transaction is consummated, Lessee shall pay
on a net after-tax basis all of the reasonable out-of-pocket expenses
of all parties to such refunding or refinancing, including, without
limitation, the reasonable fees and expenses of such parties' counsel
(including allocated costs of the Original Loan Participant's in-house
counsel) and any related loan or commitment fees; and
(6) subject to compliance by the Owner
Trustee with all applicable terms and conditions for voluntary
redemption under the Trust Indenture and this Agreement, each Holder
of a Certificate being refinanced or refunded will transfer on the
applicable Redemption Date to the Owner Trustee each Certificate held
by it immediately prior to such refunding or refinancing for
cancellation (and the Owner Trustee shall cancel the same), against
simultaneous receipt by such Holder of payment for the then
outstanding principal amount of such Certificate, accrued and unpaid
PARTICIPATION AGREEMENT [N397SW]
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interest thereon, Premium, if any, plus in the case of the Series SWA
1995 Trust N397SW-I Certificates, Break Amount, if any, together with
payment in full of all other amounts then payable to such Holder and
the Indenture Trustee hereunder or under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a
public offering of the New Debt, the Owner Participant shall have the right
(but not the obligation) to review and approve (which approval shall not be
unreasonably withheld) any registration statement filed with the SEC to be
employed in connection therewith. Any public offering of the New Debt shall
not, except as required by Lessee, contain any restrictions on the sale to
Holders who may use ERISA funding sources. It is expressly understood that the
Owner Participant shall have no obligation hereunder to consent to such public
refunding or refinancing if, in its good faith judgment, such refunding or
refinancing increases its or any of its Affiliates' exposure to (i) liabilities
under federal or state securities laws, (ii) regulation under state or federal
securities laws, (iii) the need to disclose publicly information that is not
generally available to the public, or (iv) being adversely affected in its
ability to engage in any other financing transaction, in each case to a level
unacceptable to it in its reasonable, good faith judgment. Any trustee of
public debt shall be (i) Wilmington Trust Company or (ii) a bank or trust
company in the United States and having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of trustee upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least
thirty (30) days' irrevocable written notice of the proposed date of the
optional refunding or refinancing.
(d) Anything in this Section 17 to the contrary
notwithstanding, (i) all agreements and instruments to be executed and
delivered by the Owner Participant or the Owner Trustee under this Section 17
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) no refinancing or refunding shall be consummated and neither
the Owner Participant nor the Owner Trustee shall be required to execute and
deliver any such agreement or instrument or to make any other arrangements
which in its opinion would result in any unreimbursed increased costs or
liability, including any adverse tax consequences or risk thereof (unless
indemnified against to its reasonable satisfaction) or would have any other
adverse effect on it, and (iii) the Owner Participant shall have no obligation
to make any additional investment in connection with any such refinancing.
(e) Without the consent of the Owner Participant, there
shall be no more than two optional refundings or refinancings under this
Section 17.
(f) Any refunding or refinancing pursuant to this Section
17 shall be effected in accordance with Section 6.03(a) of the Trust Indenture.
(g) When calculating any of the information required to
be set forth in a Refinancing Certificate, the Owner Participant shall make
such calculations in a manner which (A) maintains its Net Economic Return, (B)
minimizes the Net Present Value of Rents to the extent possible consistent with
clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc.
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75-28 (or any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) complies with Temp.
Treasury Reg. Section 1.861-10T or any successor thereto and uses the same
methodology and assumptions used by the Owner Participant in determining Basic
Rent, Stipulated Loss Values, Termination Values and Special Purchase Price on
the Delivery Date (except to the extent such assumptions have been altered
since the Delivery Date in connection with an adjustment to Rent pursuant to
Section 3.7 of the Lease).
(h) No refinancing or refunding pursuant to this Section
17 shall be permitted prior to the second anniversary of the Delivery Date or
during the continuance of a Lease Default or a Lease Event of Default.
SECTION 18. Interim Debt. (a) The parties hereto
acknowledge and agree that each Series SWA 1995 Trust N397SW-I Certificate
originally issued to the Original Loan Participant on the Delivery Date
represents interim debt financing and that it is intended that the Series SWA
1995 Trust N397SW-I Certificates be refinanced by Series SWA 1995 Trust N397SW
Certificates issued to new Holders. In connection therewith, in the event that
Lessee shall have given written notice to the Owner Trustee, the Indenture
Trustee, the Owner Participant and the Original Loan Participant that Lessee is
requesting a voluntary redemption of the Series SWA 1995 Trust N397SW-I
Certificates (in compliance with the provisions of Articles 6 and 15 of the
Trust Indenture) by the Owner Trustee as part of a refunding or refinancing
transaction, the Owner Participant agrees to negotiate promptly in good faith
with Lessee in connection therewith (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction, the
documentation to be executed in connection therewith and with respect to such
amendments to the Operative Agreements as may be necessary in order to
facilitate such permanent debt financing), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within five (5) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Section 18 Refinancing Certificate") setting forth
(i) the proposed date on which the Outstanding Series SWA 1995 Trust
N397SW-I Certificates will be redeemed, describing the new debt to be
issued and the other aspects of such refunding or refinancing
transaction to be consummated (such date, to be determined so as to
comply with Section 6.03(a) or 6.03(b) of the Trust Indenture (as
appropriate), the "Section 18 Refinancing Date") and (ii) the
following information: (A) the principal amount of debt to be issued
by the Owner Trustee on the Section 18 Refinancing Date, (B) and, if
such amount is less than the principal amount of the Outstanding
Series SWA 1995 Trust N397SW-I Certificates (as the Owner Participant
may agree in its sole discretion) the amount of any additional
contribution to the Trust Estate to be made by the Owner Participant
on the Section 18 Refinancing Date and (C) any proposed revised debt
amortization and schedules of Basic Rent, Stipulated Loss Value
percentages and Termination Value percentages and any revised Special
Purchase Price (including any installments thereof). The principal
amount of debt to be issued by the Owner Trustee on the Section 18
Refinancing Date shall not equal more than
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80.00% of Lessor's Cost. Within five (5) Business Days of its receipt
of the Section 18 Refinancing Certificate, Lessee may demand a
verification of the information set forth in the Section 18
Refinancing Certificate in the manner described in Section 3.7 of the
Lease. Upon the acceptance by Lessee of the accuracy of the
information set forth in the Section 18 Refinancing Certificate or the
determination of such information pursuant to such verification
procedures (such information, the "Section 18 Refinancing
Information") the appropriate parties will take the actions specified
in paragraphs (2) through (10) below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to Lessee, the Owner Participant and the Owner Trustee
(which, subject to subsection (d) below, may involve an underwriting
agreement in connection with a public offering of such debt or the
purchase of such debt by a publicly funded entity (or entities)) with
the institution or institutions to be named therein (A) providing for
(i) the issuance and sale by the Owner Trustee to such institution or
institutions on the Section 18 Refinancing Date of Series SWA 1995
Trust N397SW Certificates in an aggregate principal amount specified
in the Section 18 Refinancing Information (such debt securities, the
"Section 18 New Debt"), (ii) the application of the proceeds of the
sale of the Section 18 New Debt, plus any additional contribution to
the Trust Estate, to the redemption of the Series SWA 1995 Trust
N397SW-I Certificates Outstanding on the Section 18 Refinancing Date
and the payment of any other amounts payable to the Holders under the
Operative Agreements on the Section 18 Refinancing Date, all in
accordance with Section 6.03(b) of the Trust Indenture, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Basic Rent payable in respect of the
period from and after the Section 18 Refinancing Date shall be as
provided in the Section 18 Refinancing Information (and shall take
into account any variation of the sum of any interest or other payment
made pursuant to paragraph (5) or (5A) of this Section 18(a) and the
Deferred Equity Amount paid by or on behalf of the Owner Participant
pursuant to Section 8(dd), if applicable, from the Assumed Interest
Amount with respect to the Deferred Equity Date), (ii) amounts payable
in respect of Stipulated Loss Value, Termination Value and Special
Purchase Price from and after the Section 18 Refinancing Date shall be
as provided in the Section 18 Refinancing Information, and (iii) in
the event that the Series SWA 1995 Trust N397SW Certificates shall
have been publicly issued, the early termination notice revocation and
payment provisions shall be modified to comport with the applicable
notice and payment requirements of The Depository Trust Company or any
other depository;
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(4) the Owner Trustee will enter into an
agreement to provide for the securing of the Section 18 New Debt in
like manner as the Series SWA 1995 Trust N397SW-I Certificates and
will enter into such amendments and supplements to the Trust Indenture
(or such new indenture or other security agreement) as may be
necessary to effect such security;
(5) subject in all respects to the
provisions of Section 8(dd) and provided the Owner Participant shall
have provided the requisite funds in compliance with such Section
8(dd), if such refunding or refinancing shall be consummated on or
prior to December 31, 1995, the Owner Trustee shall pay to the
Original Loan Participant the Break Amount, if any (as indemnification
for the loss resulting from such refunding or refinancing), and all
accrued and unpaid interest on the Certificates, subject to Lessee's
obligations under Sections 3.4 and 3.8 of the Lease;
(5A) if such refunding or refinancing shall
be consummated after December 31, 1995, Lessee on behalf of the Owner
Trustee shall pay to the Original Loan Participant as Supplemental
Rent the Break Amount, if any (as indemnification for the loss
resulting from such refunding or refinancing), and all accrued and
unpaid interest on the Certificates (in each case, without duplication
of other amounts, if any, payable pursuant to any other provision of
the Operative Agreements);
(6) the Owner Trustee shall pay all of the
costs of any such refunding or refinancing so consummated, to the
extent the same are Transaction Costs required to be paid by the Owner
Participant pursuant to Section 16 above and such Transaction Costs
shall be appropriately considered in calculating any proposed revised
debt amortization and schedules of Basic Rent, Stipulated Loss Value
percentages and Termination Value percentages and the Special Purchase
Price;
(7) each Holder of the Series SWA 1995 Trust
N397SW-I Certificates will deliver to the Owner Trustee the Series SWA
1995 Trust N397SW-I Certificate held by it immediately prior to such
refunding or refinancing for cancellation (and the Owner Trustee shall
cancel the same), against simultaneous receipt by such Holder of
payment of the then outstanding principal amount of such Series SWA
1995 Trust N397SW-I Certificate, accrued and unpaid interest thereon
plus Break Amount, if any, together with payment in full of all other
amounts then payable to such Holder hereunder or under the Series SWA
1995 Trust N397SW-I Certificates or the Trust Indenture;
(8) the appropriate parties will amend such
of the Operative Agreements in such respects as shall be necessary to
reflect any amendments agreed upon by the parties thereto; provided,
that (i) all agreements and instruments to be executed and delivered
by the Owner Participant or the Owner Trustee under this Section 18
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) no refinancing or refunding shall be consummated and
neither Owner Participant nor the Owner Trustee shall be required to
execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would
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result in any unreimbursed increased costs or liability, including any
adverse tax consequences or risk thereof (unless indemnified against
to its reasonable satisfaction) or would have any other adverse effect
on it, and (iii) the Owner Participant shall have no obligation to
make any additional investment in connection with any such refinancing
(other than, for Lessee's sole benefit, the Deferred Equity Amount, if
applicable);
(9) the appropriate parties will execute and
deliver appropriate closing documents, execute and deliver appropriate
closing certificates and deliver appropriate opinions of counsel;
(10) the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 if, in
its opinion, there is a risk that such refinancing would result in any
unindemnified adverse consequences (including tax and, in the case of
a private refinancing, ERISA consequences); provided, however, that
the Owner Participant will be obligated to proceed with such
refinancing if Lessee agrees to indemnify the Owner Participant for
such unindemnified adverse consequences (any such indemnity to be
satisfactory to the Owner Participant) or provides compensation that
will maintain the Owner Participant's Net Economic Return if its
counsel cannot provide a tax opinion satisfactory to it that will
permit the Owner Participant to report properly the proposed
refinancing and rely on Lessee's indemnity; and
(11) unless otherwise agreed to by the Owner
Participant (acting in its sole discretion) and whether or not such
refunding or refinancing transaction is consummated and except to the
extent provided in paragraph (6) above, Lessee shall pay on a net
after-tax basis all of the reasonable out-of-pocket expenses of all
parties to such refunding or refinancing, including, without
limitation, the reasonable fees and expenses of such parties' counsel
(including allocated costs of the Original Loan Participant's in-
house counsel) and any related loan or commitment fees.
(b) Only one optional refinancing or refunding pursuant
to this Section 18 shall be permitted during the Term and such refinancing
shall occur on or prior to the second anniversary of the Delivery Date.
(c) Any refinancing or refunding pursuant to this Section
18 shall be of all Series SWA 1995 Trust N397SW-I Certificates then
Outstanding.
(d) Any public refinancing pursuant to this Section 18
shall comply with all the restrictions, limitations and conditions applicable
in the case of a public refinancing pursuant to Section 17(b) hereof.
(e) No refunding or refinancing pursuant to this Section
18 shall be permitted during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default.
(f) When calculating any of the information required to
be set forth in a Section 18 Refinancing Certificate, the Owner Participant
shall make such calculations in a
PARTICIPATION AGREEMENT [N397SW]
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manner which (A) maintains its Net Economic Return, (B) minimizes the Net
Present Value of Rents to the extent possible consistent with clause (A), (C)
is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28 (or any successor
thereto) and would not cause the Lease to constitute a "disqualified leaseback
or long term agreement" within the meaning of Section 467 of the Code (or any
successor thereto), and (D) satisfies the requirements of Temp. Treasury
Regulation Section 1.861-10T and any successor thereto and uses the same
methodology and assumptions used by the Owner Participant in determining Basic
Rent, Stipulated Loss Values, Termination Values and Special Purchase Price on
the Delivery Date (except to the extent such assumptions have been altered
since the Delivery Date in connection with an adjustment to Rent pursuant to
Section 3.7 of the Lease).
SECTION 19. Section 1110 Compliance. The
Participants and Lessee agree that the Owner Trustee, the Indenture Trustee and
the transactions contemplated by this Agreement and the other Operative
Agreements are intended to be, shall be and should be construed so as to be,
entitled to the full benefits of 11 U.S.C. Section 1110.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Treasurer
FORD MOTOR CREDIT COMPANY,
Owner Participant
By: USL CAPITAL CORPORATION,
as agent
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Investment Officer
Transportation and
Industrial Financing
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
Original Loan Participant
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual
capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
By: /s/ Pablo de la Canal
-----------------------------------
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as otherwise
expressly provided herein, but solely as
Indenture Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------
Senior Financial Services Officer
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SCHEDULE I
Names and Addresses
Lessee: With a copy to:
------ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President
Southwest Airlines Co. Bank of America National Trust and
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ Savings Association
▇.▇. ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇: ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Payment Instructions:
Federal Reserve Bank of S.F.
Owner Participant: ABA No. ▇▇▇▇▇▇▇▇▇
----------------- For the account of Bank of America National
Ford Motor Credit Company Trust and Savings Association
c/o USL Capital Corporation For credit to GPO Account Administration #5693
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Account No. 12331-83980
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Reference: Southwest Airlines Interim Debt
Attn: Portfolio Management, Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
M.S. 610
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Payment Instructions:
Citibank, N.A. Owner Trustee:
-------------
New York, New York Shawmut Bank Connecticut, National
ABA No. ▇▇▇▇▇▇▇▇▇ Association
For the account of Ford Motor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Credit Company ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Account Name: USL/FMCC DFO Wire Attn: Corporate Trust Administration
Account Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Account No. 4060-1687
Reference: T&IF Southwest Airlines
1995 Transaction Indenture Trustee:
-----------------
Wilmington Trust Company
▇▇▇▇▇▇ Square North
Original Loan Participant: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------- Wilmington, Delaware 19890-0001
Bank of America National Trust and Attn: Corporate Trust Administration
Savings Association Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
GPO Account Admin. #5693 Payment Instructions:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Trust Company
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Wilmington, Delaware
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇ ABA No. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ For the account of Southwest Airlines 1995-2
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Account No. 34523-0
Reference: N397SW
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Corporate Trust Administration
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SCHEDULE II
Commitments
Original Percentage of
Loan Participant: Lessor's Cost Dollar Amount
---------------- ------------- -------------
Bank of America National Trust
and Savings Association 80.0% $25,600,000.00
Owner Participant:
-----------------
Ford Motor Credit Company 20.0% $6,400,000.00
Total Commitments: 100.0% $32,000,000.00
================= ====== ==============
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▇▇▇▇▇▇▇▇ ▇▇▇
Appraisal
1. The fair market value of the Aircraft on the Delivery Date is equal to
Lessor's Cost.
2. The Aircraft is reasonably estimated to have:
(A) a useful life of 30.5 years;
(B) a residual value as of a date 24 years after the Delivery Date
of more than 20% of Lessor's Cost (without taking into account
any increase or decrease for inflation or deflation); and
(C) an estimated fair market value (taking into account expected
inflation or deflation) of not more than the Special Purchase
Price on January 1, 2014.
3. The Aircraft will not be "limited use property" as described in Rev.
Proc. 76-30, 1976-7. CB. 647.
4. Such other matters as may be reasonably requested by the Owner
Participant.
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