1
EXHIBIT 4.22
PARTICIPATION AGREEMENT
dated as of July 1, 1995
among
SOUTHWEST AIRLINES CO.,
Lessee,
NATIONSBANK, N.A.
Owner Participant,
BANK OF AMERICA ILLINOIS,
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 N602SW
2
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee . . . . . . . . . . . . . . . . . . . 5
SECTION 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Conditions Precedent to the Participations in the Aircraft . . . . . . . . . . . . . . 6
(i) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ii) No Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(iii) Original Loan Participant's Commitment . . . . . . . . . . . . . . . . . . . 7
(iv) Owner Participant's Commitment . . . . . . . . . . . . . . . . . . . . . . . 7
(v) Authorization, Execution and Delivery of Documents . . . . . . . . . . . . . 7
(vi) UCC-1's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(vii) Proof of Corporate Action, Etc . . . . . . . . . . . . . . . . . . . . . . . 8
(viii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ix) Title, Registration, Airworthiness, Etc. . . . . . . . . . . . . . . . . . . 9
(x) Representations and Warranties Accurate; No Event of
Default; No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xi) Opinions of Lessee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 10
(xii) Opinion of Manufacturer's Counsel . . . . . . . . . . . . . . . . . . . . . . 10
(xiii) Opinion of Owner Trustee's Counsel . . . . . . . . . . . . . . . . . . . . . 10
(xiv) Opinions of Owner Participant's Counsel . . . . . . . . . . . . . . . . . . . 10
(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) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxii) No Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiii) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxviii) Withholding Tax Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Conditions Precedent to the Obligations of Lessee . . . . . . . . . . . . . . . . . . 13
SECTION 5. Confidentiality of Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6. Extent of Interest of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3
SECTION 7. Lessee's Representations and Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . 15
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Organization, Citizenship, Etc. . . . . . . . . . . . . . . . . . . . . . . . 15
(ii) Corporate Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 15
(iii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(iv) Valid Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(v) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vi) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vii) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(viii) Registration and Recordation . . . . . . . . . . . . . . . . . . . . . . . . 16
(ix) Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(x) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xi) No Misstatement or Omission . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xii) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiv) Effective Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xv) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xvii) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xviii) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xix) No Federal Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xx) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(iii) Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(iv) Notice and Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(v) Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iii) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iv) Right to Defend; Subrogation; Fees and Expenses of
Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(d) Owner Participant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Interest on Overdue Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8. Other Representations, Warranties, Covenants and Indemnities . . . . . . . . . . . . . . . . 28
(a) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Chief Executive Office of SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(d) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Owner Participant's Representations and Warranties . . . . . . . . . . . . . . . . . . 30
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(g) Lessor Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Indenture Trustee Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i) Termination Instructions to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . 31
(j) Excess Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) Representations and Warranties of Indenture Trustee in Individual
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(l) Transfers of Equity Interests; Rights of Owner Participant and
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(m) Obligations of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(n) Compliance with Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(o) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(p) SBC's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 34
(q) Owner Participant's Lease Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(r) Lessee's Assumption of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(s) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(t) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(u) Lease Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(v) Revocation of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(w) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(x) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(y) Discharge of Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(z) Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(aa) Special Purchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(cc) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(dd) Deferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(ee) Lessee as Pricing Agent for Certificate . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9. Payments to Lessee of Trust Indenture Monies . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10. Other Documents; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 11. Certain Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) FAA Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(e) Engine Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(f) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(g) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(h) Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(i) No Certificate Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 12. Ownership of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 13. Notices; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 14. Change of Situs of Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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SECTION 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) Consents under Lease and Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . 46
(b) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) Counterparts; Waivers; Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) No Recourse Against Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(e) Duties Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Binding on Parties and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(g) Enforceability Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(h) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 16. Transaction Costs; Invoices and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 48
SECTION 17. Optional Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 18. Interim Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 19. Section 1110 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
SCHEDULE III
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
EXHIBIT A - Form of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B - Form of Assignment and Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of July 1, 1995 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) NATIONSBANK, N.A., a national banking association (the "Owner
Participant"), (iii) BANK OF AMERICA ILLINOIS, an Illinois banking corporation
(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. N602SW and Manufacturer's
serial number 27953 has been recently purchased by Lessee and is the subject of
this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, on the Delivery Date,
(i) Lessee and the Owner Trustee will enter
into a Purchase Agreement Assignment whereby Lessee agrees to assign
to the Owner Trustee certain rights and interests of Lessee under the
Purchase Agreement with respect to the Aircraft; and
(ii) the Manufacturer will have executed the
Manufacturer's Consent with respect to the Purchase Agreement
Assignment; and
WHEREAS, the Indenture Trustee and the Owner Trustee
concurrently with the execution and delivery of this Agreement are entering
into the Trust Indenture pursuant to which the Owner Trustee agrees, among
other things, to issue one or more Certificates as evidence of the Owner
Trustee's indebtedness to the Holders, which Certificates are to be secured by
the mortgage and security interest in, among other things, the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
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WHEREAS, as described in Section 2 hereof, the Owner Trustee
and Lessee are entering into the Lease whereby, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to purchase the Aircraft
from Lessee and to lease the same back to Lessee, and Lessee agrees to sell the
Aircraft to the Owner Trustee and to lease the same back from the Owner
Trustee;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft. (a) The terms "Lessee," "Owner Participant,"
"Original Loan Participant," "Owner Trustee" and "Indenture Trustee" shall have
the further meanings attributed thereto in the Sale and Lease Agreement dated
as of the date hereof (the "Lease") between the Owner Trustee and Lessee
relating to the Aircraft referred to in the first recital herein, and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease or the Trust Indenture.
The term "Trust Supplement" has the meaning attributed to the term "Indenture
and Trust Supplement" in the Lease and to the term "Trust Supplement" in the
Trust Indenture. The terms "Indenture Estate," "Outstanding," "Permitted
Investments," "Register" and "Trust Office" shall have the meanings set forth
in the Trust Indenture, and the term "Trust Estate" shall have the meaning set
forth in the Trust Agreement. Unless the context otherwise requires, any
reference herein to any of the Operative Agreements refers to such document as
it may be amended from time to time in accordance with its terms and the terms
of each other agreement restricting the amendment thereof.
(b) Subject to the terms and conditions of this
Agreement, (i) the Original Loan Participant agrees to finance, in part, the
Owner Trustee's payment of Lessor's Cost for the Aircraft by making a secured
loan to the Owner Trustee (herein called the "Loan") on a date to be designated
pursuant to Section 2 hereof, but in no event later than September 30, 1995, in
the amount in Dollars equal to the percentage of Lessor's Cost set forth
opposite its name on Schedule II hereto and (ii) the Owner Participant hereby
agrees, in connection with its equity investment in the beneficial ownership of
the Aircraft and the sale of the Aircraft by Lessee to the Owner Trustee
pursuant to the Lessee FAA ▇▇▇▇ 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, but in
no event later than September 30, 1995, in an amount in Dollars equal to the
percentage of Lessor's Cost set forth opposite its name on Schedule II hereto.
In the case of the Owner Participant, the amount of its participation to be
made as provided above in the payment of Lessor's Cost and, in the case of the
Original Loan Participant, the aggregate principal amount of the Series SWA
1995 Trust N602SW-I Certificate to be simultaneously issued to it, is
hereinafter called such Participant's "Commitment" for the Aircraft. In case
either Participant shall default in its obligation to make the amount of its
Commitment available pursuant to Section 2 hereof in respect of the Aircraft,
the other Participant shall have no obligation to make any portion of such
amount available or to increase the amount of its Commitment and the obligation
of the nondefaulting Participant shall remain subject to the terms and
conditions set forth in this Agreement.
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(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 the funds received by the Owner Trustee in connection with the
Aircraft will be held in accordance with the terms of, and for the period
provided in, paragraph (b) of Section 2. In such event the Defaulting
Participant will have no further right to participate in, or make a loan for,
as the case may be, the payment of Lessor's Cost for the Aircraft. Lessee
shall have the right to designate a financial institution (which term, as used
in this paragraph (c), shall mean any banking or financial institution,
institutional investor or fund which is not affiliated with Lessee or with
Owner Participant) to be substituted for the Defaulting Participant; provided,
however, that (i) such substituted financial institution shall sign and deliver
an amendment to this Agreement, in form and substance satisfactory to the Owner
Trustee, the Indenture Trustee and the remaining Participant, whereby such
financial institution agrees to be a party to this Agreement, to be bound by
all the terms hereof and to undertake all the obligations of the Defaulting
Participant contained herein, other than obligations, if any, arising from the
aforesaid failure or refusal by such Defaulting Participant, (ii) if the
Defaulting Participant is Owner Participant (A) such substituted financial
institution shall have been approved by 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. 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 each financial institution substituted for the Owner Participant
pursuant to this paragraph (c) shall (collectively, if more than one) be deemed
the Owner Participant for all purposes of this Agreement.
SECTION 2. Lessee's Notice of Delivery Date. (a)
Lessee agrees to give the Owner Participant, the Owner Trustee, the Original
Loan Participant and the Indenture Trustee at least three (3) Business Days'
written notice of the Delivery Date for the Aircraft, which Delivery Date shall
be a Business Day not later than September 30, 1995, which notice shall specify
(i) the amount of Lessor's Cost, (ii) the amount of each Participant's
Commitment for the Aircraft, and (iii) the model and FAA registration number of
the Aircraft and the manufacturer's serial numbers of the Airframe and each
Engine. As to each Participant, the making of its Commitment for such Aircraft
PARTICIPATION AGREEMENT [N602SW]
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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 N602SW-I Certificate in
the full amount of the Original Loan Participant's Commitment.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. The Owner Trustee shall issue and the Indenture Trustee shall
authenticate the Series SWA 1995 Trust N602SW-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. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇.
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 N602SW, at or before
10:00 a.m. Dallas time, on the Delivery Date specified in Lessee's notice
referred to in the first paragraph of this Section 2 (such specified Delivery
Date being herein called the "Scheduled Delivery Date").
(b) If for any reason whatsoever the closing of the
transactions contemplated hereby is not consummated on the Scheduled Delivery
Date, Lessee may by telephonic notice given by 4:30 p.m., New York City time,
on the Scheduled Delivery Date to each Participant, the Owner Trustee and the
Indenture Trustee designate a delayed date for such closing (the "Delayed
Delivery Date"), not later than the fifth Business Day after the Scheduled
Delivery Date and in no event later than September 30, 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.
If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest on such funds at the Applicable Rate (as defined below) on the amount
for the period from and including the Scheduled Delivery Date to but excluding
the Delayed Delivery Date, or, as the case may be, to but excluding the
Business Day on which such Participant's funds are returned if such return is
made by 10:00 a.m. (New York City time) or to but excluding the next following
Business Day if such return is not made by such time and, in the case of the
Original Loan Participant, for the Break Amount, if any, applicable to the
Series SWA 1995 Trust N602SW-I Certificate.
PARTICIPATION AGREEMENT [N602SW]
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"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
N602SW-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 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.
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.
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee. Subject to the terms and conditions of this Agreement, the
Owner Trustee, upon its receipt in full of the Owner Participant's and the
Original Loan Participant's Commitment for the Aircraft, as provided in Section
2 hereof, together with instructions from such Participant or its special
counsel to release such funds to Lessee, shall transfer such funds to Lessee
and the Owner Trustee shall purchase the Aircraft from Lessee and lease the
Aircraft to Lessee and such action shall constitute, without further act,
authorization and direction by the Owner Participant to the Owner Trustee:
PARTICIPATION AGREEMENT [N602SW]
-5-
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(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 N602SW-I Certificate in a principal amount equal to the amount
borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be
taken by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
SECTION 4. Conditions. (a) Conditions
Precedent to the Participations in the Aircraft. It is agreed that the
respective obligations of the Participants to participate in the payments of
Lessor's Cost are subject to the satisfaction prior to or on the Delivery Date
of the following conditions precedent, except that paragraphs (iii), (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) (insofar as it relates to the Owner
Participant), (xiv), (xxiv) (insofar as it relates to the Owner Participant)
and (xxvii) shall not be a condition precedent to the obligation of the Owner
Participant:
(i) Notice. Each Participant shall have
received due notice with respect to such participation pursuant to
Section 2 hereof (or shall have waived such notice either in writing
or as provided in Section 2).
(ii) No Change in Law. No change shall have
occurred after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the
Original Loan Participant, as the case may be, would make it a
violation of law or regulations for (x) Lessee, the Indenture Trustee,
any Participant or the Owner Trustee to execute, deliver and perform
the Operative Agreements to which any of them is a party or (y) the
Original Loan Participant or the Owner Participant to make its
Commitment available or, in the case of the Original Loan Participant,
to acquire the Series SWA 1995 Trust N602SW-I Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
PARTICIPATION AGREEMENT [N602SW]
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(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 N602SW-I Certificate,
only the Indenture Trustee, acting on behalf of the Holders, shall
receive the original counterpart of the Lease and the initial Lease
Supplement, and only Lessee and the Owner Participant shall receive
copies of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering
the Aircraft and dated the Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering
the Aircraft and dated the Delivery Date;
(6) the Bills of Sale and an
invoice from Lessee specifying the Lessor's Cost and dated the
Delivery Date;
(7) the Purchase Agreement
Assignment;
(8) an acceptance certificate
covering the Aircraft in the form agreed to by the
Participants and Lessee (the "Acceptance Certificate") duly
completed and executed by the Owner Trustee or its agent,
which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
(10) the Series SWA 1995 Trust
N602SW-I Certificate; and
(11) the Manufacturer's Consent.
PARTICIPATION AGREEMENT [N602SW]
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(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;
(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
PARTICIPATION AGREEMENT [N602SW]
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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, 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
PARTICIPATION AGREEMENT [N602SW]
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Section 1110 of the United States Bankruptcy Code in
connection with its right to take possession of the Airframe
and Engines in the event of a case under Chapter 11 of the
United States Bankruptcy Code in which Lessee is a debtor; and
(5) the Aircraft has been duly
certificated by the FAA as to type and airworthiness in
accordance with the terms of the Lease and has a current,
valid U.S. standard certificate of airworthiness issued by the
FAA.
(x) Representations and Warranties Accurate;
No Event of Default; No Adverse Change. On the Delivery Date, (A) the
representations and warranties of Lessee contained in Section 7 hereof
and in the Tax Indemnity Agreement shall be true and accurate as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties shall be true and
accurate on and as of such earlier date), (B) no event shall have
occurred and be continuing, or would result from the purchase, sale,
lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) a
Lease Event of Default or an Indenture Event of Default, and (C) no
material adverse change shall have occurred in the consolidated
financial condition of Lessee and its subsidiaries from that shown in
the consolidated financial statements of Lessee and its subsidiaries
as of December 31, 1994.
(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 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Associate General Counsel for 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) ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel to the Owner
Participant and (b) in-house or other counsel for the Owner
Participant in a position to address the Owner Participant's due
incorporation and due authorization and execution of the Operative
Agreements to which the Owner Participant is a party.
PARTICIPATION AGREEMENT [N602SW]
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(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 ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 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 and as to the matters stated in
paragraphs (x) (insofar as it relates to Lessee), (xxii) and (xxiii)
(to the knowledge of Lessee, except in regard to matters relating to
the Participants, Indenture Trustee or the Owner Trustee, in which
event such representation shall be to the knowledge of Lessee without
any investigation whatsoever) of this Section 4(a).
(xix) [Intentionally Reserved].
(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.
(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.
PARTICIPATION AGREEMENT [N602SW]
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(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) and (a)
each Participant shall, by making its Commitment available as provided
in Section 1(b) of this Agreement, (b) the Indenture Trustee shall, by
authenticating the Series SWA 1995 Trust N602SW-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 ▇▇▇▇▇▇, ▇▇▇▇▇
& Bockius, 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 July 1, 1995, no amendment, modification, addition or change in
or to the provisions of the Code (including for this purpose, any
non-Code provisions of legislation affecting the Code such as
transition rules or effective date provisions), the regulations
promulgated under the Code (including temporary or proposed
regulations), Internal Revenue Service Revenue Procedures or Revenue
Rulings, or other administrative interpretations, applicable judicial
precedents or Executive Orders of the President of the United States
which would adversely affect the accuracy of the Tax Assumptions set
forth in Section 2 of the Tax Indemnity Agreement.
(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 in accordance with applicable regulations to qualify for such
exemption or reduction.
Promptly upon the registration of the Aircraft and the
recording of the Lease, the Trust Indenture, the Trust Agreement, the Lease
Supplement and the Trust Supplement covering the
PARTICIPATION AGREEMENT [N602SW]
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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 Lessee.
(ii) Those documents described in Section
4(a)(v) shall have been duly authorized, executed and delivered by the
respective party or parties thereto (other than Lessee) in the manner
specified in Section 4(a)(v), shall each be satisfactory in form and
substance to Lessee, shall be in full force and effect on the Delivery
Date, and an executed counterpart of each thereof (other than the
Series SWA 1995 Trust N602SW-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).
PARTICIPATION AGREEMENT [N602SW]
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(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 July 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, 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, (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
PARTICIPATION AGREEMENT [N602SW]
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Indenture, hereunder, or under any other Operative Agreement (including,
without limitation, amounts payable as Premium or Break Amount), except as
expressly provided in this Agreement or (in the case of the Owner Trustee) in
the Trust Indenture.
SECTION 7. Lessee's Representations and Warranties;
Indemnities.
(a) In General. Lessee represents warrants, covenants
and agrees that:
(i) Organization, Citizenship, Etc. Lessee
(A) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, (B) is a "citizen of
the United States" (as defined in Section 40102 of Title 49, U.S.C.)
holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo, (C) the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties
and to enter into and perform its obligations under this Agreement and
the other Operative Agreements to which Lessee is or will be a party,
and (D) is duly qualified to do business as a foreign corporation in
good standing in each state in which the nature of its business makes
such qualification necessary or the failure to be so qualified or so
to be in good standing would have a material adverse effect on its
business or operations or would impair its ability to perform its
obligations under the Operative Agreements.
(ii) Corporate Authorization, Etc. The
execution, delivery and performance of this Agreement and the other
Operative Agreements to which Lessee is or will be a party (A) have
been duly authorized by all necessary corporate action on the part of
Lessee, (B) do not require any shareholder approval, or approval or
consent of any trustee or holders of indebtedness or obligations of
Lessee or of any lessor under any lease to Lessee except such as have
been duly obtained, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order applicable to or
binding on Lessee or any of its subsidiaries or the articles of
incorporation or by-laws of Lessee (each as amended to date), or (2)
contravene or result in any breach of, or constitute any default
under, or result in the creation of any Lien (other than Permitted
Liens) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan, credit agreement or other
agreement to which Lessee is a party or by which it or its properties
may be bound or affected.
(iii) Governmental Approvals. Neither the
execution and delivery by Lessee of this Agreement or the other
Operative Agreements to which Lessee is or will be a party, nor the
consummation of any of the transactions by Lessee contemplated hereby
or thereby, requires the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency, except for (A)
routine filings of copies of such Operative Agreements with the SEC,
(B) the certification referred to in Section 4(a)(ix)(5), the
registration referred to in Section 4(a)(ix)(2) and the filings and
recordings referred to in Sections 4(a)(vi), 4(a)(ix)(1), 4(a)(ix)(2)
and 4(a)(ix)(3), and
PARTICIPATION AGREEMENT [N602SW]
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(C) such federal and state securities law approvals or filings that
will be required in connection with the public offering, if any, of
the Certificates.
(iv) Valid Agreements. This Agreement and
the other Operative Agreements to which Lessee is or will be a party,
as and when entered into, do or will, assuming due authorization,
execution and delivery by the party or parties thereto other than
Lessee, constitute legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the respective terms
hereof and thereof.
(v) No Proceedings. There are no pending
or, to Lessee's knowledge, threatened actions or proceedings before
any court or administrative agency which, having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to materially adversely affect the consolidated financial
condition of Lessee and its subsidiaries, or the ability of Lessee to
perform its obligations under this Agreement and the other Operative
Agreements to which Lessee is or will be a party.
(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, 1994 and the unaudited consolidated financial statements
of Lessee and its subsidiaries contained in the Lessee's Quarterly
Report on Form 10-Q for the period ended March 31, 1995 (copies of
each of which have been furnished to each Participant) have been
prepared in accordance with generally accepted accounting principles,
present fairly, in all material respects, the consolidated financial
position of Lessee and its subsidiaries as of such dates and the
consolidated results of their operations and their cash flows for the
periods then ended, and since December 31, 1993, there has been no
material adverse change in such consolidated financial position.
(viii) Registration and Recordation. Except
for (A) the registration of the Aircraft with the FAA pursuant to the
Act in the name of Owner Trustee, (B) the filing for recordation of
the instruments referred to in Section 4(a)(ix)(2) and (3) and this
Agreement, if deemed necessary due to the incorporation by reference
in such other instruments of terms defined herein, (C) the filing of
the UCC financing statements referred to in Section 4(a)(vi) and
continuation statements at periodic intervals, (D) the taking of
possession by the Indenture Trustee of the original counterparts of
the Lease and the initial Lease Supplement, and (E) the affixation of
the nameplate referred to in Section 7.1.2 of the Lease, no further
action, including any filing or recording of any document (including
any financing statement in respect thereof under Article 9 of the
Uniform Commercial Code of any applicable jurisdiction), is necessary
or advisable in order to establish and perfect the right, title or
interest of Owner Trustee in the property constituting the Trust
Estate, or of
PARTICIPATION AGREEMENT [N602SW]
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Indenture Trustee in the property constituting the Trust Indenture
Estate, in any applicable jurisdiction within the United States of
America.
(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 27 other
leasing companies or other institutional investors (in the case of
such beneficial interest or securities), or six other institutional
investors (in the case of the Certificates and other similar interests
and securities) or (assuming the accuracy of the representations in
Sections 8(a), 8(d), 8(k)(vi) and 8(p)(viii)) to any Person in
violation of the Securities Act or applicable state securities laws,
or both, and Lessee will take no action which would constitute or
cause such violation.
(xi) No Misstatement or Omission. Neither
the financial statements referred to in Section 7(a)(vii) nor any
other documents furnished by Lessee to Owner Trustee, Indenture
Trustee or any Participant in connection with the transactions
contemplated by this Agreement or the other Operative Agreements
contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein (in the case
of statements referred to in Section 7(a)(vii), as of the date made)
not misleading; there is no fact known by Lessee which Lessee has not
disclosed to such parties in writing which materially adversely
affects or, so far as Lessee can now reasonably foresee, will
materially adversely affect the ability of Lessee to carry on its
business and perform its obligations under this Agreement or the other
Operative Agreements to which it is a party.
(xii) Investment Company. Neither Lessee nor
any subsidiary of Lessee is an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) No Event of Default. No Lease Event of
Default or Lease Default has occurred and is continuing under the
Lease.
(xiv) Effective Sale. On the Delivery Date,
the Aircraft will be situated in Texas and the sale of the Aircraft by
Lessee to Owner Trustee shall be complete and effective and not
voidable or void.
(xv) ERISA. Lessee has never sponsored,
maintained or made contributions to any defined benefit plan subject
to the provisions of Title IV of the Employee
PARTICIPATION AGREEMENT [N602SW]
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Retirement Income Security Act of 1974, as amended ("ERISA"), and (in
reliance upon the Participants' representations in Section 8(o)) the
transactions contemplated by this Agreement do not constitute a
"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available by
statute, regulation or class exemption. The execution and delivery of
this Agreement and the other Operative Agreements and the consummation
of the transactions contemplated hereby and thereby will not involve
any non-exempt prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code (such representation being
made solely in reliance upon and subject to the accuracy of the
representations contained in Section 8(o)).
(xvi) Title to Aircraft, etc. Good and
marketable title to the Aircraft will be at the time of delivery to
Owner Trustee vested in Lessee free and clear of all Liens other than
the rights of Lessee under the Lease and the Lease Supplement covering
the Aircraft, the Lien of the Trust Indenture, the beneficial interest
of the Owner Participant in the Aircraft and the Liens permitted by
clause (d) (solely for taxes not yet due) or (e) of Section 6 of the
Lease; and, subject to the filing for recordation of the Lessee FAA
▇▇▇▇ 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 and 8.1 of
the Lease) since its delivery to Lessee by Manufacturer, Lessee is
unaware of any material mechanical or structural defects in or damage
to the Aircraft since its delivery to Lessee by Manufacturer and there
has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event
of Loss.
(xviii) Use of Proceeds. None of the proceeds
from the issuance of the Certificates or from the acquisition by the
Owner Participant of its beneficial interest in the Trust Estate will
be used directly or indirectly by Lessee so as to result in a
violation of Regulation G or U of the Board of Governors of the
Federal Reserve System.
(xix) No Federal Approvals. No governmental
approval in the United States of any kind is required of the Owner
Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance
under this Agreement or any agreement contemplated hereby solely by
reason of any fact or circumstance peculiar to: (a) Lessee (as
contrasted to other airlines), (b) the nature of the Aircraft, or (c)
Lessee's proposed operations or use of the Aircraft.
(xx) Section 1110. Owner Trustee, as lessor
under the Lease, and the Indenture Trustee, as assignee thereof, are
entitled to the protection of Section 1110 of the
PARTICIPATION AGREEMENT [N602SW]
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United States Bankruptcy Code in connection with their right to take
possession of the Airframe and Engines in the event of a case under
Chapter 11 of the United States Bankruptcy Code in which Lessee is a
debtor. 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 company, succession taxes and estate or
franchise taxes (other than taxes which are in the nature of sales or
use taxes, value-added taxes, rental taxes, license taxes, consumption
taxes, ad valorem taxes or
PARTICIPATION AGREEMENT [N602SW]
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property taxes) imposed by (A) the federal government of the United
States (including without limitation any taxes collected by
withholding) (but specifically excluding any excise taxes imposed in
connection with the occurrence of a "prohibited transaction", within
the meaning of Section 406 of ERISA or Section 4975 of the Code, for
which an exemption is not available by statute, regulation or class
exemption) or (B) any state or local government or governmental
subdivision or state or local taxing authority in the United States of
America (including any possession or territory of the United States of
America) other than in the case of (B) any such tax which is a Covered
Income Tax, as defined below; (2) on, based on, or measured by, any
fees or compensation received by Owner Trustee or Indenture Trustee in
its individual capacity for services rendered in connection with the
transactions contemplated hereby; (3) relating to the Aircraft for any
period after the later of (A) the expiration or early termination of
the Lease and the return of the Aircraft in connection therewith in
accordance with the terms thereof and (B) payment in full of
Stipulated Loss Value or Termination Value, as the case may be, and
all Rent due and owing in accordance with the Lease; (4) arising out
of or caused by the wilful misconduct or gross negligence of such
Indemnified Party or the inaccuracy or breach of any representation,
warranty or covenant of such Indemnified Party contained in any
Operative Agreement; (5) imposed on the income of such Indemnified
Party by a foreign government or taxing authority, except to the
extent such Taxes are imposed by reason of the location, operation,
use or rental of the Aircraft or any Part thereof in such jurisdiction
or the presence of Lessee or Sublessee or other user in such
jurisdiction or the making of payments from such jurisdiction; (6)
which may become payable in connection with the occurrence of a
"prohibited transaction", within the meaning of Section 406(b) of
ERISA or Section 4975(c)(1)(E) or (F) of the Code, involving the
assets of any "employee benefit plan" within the meaning of Section
3(3) of ERISA, or of any "plan" within the meaning of Section
4975(e)(1) of the Code, with respect to which the Owner Participant is
the "plan sponsor" within the meaning of Section 3(16)(B) of ERISA;
and (7) which become payable as a result of any involuntary
disposition attributable to the bankruptcy of the Owner Participant or
Owner Trustee or any voluntary sale, transfer, mortgaging, pledging or
financing by such Indemnified Party of all or a portion of its
interest in the Aircraft, the Trust Estate, the Trust Indenture
Estate, the Lease, or any other Operative Agreement in a transaction
not contemplated by the Operative Agreements (it being understood that
any disposition of the Aircraft or any Part as a result of a
substitution, replacement or modification thereof or thereto by Lessee
shall not be treated as voluntary) unless, in each case, such transfer
shall occur (A) pursuant to the exercise of remedies under Section 15
of the Lease or (B) pursuant to Section 7, 8, 9, 10 or 18 thereof. As
used in clause (1)(B) of this Section 7(b)(ii), the term "Covered
Income Tax" means a Tax described in said clause (1)(B) imposed on an
Indemnified Party by any taxing authority (A) in whose jurisdiction
such Indemnified Party (including for this purpose all entities with
which it is combined, integrated or consolidated in such taxing
authority's jurisdiction) did not engage in business, did not maintain
an office or other place of business and was not otherwise located, if
such Tax resulted from the operation of the Aircraft or any Engine in
such jurisdiction or the transactions contemplated by the Operative
Agreements, or (B) in whose jurisdiction such Indemnified Party in
fact is doing business, maintaining an office or other place of
business or is otherwise located, if such circumstance was no factor
in the imposition of such Tax.
PARTICIPATION AGREEMENT [N602SW]
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(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 to all such other leveraged equipment leasing transactions on a
pari passu basis.
If as a result of any Advance (as hereinafter
defined) to an Indemnified Party the aggregate taxes paid or accrued
by such Indemnified Party for any taxable year shall be more than the
amount of such taxes which would have been payable by the Indemnified
Party had no such Advance been made, and if such increase in taxes was
not taken into account in determining the amount of the Advance, then
such increase in taxes will be treated as Taxes for which Lessee must
indemnify the Indemnified Party pursuant to this Section 7(b). Upon
the final determination of any contest pursuant to Section 7(b)(iv)
hereof in respect of any Taxes for which Lessee has made an Advance,
the amount of Lessee's obligation shall be determined under this
Section 7(b)(iii) as if such Advance had not been made. Any
obligation of Lessee under this Section 7(b) and the Indemnified
Party's obligation to repay
PARTICIPATION AGREEMENT [N602SW]
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the Advance will be satisfied first by set off against each other and
any difference owing by either party will be paid within 10 days of
such final determination.
(iv) Notice and Contest. If written claim is
received by an Indemnified Party for Taxes, which claim, if sustained,
would require the payment of an indemnity by Lessee pursuant to this
Section 7(b), such Indemnified Party shall notify Lessee of such claim
within 15 days after its receipt; provided, that failure to provide
such notice within 15 days will not relieve Lessee of any
indemnification obligation pursuant to this Section 7(b) if such
failure does not preclude Lessee from exercising its contest rights
hereunder. Payments due from Lessee to such Indemnified Party
pursuant to this Section 7(b) shall be made directly to such
Indemnified Party within 30 days of written demand by such Indemnified
Party to Lessee. If requested by Lessee in writing (provided, that
Lessee shall have furnished Indemnified Party with a written opinion
of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ 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 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
PARTICIPATION AGREEMENT [N602SW]
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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 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
PARTICIPATION AGREEMENT [N602SW]
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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 (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-
PARTICIPATION AGREEMENT [N602SW]
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use, presence, operation, condition, storage, preparation,
installation, testing, manufacture, design, fitness for use,
merchantability, modification, replacement, substitution, alteration,
maintenance, repair, re-lease, sale, return, transportation, transfer,
abandonment or other disposition thereof or any portion thereof
(including, without limitation, latent and other defects, whether or
not discoverable, and any claim for patent, trademark or copyright
infringement, or arising under environmental control, noise or
pollution laws or regulations, and loss of or damage to any property
or the environment or death or injury to any person), or (d) the
offer, sale or delivery of the Certificates, whether before or after
the Delivery Date (the indemnity in this clause (d) to extend also to
any Person who controls an Indemnified Party, its successors, assigns,
employees, servants and agents within the meaning of Section 15 of the
Securities Act).
(ii) Exceptions. The indemnity set forth in
Section 7(c)(i) shall not extend to any Loss with respect to such
Indemnified Party (A) to the extent that such Loss is caused by acts,
omissions or events which occur after full and final compliance by
Lessee with all the terms of the Operative Agreements, (B) to the
extent such Loss is caused by acts, omissions or events which occur
following the earlier of: (I) acceptance of possession of the Airframe
or any Engine or Part by Lessor or its designee pursuant to the terms
of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long
as Lessor shall be entitled to exercise remedies under such Section
15), (II) the termination of the Term in accordance with Section 9 of
the Lease, or (III) the transfer of title to the Aircraft to Lessee
(or its designee) pursuant to Section 10.1.4 or Section 18.2 of the
Lease, (C) to the extent that such Loss is a Tax or a loss of tax
benefits, whether or not Lessee is required to indemnify therefor
pursuant to Section 7(b) hereof, (D) to the extent that such Loss is
caused by the willful misconduct or gross negligence of such
Indemnified Party (other than willful misconduct or gross negligence
imputed to such Indemnified Party solely by reason of its interest in
the Aircraft) or any material misrepresentation or violation or breach
of any obligations of such Indemnified Party contained in the
Operative Agreements then in force unless such misrepresentation,
violation or breach is a result of Lessee's failure to comply with the
terms of any Operative Agreement to which it is a party, or (E) to the
extent such Loss is associated with a sale, assignment or transfer by
such Indemnified Party of its respective interest in the Aircraft, the
Certificates or the transactions contemplated hereby (other than (1)
as required by the Operative Agreements and (2) during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of
the Lease) or a Lease Event of Default or the exercise of remedies
under the Lease). This Section 7(c) does not constitute a guarantee
of the useful life or residual value of the Aircraft or a guarantee
that the Certificates will be paid.
(iii) Notice. If any Indemnified Party or
Lessee has knowledge of any Loss for which Lessee is obligated to
indemnify under this Section 7(c), it shall give prompt written notice
thereof to Lessee or such Indemnified Party, as the case may be, but
failure to give such notice shall not relieve Lessee of its
obligations hereunder or from any other obligation that Lessee may
have to such Indemnified Party at law or in equity, and no payment by
Lessee to an Indemnified Party pursuant to this Section 7(c) shall be
deemed to constitute a waiver or release of any right or remedy which
Lessee may have against such
PARTICIPATION AGREEMENT [N602SW]
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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.
The Indemnified Party shall supply Lessee, at Lessee's
expense, with such information within its possession reasonably requested by
Lessee as is necessary or advisable for Lessee to control or participate in any
proceeding to the extent permitted by this Section 7(c). Such Indemnified
Party shall not enter into a settlement or other compromise with respect to any
Loss without the prior written consent of Lessee (except during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of the Lease)
or Lease Event of Default when such consent shall not be required if such
Indemnified Party gives 10 days' prior written notice to Lessee describing the
proposed settlement or other compromise), which consent shall not be
unreasonably withheld or delayed, unless such Indemnified Party waives its
right to be indemnified with respect to such Loss under this Section 7(c).
Lessee shall supply the Indemnified Party with such
information reasonably requested by the Indemnified Party as is necessary or
advisable for the Indemnified Party to control or participate in any proceeding
to the extent permitted by this Section 7(c).
PARTICIPATION AGREEMENT [N602SW]
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Upon payment or indemnification of any amount pursuant to this
Section 7(c), Lessee, without any further action, shall be subrogated to any
claims the Indemnified Party may have relating thereto other than claims under
Section 5.03 or 7.01 of the Trust Agreement or Section 9.06 of the Trust
Indenture, comparable claims arising in favor of the Owner Trustee or the
Indenture Trustee as a matter of trust law and claims under any insurance
maintained by any Indemnified Party or any of its Affiliates. The Indemnified
Party agrees to give such further assurances or agreements and to cooperate in
all reasonable respects with Lessee and its insurers to permit Lessee to pursue
such claims.
In the event that Lessee shall have paid an amount to an
Indemnified Party pursuant to this Section 7(c), and such Indemnified Party
subsequently shall be reimbursed in respect of such indemnified amount by any
other Person, such Indemnified Party shall (provided no Lease Default or Lease
Event of Default shall have occurred and be continuing) promptly pay (but not
before Lessee shall have made all payments then due to such Indemnified Party
pursuant to this Section 7(c) and any other payments then due under the
Operative Agreements) an amount equal to the amount of such reimbursement
(adjusted for any net tax impact of such receipt and payment, but in no event
more than such indemnified amount previously paid to such Person) to Lessee.
Subject to the provisions of the preceding sentence, Lessee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor, whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of any other document or instrument,
and the Person seeking indemnification from Lessee pursuant to any provision of
this Agreement may proceed directly against Lessee without first seeking to
enforce any other right of indemnification.
Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee (including the reasonable fees and expenses
of its counsel and any agent appointed in accordance with Section 9.02(c) of
the Trust Indenture) and, as provided in Section 6.07 of the Trust Agreement,
the Owner Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel), without cost, on a net after-tax basis, to the Owner
Participant, for acting as such, other than such fees and expenses which
constitute Transaction Costs. Lessee agrees that it will pay the reasonable
fees and expenses of any separate owner trustee or co-trustee appointed
pursuant to Section 9.02 of the Trust Agreement as a result of any requirement
of law or if otherwise required by any Operative Agreement or if requested, or
consented to, by the Lessee.
(d) Owner Participant's Indemnity. Owner Participant
covenants and agrees that if (i) Lessee has elected pursuant to Section 9.1 of
the Lease to terminate the Lease by causing the Aircraft to be sold pursuant to
Section 9.2 of the Lease and (ii) Owner Trustee has, pursuant to Section 9.3 of
the Lease, given to Lessee written notice of Lessor's election to retain title
to the Aircraft, and (iii) Owner Trustee has failed to make, on or before the
proposed termination date, any payment required to be made by Owner Trustee
pursuant to Section 9.3 in connection with its retention of title to the
Aircraft, Owner Participant will indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any excess of the highest bid received
on or before the proposed termination date over the price for which the
Aircraft may subsequently be sold (but disregarding any portion of such bid or
such price in excess of the applicable Termination Value), any additional Rent
paid by Lessee (less an amount representing the fair value to Lessee of its use
of the Aircraft for the period of time in respect of which such Rent was paid)
and any reasonable
PARTICIPATION AGREEMENT [N602SW]
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fees and expenses of lawyers, appraisers, brokers or accountants) incurred as a
consequence of such failure by Owner Trustee.
(e) Payments. Any payments made pursuant to this Section
7 shall be made directly to the Person entitled thereto within 10 Business Days
of demand therefor in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the
order of the payee and mailed to the payee by certified mail, postage prepaid
at its address as set forth in this Agreement.
(f) Interest on Overdue Amounts. If any amount payable
by Lessee or any Indemnified Party, as the case may be, under this Section 7 is
not paid when due, Lessee or such Indemnified Party, as the case may be, shall
pay an additional amount equal to interest at the Overdue Rate on the overdue
amount for the period from and including the due date for the overdue payment
to but excluding the date of payment of the overdue amount.
(g) Survival. All indemnities, obligations, adjustments
and payments provided for in this Section 7 shall survive, and remain in full
force and effect, notwithstanding the expiration or other termination of this
Agreement, the Lease or any other Operative Agreement. The obligations of
Lessee in respect of all such indemnities, obligations, adjustments and
payments are expressly made for the benefit of, and shall be enforceable by,
each Indemnified Party or other indemnitee entitled thereto, without taking any
action under the Lease.
SECTION 8. Other Representations, Warranties,
Covenants and Indemnities. (a) Securities Laws. The Owner Participant
represents that it is acquiring its interest in the Trust Estate for investment
purposes only and not with a present intent as to any resale or distribution
thereof except as otherwise permitted by Rule 144A under the Securities Act,
(subject nonetheless to any requirement of law that the disposition of its
properties shall at all times be and remain within its control) and that
neither it nor anyone acting on its behalf has directly or indirectly offered
any interest in the Trust Estate or any Certificates or any similar securities
for sale to, or solicited any offer to acquire any of the same from, anyone in
a manner which would result in a violation of the Securities Act or the
securities laws, rules and regulations of any state.
(b) Citizenship. Each of the Owner Participant and SBC,
in its individual capacity, represents and warrants to the other parties to
this Agreement that it is a "citizen of the United States" as defined in 49
U.S.C. Section 40102(a)(15)(C). The Owner Participant agrees, solely for the
benefit of Lessee, each Sublessee, the Indenture Trustee and the Holders, that
if at any time (i) it shall not be a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) and (ii) the Aircraft shall be, or
would therefore become, ineligible for registration in the name of the Owner
Trustee under the Act and regulations then applicable thereunder (it being
understood that the effect of any such status shall be determined without
giving consideration to any provision of the Act (or any superseding statute)
which permits United States registration of an aircraft based on conditions
which impose restrictions on the location and use of such aircraft or otherwise
restrict the ability of an air carrier to operate an aircraft in the ordinary
course of its business), then the Owner Participant shall (at its own expense
and without any reimbursement or indemnification from Lessee) as soon as is
reasonably practicable but in any event within 30 days
PARTICIPATION AGREEMENT [N602SW]
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after a Responsible Company Officer of the Owner Participant shall obtain
actual knowledge of such loss of citizenship (A) effect voting trust or other
similar arrangements or take any other action as may be necessary to prevent
any deregistration or to maintain the United States registration of the
Aircraft and (to the extent such recordation is dependent on the U.S.
registration of the Aircraft) the recordation with the FAA of the Trust
Indenture and the Lease, or (B) transfer its beneficial interest in the Trust
Estate in accordance with Section 8(l) hereof. It is understood that: (1) the
Owner Participant shall be liable to any of the other parties hereto for any
damages suffered by any such other party as the result of the representation
and warranty of the Owner Participant in the first sentence of this Section
8(b) proving to be untrue as of the Delivery Date; and (2) the Owner
Participant shall be liable to Lessee, any Sublessee and any Holder for any
damages which may be incurred by Lessee, any Sublessee or such Holder as a
result of such loss of citizenship by the Owner Participant and the inability
to register (or maintain the registration of) the Aircraft in the name of the
Owner Trustee under the Act and regulations then applicable thereunder as a
result of such loss of citizenship. Each of Lessee (as provided in Section
11(b)), the Original Loan Participant, the Owner Trustee and the Indenture
Trustee agrees, upon the request and at the sole expense of the Owner
Participant, to take all reasonable acts requested by the Owner Participant in
complying with its obligations under clause (A) or (B) of the second sentence
of this Section 8(b). 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.
(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 N602SW-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.
PARTICIPATION AGREEMENT [N602SW]
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(e) [Intentionally Reserved].
(f) Owner Participant's Representations and Warranties.
The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a national
banking association duly organized and validly existing and in good
standing under the laws of the United States and has the corporate
power and authority to carry on its business as now conducted, to own
or hold under lease its properties and to enter into and perform its
obligations under the Owner Participant Agreements;
(ii) the Owner Participant Agreements have
been duly authorized by all necessary corporate action on the part of
the Owner Participant, do not require any approval not already
obtained of stockholders of the Owner Participant or any approval or
consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been
duly executed and delivered by the Owner Participant, and, subject to
and in reliance upon the representations made by the Original Loan
Participant and Lessee in Sections 8(o) and 7(a)(xv), respectively,
and compliance with the covenants of Section 8(d), neither the
execution and delivery thereof by the Owner Participant, nor the
consummation of the transactions contemplated thereby by the Owner
Participant, nor compliance by the Owner Participant with any of the
terms and provisions thereof will contravene any United States federal
or state law, judgment, governmental rule, regulation or order
applicable to or binding on the Owner Participant (it being understood
that no representation or warranty is made with respect to laws, rules
or regulations relating to aviation or to the nature of the equipment
owned by the Owner Trustee, other than such laws, rules or regulations
relating to the citizenship requirements of the Owner Participant
under applicable aviation law) or contravene or result in any breach
of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a)
of the definition thereof) upon the Trust Estate under any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
bank loan or credit agreement, corporate charter, by-law or other
agreement or instrument to which the Owner Participant is a party or
by which it or its properties may be bound or affected;
(iii) assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, each
of the Owner Participant Agreements constitutes a legal, valid and
binding obligation of the Owner Participant enforceable against the
Owner Participant in accordance with the terms thereof;
(iv) there are no pending or, to the
knowledge of the Owner Participant, threatened actions or proceedings
against the Owner Participant before any court or administrative
agency which, if determined adversely to the Owner Participant, would
materially adversely affect the financial condition of the Owner
Participant or the ability of the Owner Participant to perform its
obligations under the Owner Participant Agreements;
(v) on the Delivery Date, there will be no
Lessor Liens attributable to the Owner Participant;
PARTICIPATION AGREEMENT [N602SW]
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(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 gross negligence or willful misconduct,
(iii) claims against the Indenture Trustee relating to Taxes or Losses which
are excluded from the indemnification provided by Section 7 hereof pursuant to
said Section 7, or (iv) claims against the Indenture Trustee arising out of the
transfer by the Indenture Trustee of all or any portion of its interest in the
Aircraft, the Trust Estate, the Trust Indenture Estate or the Operative
Agreements other than (A) a transfer of the Aircraft pursuant to Section 9, 10
or 18 of the Lease or Article 5 or 8 of the Trust Indenture, (B) any borrowing
pursuant to Section 17 hereof, or (C) a transfer of the Aircraft pursuant to
Section 15 of the Lease while a Lease Event of Default is continuing and prior
to the time that the Indenture Trustee has received all amounts due pursuant to
the Trust Indenture.
(i) Termination Instructions to Owner Trustee. The Owner
Participant will not instruct the Owner Trustee to terminate any Operative
Agreement in violation of the terms thereof.
(j) Excess Payment. If (i) all or any part of the Trust
Estate becomes the property of, or the Owner Participant becomes, a debtor
subject to the reorganization provisions of the Bankruptcy Reform Act of 1978
or any successor provision, (ii) pursuant to such reorganization provisions the
Owner Trustee (in its individual capacity) or the Owner Participant is
required, by reason of the Owner Trustee (in its individual capacity) or the
Owner Participant being held to have recourse liability to any Holder or the
Indenture Trustee, directly or indirectly (other than the recourse liability of
the Owner Participant under this Agreement), to make payment on account of any
amount payable as principal, Break Amount, if any, Premium, if any, or interest
on the Certificates, and (iii) any such Holder or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects
any payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Holder or the Indenture
Trustee shall promptly refund to the Owner Trustee or the Owner Participant
(whichever shall have made
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such payment) such Excess Payment. For purposes of this Section 8(j), "Excess
Payment" means the amount by which such payment exceeds the amount which would
have been received by such Holder or the Indenture Trustee if the Owner Trustee
(in its individual capacity) or the Owner Participant had not become subject to
the recourse liability referred to in clause (ii) above. Nothing contained in
this Section 8(j) shall prevent such Holder or the Indenture Trustee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of the Owner Trustee (in its individual capacity) or the Owner Participant
under this Agreement or the Trust Indenture (and any exhibits or annexes
thereto).
(k) Representations and Warranties of Indenture Trustee
in Individual Capacity. The Indenture Trustee represents and warrants, in its
individual capacity, as follows:
(i) it is a "citizen of the United States"
as defined in the Act, that it will notify promptly all parties to
this Agreement if in its reasonable opinion its status as a "citizen
of the United States" is likely to change and that it will resign as
Indenture Trustee as provided in Section 9.07 of the Trust Indenture
if it should cease to be a "citizen of the United States";
(ii) it is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter
into and perform its obligations under the Trust Indenture and this
Agreement and to authenticate the Certificates;
(iii) the Indenture Trustee Agreements, and
the authentication of the Certificates have been duly authorized by
all necessary corporate action on its part, and neither 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
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Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, for sale to, or solicited any
offer to acquire any such interest or security from, or has sold any
interest or security to, any Person, and it will not directly or
indirectly make any such offer, solicitation or sale.
(l) Transfers of Equity Interests; Rights of Owner
Participant and Owner Trustee. So long as the Aircraft shall be leased to
Lessee under the Lease and so long as the Certificates are outstanding, the
Owner Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust Estate or the
Trust Agreement to any Person unless (i) the proposed transferee is a
"Transferee" (as defined below) and (ii) the Owner Participant shall have
delivered to the Owner Trustee, Lessee and the Indenture Trustee an opinion (in
form, scope and substance reasonably satisfactory to the Indenture Trustee and
Lessee) of counsel reasonably satisfactory to the Indenture Trustee and Lessee
to the effect that the agreement referred to in clause (O) below and any
guaranty required by clause (B) or (C) below, are the legal, valid, binding and
enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital, surplus and undivided profits of
at least $75,000,000 or a limited partnership or corporation whose net worth is
at least $75,000,000, (B) any subsidiary of such a bank, financial institution,
limited partnership or corporation; provided, that such bank, financial
institution, limited partnership or corporation furnishes to the Owner Trustee,
the Indenture Trustee and Lessee a guaranty substantially in the form of
Exhibit A with respect to the Owner Participant's obligations, in the case of
the Owner Trustee, under the Trust Agreement and, in the case of the Indenture
Trustee and Lessee, the Owner Participant's obligations hereunder, or (C) any
other corporation or limited partnership, provided such obligations are
guaranteed (such guaranty to be substantially in the form of Exhibit A) by the
transferor Owner Participant; provided, however, that unless otherwise
consented to by Lessee any Transferee shall not be an air carrier, an air
freight forwarder or other similar Person or a corporation controlling,
controlled by or under common control with such an air carrier, an air freight
forwarder or other similar Person. Each such transfer to a Transferee shall be
subject to the conditions that (M) upon giving effect to such transfer, the
Transferee is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) or the Transferee, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), shall
have entered into a voting trust or similar arrangement which permits the
registration of the Aircraft under the Act in the name of the Owner Trustee
without any restriction on the operation of the Aircraft, (N) the Transferee
has the full power and authority to enter into and carry out the transactions
contemplated hereby, (O) the Transferee enters into an agreement or agreements
substantially in the form of Exhibit B, (P) such transfer does not result in a
nonexempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA with respect to such Holders about which the Owner Participant shall
have received such information as may be reasonably necessary in making such
determination (and Owner Participant shall request such information and each of
Lessee, the Original Loan Participant and the Indenture Trustee shall cooperate
in providing such information as may be available), (Q) such transfer does not
violate any applicable law including, without limitation, the Act, or any rules
or regulations promulgated thereunder, the Securities Act or the Trust
Indenture Act of 1939, (R) after giving effect to such transfer, there shall be
no more than one Owner Participant of record at that time and (S) such transfer
will not give rise to an Indenture Default or Indenture Event of Default; and
Lessee or the Indenture Trustee may
PARTICIPATION AGREEMENT [N602SW]
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request such Transferee to provide an opinion of counsel (who shall be
reasonably satisfactory to Lessee and the Indenture Trustee) in form, scope and
substance reasonably satisfactory to Lessee and the Indenture Trustee as to any
matter set forth in clause (Q) and as to such other matters as Lessee or the
Indenture Trustee may reasonably request. Upon any such transfer by the Owner
Participant as above provided, the Transferee shall be deemed the Owner
Participant for all purposes hereof and of the other Operative Agreements and
each reference herein to the transferor Owner Participant shall be deemed for
all purposes, with respect to circumstances existing and requirements arising
thereafter, to be to the Transferee and the transferor Owner Participant shall
be relieved of all obligations of the transferring Owner Participant under the
Owner Participant Agreements arising after the date of such transfer except to
the extent fairly attributable to acts or events occurring prior thereto and
not assumed by the transferee Owner Participant. If the Owner Participant
intends to transfer its interests hereunder, it shall give prior written notice
thereof as soon as practicable, but in no event less than ten (10) Business
Days prior thereto, to the Indenture Trustee, the Owner Trustee and Lessee,
specifying the name and address of the proposed Transferee and the facts
necessary to determine whether or not the requirements for a Transferee, as set
forth herein, are satisfied. The Owner Participant shall pay, or shall cause
the transferee Owner Participant to pay, all of the reasonable costs and
expenses (including, without limitation, legal fees and expenses) of the other
parties hereto (except the costs and expenses of Lessee if such transfer is
effected during the continuance of a Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or a Lease Event of Default or in connection
with the exercise of remedies under the Lease), on a net after-tax basis, of
any such transfer. For purposes of this Agreement, "net worth" shall mean the
excess of total tangible assets over total liabilities, each to be determined
in accordance with generally accepted accounting principles consistently
applied.
(m) Obligations of Trustees. The Indenture Trustee shall
be responsible for the payment, performance and discharge of, and shall fully
and completely pay, perform and discharge, all of its obligations under the
Trust Indenture in accordance with the terms thereof. Subject to the terms and
provisions of the Trust Agreement, the Owner Trustee shall be responsible for
the payment, performance and discharge of, and shall fully and completely pay,
perform and discharge, all of its obligations under the Lease in accordance
with the terms thereof.
(n) Compliance with Trust Indenture. 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:
PARTICIPATION AGREEMENT [N602SW]
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(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;
(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) 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;
PARTICIPATION AGREEMENT [N602SW]
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(viii) neither it nor anyone acting on its
behalf has offered any interest in the Trust Estate or any
Certificates or any similar securities for sale to, or solicited any
offer to acquire the same from, anyone, and no responsible officer or
responsible employee of 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 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 those
costs and expenses specified to be paid by the Owner Participant pursuant to
the Lease.
(r) Lessee's Assumption of Debt. Subject to compliance
by Lessee with all of its obligations under the Operative Agreements and
provided that the Series SWA 1995 Trust N602SW-I Certificate is no longer
outstanding, each of the Owner Trustee, the Indenture Trustee and the Owner
Participant covenants and agrees that, at Lessee's expense on a net after-tax
basis (including, without limitation, reasonable attorneys' fees and expenses
of each of such parties), (i) if Lessee elects to terminate the Lease and to
purchase the Aircraft pursuant to Section 18.2(b) of the Lease, each of such
parties will, subject to due compliance by Lessee with the provisions of said
Section 18.2(b), execute and deliver appropriate documentation to Transfer to
Lessee the Aircraft, and (ii) Lessee, in connection with such purchase, may (if
no Lease Event of Default shall have occurred and be continuing, unless such
Lease Event of Default is waived by the Indenture Trustee)
PARTICIPATION AGREEMENT [N602SW]
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assume (and, as set forth in Section 18.2(c) of the Lease, receive a credit in
an amount equal to the principal amount of the debt assumed, against the
purchase price payable by Lessee pursuant to Section 18.2(b) of the Lease) the
obligations of the Owner Trustee pursuant to Section 7.03 of the Trust
Indenture and the Certificates (and the Lease, to the extent that the Owner
Trustee's obligations thereunder are incorporated into the Trust Indenture or
the Certificates), and in such event each of the parties shall execute and
deliver appropriate documentation as contemplated by Section 7.03 of the Trust
Indenture.
(s) [Intentionally Reserved].
(t) [Intentionally Reserved].
(u) Lease Adjustments. Section 3.7 of the Lease
contemplates that, under certain circumstances, the Owner Participant will make
certain recalculations and the Owner Participant hereby agrees to promptly take
such actions as may be necessary or desirable to give effect to and to cause
the Owner Trustee to give effect to the provisions of Section 3.7 of the Lease.
(v) Revocation of Trust Agreement. The Owner Participant
agrees, notwithstanding anything to the contrary contained in the Trust
Agreement, (i) solely for the benefit of the Indenture Trustee that it will not
revoke or otherwise terminate the Trust Agreement as long as the Trust
Indenture is in effect, and (ii) solely for the benefit of Lessee that it will
not revoke or otherwise terminate the Trust Agreement during the Term without
the prior written consent of Lessee, except that, notwithstanding the foregoing
clauses (i) and (ii), or any other provision of the Operative Agreements to the
contrary, the Owner Participant shall have the right to terminate the trusts
set forth in the Trust Agreement without the consent of any other party to the
Operative Agreements, at any time, if in connection therewith the Owner
Participant shall simultaneously create a new trust upon substantially the same
terms and conditions as the trusts so terminated and shall cause the Trust
Estate to be vested in the Owner Trustee under the new trust upon the same
terms and conditions so applied to such terminated trust; provided, however,
that in connection with any such termination (A) none of the creation of such
new trust, the termination of the trust set forth in the Trust Agreement or the
transactions consummated in connection therewith will have any adverse impact
on any of Lessee's rights or the Indenture Trustee's rights under the Operative
Agreements (including the first priority lien status of the Lien of the Trust
Indenture), (B) Lessee shall have no responsibility to indemnify any
Indemnified Party under any provision of any Operative Agreement for any Taxes
or other consequences that in either case would not have been incurred but for
such termination and transfer, (C) the Owner Participant shall indemnify Lessee
and the Indenture Trustee for any costs, expenses, taxes or other consequences
that in either case would not have been incurred but for such termination and
transfer, (D) the Owner Participant shall provide Lessee and the Indenture
Trustee with an opinion in form and substance reasonably satisfactory to them
as to the effect of such termination and transfer, and (E) immediately after
such transfer, the beneficiary of the new trust shall be the same as the
beneficiary of the trust set forth in the Trust Agreement. The Owner
Participant further agrees (x) promptly to provide instructions to the Owner
Trustee, upon the request of the Owner Trustee and as otherwise required 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
PARTICIPATION AGREEMENT [N602SW]
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such institution resigns as Owner Trustee, unless the Owner Participant shall
have consulted in good faith with Lessee prior to such removal or replacement;
provided, that no such consultation shall be required if a Lease Event of
Default shall have occurred and be continuing.
(w) [Intentionally Reserved].
(x) Withholding Taxes. The Original Loan Participant
represents that it is exempt from United States withholding taxes, and
covenants that, if required to obtain or renew such exemption, it will properly
prepare and promptly furnish to each of the Owner Trustee, the Indenture
Trustee and Lessee Internal Revenue Service Form 1001, Form 4224 (with respect
to each tax year) or Form W-8, whichever is applicable. The Original Loan
Participant represents, warrants and covenants that it will promptly notify the
Owner Trustee, the Indenture Trustee and Lessee if it transfers any interest in
its Series SWA 1995 Trust N602SW-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 it will
not, and the Owner Participant agrees that during such time as a Lease Event of
Default has not occurred it will not cause the Owner Trustee to, take any
action to effect such satisfaction and discharge except upon the request of
Lessee made pursuant to this Section 8(y).
(z) Permitted Investments. The Owner Trustee agrees that
(i) so long as the Trust Indenture has not been duly discharged, any profit,
income, interest, dividend or gain realized upon the maturity, sale or other
disposition of any Permitted Investment made by the Indenture Trustee pursuant
to Section 9.04 of the Trust Indenture, and paid to Lessee on behalf of the
Owner Trustee by the Indenture Trustee in accordance with the terms of such
Section 9.04, shall be entirely for the account of, and the sole property of,
Lessee who, for such purposes, shall not be deemed to be acting as agent of the
Owner Trustee, and Lessee shall have no obligation to pay over such profit,
income, interest, dividend or gain to the Owner Trustee, (ii) any such profit,
income, interest,
PARTICIPATION AGREEMENT [N602SW]
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dividend or gain not theretofore distributed shall, upon discharge of the Trust
Indenture, be paid by the Indenture Trustee to Lessee, unless instructed by the
Owner Participant to distribute such funds to the Owner Participant or the
Owner Trustee to the extent the Owner Participant or the Owner Trustee is owed
any amounts under the Operative Agreements that have not been paid when due,
and (iii) except to the extent the Owner Trustee or Owner Participant is owed
any amounts under the Operative Agreements by Lessee and such amounts are not
paid when due, the Owner Participant may cause the Indenture Trustee to
distribute and apply such profit, income, interest, dividend or gain realized
upon the maturity, sale or other disposition of investment of funds pursuant to
Section 22.1 of the Lease, in satisfaction or partial satisfaction of the
amounts so due.
(aa) Special Purchase Option. If Lessee shall have
elected both (i) to assume all of the rights and obligations of Lessor under
the Trust Indenture in accordance with Section 7.03 of the Trust Indenture and
(ii) to pay to Lessor the installments specified in the proviso to Section
18.2(c) of the Lease, then, as further conditions precedent to those specified
in paragraphs (c) and (d) of Section 18.2 of the Lease to such assumption:
(1) the Indenture Trustee shall have
received evidence reasonably satisfactory to it that the Trust
Indenture, after giving effect to the transactions contemplated by
Section 18.2(d) of the Lease, constitutes a first priority and
perfected security interest in the Aircraft, which evidence shall
include an opinion of the tenor contemplated by Section 7.03(h) of the
Trust Indenture; and (2) the Indenture Trustee and the Owner Trustee
shall execute and deliver an intercreditor agreement that covers the
following matters:
(x) the Owner Trustee shall not,
notwithstanding any Lease Event of Default, exercise any
remedy accorded to it pursuant to Section 15 of the Lease
until the Trust Indenture shall have been discharged pursuant
to Section 10.01 of the Trust Indenture;
(y) payment of the Supplemental
Rent under the Lease in respect of the installments specified
in Section 18.2(c) of the Lease, and all other amounts owing
to the Owner Trustee (other than Excluded Payments)
(collectively, "Equity Payments"), shall be fully and
unconditionally subordinated to the payment in full in cash of
principal, interest, Break Amount or Premium, if any, and all
other amounts owing to the Holders or the Indenture Trustee
under or in respect of the Certificates or the Trust Indenture
(collectively, "Debt Payments"), all pursuant to such terms of
subordination as shall be effectively and substantively
equivalent to the manner in which Debt Payments are paid or
payable in priority to the Equity Payments, and such other
customary terms of subordination as shall be reasonably
required by the Indenture Trustee; and
(z) the Owner Trustee shall have
the substantive equivalent of the cure and buy-out rights
specified in clauses (e)(i) and (e)(ii) of Section 8.03 of the
Trust Indenture.
(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or Section 8.03(e)(ii)
of the Indenture, the Original Loan Participant
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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
N602SW-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 N602SW-I Certificate or participation will not
result in a nonexempt prohibited transaction under Section 4975 of the Code or
Section 406 of ERISA. Any such Person shall require any transferee of its
interest to make the representations, warranties and covenants in the preceding
sentence.
(cc) [Intentionally Reserved].
(dd) Deferred Equity. The Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and not with 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, 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 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 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 to fund the
obligations of the Owner Trustee arising pursuant to clause (5) of Section
18(a). In the event the Owner Participant fails to make such payment, or if
the Owner Trustee shall fail to make the payment required pursuant to clause
(5) of Section 18(a), and in either case Lessee shall make an Advance as
required by Section 3.8 of the Lease, Lessee may 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 and, without duplication of the foregoing, shall have such remedies as
may be available to it against the Owner Participant at law or in equity in
respect of the recovery of any such Advance. 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 to maximum rate
permitted by applicable law. All amounts paid to Lessee by the Owner
Participant in respect of the Advance or deducted by Lessee
PARTICIPATION AGREEMENT [N602SW]
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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.
(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 N602SW-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 distributable at such time to the Owner
Participant. Any net losses on such investment shall be for the account of
Lessee. Any net earnings on such investment shall be distributed from time to
time by Lessee to the Owner Participant after deducting therefrom any portion
of such fee then due and unpaid. Upon the date required by applicable law
dealing with unclaimed property, Lessee will distribute to the Owner
Participant any amount held by it pursuant to this Section 9 and not previously
applied to the payment of the Certificates, after deducting therefrom any
portion of such fee then due and unpaid.
SECTION 10. Other Documents; Amendment. Lessee
acknowledges receipt of executed copies of the Trust Agreement and Trust
Indenture and hereby consents in all respects to the execution and delivery of
the Trust Agreement and Trust Indenture and to all the terms thereunder,
including, without limitation, the assignment under the Trust Indenture of
Lessor's rights under the Lease. Each of the Owner Participant and the Owner
Trustee hereby (A) agrees with Lessee and the Indenture Trustee to comply with
all of the terms of the Trust Agreement and, to the extent the same purports or
is stated to bind the Owner Participant, the Trust Indenture (each as the same
may hereafter be amended or supplemented from time to time in accordance with
the terms thereof) applicable to it, to the extent such non-compliance would be
adverse to such party; and (B) subject to Section 8(v), agrees with Lessee and
the Indenture Trustee not to amend, supplement or otherwise modify any
provision of the Trust Agreement in a manner adversely affecting such party
without the prior written consent of such party. In addition, unless a Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing and so long as the Lease
has not been terminated, the Indenture Trustee and the Owner Trustee hereby
agree for the benefit of Lessee that without the consent of Lessee they will
not (and the Owner Participant agrees that it will not cause the Owner Trustee
to) amend, supplement or
PARTICIPATION AGREEMENT [N602SW]
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otherwise modify any provision of the Trust Indenture in a manner adversely
affecting Lessee. The Indenture Trustee and the Owner Trustee agree to
promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Agreements to which Lessee is not a party.
Each Holder agrees that it will not take any action in respect of the Trust
Indenture Estate except through the Indenture Trustee pursuant to the Trust
Indenture or as otherwise permitted by the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee
covenants and agrees with the Participants, the Indenture Trustee and the Owner
Trustee, in its capacity as such and in its individual capacity, as follows:
(a) Further Assurances. Lessee will cause to be done,
executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in the name
of the Owner Trustee, or shall furnish to the Owner Trustee such information as
may be required to enable the Owner Trustee to make application for such
registration (at the expense of Lessee, including, without limitation,
reasonable attorneys' fees and expenses), and shall promptly furnish to the
Owner Trustee such information as may be required to enable the Owner Trustee
to timely file any reports required to be filed by it as the lessor under the
Lease or as the owner of the Aircraft with any governmental authority
(including tax authorities), it being understood that Lessee shall not be
required to comply with this covenant to the extent that 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
Trust Agreement, the Lease, all Lease Supplements, the Trust Indenture, all
Trust Supplements and any financing statements or other instruments as are
necessary to maintain, so long as the Trust Indenture or the Lease is in
effect, the perfection of the security interests created by the Trust Indenture
and any security interest that may be claimed to have been created by the Lease
and the ownership interest of the Owner Trustee in the Aircraft. Lessee
agrees, upon the request and at the sole expense of the Owner Participant, to
take all reasonable acts requested by the Owner Participant in complying with
its obligations under clause (A) or (B) of the second sentence of Section 8(b).
(c) FAA Filings. Upon the execution and delivery of the
Lessee FAA ▇▇▇▇ of Sale, the Lease Supplement and Trust Supplement covering the
Aircraft, the Lease and the Trust Indenture shall be filed for recording with
the FAA in the following order of priority: first, the Lessee FAA ▇▇▇▇ of
Sale; second, the FAA registration application; third, the Trust Indenture,
with the Trust Agreement and the Trust Supplement covering the Aircraft
attached; and fourth, the Lease, with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement covering the Aircraft
attached. Lessee agrees to furnish the Participants and the Indenture Trustee
with copies of the foregoing documents with recording data as promptly as
practicable following the issuance of same by the FAA.
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(d) Annual Compliance Opinions. Lessee will furnish to
Owner Trustee and Indenture Trustee annually after the execution hereof (but
not later than December 1 of each year), commencing with the year 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),
substantially in the form of the Purchase Agreement Assignment, and to use its
best efforts to obtain from the Engine Manufacturer a consent and agreement in
substantially the form of the Manufacturer's Consent.
(f) Merger. Lessee will not consolidate with or merge
into any other corporation or convey, transfer or lease all or substantially
all of its assets to any Person unless:
(i) the corporation formed by such
consolidation or into which Lessee is merged or the Person which
acquires by conveyance, transfer or lease all or substantially all of
the assets of Lessee as an entirety, as the case may be (the
"Successor") shall be (i) a corporation 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;
(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
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Section 11(f) (except that such opinion need not refer to subparagraph
(iii) above), that the agreements entered into to effect such
consolidation, merger, conveyance, transfer or lease and such
assumption agreement are legal, valid and binding obligations of the
Successor, enforceable against the Successor in accordance with their
respective terms (subject to applicable bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally
and to general principles of equity), and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(v) the Successor shall make such filings
and recordings with the FAA pursuant to the Act, as shall be necessary
or desirable to evidence such consolidation, merger, conveyance,
transfer or lease with or to such Successor.
Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements with
the same effect as if the Successor had been named as Lessee therein. No such
conveyance, transfer or lease of all or substantially all of the assets of
Lessee as an entirety shall have the effect of releasing Lessee or any
successor corporation or Person which shall theretofore have become such in the
manner prescribed in this Section 11(f) from its liability in respect of any
Operative Agreement to which it is a party. Nothing contained herein shall
permit any lease, sublease or other arrangement for the use, operation or
possession of the Aircraft except in compliance with the applicable provisions
of the Lease (or any assignment by Lessee of its rights under the Lease, except
in connection with a transaction in compliance with the express provisions of
this Section 11(f)).
(g) Corporate Existence. Except as permitted by Section
11(f) hereof, Lessee shall at all times maintain its corporate existence.
Lessee covenants and agrees that it will at all times be a "citizen of the
United States" within the meaning of the Act.
(h) Certificate Schedule. Lessee will provide on behalf
of the Owner Trustee the amortization schedule for the Certificate to be issued
to the Original Loan Participant at least two days before the Delivery Date.
(i) No Certificate Ownership. Lessee agrees that it will
not, at any time, hold any Certificates.
SECTION 12. Ownership of Aircraft. It is hereby
agreed among Lessee, the Owner Participant and the Owner Trustee that for all
purposes the Owner Trustee will be the owner of the Aircraft (except that the
Owner Participant will be the owner for income tax purposes and except under
the circumstances contemplated by the proviso to Section 18.2(d) of the Lease)
and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes and all other
relevant purposes (subject to the election referred to above).
SECTION 13. Notices; Consent to Jurisdiction. (a)
Except as otherwise provided in this Agreement respecting telephone notices,
all notices, demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be in writing and
shall be personally delivered or sent by registered or certified mail, postage
prepaid, or
PARTICIPATION AGREEMENT [N602SW]
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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 take whatever action may be reasonably necessary to accomplish such
removal; provided, that (A) Lessee shall provide such additional tax
indemnification as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Agreements of the Owner Participant shall
not be adversely altered as a result of the taking of such action, or the Owner
Participant shall be indemnified by Lessee to its reasonable satisfaction for
any such alteration, (C) the lien of the Trust Indenture on the Trust Indenture
Estate shall not be adversely affected by such action, and Lessee shall execute
and deliver such documents as may be requested by the Indenture Trustee to
continue the perfection and priority of the lien on the Trust Indenture Estate,
(D) the Owner Participant shall have received an opinion or opinions of counsel
(reasonably satisfactory to the Owner Participant) in scope, form and substance
reasonably satisfactory to the Owner Participant to the effect that (I) the
trust, as thus removed, shall remain a validly established trust and the Trust
Agreement and other Operative
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Agreements shall remain valid, binding and enforceable in accordance with their
terms, (II) any amendments to the Trust Agreement necessitated by such removal
shall have been duly authorized, executed and delivered by the parties thereto
and shall constitute the legal, valid and binding obligations of such parties,
enforceable in accordance with their terms, (III) such removal will not result
in the imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify the Owner Participant, the Owner Trustee or the Trust
Estate pursuant to Section 7(b) hereof (taking into account any additional
indemnification provided by Lessee pursuant to clause (A) of this sentence),
(IV) such removal will not result in any Loss of MACRS Deductions, Transaction
Expense Deductions, Interest Deductions or an Inclusion (as defined in the Tax
Indemnity Agreement) with respect to which Lessee is not required to indemnify
the Owner Participant pursuant to Section 6 of the Tax Indemnity Agreement
(taking into account any additional indemnification provided by Lessee pursuant
to clause (A) of this sentence), and (V) covering such other matters as the
Owner Participant may reasonably request, (E) if 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, and (F) Lessee
shall indemnify and hold harmless the Owner Participant on a net after-tax
basis against any and all reasonable and actual costs and expenses including
attorneys' fees and disbursements, registration, recording or filing fees
incurred by the Owner Trustee or Owner Participant, in connection with such
change of situs.
SECTION 15. Miscellaneous.
(a) Consents under Lease and Trust Indenture. Each of
the Owner Participant and each Holder covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of the Owner
Trustee, as Lessor, or the Indenture Trustee under the terms of the Lease,
which by its terms is not to be unreasonably withheld by the Owner Trustee, as
Lessor, or by the Indenture Trustee. Each Holder covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Indenture Trustee under the terms hereof or in the Trust Indenture, which by
its terms is not to be unreasonably withheld by the Indenture Trustee.
(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, the Owner Trustee, the Indenture Trustee,
the Owner Participant and the Original Loan Participant provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, the
Original Loan Participant's and the Owner Participant's obligations under any
and all thereof, shall survive the making available of the respective
Commitments by the Participants, the delivery or return of the Aircraft, the
transfer of any interest of the Owner Participant in the Trust Estate or the
Aircraft or any Engine or the transfer of any interest by any Holder in any
Certificate or the Trust Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Agreement, except as
otherwise expressly provided herein or therein.
(c) Counterparts; Waivers; Governing Law. This Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument. Neither this
Agreement nor any of the terms hereof may be terminated, amended, supplemented,
waived or modified, except by an instrument in writing signed by the party
against which the
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enforcement of the termination, amendment, supplement, waiver or modification
is sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to Lessee, the Indenture Trustee and the Owner Trustee. The terms of
this Agreement shall be binding upon, and inure to the benefit of and shall be
enforceable by, Lessee, the Participants, the Indenture Trustee and the Owner
Trustee. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, 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.
(e) Duties Limited. No Participant shall have any
obligation or duty to Lessee, to any other Participant or to others with
respect to the transactions contemplated hereby except those obligations or
duties of such Participant expressly set forth in this Agreement and the other
Operative Agreements and no Participant shall be liable for performance by any
other party hereto of such other party's obligations or duties hereunder.
Without limitation of the generality of the foregoing, under no circumstances
whatsoever (except as provided in Section 7(d) hereof) shall any Participant be
liable to Lessee, nor shall any Participant be liable to any other Participant,
for any action or inaction on the part of the Indenture Trustee or the Owner
Trustee in connection with the transactions contemplated herein, whether or not
such action or inaction is caused by the willful misconduct or gross negligence
of the Indenture Trustee or the Owner Trustee.
(f) Binding on Parties and Successors. This Agreement
shall be binding upon and shall inure to the benefit of and shall be
enforceable against, the parties hereto and their respective successors and
permitted assigns including each successive holder of the Owner Participant's
interest and each successive holder of any Certificate issued and delivered
pursuant to this Agreement or the Trust Indenture whether or not an express
assignment to such holder of rights and obligations under this Agreement has
been made.
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(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 17 or 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, (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, (iii) the initial fee and initial reasonable and
actual disbursements of the Owner Trustee under the Trust Agreement, (iv) the
initial fee and initial reasonable and actual disbursements of the Indenture
Trustee under the Trust Indenture, (v) the fee and expenses of Aero Economics,
Inc. (or of such other appraiser as shall be acceptable to Lessee and the Owner
Participant) with respect to the appraisal of the Aircraft required on or
before the Delivery Date pursuant to Section 4(a) hereof, (vi) the advisory
fees and expenses of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ Financial Corporation, (vii) the
reasonable out-of-pocket disbursements, costs and expenses of the Original Loan
Participant relating to the transactions contemplated hereby, (viii) the
reasonable out-of-pocket expenses of the Owner Participant relating to the
transactions contemplated hereby, excluding the fees and expenses of Owner
Participant's counsel, (ix) the initial fee, if any, of the Original Loan
Participant, (x) the placement or underwriting fees, commissions and expenses,
if any, in placing the permanent debt pursuant to Section 18 hereof and all
costs and expenses associated with a public offering, if any, pursuant thereto,
and (xi) printing and distribution costs.
(b) Each of the Owner Trustee, the Indenture Trustee,
Lessee and the Participants shall promptly submit to the Owner Participant
copies of invoices of the Transaction Costs as they are received. Lessee shall
also be provided with a copy of any ▇▇▇▇ for legal expenses, with an
opportunity to review and approve it (such approval not to be unreasonably
withheld or delayed). The Owner Participant agrees to pay such amounts
directly or to transfer to the Owner Trustee from time to time promptly upon
receipt of invoices of Transaction Costs such amount as shall be necessary in
order to enable the Owner Trustee to pay such Transaction Costs. To the extent
of funds received by it, the Owner Trustee agrees to pay all invoices of
Transaction Costs that have been so approved promptly upon receipt thereof.
Notwithstanding the foregoing, Lessee, (x) at its option, may pay directly any
Transaction Costs in excess of (i) 0.365% 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
PARTICIPATION AGREEMENT [N602SW]
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18, (y) shall pay the fees of its special counsel and, (z) in the event that
the transactions contemplated hereby shall not be consummated, Lessee shall pay
all Transaction Costs, plus the fees and expenses of Owner Participant's
counsel, except that the fees and expenses referred to in clause (a) (viii)
above, and the fees, expenses and disbursements of the Owner Participant's
counsel, shall be borne by the Owner Participant if such failure to consummate
the transactions results from the failure of the Owner Participant to close
after all conditions precedent to the Owner Participant's funding (other than
those conditions within the control of the Owner Participant) of its Commitment
set forth herein have been satisfied. In any and all events, Lessee agrees to
pay on a net after-tax basis the reasonable out-of-pocket costs and expenses
(including counsel fees) of each Indemnified Party incurred in connection with
the entering into or giving or withholding of any future waiver, modification,
supplement, consent, amendment or other action with respect to any Operative
Agreement which (a) is requested by Lessee, (b) results from any adjustment
pursuant to Section 3.7 of the Lease, or (c) is necessary to effectuate the
intent of any Operative Agreement. In addition, upon such failure to
consummate, Lessee shall pay the Original Loan Participant any applicable Break
Amount.
SECTION 17. Optional Redemption of Certificates.
(a) Subject to paragraph (d) below, in the event that Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant requesting that there be effected a voluntary redemption of the
Outstanding Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in
good faith to conclude an agreement with Lessee as to the terms of such
refunding or refinancing transaction (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Refinancing Certificate") setting forth (i) the
proposed date on which the Outstanding Certificates will be redeemed,
describing the new debt to be issued and the other aspects of such
refunding or refinancing transaction to be consummated (such date, the
"Refinancing Date", which date shall be determined so as to comply
with Section 6.03(a) of the Trust Indenture) and (ii) the following
information: (A) subject to the limitations set forth in this Section
17, the proposed adjusted ratio of debt evidenced by the Certificates
to the Owner Participant's investment in the beneficial ownership of
the Aircraft (such ratio, the "Debt/Equity Ratio"), (B) the principal
amount of debt to be issued by the Owner Trustee on the Refinancing
Date, and (C) the proposed revised debt amortization and schedules of
Basic Rent, Stipulated Loss Value percentages and Termination Value
percentages and the revised Special Purchase Price (including any
installments thereof). The Refinancing Certificate shall not provide
for a Debt/Equity ratio of more than 4:1. Within ten (10) Business
Days of its receipt of the Refinancing Certificate, Lessee may demand
a verification of the information set forth in the Refinancing
Certificate in the manner described in Section 3.7 of the Lease. Upon
the acceptance by Lessee of the accuracy of the information set forth
in the Refinancing Certificate or the determination of such
information pursuant to such verification procedures (such
information, the "Refinancing
PARTICIPATION AGREEMENT [N602SW]
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Information") the appropriate parties will take the actions specified
in subparagraphs (2) through (6) below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to the Owner Participant, the Owner Trustee and Lessee
(which may involve an underwriting agreement in connection with a
public offering of such debt or the purchase of such debt by a
publicly funded entity (or entities) or the sale of the Owner
Trustee's interest in the Trust Estate and/or the Aircraft and its
simultaneous resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance
and sale by the Owner Trustee to such institution or institutions on
the Refinancing Date of debt securities in an aggregate principal
amount specified in the Refinancing Information, which amount shall be
at least equal to the aggregate principal amount of all Certificates
Outstanding on the Refinancing Date (such debt securities, the "New
Debt"), (ii) the application of the proceeds of the sale of the New
Debt to the redemption of all such Certificates on the Refinancing
Date and the payment of any other amounts payable to the Holders under
the Operative Agreements on the Refinancing Date, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Interim Rent (if applicable) and 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 N602SW
Certificates shall have been publicly issued, the early termination
notice revocation and payment provisions shall be modified to comport
with the applicable notice and payment requirements of The Depository
Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the New Debt in
like manner as the Certificates and will enter into such amendments
and supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) unless otherwise agreed to or required
by the Owner Participant to be paid as a Transaction Cost and whether
or not such refunding or refinancing transaction is consummated,
Lessee shall pay on a net after-tax basis all of the reasonable
out-of-pocket expenses of all parties to such refunding or
refinancing, including, without limitation, the reasonable fees and
expenses of such parties' counsel (including allocated costs of the
Original Loan Participant's in-house counsel) and any related loan or
commitment fees; and
PARTICIPATION AGREEMENT [N602SW]
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(6) subject to compliance by the Owner
Trustee with all applicable terms and conditions for voluntary
redemption under the Trust Indenture and this Agreement, each Holder
of a Certificate being refinanced or refunded will transfer on the
applicable Redemption Date to the Owner Trustee each Certificate held
by it immediately prior to such refunding or refinancing for
cancellation (and the Owner Trustee shall cancel the same), against
simultaneous receipt by such Holder of payment for the then
outstanding principal amount of such Certificate, accrued and unpaid
interest thereon, Premium, if any, plus in the case of the Series SWA
1995 Trust N602SW-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) neither Owner Participant nor the Owner Trustee shall be
required to execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would result in any unreimbursed
increased costs or liability, including any adverse tax consequences or risk
thereof (unless indemnified against to its reasonable satisfaction) or would
result in any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional investment in
connection with any such refinancing.
(e) Without the consent of the Owner Participant, there
shall be no more than two optional refundings or refinancings under this
Section 17.
(f) Any refunding or refinancing pursuant to this Section
17 shall be of all Certificates then Outstanding and shall be effected in
accordance with Section 6.03(a) of the Trust Indenture.
PARTICIPATION AGREEMENT [N602SW]
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(g) When calculating any of the information required to
be set forth in a Refinancing Certificate, the Owner Participant shall make
such calculations in a manner which (A) maintains its Net Economic Return, (B)
minimizes the Net Present Value of Rents to the extent possible consistent with
clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28 (or
any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) uses the same methodology
and assumptions used by the Owner Participant in determining Interim Rent,
Basic Rent, Stipulated Loss Values, Termination Values and Special Purchase
Price on the Delivery Date (except to the extent such assumptions have been
altered since the Delivery Date in connection with an adjustment to Rent
pursuant to Section 3.7 of the Lease).
(h) No refinancing or refunding pursuant to this Section
17 shall be permitted during the continuance of a Lease Default or a Lease
Event of Default.
SECTION 18. Interim Debt. (a) The parties hereto
acknowledge and agree that each Series SWA 1995 Trust N602SW-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 N602SW-I Certificates be refinanced by Series SWA 1995 Trust N602SW
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 N602SW-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
N602SW-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 N602SW-I Certificates, then the amount of any
additional contribution to the Trust Estate to be made by the Owner
Participant on the Section 18 Refinancing Date and (C) the proposed
revised debt amortization and schedules of Interim Rent, Basic Rent,
Stipulated Loss Value percentages and Termination Value percentages
and the revised Special Purchase Price (including any installments
thereof). The principal amount of debt to be issued by the Owner
Trustee on the Section 18 Refinancing Date shall not equal more than
80.00% of Lessor's
PARTICIPATION AGREEMENT [N602SW]
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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 N602SW 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
N602SW-I Certificates Outstanding on the Section 18 Refinancing Date
and the payment of any other amounts payable to the Holders under the
Operative Agreements on the Section 18 Refinancing Date, all in
accordance with Section 6.03(b) of the Trust Indenture, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt (other than any
representations, warranties and covenants deemed made by such Holders
by virtue of their accepting any Certificate issued to them)) make
such representations, warranties and covenants as the Owner
Participant or Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Interim Rent (if applicable) and Basic
Rent payable in respect of the period from and after the Section 18
Refinancing Date shall be as provided in the Section 18 Refinancing
Information (and shall take into account any variation of the sum of
any interest payment made pursuant to paragraph (5) 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
N602SW Certificates shall have been publicly issued, the early
termination notice revocation and payment provisions shall be modified
to comport with the applicable notice and payment requirements of The
Depository Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the Section 18 New
Debt in like manner as the Series SWA 1995
PARTICIPATION AGREEMENT [N602SW]
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Trust N602SW-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) if such refunding or refinancing shall
be consummated on or prior to the Deferred Equity Date, 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 Section 3.4 of the
Lease;
(5A) if such refunding or refinancing shall
be consummated after the Deferred Equity Date, 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) except as provided in paragraph (5)
above, the Owner Trustee shall pay all of the costs of any such
refunding or refinancing so consummated, such costs shall be
considered as Transaction Costs and paid in accordance with and
subject to the limitations of Section 16 above and such Transaction
Costs shall be appropriately considered in calculating the proposed
revised debt amortization and schedules of Basic Rent, Stipulated Loss
Value percentages and Termination Value percentages;
(7) each Holder of the Series SWA 1995 Trust
N602SW-I Certificates will deliver to the Owner Trustee the Series SWA
1995 Trust N602SW-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 N602SW-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 N602SW-I Certificates or the Trust Indenture;
(8) the appropriate parties will amend such
of the Operative Agreements in such respects as shall be necessary to
reflect any amendments agreed upon by the parties thereto; provided,
that (i) all agreements and instruments to be executed and delivered
by the Owner Participant or the Owner Trustee under this Section 18
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee
shall be required to execute and deliver any such agreement or
instrument or to make any other arrangements which in its opinion
would result in any unreimbursed increased costs or liability,
including any adverse tax consequences or risk thereof (unless
indemnified against to its reasonable satisfaction) or would result in
any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional
investment in connection with any such refinancing (other than the
Deferred Equity Amount, if applicable);
PARTICIPATION AGREEMENT [N602SW]
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(9) the appropriate parties will execute and
deliver appropriate closing documents, execute and deliver appropriate
closing certificates and deliver appropriate opinions of counsel; and
(10) the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 if, in
its opinion, there is a risk that such refinancing would result in any
unindemnified adverse consequences (including tax consequences);
provided, however, that the Owner Participant will be obligated to
proceed with such refinancing if Lessee agrees to indemnify the Owner
Participant for such unindemnified adverse consequences (any such
indemnity to be satisfactory to the Owner Participant).
Notwithstanding the foregoing, the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 unless
(i) the Lessee requires in the case of a private refinancing, each
Holder to represent to the Lessee that it is not using ERISA funding
sources, or that an exemption is available with respect to its
purchase and holding of the debt, or (ii) in the case of a public
refinancing, an exemption with respect to pass through certificates
(such as Prohibited Transaction Exemption 89-89 or 90-24 or any other
comparable exemption) is available.
(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 N602SW-I Certificates then
Outstanding.
(d) Any public refinancing pursuant to this Section 18
shall comply with all the restrictions, limitations and conditions applicable
in the case of a public refinancing pursuant to Section 17(b) hereof.
(e) No refunding or refinancing pursuant to this Section
18 shall be permitted during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default.
(f) When calculating any of the information required to
be set forth in a Section 18 Refinancing Certificate, the Owner Participant
shall make such calculations in a manner which (A) maintains its Net Economic
Return, (B) minimizes the Net Present Value of Rents to the extent possible
consistent with clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev.
Proc. 75-28 (or any successor thereto) and would not cause the Lease to
constitute a "disqualified leaseback or long term agreement" within the meaning
of Section 467 of the Code (or any successor thereto), and (D) uses the same
methodology and assumptions used by the Owner Participant in determining
Interim Rent, 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).
PARTICIPATION AGREEMENT [N602SW]
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SECTION 19. Section 1110 Compliance. The
Participants and Lessee agree that the transactions contemplated by this
Agreement and the other Operative Agreements are intended to be, shall be and
should be construed so as to be, entitled to the full benefits of 11 U.S.C.
Section 1110.
PARTICIPATION AGREEMENT [N602SW]
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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
NATIONSBANK, N.A.
Owner Participant
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Vice President
BANK OF AMERICA ILLINOIS,
Original Loan Participant
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Managing Director
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual
capacity only as expressly provided herein
and otherwise solely as Owner Trustee,
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as otherwise
expressly provided herein, but solely as
Indenture Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Senior Financial Services
Officer
PARTICIPATION AGREEMENT [N602SW]
63
SCHEDULE I
Names and Addresses
Lessee: Payment Instructions:
------ Federal Reserve Bank of S.F.
Southwest Airlines Co. ABA No. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ For the account of Bank of America National
P.O. Box 36611 Trust and Savings Association
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ For credit to GPO Account Administration #5693
Attn: Treasurer Account No. 12330-14364
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Reference: Southwest Airlines Interim Debt
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Owner Participant:
-----------------
NationsBank, N.A.
c/o NationsBanc Lease Investments, Inc.
NationsBanc Corp. Center, 12th Floor Owner Trustee:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ -------------
NC-1007-12-01 ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Association
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Payment Instructions: Attn: Corporate Trust Administration
NationsBank of North Carolina Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
ABA No. ▇▇▇▇▇▇▇▇▇
For the account of
NationsBanc Indenture Trustee:
Lease Investments, Inc. -----------------
Account No. 001608249 Wilmington Trust Company
Reference: Southwest Airlines ▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Corporate Trust Administration
Original Loan Participant: Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------- Payment Instructions:
Bank of America Illinois Wilmington Trust Company
GPO Account Admin. #5693 Wilmington, Delaware
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ No. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ For the account of Southwest Airlines 1995-1
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ Account No. 30875-0
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Reference: N602SW
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to: Corporate Trust Administration
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Managing Director
Bank of America National Trust and
Savings Association
Unit 5618
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
PARTICIPATION AGREEMENT [N602SW]
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SCHEDULE II
Commitments
Original Percentage of
Loan Participant: Lessor's Cost Dollar Amount
---------------- ------------- -------------
Bank of America Illinois 73.63652053% $23,563,686.57
Owner Participant:
-----------------
NationsBank, N.A. 26.36347947% $ 8,436,313.43
------------ --------------
Total Commitments: 100% $32,000,000.00
================= ==== ==============
PARTICIPATION AGREEMENT [N602SW]
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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 November 6, 2019 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, 2015.
3. The Aircraft will not be "limited use property" as described in Rev.
Proc. 76-30, 1976-7. CB. 647.
4. Such other matters as may be reasonably requested by the Owner
Participant.
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EXHIBIT A
TRANSFEREE OP GUARANTY
TRANSFEREE OP GUARANTY, dated as of
________________by___________________________, a ___________ ________
corporation ("Transferee OP Guarantor") to and for the benefit of the Indenture
Trustee, the Owner Trustee, individually and as Owner Trustee, the Lessee and
the Original Loan Participant referred to in the Participation Agreement
described below (collectively, together with their permitted successors and
assigns, "Beneficiaries" and, individually, a "Beneficiary").
WITNESSETH:
WHEREAS, _________________ a _____________
[corporation] ("Transferor"), is Owner Participant under that certain
Participation Agreement, dated as of _______________ among Southwest Airlines
Co., as Lessee, Nationsbank, N.A., as Owner Participant [and Transferor's
predecessor in interest], Bank of America Illinois, as the Original Loan
Participant, Shawmut Bank Connecticut, National Association, in its individual
capacity only as expressly provided therein and otherwise solely as Owner
Trustee, and Wilmington Trust Company, in its individual capacity and as
Indenture Trustee (the "Participation Agreement");
WHEREAS, Transferor wishes to transfer, except to the
extent expressly reserved to Transferor, all of its right, title and interest
in and to the Participation Agreement, the Trust Estate and the other Operative
Agreements to which Transferor is a party, and all proceeds therefrom as set
forth in the Assignment and Assumption Agreement dated the date hereof between
Transferor and ________________________, a _______________________corporation
("Transferee"); and
WHEREAS, the terms of the Participation Agreement
provide that the aforementioned transfer is conditioned upon the execution and
delivery of this Guaranty by Transferee OP Guarantor;
NOW, THEREFORE, Transferee OP Guarantor hereby agrees
with and for the benefit of Beneficiaries as follows:
1. Definitions. Capitalized terms used herein and
not otherwise defined herein shall have the meanings given such terms in the
Sale and Lease Agreement, dated as of July 1, 1995 between the Owner Trustee
and Lessee, and the rules of usage set forth therein shall apply hereto.
2. Guaranty. (a) Transferee OP Guarantor hereby
unconditionally and irrevocably guarantees, as primary obligor and not as a
surety, to Beneficiaries and their respective successors, endorsees,
transferees and assigns, the prompt and complete payment by Transferee when due
(whether at the stated maturity, by acceleration or otherwise) of, and the
faithful performance of and compliance with, all payment obligations of
Transferee under the Participation Agreement and
PARTICIPATION AGREEMENT [N602SW]
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each other Operative Agreement to which Owner Participant is a party or by
which it is bound (collectively, the "Relevant Documents"), strictly in
accordance with the terms thereof and the timely performance of all other
obligations of Transferee thereunder (such payment and other obligations, the
"Obligations"), and Transferee OP Guarantor further agrees to pay all expenses
(including, all fees and disbursements of counsel) that may be paid or incurred
by Beneficiaries in enforcing any rights with respect to, or collecting, any or
all of the Obligations and/or enforcing any rights with respect to, or
collecting against, Transferee OP Guarantor under this Guaranty.
(b) No payment or payments made by Transferee,
Transferee OP Guarantor, any other guarantor or any other Person or received or
collected by any Beneficiary from Transferee, Transferee OP Guarantor, any
other guarantor or any other person by virtue of any action or proceeding or
any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of Transferee OP Guarantor
hereunder until the Obligations are paid and performed in full.
(c) If for any reason any Obligation (whether
affirmative or negative in character) shall not be observed or performed or
paid promptly when due and payable, Transferee OP Guarantor shall promptly
perform or observe or cause to be performed or observed each such Obligation or
undertaking and shall forthwith pay such amount at the place and to the person
or entity entitled thereto pursuant to the Relevant Documents regardless of
whether or not any Beneficiary or anyone on behalf of any Beneficiary shall
have instituted any suit, action or proceeding or exhausted its remedies or
taken any steps to enforce any rights against Transferee or any other person or
entity to compel any such performance or to collect all or any part of such
amount pursuant to the provisions of the Relevant Documents or at law or in
equity, or otherwise, and regardless of any other condition or contingency.
3. No Subrogation. Notwithstanding any payment or
payments made by Transferee OP Guarantor hereunder or any set-off or
application of funds of Transferee OP Guarantor by any Beneficiary, Transferee
OP Guarantor shall not be entitled to be subrogated to any of the rights of any
Beneficiary against Transferee or any collateral, security or guarantee or
right of set-off held by any Beneficiary for the payment of the Obligations,
nor shall Transferee OP Guarantor seek or be entitled to seek any reimbursement
from Transferee in respect of payments made by Transferee OP Guarantor
hereunder, unless all amounts and performance then owing to Beneficiaries by
Transferee on account of the Obligations shall have been paid and performed in
full.
4. Amendments, etc., with respect to the Obligations;
Waiver of Rights. The Transferee OP Guarantor shall remain fully obligated
hereunder notwithstanding that, without any reservation of rights against the
Transferee OP Guarantor and without notice to or further assent by the
Transferee OP Guarantor, any demand for payment or performance of any of the
Obligations made by any Beneficiary may be rescinded by such party and any of
the Obligations continued, and the Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by any Beneficiary and any
Relevant Document, and/or any collateral security document or other guarantee
or document in connection therewith may be amended,
PARTICIPATION AGREEMENT [N602SW]
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modified, supplemented or terminated, in whole or in part, as the parties
thereto may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by any Beneficiary for the
payment or performance of the Obligations may be sold, exchanged, waived,
surrendered or released. No Beneficiary shall have any obligation to protect,
secure, perfect or insure any lien at any time held by it as security for the
Obligations or for this Guaranty or any property subject thereto. When making
any demand hereunder against the Transferee OP Guarantor, a Beneficiary may,
but shall be under no obligation to, make a similar demand on the Transferee or
any other guarantor, and any failure by a Beneficiary to make any such demand
or to collect any payments from the Transferee or any such other guarantor or
any release of the Transferee or such other guarantor shall not relieve the
Transferee OP Guarantor of its obligations or liabilities hereunder, and shall
not impair or affect the rights and remedies, express or implied, or as a
matter of law, of any Beneficiary against the Transferee OP Guarantor. For
purposes hereof, "demand" shall include the commencement and continuance of any
legal proceedings.
5. Guaranty Absolute and Unconditional. The
Transferee OP Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by any Beneficiary upon this Guaranty or acceptance of this Guaranty;
the Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Guaranty; and all dealings between the Transferee or the
Transferee OP Guarantor and any Beneficiary shall likewise be conclusively
presumed to have been had or consummated in reliance upon this Guaranty. The
Transferee OP Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Transferee or the
Transferee OP Guarantor with respect to the Obligations. The Transferee OP
Guarantor understands and agrees that this Guaranty shall be construed as a
continuing, absolute and unconditional guarantee of payment and performance
(and not merely of collectibility) without regard to (a) the validity,
regularity or enforceability of any Relevant Document, any of the Obligations
or any collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by any Beneficiary, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to or be asserted by the
Transferee against any Beneficiary, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Transferee or the Transferee OP
Guarantor) that constitutes, or might be construed to constitute, an equitable
or legal discharge of the Transferee for the Obligations, or of the Transferee
OP Guarantor under this Guaranty, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against the Transferee OP Guarantor,
any Beneficiary may, but shall be under no obligation to, pursue such rights
and remedies as it may have against the Transferee or any other person or
entity or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by any Beneficiary to
pursue such other rights or remedies or to collect any payments from the
Transferee or any such other person or entity or to realize upon any such
collateral security or guarantee or exercise any such right of offset, or any
release of the Transferee or any such other person or entity or any such
collateral security, guarantee or right of offset, shall not relieve the
Transferee 0P Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of any Beneficiary against the Transferee OP Guarantor. This
Guaranty shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Transferee OP Guarantor and the
successors and assigns thereof, and shall inure to the benefit of the
Beneficiaries, and their respective
PARTICIPATION AGREEMENT [N602SW]
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successors, endorsees, transferees and assigns, until all of the Obligations
and the obligations of the Transferee OP Guarantor under this Agreement shall
have been satisfied by payment and performance in full. The Transferee OP
Guarantor further agrees that, without limiting the generality of this
Guaranty, if any Beneficiary (or any assignee thereof) shall be prevented by
applicable law from exercising its remedies (or any of them) against the
Transferee under any Operative Document, such Beneficiary (or any assignee
thereof) shall be entitled to receive hereunder from the Transferee OP
Guarantor, upon demand therefor, the sums that would have otherwise been due
from the Transferee had such remedies been able to be exercised.
6. Reinstatement. This Guaranty shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, or any of the Obligations is rescinded or must otherwise be
restored or returned by any Beneficiary upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Transferee or the Transferee
OP Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Transferee
or the Transferee OP Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made. The Transferee OP
Guarantor shall not commence any "case" (as defined in Title 11 of the United
States Code) against the Transferee.
7. Payments. The Transferee OP Guarantor hereby
guarantees that payments hereunder shall be paid without set-off, counterclaim,
deduction or withholding, except as required by applicable law, and shall be
made in Dollars, provided, if any withholding Taxes are so imposed under
applicable law, the Transferee OP Guarantor shall pay an additional amount such
that the net amount actually received by the Person entitled thereto, free of
withholding, will equal the amount then due absent such withholding.
8. Representations and Warranties. The Transferee OP
Guarantor hereby represents and warrants that:
(a) it is a [corporation] duly organized and
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power
and authority to carry on its business as now conducted, to
own or hold under lease its properties and to enter into and
perform its obligations under this Guaranty;
(b) this Guaranty has been duly authorized by all
necessary corporate action on the part of the Transferee OP
Guarantor, does not require any approval not already obtained
of stockholders of the Transferee OP Guarantor or any approval
or consent not already obtained of any trustee or holders of
any indebtedness or obligations of the Transferee OP
Guarantor, and has been duly executed and delivered by the
Transferee OP Guarantor;
(c) this Guaranty constitutes a legal, valid and
binding obligation of the Transferee OP Guarantor enforceable
in accordance with its terms;
PARTICIPATION AGREEMENT [N602SW]
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(▇) there are no pending or, to the knowledge of
the Transferee OP Guarantor, threatened actions or proceedings
against the Transferee OP Guarantor before any court or
administrative agency which, if determined adversely to the
Transferee OP Guarantor, would materially adversely affect the
financial condition of the Transferee OP Guarantor or the
ability of the Transferee OP Guarantor to perform its
obligations under this Guaranty;
(e) its net worth (as defined in Section 8(l) of
the Participation Agreement) is at least $75,000,000; and
(f) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the
passage of time or the giving of notice or both, constitute)
an Indenture Event of Default which has been caused by or
relates to the Transferee OP Guarantor and which is presently
continuing.
9. Severability. Any provision of this Guaranty
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
10. No Waiver; Cumulative Remedies . No
Beneficiary shall by any act (except by a written instrument pursuant to
Section 12 hereof), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any Beneficiary, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by a Beneficiary of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy that such Beneficiary
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
11. Integration. This Guaranty represents the
entire agreement of Transferee OP Guarantor with respect to the subject matter
hereof and there are no promises or representations by any Beneficiary relative
to the subject matter hereof not reflected herein.
12. Amendments and Waivers. None of the terms or
provisions of this Guaranty may be waived, amended or supplemented or otherwise
modified except by a written instrument executed by Transferee OP Guarantor and
each Beneficiary.
13. Section Headings. The Section headings used
in this Guaranty are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
PARTICIPATION AGREEMENT [N602SW]
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▇▇. Successors and Assigns. This Guaranty shall be
binding upon the successors and assigns of Transferee OP Guarantor and shall
inure to the benefit of Beneficiaries and their respective successors and
assigns.
15. GOVERNING LAW. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO ANY CONFLICT OF
LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION.
16. Notices. All notices and other
communications required under the terms and conditions hereof shall be given
and shall be effective in accordance with the provisions of Section 13(a) of
the Participation Agreement; provided that notices to the Transferee OP
Guarantor shall be sent to _______________________.
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IN WITNESS WHEREOF, the undersigned has caused this
Transferee OP Guaranty to be duly executed and delivered by its duly authorized
officer as of the day and the year first above written.
[NAME OF TRANSFEREE OP GUARANTOR]
By:__________________________________
Title:_______________________________
PARTICIPATION AGREEMENT [N602SW]
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EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of _______, between
______________________, a ______________ [corporation] ("Assignor") and
______________________________, a ________________[corporation] ("Assignee")
(the "Agreement").
WITNESSETH:
WHEREAS, the parties hereto desire to effect (a) the transfer by
Assignor to Assignee of all of the right, title and interest of the Assignor
(except as reserved below) in, under and with respect to, among other things,
(i) the Participation Agreement, dated as of July 1, 1995, among Southwest
Airlines Co., as Lessee, Nationsbank, N.A., as Owner Participant, Bank of
America Illinois, as Original Loan Participant, Shawmut Bank Connecticut,
National Association, in its individual capacity only as expressly provided
therein and otherwise solely as Owner Trustee, and Wilmington Trust Company, in
its individual capacity and as Indenture Trustee, as the same may be amended,
modified or supplemented from time to time (the "Participation Agreement"),
(ii) the Trust Agreement identified in the Participation Agreement, (iii) the
Trust Estate (as defined in the Trust Agreement) and (iv) the proceeds
therefrom and (b) the assumption by Assignee of the obligations of Assignor
accruing thereunder;
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings given such terms in the Sale and Lease
Agreement, dated as of July 1, 1995 between the Owner Trustee and Lessee, and
the rules of usage set forth therein shall apply hereto.
2. Assignment. Assignor does hereby sell, convey, assign, transfer
and set over unto Assignee, as of the date hereof, all of its right, title and
interest in, under and with respect to the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement, the Trust Estate or any other contract,
agreement, document or instrument relating to the Trust Estate by which
Assignor is bound, and any proceeds therefrom, together with all other
documents and instruments evidencing any of such right, title and interest,
except such rights of Assignor as have accrued to Assignor prior to the date
hereof (including the right to receive any amounts due or accrued to Assignor
under the Trust Agreement as of a date prior to such date and the right to
receive any indemnity payment pursuant to the Participation Agreement or the
Tax Indemnity Agreement with respect to events occurring prior to such date).
3. Assumption. Assignee hereby undertakes, for the benefit of
Assignor, Indenture Trustee, Owner Trustee, Original Loan Participant and
Lessee and their successors and assigns, all of the duties and obligations of
Assignor whenever accrued (other than duties and obligations of Assignor
required to be performed by it on or prior to the date hereof under the
Participation Agreement, the Trust Agreement, the Tax Indemnity Agreement or
any other contract, agreement, document or other instrument relating to the
Trust Estate to which Assignor is a party or by which it is bound) pursuant to
the Participation Agreement, the Trust Agreement, the Tax Indemnity Agreement
or any other
PARTICIPATION AGREEMENT [N602SW]
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contract, agreement, document or other instrument relating to the Trust Estate
to which Assignor is a party or by which it is bound, and hereby confirms that
it shall be deemed a party to the Participation Agreement, the Trust Agreement,
the Tax Indemnity Agreement and each other contract, agreement, document or
other instrument relating to the Trust Estate to which Assignor is a party or
by which it is bound as if therein named as Owner Participant.
4. Release of Assignor. Except for liabilities not assumed as
provided in Section 3 hereof and except to the extent applicable as a condition
to the continued enforcement of any rights thereunder retained by Assignor,
upon the execution of this Assignment and Assumption Agreement, Assignor shall
have no further duty or obligation under the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement or under any other contract, agreement,
document or other instrument relating to the Trust Estate to which Assignor is
a party or by which it is bound; provided, however, that Assignor shall in no
event be released from any liability on account of any breach by it of any
representations or warranties, covenants or obligations set forth in the
Participation Agreement or for any fraudulent or willful misconduct engaged in
by it on or prior to the date hereof; provided further, that Assignor shall
remain liable for, and shall indemnify and hold harmless the Original Loan
Participant from and against any reduction in the amount payable out of the
Trust Estate to the Original Loan Participant, and any other losses, costs or
expenses incurred by the Original Loan Participant to the extent that any such
reduction, loss, cost or expense shall result from the imposition or
enforcement of any Lien or any claim against the Trust Estate by a taxing
authority because of the nonpayment by Assignor of taxes imposed on or measured
by its income or gross receipts by such taxing authority arising from the
assignment hereunder.
5. Appointment as Attorney-in-Fact. In furtherance of the within
assignment, Assignor hereby constitutes and appoints Assignee, and its
successors and assigns, the true and lawful attorneys of Assignor, with full
power of substitution, in the name of Assignee or in the name of Assignor but
on behalf of and for the benefit of and at the expense of Assignee, to collect
for the account of Assignee all items sold, transferred or assigned to Assignee
pursuant hereto; to institute and prosecute, in the name of Assignor or
otherwise, but at the expense of Assignee, all proceedings that Assignee may
deem proper in order to collect, assert or enforce any claim, right or title of
any kind in or to the items sold, transferred or assigned; to defend and
compromise at the expense of Assignee any and all actions, suits or proceedings
as to title to or interest in any of the property acquired by Assignee; and to
do all such acts and things in relation thereto at the expense of Assignee as
Assignee shall reasonably deem advisable. Assignor hereby acknowledges that
this appointment is coupled with an interest and is irrevocable by Assignor in
any manner or for any reason.
6. Payments. Assignor hereby covenants and agrees to pay over to
Assignee, if and when received following the date hereof, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of Assignor that, under Section 2 hereof, belong to Assignee, and
Assignee hereby covenants and agrees to pay over to Assignor, if and when
received following the date hereof, any amounts (including any sums payable as
interest in respect thereof) paid to or for the benefit of Assignee that, under
Section 2 hereof, belong to Assignor.
7. Representations and Warranties. Assignee represents and warrants
that:
PARTICIPATION AGREEMENT [N602SW]
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(a) it is a [corporation] duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority to carry on its business as now conducted, to own
or hold under lease its properties and to enter into and perform its
obligations under this Agreement and the Owner Participant Agreements;
(b) this Agreement has been duly authorized by all necessary corporate
action on the part of the Assignee, does not require any approval not already
obtained of stockholders of the Assignee or any approval or consent not already
obtained of any trustee or holders of any indebtedness or obligations of the
Assignee, and has been duly executed and delivered by the Assignee;
(c) assuming that this Agreement and each of the Owner Participant
Agreements is the legal, valid and binding obligation of each other party
thereto, this Agreement and each such Owner Participant Agreement constitute
the legal, valid and binding obligations of the Assignee enforceable in
accordance with their respective terms;
(d) subject to and in reliance upon the representations made by the Original
Loan Participant and Lessee in Sections 8(o) and 7(a)(xv) of the Participation
Agreement, respectively, and compliance with the covenants of Section 8(d) and
8(bb) of the Participation Agreement, neither the execution and delivery by the
Assignee of this Agreement, nor the consummation of the transactions
contemplated hereby or by the Owner Participant Agreements, nor compliance by
the Assignee with any of the terms and provisions hereof or of the Owner
Participant Agreements will contravene any United States federal or state law,
judgment, governmental rule, regulation or order applicable to or binding on
the Assignee (it being understood that no representation or warranty is made
with respect to laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws, rules
or regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law) or contravene or result in any
breach of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a) of the
definition thereof) upon the Trust Estate under any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, corporate charter, by-law or other agreement or instrument to
which the Assignee is a party or by which it or its properties may be bound or
affected;
(e) there are no pending or, to the knowledge of the Assignee, threatened
actions or proceedings against the Assignee before any court or administrative
agency which, if determined adversely to the Assignee, would materially
adversely affect the financial condition of the Assignee or the ability of the
Assignee to perform its obligations under this Agreement or the Owner
Participant Agreements;
(f) on the Delivery Date, there will be no Lessor Liens attributable to the
Assignee;
(g) the Assignee's net worth (as defined in Section 8(l) of the
Participation Agreement) is at least $75,000,000;
(h) there has not occurred any event which constitutes (or to the best of
its knowledge would, with the passage of time or giving of notice or both,
constitute) an Indenture Event of Default which has been caused by or relates
to the Assignee and which is presently continuing;
(i) it is a permitted Transferee under Section 8(l)(A) of the Participation
Agreement;
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(j) it is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) [or it has, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), entered
into a voting trust or similar arrangement which permits the registration of
the Aircraft under the Act in the name of the Owner Trustee without any
restriction on the operation of the Aircraft]; and
(k) it has the full power and authority to enter into the transactions
contemplated by the Owner Participant Agreements.
8. GOVERNING LAW. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO ANY
CONFLICT OF LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION.
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IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Assumption Agreement as of the day and year first above written.
[ASSIGNOR]
By ________________________________
Title:_____________________________
[ASSIGNEE]
By _______________________________
Title:_____________________________