Exhibit 10. Material Contracts
POLARIS AIRCRAFT INCOME FUND II
SERVICES AGREEMENT
By and Between
POLARIS INVESTMENT MANAGEMENT CORPORATION,
a California corporation, and
GE CAPITAL AVIATION SERVICES, INC.,
a Delaware corporation
Dated as of July 1, 1994
SERVICES AGREEMENT
TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
2. PROVISION OF SERVICES AND COMPENSATION THEREFOR . . . . . . . 3
2.1 Performance of Services; Staff and Resources . . . . 3
2.2 Compensation for Services . . . . . . . . . . . . . 4
2.3 Expense Reimbursement . . . . . . . . . . . . . . . 4
2.4 Subordination . . . . . . . . . . . . . . . . . . . 5
2.5 Standard of Performance . . . . . . . . . . . . . . 5
2.6 Cooperation . . . . . . . . . . . . . . . . . . . . 5
2.7 Servicer Not a General Partner . . . . . . . . . . . 5
2.8 PIMC Responsibility . . . . . . . . . . . . . . . . 5
3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 6
3.1 Representations by PIMC . . . . . . . . . . . . . . 6
3.2 Representations by Servicer . . . . . . . . . . . . 6
3.3 Survival . . . . . . . . . . . . . . . . . . . . . . 7
4. CONTROL AND DECISION-MAKING . . . . . . . . . . . . . . . . . 7
4.1 General Partner's Role; Actions Requiring
Approval . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Servicer Committee . . . . . . . . . . . . . . . . . 8
4.3 Reports and Other Documents . . . . . . . . . . . . 8
4.4 Access . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Maintenance of Books and Records . . . . . . . . . . 9
5. EXCULPATION AND INDEMNIFICATION . . . . . . . . . . . . . . . 9
5.1 Exculpation and Indemnification of Servicer . . . . 9
5.2 Exculpation and Indemnification of PIMC . . . . . . 10
6. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . 10
6.1 Term . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Termination by PIMC . . . . . . . . . . . . . . . . 10
6.3 Termination by Servicer . . . . . . . . . . . . . . 10
6.4 Effect of Termination . . . . . . . . . . . . . . . 11
6.5 Post-Termination Matters . . . . . . . . . . . . . . 11
7. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 12
8. CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . 12
9. NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . 13
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PAGE
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 13
10.1 No Commingling . . . . . . . . . . . . . . . . . . . 13
10.2 Successors and Assigns . . . . . . . . . . . . . . . 13
10.3 Governing Law . . . . . . . . . . . . . . . . . . . 13
10.4 Entire Agreement . . . . . . . . . . . . . . . . . . 13
10.5 Waivers . . . . . . . . . . . . . . . . . . . . . . 13
10.6 Counterparts . . . . . . . . . . . . . . . . . . . . 13
10.7 Independent Contractor Relationship . . . . . . . . 14
10.8 Further Assurances . . . . . . . . . . . . . . . . . 14
10.9 Severability . . . . . . . . . . . . . . . . . . . . 14
10.10 Notices . . . . . . . . . . . . . . . . . . . . . . 14
10.11 Titles and Captions . . . . . . . . . . . . . . . . 15
10.12 Amendments to Partnership Agreement . . . . . . . . 15
10.13 Attorneys' Fees . . . . . . . . . . . . . . . . . . 15
10.14 Additional Insured . . . . . . . . . . . . . . . . . 15
10.15 Net Worth of Servicer . . . . . . . . . . . . . . . 15
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SERVICES AGREEMENT
THIS SERVICES AGREEMENT ("Services Agreement") is entered into to be
effective as of July 1, 1994, by and between: GE CAPITAL AVIATION SERVICES,
INC., a Delaware corporation ("Servicer"), and POLARIS INVESTMENT MANAGEMENT
CORPORATION, a California corporation ("PIMC").
RECITALS
A. PIMC currently serves as general partner of Polaris Aircraft
Income Fund II, a California Limited Partnership formed under the laws of the
State of California (the "Partnership").
B. PIMC desires to enter into this Services Agreement with Servicer
in order to engage Servicer to perform or cause to be performed for the
Partnership certain services which are more specifically described in
Section 2.
C. Servicer, having personnel with substantial expertise in the
areas of managing, leasing, selling and otherwise dealing with aircraft of the
type owned by the Partnership and providing administrative services in
connection therewith, and having the capability, technology and other
supporting resources to perform the services as they are required to be
performed by Servicer pursuant to this Services Agreement, desires to be
engaged to perform such services.
D. PIMC will continue to maintain such executive personnel and
other staff as PIMC shall determine in order to enable PIMC to discharge all of
its responsibilities, including those referred to in this Services Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Services Agreement, the following terms shall
have the respective meanings ascribed to them below. Capitalized terms used
herein, but not otherwise defined below or elsewhere in this Services
Agreement, shall have the respective meanings assigned to them in the
Partnership Agreement (as such term is hereinafter defined):
Affiliate of any person shall mean: (i) any other person directly or
indirectly controlling, controlled by or under common control with such
person; (ii) any other person owning or controlling ten percent or more of
the outstanding voting securities of such person; (iii) any officer,
director or partner of such person; and (iv) if such other person is an
officer, director or partner, any company for which such person acts in
such capacity.
Aircraft shall mean the aircraft owned directly or indirectly by the
Partnership and any related equipment, including spare parts and engines,
and shall include any beneficial interest in an Aircraft.
Aircraft Management Fee shall have the meaning set forth in the
Partnership Agreement.
Aircraft Management Services shall mean the Aircraft management
services which are provided to the Partnership by PIMC pursuant to the
terms of the Partnership Agreement in managing the Partnership's portfolio
of Aircraft, and shall include the services described in Section 9.3 of
the Partnership Agreement with respect to the Aircraft.
Aircraft Sales Services shall mean the services which are provided to
the Partnership by PIMC pursuant to the terms of the Partnership Agreement
in connection with the sale or other disposition of one or more of the
Aircraft by the Partnership.
Assignment shall have the meaning set forth in Section 7 of this
Services Agreement.
Cash Available from Operations shall have the meaning set forth in
Section 2.1 of the Partnership Agreement.
Cash Available from Sale Proceeds shall have the meaning set forth in
Section 2.1 of the Partnership Agreement.
Conflicts Standard shall have the meaning set forth in Section 8 of
this Services Agreement.
Effective Date shall mean July 1, 1994.
GE Capital shall mean General Electric Capital Corporation, a New
York corporation.
Legal Proceeding shall mean any action, suit, litigation,
arbitration, proceeding (including, without limitation, any civil,
criminal, administrative or appellate proceeding), prosecution, audit,
examination, inquiry, inquest, hearing or investigation.
Other Assets shall have the meaning set forth in Section 8 of this
Services Agreement.
Partnership shall have the meaning set forth in Recital A.
Partnership Agreement shall mean the Amended and Restated Limited
Partnership Agreement governing the affairs of the Partnership in effect
as of the Effective Date, as the same may be amended thereafter from time
to time.
Partnership Expenses shall mean any expenses that the Partnership may
permissibly pay or reimburse to PIMC or an Affiliate of PIMC pursuant to
the terms of the Partnership Agreement, including but not limited to all
such expenses which are described in Section 10.1 of the Partnership
Agreement.
PIMC Managed Asset shall have the meaning set forth in Section 8 of
this Services Agreement.
Portfolio Management Services shall mean the portfolio and
partnership management services which are provided to the Partnership
pursuant to the terms of the Partnership Agreement, including but not
limited to:
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(i) preparing or causing to be prepared certain reports,
statements and other relevant information relating to the Partnership
as PIMC may from time to time request;
(ii) employing employees, agents, independent contractors,
brokers, attorneys, accountants and other persons to perform services
for the Partnership, and dismissing such persons;
(iii) preparing, filing and publishing any and all instruments
or documents necessary to enable the Partnership to transact business
or otherwise to exist, operate and be recognized as a limited
partnership in jurisdictions outside California;
(iv) preparing financial projections of future results of
operations;
(v) causing to be performed any substantive accounting or tax
related research on new issues;
(vi) pursuant to the appropriate instruction by PIMC, causing
checks to be signed and approving wire transfers from bank accounts;
(vii) preparing and coordinating any communication regarding
delinquent payments with aircraft lessees; and
(viii) performing financial analyses with respect to
capitalization of aircraft expenditures.
; provided, however, that Portfolio Management Services shall not include
(i) Aircraft Management Services, (ii) Aircraft Sales Services,
(iii) investor relations services, and (iv) those accounting and financial
reporting services defined as the "Services" in that certain Program
Accounting and Financial Reporting Administration Agreement between PIMC
and ReSource/Phoenix, a division of Phoenix Leasing Incorporated.
Sales Commission shall have the meaning assigned to such term in
Section 2.1 of the Partnership Agreement.
Servicer Committee shall have the meaning set forth in Section 4.2 of
this Services Agreement.
Services shall mean the Aircraft Sales Services, the Aircraft
Management Services, and the Portfolio Management Services.
Standard of Performance shall have the meaning set forth in
Section 2.5 of this Services Agreement.
Termination Date shall mean the date on which this Services Agreement
terminates pursuant to the provisions of Section 6 of this Services
Agreement.
Unit Holders shall mean the investors in the Partnership, whether
denominated as limited partners or unit holders, and their respective
assignees or transferees.
2. PROVISION OF SERVICES AND COMPENSATION THEREFOR.
2.1 Performance of Services; Staff and Resources. From and after the
Effective Date, Servicer shall provide or arrange for the provision of the
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Aircraft Management Services, Aircraft Sales Services and Portfolio Management
Services. Servicer shall employ or otherwise engage such staff and maintain
such supporting resources as Servicer shall reasonably deem necessary, both in
number and in quality, to enable Servicer to perform the Services in accordance
with the terms of this Services Agreement.
2.2 Compensation For Services. As full compensation for the performance
of the Services by Servicer, PIMC shall pay to Servicer the following amounts:
(i) an amount equal to fifty percent (50%) of the Aircraft
Management Fees received by PIMC at any time pursuant to Section 9.3 of
the Partnership Agreement with respect to the period from the Effective
Date until the Termination Date, which amount shall be paid to Servicer
within five days after the date on which PIMC receives the corresponding
Aircraft Management Fees;
(ii) an amount equal to all Sales Commissions received by PIMC at
any time pursuant to Section 9.4 of the Partnership Agreement with respect
to sales of Aircraft arranged or effected by Servicer pursuant to this
Services Agreement during the period from the Effective Date until the
Termination Date, which amount shall be paid to Servicer by PIMC within
five days after the date on which PIMC receives the corresponding Sales
Commissions with respect to such Aircraft;
(iii) within five days after the end of each calendar year, with
respect to the immediately preceding year, an amount equal to the
difference between (A) the Cash Available From Operations and Cash
Available From Sale Proceeds which PIMC receives from the Partnership
during such preceding year, and (B) any amounts paid with respect to such
preceding year by PIMC to parties other than Servicer for services related
to the Partnership (not including any such amounts for which PIMC is
entitled to reimbursement from the Partnership); and
(iv) an amount equal to the reimbursement (the "Expense
Reimbursement") for Partnership Expenses which PIMC receives from the
Partnership pursuant to Section 2.3 herein on account of expenses incurred
by Servicer in performing the Services pursuant to this Services
Agreement.
2.3 Expense Reimbursement. The Expense Reimbursement to be made to
Servicer pursuant to clause (iv) of Section 2.2 shall be based upon Services
actually performed by Servicer during the period from the Effective Date until
the Termination Date, and shall be subject to all of the expense reimbursement
limitations set forth in the Partnership Agreement, including but not limited
to those set forth in Sections 10.1 and 10.2 of the Partnership Agreement.
Servicer shall on a monthly basis submit to PIMC an itemized statement of
expenses incurred by Servicer in performing the Services pursuant to this
Services Agreement for the immediately preceding month as to which Servicer
believes it is entitled to reimbursement pursuant to the Partnership Agreement.
Such statement shall be accompanied by such supporting detail and documentation
(including without limitation employee time records, receipts, expense
allocation information and the like) as PIMC shall reasonably request. After
receiving such itemized statement and such detail and documentation for a
particular month, PIMC shall review the same and promptly make a determination
of the amount of such expenses which are "Partnership Expenses" and as to which
Servicer is entitled to be reimbursed pursuant to the Partnership Agreement.
The determination of PIMC in this regard shall be final and binding upon
Servicer, absent manifest error on the part of PIMC. Promptly after making
such determination, PIMC shall submit to the Partnership for reimbursement the
amount of Partnership Expenses PIMC so determines are reimbursable, and will
4
pay to Servicer an amount equal to the amount of such expenses actually
reimbursed by the Partnership to PIMC on account of Services performed by
Servicer, within five days after the date PIMC receives such reimbursement from
the Partnership.
2.4 Subordination. Servicer hereby acknowledges that payments by the
Partnership to PIMC of Sales Commissions are subordinated to certain returns to
the Unit Holders as provided in Section 9.4 of the Partnership Agreement and
that no amounts will be paid to Servicer unless and until such time, if any, as
PIMC shall actually receive from the Partnership the Sales Commissions.
2.5 Standard of Performance. In performing the Services required to be
performed by it pursuant to this Services Agreement, Servicer shall perform
such Services (i) in accordance with all applicable laws, rules and
regulations, (ii) in a manner that is consistent with all applicable provisions
of the Partnership Agreement (and Servicer shall take no action with respect to
the Partnership which PIMC as general partner of the Partnership is not
permitted to take), and (iii) with such care and in accordance with such
standards of performance as would be applied to the general partner of the
Partnership pursuant to the terms of the Partnership Agreement if the general
partner had performed such Services directly (including, without limitation, in
accordance with any fiduciary duty owed by the general partner of the
Partnership as a result of its status as general partner of the Partnership).
Without limiting the generality of the foregoing, Servicer shall not directly
or indirectly take any of the actions prohibited by Section 15.3 of the
Partnership Agreement. (The standards set forth in this Section 2.5 shall be
referred to collectively as the "Standard of Performance").
2.6 Cooperation. PIMC shall at all times cooperate with Servicer to
enable Servicer to provide the Services, including providing Servicer with all
powers of attorney as may be reasonably necessary or appropriate for Servicer
to perform the Services.
2.7 Servicer Not a General Partner. PIMC shall continue to serve as
general partner of the Partnership and shall continue to have all of the
rights, powers, and interests as general partner, whether granted to it by the
Partnership Agreement, by applicable law, rule or regulation, or otherwise.
Nothing in this Services Agreement is intended to imply that Servicer is acting
as or substituting for PIMC as the general partner of the Partnership, and PIMC
acknowledges that the responsibility for the Partnership and the protection of
the assets of the Partnership which PIMC had immediately prior to the Effective
Date by virtue of its role as general partner of the Partnership shall remain
with PIMC, and PIMC shall take such actions as PIMC deems necessary or
appropriate in order to discharge such responsibility. Without limiting the
foregoing, no provision of this Services Agreement (including without
limitation the provisions of this Section 2 requiring Servicer to perform
Portfolio Management Services for the Partnership) shall be construed as
stating or implying that Servicer is acting as or substituting for PIMC as
general partner of the Partnership, or that Servicer has assumed any fiduciary
duty that PIMC, as general partner of the Partnership, has had or hereafter
has.
2.8 PIMC Responsibility. Notwithstanding the appointment of Servicer to
perform the Services, PIMC shall continue to have and exercise through the PIMC
board of directors control and management of all matters related to its ongoing
business, operations, assets and liabilities.
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3. REPRESENTATIONS AND WARRANTIES
3.1 Representations by PIMC. PIMC hereby represents and warrants to
Servicer as follows:
(i) PIMC (a) is a corporation duly organized, validly existing and
in good standing under the laws of the State of California, and (b) has
full corporate power and authority to enter into this Services Agreement
and to perform all of the terms, conditions and provisions set forth
herein to be performed by PIMC, and the execution, delivery and
performance of this Services Agreement by PIMC have been duly authorized
by all necessary action on the part of PIMC and its officers, directors
and stockholder, and this Services Agreement has been duly executed and
delivered by PIMC;
(ii) this Services Agreement is binding upon and enforceable against
PIMC in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity);
(iii) none of the transactions hereby contemplated to be performed
by PIMC, nor the fulfillment of the terms, provisions and conditions
hereof, will materially conflict with, or result in a material breach of
any of the material terms, conditions, or provisions of, or constitute a
default under (a) any of the provisions of PIMC's articles of
incorporation or bylaws, (b) any resolution adopted by the stockholder or
board of directors of PIMC, or (c) any material agreement or instrument to
which PIMC is a party or by which it is bound;
(iv) the Partnership Agreement permits PIMC to engage Servicer to
perform the Services described in this Services Agreement on the terms set
forth herein;
(v) the copy of the Partnership Agreement heretofore provided to
Servicer is a true, correct and complete copy; and
(vi) PIMC is the sole general partner of the Partnership.
3.2 Representations by Servicer. Servicer hereby represents and warrants
to PIMC as follows:
(i) Servicer (a) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and (b) has
full corporate power and authority to enter into this Services Agreement
and to perform all of the terms, conditions and provisions set forth
herein to be performed by Servicer, and the execution, delivery and
performance of this Services Agreement by Servicer have been duly
authorized by all necessary action on the part of Servicer and its
officers, directors and stockholder, and this Services Agreement has been
duly executed and delivered by Servicer;
(ii) this Services Agreement is binding upon and enforceable against
Servicer in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity); and
6
(iii) none of the transactions hereby contemplated to be performed
by Servicer, nor the fulfillment of the terms, provisions and conditions
hereof, will materially conflict with, or result in a material breach of
any of the material terms, conditions, or provisions of, or constitute a
default under (a) any of the provisions of Servicer's certificate of
incorporation or bylaws, (b) any resolution adopted by the stockholder or
board of directors of Servicer, or (c) any material agreement or
instrument to which Servicer is a party or by which it is bound.
3.3 Survival. All representations and warranties contained in this
Services Agreement or made pursuant hereto or in connection herewith shall
remain in effect for a period of 12 months after the Termination Date, after
which they shall expire and cease to be of any force and effect, provided that
any representation or warranty which is not true when made and which is made
fraudulently and with intent to defraud or mislead shall survive such 12-month
period.
4. CONTROL AND DECISION-MAKING.
4.1 General Partner's Role; Actions Requiring Approval.
(a) PIMC, as general partner of the Partnership, shall have the
right to review and supervise all actions taken by Servicer hereunder.
Servicer shall take any actions relating to this Services Agreement that PIMC
may direct so long as such actions are reasonably deemed by PIMC to be
necessary or appropriate in order to permit PIMC to fulfill its fiduciary
duties as general partner of the Partnership or otherwise to be in the best
interests of the Partnership or its Unit Holders.
(b) Except as provided in this subsection (b) or subsection (c)
below, Servicer shall have the power and authority to provide or arrange for
the provision of the Services, without prior approval from PIMC.
Notwithstanding anything herein to the contrary, the following actions with
respect to the Partnership shall require the prior approval of PIMC, and if
Servicer shall propose that PIMC approve any of the following actions with
respect to the Partnership, it shall prepare and submit to PIMC, at a time
sufficiently far in advance of the date such action is proposed to be taken as
is reasonably necessary for PIMC to consider whether or not to approve such
proposed action (and in no event less than five days prior to the date of such
proposed action), a written description of the proposed action stating the
basis therefor and Servicer's recommendation with respect thereto (together
with such supporting materials as PIMC may reasonably request):
(i) selling or otherwise disposing of one or more Aircraft by the
Partnership (including, without limitation, the sale or other disposition
of an Aircraft as parts or scrap);
(ii) entering into any new lease (or any renewal or extension of an
existing lease) with respect to any Aircraft;
(iii) terminating or modifying any lease with respect to any
Aircraft;
(iv) financing or refinancing one or more Aircraft by the
Partnership;
(v) borrowing money by the Partnership;
(vi) surrendering an Aircraft to a lender;
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(vii) filing for protection under the bankruptcy laws by the
Partnership;
(viii) deferring or waiving any Partnership obligations to PIMC;
(ix) hiring counsel for the Unit Holders;
(x) making material capital, maintenance or inspection expenditures
for the Partnership;
(xi) hiring any broker to sell or lease any Aircraft;
(xii) causing an Aircraft to be placed in storage for a period in
excess of thirty days;
(xiii) transferring Partnership assets to a master limited
partnership or any other form of so-called partnership roll-up;
(xiv) entering into any contract (including, without limitation, any
contract of sale), agreement or instrument other than a contract,
agreement or instrument entered into in the ordinary course of business
that has a term of less than one year and that does not contemplate
payments which will exceed, over the term of the contract, agreement or
instrument, $100,000 in the aggregate;
(xv) issuing any guaranty on behalf of, or otherwise pledging the
credit of, the Partnership;
(xvi) incurring on behalf of the Partnership any liability (actual
or contingent) or causing any such liability to be incurred;
(xvii) amending the Partnership Agreement in any respect;
(xviii) changing in any material respect the type or amount of
insurance coverage in place for the Partnership as of the Effective Date;
(xix) making any distributions to Unit Holders;
(xx) commencing any Legal Proceeding with respect to the Partnership
or the Aircraft; and
(xxi) incurring any Partnership Expenses for which Servicer will
seek reimbursement pursuant to this Services Agreement which exceed in the
aggregate, for any calendar month, the sum of $10,000.
(c) In addition to the matters listed in subsection (b) above, PIMC
shall have the right, upon at least ten (10) days' prior written notice to
Servicer, to designate any additional action as an action that shall require
PIMC's prior approval if, in PIMC's reasonable judgment, such designation is
reasonably necessary in order to permit PIMC to carry out its fiduciary duties
as general partner of the Partnership.
4.2 Servicer Committee. Servicer has established or shall hereafter
establish a committee (the "Servicer Committee) which shall have, and shall
regularly exercise, the authority to approve matters relating to this Services
Agreement. Servicer shall submit to PIMC for PIMC's approval only those
proposed actions which have previously been approved by the Servicer Committee.
4.3 Reports and Other Documents. Servicer shall supply to PIMC the
following documents and reports:
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(i) copies of all correspondence and reports prepared by, or at the
direction of, Servicer and sent to or filed on behalf of the Partnership
with any federal regulatory agency (including, without limitation, the
Securities and Exchange Commission) or with any state or local regulatory
agency;
(ii) copies of all complaints, arbitration notices, mediation
notices, cease and desist orders and other similar orders from federal,
state or local regulatory authorities or other third parties, notices
threatening any Proceeding, and any other similar notices, in each case
which are received by Servicer and which relate to the Partnership or its
assets or operations;
(iii) copies of the annual report (including audited financial
statements) and related management letters normally prepared with respect
to the Partnership by the independent certified public accountants for the
Partnership;
(iv) any return (including any informational return), report,
statement, schedule, notice, form or other document or information
prepared by, or at the direction of, Servicer and filed with or submitted
to, or required to be filed with or submitted to, any federal, state or
local governmental agency in connection with the determination,
assessment, collection, or payment of any tax, assessment, deficiency or
other fee relating in any way to the Partnership or its assets or
operations; and
(v) copies of such other documents and reports relating to this
Services Agreement as PIMC may reasonably request.
Copies of the materials described in clauses (i), (iii) and (iv) above shall be
submitted to PIMC for its review and approval prior to the time the same are
sent to Unit Holders, filed with the Securities and Exchange Commission or any
state or local regulatory agency, or filed with any taxing authority, as
applicable.
4.4 Access. PIMC shall have the right, at all reasonable times during
customary business hours and at its own expense, upon reasonable advance notice
to Servicer, to inspect and make copies of the books of account and records of
Servicer relating to this Services Agreement and the matters set forth herein,
to enable PIMC to monitor the performance by Servicer under this Services
Agreement and otherwise to enable PIMC to discharge its obligations under this
Services Agreement and its obligations and responsibilities as general partner
of the Partnership. Such right may be exercised on behalf of PIMC by any
designated agent or employee of PIMC or by an independent certified public
accountant designated by PIMC.
4.5 Maintenance of Books and Records. Without the prior written consent
of PIMC, Servicer shall not destroy or otherwise dispose of the books of
account and records of Servicer relating to this Services Agreement or the
matters set forth herein.
5. EXCULPATION AND INDEMNIFICATION.
5.1 Exculpation and Indemnification of Servicer. Nothing contained in
this Services Agreement shall in any way limit or constitute a waiver of any of
the exculpation and indemnification rights to which Servicer may be entitled
pursuant to (i) the Partnership Agreement (including without limitation the
provisions of Section 22 thereof), (ii) applicable laws, rules and regulations,
9
and (iii) the provisions of any insurance policy now or hereafter maintained
which provides coverage to Servicer.
5.2 Exculpation and Indemnification of PIMC. Nothing contained in this
Services Agreement shall in any way limit or constitute a waiver of any of the
exculpation and indemnification rights to which PIMC may be entitled pursuant
to (i) the Partnership Agreement (including without limitation the provisions
of Section 22 thereof), (ii) applicable laws, rules, and regulations, and
(iii) the provisions of any insurance policy now or hereafter maintained which
provides coverage to PIMC.
6. TERM AND TERMINATION.
6.1 Term. This Services Agreement shall commence on the Effective Date
and shall continue until the completion of the winding up and liquidation of
the Partnership and the distribution of all of its assets; provided, however,
that this Services Agreement may be sooner terminated by PIMC in the manner
provided in Section 6.2 below, and may be sooner terminated by Servicer in the
manner provided in Section 6.3 below.
6.2 Termination by PIMC. If, during the term of this Services Agreement,
any of the events listed below shall occur, PIMC, in addition to all of its
other rights and remedies, may terminate this Services Agreement upon written
notice to Servicer:
(i) any breach by Servicer of any of the representations, warranties
or covenants made by Servicer in this Services Agreement or in any
certificate or document executed pursuant hereto or in connection
herewith, which breach shall not be cured within thirty (30) days after
receipt of written notice thereof from PIMC or within such longer period
(but in any event not to exceed one hundred and twenty (120) days), if
any, as may be reasonably required to effect such cure by Servicer so long
as Servicer is diligently proceeding to effect such cure;
(ii) the discontinuance or cessation of business by Servicer,
including by reason of the bankruptcy of Servicer;
(iii) a decision made in the good faith judgment of PIMC that
termination is required to permit PIMC to satisfy its fiduciary
obligations to the Partnership or the Unit Holders;
(iv) at any time after the Effective Date, the adoption or enactment
of any applicable law or governmental rule, requirement, guideline, order
or regulation, or any change therein or change in the interpretation or
administration thereof, by any judicial or governmental authority which
shall make it illegal, impossible or inappropriate for PIMC to engage
Servicer to provide the Services;
(v) a decision made in the good faith judgment of PIMC that Servicer
is not acting in the best interests of the Partnership; or
(vi) the withdrawal, removal or replacement of PIMC as general
partner of the Partnership.
6.3 Termination by Servicer. If, during the term of this Services
Agreement, any of the events listed below shall occur, Servicer, in addition to
all of its other rights and remedies, may terminate this Services Agreement
upon written notice to PIMC:
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(i) a continuing default in the payment of any amounts owing to
Servicer under this Services Agreement, which default shall not be cured
within ten (10) days after receipt of written notice thereof from
Servicer;
(ii) the breach by PIMC of any of PIMC's representations, warranties
or covenants set forth in this Services Agreement or in any certificate or
document executed pursuant hereto or in connection herewith (other than
those covenants described in clause (i) above dealing with the payment of
amounts owing to Servicer under this Services Agreement), which breach
shall not be cured within thirty (30) days after receipt of written notice
thereof from Servicer or within such longer period (but in any event not
to exceed one hundred and twenty (120) days), if any, as may be reasonably
required to effect such cure by PIMC so long as PIMC is diligently
proceeding to effect such cure;
(iii) the withdrawal, removal or replacement of PIMC as general
partner of the Partnership;
(iv) at any time after the Effective Date, the adoption or enactment
of any applicable law or governmental rule, requirement, guideline, order
or regulation, or any change therein or change in the interpretation or
administration thereof, by any judicial or governmental authority which
shall make it illegal, impossible or inappropriate for Servicer to provide
the Services described herein; or
(v) the amendment of the Partnership Agreement of the Partnership
which has a material adverse effect on Servicer's rights, compensation or
obligations under this Services Agreement.
6.4 Effect of Termination. In the event of the termination of this
Services Agreement, then the entitlement of Servicer with respect to any
compensation provided for in this Services Agreement shall terminate
concurrently therewith. Notwithstanding the foregoing, no termination of this
Services Agreement shall impair the rights of Servicer to ultimately receive
all amounts earned by Servicer under this Services Agreement prior to the
effective date of any such termination.
6.5 Post-Termination Matters.
Upon the expiration of the term of this Services Agreement or in the
event of the earlier termination of this Services Agreement, Servicer shall:
(i) turn over to PIMC, without charge, all books, records, contracts
and documents relating to the Partnership, whether in writing or stored in
electro-magnetic or any other form, all bank accounts maintained with
respect to the Partnership and/or PIMC, all management summaries relating
to the administration of Partnership business, and all management systems
utilized to provide the Services, and all other materials generally
relating to the Partnership;
(ii) assign to PIMC all executory contracts to which Servicer is a
party which (x) relate primarily to the performance of the Services and
(y) have been approved by PIMC or otherwise have been entered into in
accordance with the provisions of this Services Agreement, whereupon PIMC
or an Affiliate of PIMC shall assume the obligations of Servicer to be
performed after, and that relate to the period after, the date of such
assignment, but only to the extent that such obligations relate to the
performance of the Services for the Partnership;
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(iii) offer to sell to PIMC, at the lower of book or market value,
such equipment, furnishings and other personal property that Servicer
shall then own and shall have utilized in connection with its performance
of this Services Agreement that Servicer shall not require (in Servicer's
sole discretion) in order to continue its other business activities
following termination of this Services Agreement;
(iv) consent, without the payment of any consideration, to the
employment by PIMC, or any other person that PIMC may retain to provide
Services to the Partnership following termination of this Services
Agreement of any of Servicer's employees whom Servicer shall not require
(in Servicer's sole discretion) in order to continue its other business
activities; and
(v) for such period as is reasonably required therefor, generally
cooperate in good faith with PIMC in order to facilitate the discharge by
PIMC of its obligations under the Partnership Agreement and its
obligations under applicable laws, rules, requirements, guidelines, orders
and regulations.
7. ASSIGNMENT.
Servicer shall have no right to assign, give, delegate, convey
(including by way of a transfer of control of Servicer), mortgage, license or
otherwise transfer or encumber all or any part of its rights, duties, or other
interests in this Services Agreement (collectively, an "Assignment"), without
the consent of PIMC; provided, however, that such consent shall not be
unreasonably withheld with respect to a transfer by Servicer to an Affiliate of
Servicer so long as Servicer has given to PIMC at least 60 days prior written
notice of a proposed transfer and so long as (i) the proposed transferee is a
reputable company in good standing in the jurisdictions in which it operates,
(ii) the proposed transferee undertakes in a manner reasonably satisfactory to
PIMC to commit personnel to the provision of Services which are of comparable
quality, number and experience to Servicer personnel providing such Services at
the time of the proposed assignment, and (iii) the proposed transferee has a
net worth of $25,000,000 or more. Any attempted Assignment in violation of
this Section 7 shall be a material default under this Services Agreement and,
at the option of PIMC, shall be null and void.
8. CONFLICTS OF INTEREST.
PIMC acknowledges and agrees that (i) in addition to providing the
Services to PIMC under this Services Agreement, Servicer and its Affiliates may
provide services to, and shall be entitled to provide such services from time
to time with respect to the separate assets ("Other Assets") and businesses of,
GE Capital, its Affiliates and third parties; (ii) in the course of conducting
such activities, Servicer may from time to time have conflicts of interest in
performing its duties on behalf of the various entities to which it provides
services and with respect to the various assets in respect of which it provides
services; and (iii) the PIMC board of directors has approved the transactions
contemplated by this Services Agreement and desires that such transactions be
consummated and in giving such approval the PIMC board of directors has
expressly recognized that such conflicts of interest may arise and that when
such conflicts of interest arise Servicer shall perform the Services in
accordance with the Standard of Performance and the Conflicts Standard.
If conflicts of interest arise regarding the provision of Services
with respect to (i) a particular asset subject to the terms of this Services
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Agreement (a "PIMC Managed Asset"), on the one hand, and another asset owned by
an investment vehicle sponsored by PIMC as to which Servicer provides
management services, on the other hand, or (ii) any PIMC Managed Asset, on the
one hand, and Other Assets, on the other hand, Servicer shall perform the
Services in good faith and, without limiting the generality of the foregoing,
to the extent (x) such PIMC Managed Asset and assets of such investment vehicle
or (y) such PIMC Managed Asset and such Other Assets are substantially similar
in terms of objectively identifiable characteristics relevant for purposes of
the particular Services to be performed, including without limitation
characteristics deemed relevant by a potential lessee or purchaser, Servicer
shall not discriminate between such PIMC Managed Asset and assets of such
investment vehicle or between such PIMC Managed Asset and such Other Assets,
respectively, on the basis of ownership, fees payable to Servicer in respect of
a particular transaction, or on an unreasonable basis. (The standards set
forth in this Section 8 shall be referred to collectively as the "Conflicts
Standard").
9. NO THIRD PARTY BENEFICIARIES.
Under no circumstances shall any provision of this Services Agreement
be deemed to be for the benefit of or enforceable by any person or entity other
than PIMC and Servicer (and their respective permitted successors and assigns)
and, to the extent expressly provided herein, their respective Affiliates.
10. MISCELLANEOUS.
10.1 No Commingling. The funds of PIMC shall not be commingled by
Servicer with the funds of any other person or entity. The funds of the
Partnership shall not be commingled by Servicer with the funds of any other
person or entity, except as expressly permitted by the Partnership Agreement.
10.2 Successors and Assigns. Without limiting the restrictions on
Assignment set forth in Section 7, this Services Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
permitted successors and assigns.
10.3 Governing Law. This Services Agreement shall be construed in
accordance with the laws of the State of California, and venue for any legal
action arising out of this Services Agreement shall be in San Francisco County,
California.
10.4 Entire Agreement. This Services Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes any prior oral or written agreement between the parties respecting
the subject matter hereof.
10.5 Waivers. Neither this Services Agreement nor any of the terms
hereof may be terminated, amended or waived orally by the parties, but only by
an instrument in writing signed by the party against which enforcement of the
termination, amendment or waiver is sought. Notwithstanding the foregoing
provisions of this Section 10.5, the rights and obligations of the parties
hereunder shall be automatically modified from time to time hereunder to the
extent and in the manner necessary to make this Services Agreement and the
rights and obligations of the parties hereunder comply with any and all
applicable federal, state and local laws, rules and regulations.
10.6 Counterparts. This Services Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
13
be necessary in making proof of this Services Agreement to produce or account
for more than one such counterpart.
10.7 Independent Contractor Relationship. This Services Agreement is not
intended to and shall not create any relationship of principal and agent,
partnership, joint venture, employer and employee or any other relationship,
association or affiliation whatsoever between the parties, except for that of
independent contractor.
10.8 Further Assurances. Each party covenants on behalf of itself, its
successors and assigns, to execute, with acknowledgment or affidavit if
required, any and all documents and writings which may be necessary or
desirable to carry out the purposes of this Services Agreement.
10.9 Severability. In the event that any provision of this Services
Agreement, or the application of such provision to any person, entity or set of
circumstances, shall be deemed invalid, unlawful or unenforceable to any
extent, the remainder of this Services Agreement, and the application of all
such provisions to persons, entities or circumstances other than those
determined invalid, unlawful or unenforceable shall not be affected and shall
continue to be enforceable to the fullest extent permitted by law.
10.10 Notices.
(a) All notices, demands or requests provided for or permitted to be
given pursuant to this Services Agreement must be in writing. All notices,
demands and requests to be sent to PIMC or the Partnership pursuant hereto
shall be deemed to have been properly given if served by personal delivery, by
depositing the same in the United States mail, postpaid, by depositing the same
with any reputable overnight mail courier, or by transmission of same by
telecopy or similar service, at the following address:
Until September 1, 1994:
Polaris Investment Management Corporation
Four Embarcadero Center, 40th Floor
San Francisco, CA 94111
Attention: James Linnan
After September 1, 1994:
Polaris Investment Management Corporation
201 Mission Street
San Francisco, CA 94105
Attention: James Linnan
with a copy at any time to:
Polaris Investment Management Corporation
1600 Summer Street
Stamford, CT 06927-1559
Attention: Howard Feinsand
(b) All notices, demands or requests to be sent to Servicer
pursuant hereto shall be deemed to have been properly given if served by
personal delivery, by depositing the same in the United States mail, postpaid,
by depositing the same with any reputable overnight mail courier, or by
transmission of same by telecopy or similar service, at the following address:
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GE Capital Aviation Services, Inc.
1600 Summer Street
Stamford, CT 06927-1559
Attention: President
with a copy to:
GE Capital Aviation Services, Inc.
1600 Summer Street
Stamford, CT 06927-1559
Attention: General Counsel
(c) Unless another requirement is specifically set forth in any
Section hereof, each notice, demand and request shall be effective upon
personal delivery, upon confirmation of receipt of the applicable telecopy, or
three (3) business days after the date on which the same is deposited in the
United States mail or with any reputable overnight mail courier in accordance
with the foregoing requirements. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall not adversely impact the effectiveness of any such notice, demand or
request.
(d) By giving to the other parties at least ten (10) days'
written notice thereof, the parties hereto, and their respective permitted
successors and assigns, shall have the right from time to time and at any time
during the term of this Services Agreement to change their respective addresses
and each shall have the right to specify as its address any other address
within the United States of America.
10.11 Titles and Captions. Paragraph titles or captions contained in
this Services Agreement are inserted only as a matter of convenience and for
reference. Such titles and captions in no way define, limit, extend or
describe the scope of this Services Agreement nor the intent of any provisions
hereof.
10.12 Amendments to Partnership Agreement. PIMC hereby covenants and
agrees that it shall give to Servicer prompt written notice of any amendment to
the Partnership Agreement proposed by PIMC or, to PIMC's knowledge, proposed by
Unit Holders of the Partnership.
10.13 Attorneys' Fees. If any party hereto brings an action to
enforce the terms hereof or to obtain a declaration of the rights of such party
hereunder, the prevailing party in any such action, upon its final resolution,
shall be entitled to such party's reasonable attorneys' fees to be paid by the
losing party.
10.14 Additional Insured. PIMC agrees that Servicer may add itself
and its Affiliates as additional insured parties (at the expense of the
Partnership to the extent permitted by the Partnership Agreement) under any
blanket insurance program applicable to the Partnership that is in effect from
time to time with respect to the Services provided hereunder.
10.15 Net Worth of Servicer.
(a) Servicer represents and warrants that no later than 30 days
after the date this Services Agreement has been fully executed, its net worth
(calculated in accordance with generally accepted accounting principles) will
be greater than $25,000,000. Servicer covenants and agrees that from and after
the date Servicer's net worth is greater than $25,000,000 as provided in the
immediately preceding sentence, Servicer will not pay or permit to be paid any
15
dividends or make any other distributions to its shareholder or shareholders
which would have the result of reducing Servicer's net worth to the extent
that Servicer's net worth following any such reduction would be less than
$25,000,000.
(b) Within one hundred twenty (120) days after the end of each
calendar year during the term of this Services Agreement, Servicer shall cause
to be delivered to PIMC a balance sheet setting forth Servicer's net worth as
of the last day of such calendar year (calculated in accordance with generally
accepted accounting principles).
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IN WITNESS WHEREOF, the parties have executed this Services
Agreement as of the Effective Date.
SERVICER:
GE CAPITAL AVIATION SERVICES, INC.
a Delaware corporation
By: /S/ Howard L. Feinsand
----------------------
Name: Howard L. Feinsand
----------------------
Its: Senior Vice President
----------------------
PIMC:
POLARIS INVESTMENT MANAGEMENT CORPORATION,
a California corporation
By: /S/ Howard L. Feinsand
----------------------
Name: Howard L. Feinsand
----------------------
Its: Senior Vice President
----------------------
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