KEEP WELL AGREEMENT
This KEEP WELL AGREEMENT is dated as of April 1, 1997, and
made by TRITON AVIATION SERVICES LIMITED, a Bermuda corporation ("TASL"), in
favor of TRITON AVIATION SERVICES III LLC, a California limited liability
company (the "Borrower"), and in favor of POLARIS AIRCRAFT INCOME FUND III, a
California limited partnership (the "Lender") (the "Agreement").
R E C I T A L S:
WHEREAS, the Lender has entered into a Purchase, Assignment
and Assumption Agreement dated as of April 1, 1997 with the Borrower (said
Agreement, as it may hereafter be amended or otherwise modified from time to
time, being the "Purchase Agreement", the terms defined therein and not
otherwise defined herein being used herein as therein defined) and, in
connection therewith, the Borrower has delivered to the Lender a promissory note
effective as of April 1, 1997 in the amount of $9,713,711 (the "Note"); and
WHEREAS, TASL, as the owner of 99 percent of the outstanding
member interests in the Borrower, will derive substantial direct and indirect
economic benefit from the transactions contemplated by the Purchase Agreement
and the delivery of the Note to the Lender; and
WHEREAS, in connection with the execution and delivery of the
Purchase Agreement and the Note, the Lender is requiring that TASL shall have
executed and delivered this Agreement;
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lender to enter into the Purchase Agreement and accept delivery of
the Note, TASL hereby agrees as follows:
SECTION 1. Obligation to Cause the Borrower to Perform. (a) TASL shall pay to
the Borrower from time to time, in cash in United States dollars through
additional contributions to the equity of the Borrower, amounts sufficient to
permit the Borrower promptly to perform all of its obligations under the Note,
the Security Agreement and the Purchase Agreement.
(b) Notwithstanding anything to the contrary contained herein,
TASL shall not be required to make unrecouped payments under this Agreement to
the Borrower or the Lender in excess of an aggregate of $956,111 (the "Maximum
Obligation") at any time outstanding; provided, however, that any dividends or
other distributions made by the Borrower (other than dividends or distributions
made in respect of any Equity Dividend Amount, as such term is defined in the
Note), shall be deemed to be made in recoupment of any payments made by TASL
hereunder and the aggregate amount of TASL's obligation under subsection (a)
above shall be restored by the amount of such dividend or distribution, up to
the Maximum Obligation.
(c) If TASL shall at any time and from time to time fail to
perform or comply with any of its obligations contained in subsection (a) above
and if for any reason the Lender shall have failed to receive when due and
payable (whether at stated maturity, by acceleration, or otherwise) the payment
of all or any part of the principal of or interest on the Note or any other
amount payable by the Borrower thereunder or under the Security Agreement or the
Purchase Agreement, then in each such case:
(i) it shall be conclusively assumed without necessity of
proof that such failure by TASL was the sole and direct cause of the
Lender failing to receive such payment when due irrespective of any
other contributing or intervening cause whatsoever;
(ii) TASL agrees that it will be unconditionally liable
to the Lender for liquidated damages (for loss of a bargain and not as
a penalty) for the amount of such payment not received by the Lender
when so due and payable as well as for all costs and expenses, if any,
incurred by the Lender in enforcing this Agreement (but only to the
extent of and as a reduction of the Maximum Obligation);
(iii) TASL further irrevocably waives to the full extent
permitted by applicable law any right or defense TASL may have to cause
the Lender to prove the cause or amount of such damages or to mitigate
the same; and
(iv) since TASL has agreed to liquidated damages in the
amount specified above, the Lender shall not be entitled to any damages
in excess of such amount with respect to such payment.
(d) Notwithstanding anything herein to the contrary, during
any period in which the Lender shall have failed to receive when due and payable
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(whether at stated maturity, by acceleration or otherwise) the payment of all or
any part of the principal of or interest on the Note or any other amount payable
by the Borrower thereunder or under the Security Agreement or the Purchase
Agreement, TASL shall make payment of all funds under this Agreement directly to
the Lender c/o Polaris Investment Management Corporation, 201 Mission Street,
27th Floor, San Francisco, CA 94105, and the Lender shall apply such funds in
the same manner as though paid directly by the Borrower. All payments which are
received by the Borrower contrary to the provisions of this subsection (d) shall
be received in trust for the benefit of the Lender, shall be segregated from
other funds and property held by the Borrower, and shall be paid over to the
Lender in the same form as so received (with any necessary indorsement).
SECTION 2. Other Permitted Payments. If and to the extent that
amounts paid to the Borrower pursuant to Section 1(a) do not exceed the Maximum
Obligation, TASL may make payments to the Borrower from time to time for any
purpose in which the Borrower is permitted to engage, and in each case the
amount of such payment shall be credited against TASL's obligation to make
payments to the Borrower under Section 1(a) hereof up to the Maximum Obligation;
provided, however, that if the Borrower sells, transfers, conveys or otherwise
disposes of an Asset (as such term is defined in the Note) for an amount (the
"Sale Price") that is less than 90% of the product of (x) the Allocable Portion
Percentage (as defined in the Note) for such Asset multiplied by (y) the then
outstanding balance of the Note, then any payment made by TASL to the Borrower
in the 60 day period preceding or the 60 day period following such sale,
transfer, conveyance or other disposition shall be included in determining if
the Maximum Obligation has been reached only after deducting (a) the Shortfall
Amount (as defined below) and (b) any dividends or other distributions (other
than dividends or distributions in respect of any Equity Dividend Amount) made
by the Borrower during both such periods. For purposes of this Section 2,
"Shortfall Amount" means the amount that is the difference between (i) the
product of the Allocable Portion Percentage for the Asset which has been sold,
transferred, conveyed or otherwise disposed of multiplied by the then
outstanding balance of the Note and (ii) the Sale Price.
SECTION 3. Taxes, Authorizations, Etc. (a) TASL will pay any
stamp or other tax (including any interest and penalties) with respect to the
performance by TASL of its obligations pursuant to this Agreement; provided,
however, in no event shall such taxes include any taxes imposed upon or measured
by the gross or net income of the Borrower or the Lender. If any such tax is
paid by the Lender in the good faith belief that such tax is owing, TASL will,
upon demand of the Lender, indemnify the Lender for such payment, together with
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any interest, penalties and expenses in connection therewith plus interest
thereon at the lesser of 10% or the maximum rate under applicable law. The
Lender shall thereafter cooperate in a commercially reasonable manner with TASL
in seeking any refunds of such taxes, interest, penalties and expenses which
refunds and any interest thereon shall be paid by the Lender to TASL within five
(5) business days of receipt by the Lender, provided, that in no event shall the
Lender be required to expend its own funds in seeking any such refund and
provided, further, that any expenses incurred in connection therewith shall be
paid by TASL.
(b) TASL will obtain any authorization, approval or other
action by, and will give any notice to or make any filing with, any governmental
authority or regulatory body required in connection with the performance by TASL
of its obligations pursuant to this Agreement.
SECTION 4. Obligation Absolute. TASL will perform its
obligations under this Agreement regardless of any law, regulation or order now
or hereafter in effect in any jurisdiction affecting any of the terms of the
Note, the Security Agreement or the Purchase Agreement or any other document
related thereto or the rights of the Lender with respect thereto. The
obligations of TASL under this Agreement shall be absolute and unconditional
irrespective of:
(i) any lack of validity, enforceability or value of the
Purchase Agreement, the Note, the Security Agreement or any other
agreement or instrument relating thereto or any collateral therefor;
(ii) any change in any term of the Note (including any
change in the time, manner or place of payment thereof), the Security
Agreement or the Purchase Agreement, or any other amendment or waiver
of or any consent to departure from the Note, the Security Agreement or
the Purchase Agreement;
(iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for the Note, the Security Agreement or
the Purchase Agreement;
(iv) any failure to pay any taxes which may be payable
with respect to the performance of such obligations by TASL, or any
failure to obtain any authorization or approval from or other action
by, or to notify or file with, any Government Entity required in
connection with the performance of such obligations by TASL; or
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(v) any impossibility or impracticality of performance,
illegality, force majeure, any act of any Government Entity, or any
other circumstance which might constitute a defense available to, or a
discharge of, TASL or a surety, or any other circumstance, event or
happening whatsoever, whether foreseen or unforeseen and whether
similar or dissimilar to anything referred to above in this Section 4.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment is rescinded or must otherwise be returned by the
Lender upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, all as though such payment had not been made. The obligations of TASL
under this Agreement shall not be subject to reduction, termination or other
impairment by reason of any set-off, recoupment, counterclaim or defense or for
any other reason.
SECTION 5. Waiver. TASL hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to the Purchase
Agreement, the Note and this Agreement and any requirement that the Lender
protect, secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against the Borrower or
any other person or entity or any collateral.
SECTION 6. Separate Undertaking. Without limiting the
generality of any of the foregoing provisions of this Agreement, TASL
irrevocably waives, to the full extent permitted by applicable law and for the
benefit of, and as a separate undertaking with, the Lender, any defense to the
performance of this Agreement which may be available to TASL as a consequence of
this Agreement being rejected or otherwise not assumed by the Borrower or any
trustee or other similar official for the Borrower or for any substantial part
of the property of the Borrower, or as a consequence of this Agreement being
otherwise terminated or modified, in any proceeding seeking to adjudicate the
Borrower a bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, protection, relief or composition of the Borrower
or the debts of the Borrower under any law relating to bankruptcy, insolvency or
reorganization or relief or protection of debtors, whether such rejection,
non-assumption, termination or modification be by reason of this Agreement being
held to be an executory contract or by reason of any other circumstance. If this
Agreement shall be so rejected or otherwise not assumed, or so terminated or
modified, TASL agrees for the benefit of, and as a separate undertaking with,
the Lender, that it will be unconditionally liable to pay to the Lender an
amount equal to each payment which would otherwise be payable by TASL under or
in connection with this Agreement if this Agreement were not so rejected or
otherwise not assumed or were otherwise not so terminated or modified, such
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amount to be payable to the Lender, as and when such payment would otherwise be
payable hereunder and such amount to be applied as such payment would otherwise
be applied under the Note.
SECTION 7. Representations and Warranties. TASL hereby
represents and warrants to Borrower and Lender as follows:
(a) TASL (i) is a corporation duly organized, validly existing
and in good standing under the laws of Bermuda and (ii) has the
requisite power and authority to carry on its business as presently
conducted and as proposed to be conducted after the date of this
Agreement and to enter into and perform its obligations under this
Agreement.
(b) TASL is the beneficial and record owner of 99% of all
outstanding member interests of the Borrower free and clear of any
lien, security interest or other charge or encumbrance other than that
set forth in the Security Agreement.
(c) The execution and delivery by TASL of this Agreement, and
the performance by TASL of its obligations hereunder (i) have been duly
authorized by all necessary action on the part of TASL, (ii) do not
contravene any provision of law, governmental rule, regulation,
judgment or order applicable to or binding on TASL, or the
organizational documents of TASL and (iii) do not require the consent
or approval of, the giving of notice to, the registration with, or the
taking of any other action in respect of, any federal, state or foreign
governmental authority or agency or any other Person, except those
already obtained.
(d) This Agreement has been duly executed and delivered and is
enforceable against TASL in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws affecting the rights and remedies of
creditors generally and, with respect to the enforceability of this
Agreement, by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).
SECTION 8. No Transfer of Interest. TASL covenants and agrees
that, so long as the Note shall remain unpaid, TASL will not sell, assign,
pledge, encumber or otherwise dispose of any member interest of the Borrower
except to the extent and in the manner permitted by the Security Agreement and
that any transfer by it of any interest in the Borrower shall not reduce,
release or lessen its obligations under this Agreement.
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SECTION 9. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by TASL therefrom shall
in any event be effective unless the same shall be in writing and signed by the
Borrower and the Lender, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 10. Expenses. TASL will upon demand pay to the
Borrower and the Lender, respectively, the amount of any and all reasonable
expenses, including attorneys' fees and expenses, which the Borrower and the
Lender, as the case may be, may incur in connection with the exercise or
enforcement of any of their respective rights or interests hereunder; provided,
however, that TASL shall not be obligated to pay any costs or expenses
(including attorney's fees) incurred by the Borrower or the Lender in connection
with the preparation of this Agreement or (x) any ordinary administrative costs
and expenses of the Borrower so long as there is no default by TASL under this
Agreement or (y) any ordinary administrative costs and expenses of the Lender so
long as there is no default by TASL under this Agreement or a default by the
Borrower under the Purchase Agreement, the Note or any other Ancillary
Agreement.
SECTION 11. Addresses for Notices. All notices, demands,
declarations and other communications required by this Agreement shall be in
writing and shall be effective (i) if given by facsimile, when transmitted, (ii)
if given by registered or certified mail, three business days after being
deposited with the U.S. Postal Service, (iii) if given by courier, when
received, or (iv) if personally delivered, when so delivered, addressed:
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If to TASL, to:
Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Facsimile: (415) 398-9184
or to such other address as TASL may from time to time designate in writing to
the Borrower and Lender.
If to the Borrower, to:
Triton Aviation Services III LLC
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Facsimile: (415) 398-9184
or to such other address as the Borrower may from time to time designate in
writing to TASL and Lender.
If to Lender, to:
Polaris Aircraft Income Fund III
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, CA 94105
Attention: President
Facsimile: (415) 284-7460
With a copy to:
Polaris Aircraft Income Fund III
c/o Polaris Investment Management Corporation
201 High Ridge Road, 1st Floor
Stamford, CT 06927-4900
Attention: Portfolio Management
Facsimile: (203) 357-4585
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or to such other address as Lender shall from time to time designate in writing
to the Borrower and TASL.
SECTION 12. No Waiver; Remedies. No failure on the part of the
Borrower or the Lender to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 13. Continuing Agreement; Transfer of Note. This
Agreement is a continuing agreement and shall (i) remain in full force and
effect until payment in full and discharge of the Note, (ii) be binding upon
TASL, its successors and assigns, and (iii) inure to the benefit of and be
enforceable by the Borrower, the Lender and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), the Lender may assign or otherwise transfer the Note held by it to any
other person or entity, and such other person or entity shall thereupon become
vested with all the rights in respect thereof granted to the Lender herein or
otherwise.
SECTION 14. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of California.
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IN WITNESS WHEREOF, TASL has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
TRITON AVIATION SERVICES
LIMITED
By: /S/JOHN E. FLYNN
---------------------
Name: JOHN E. FLYNN
Title: PRESIDENT
The foregoing Agreement
is hereby accepted and
agreed to as of the date
first above written:
TRITON AVIATION SERVICES III LLC
By: Triton Aviation Services
Limited, Manager
By:/S/JOHN E. FLYNN
---------------------
Name: JOHN E. FLYNN
Title: PRESIDENT
POLARIS AIRCRAFT INCOME FUND III
By: Polaris Investment Management
Corporation, General Partner
By:/S/MARC A. MEICHES
----------------------
Name: MARC A. MEICHES
Title: VICE PRESIDENT
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