PROMISSORY NOTE
$26,396,590 Effective as of
April 1, 1997
FOR VALUE RECEIVED, the undersigned, TRITON AVIATION SERVICES
IV LLC, a California limited liability company having its principal office at 55
Green Street, San Francisco, California 94111 ("Borrower"), hereby promises to
pay to the order of POLARIS AIRCRAFT INCOME FUND IV, a California limited
partnership ("Lender"), having an office c/o General Electric Capital Aviation
Services, Inc. at 201 High Ridge Road, Stamford, CT 06925, the principal amount
of TWENTY-SIX MILLION THREE HUNDRED NINETY-SIX THOUSAND FIVE HUNDRED NINETY AND
00/100 DOLLARS ($26,396,590) (hereinafter referred to as the principal amount
hereof), together with interest thereon (computed on the basis of a 360 day
year) on the unpaid balance thereof, commencing from the effective date hereof.
Interest shall accrue and be payable at a rate equal to the lesser of the
maximum lawful rate under applicable law or twelve percent (12%) per annum (the
"Interest Rate"). All past due installments of principal and, if permitted by
applicable law, of interest, shall bear interest at a rate equal to the Interest
Rate plus two percent (2%) per annum (the "Default Interest Rate"). During the
existence of any Event of Default (as such term is defined in Section 5 of this
Promissory Note), the entire unpaid balance of principal shall, at the option of
the holder hereof, bear interest at the Default Interest Rate. Borrower agrees
to pay Lender quarterly, as it accrues, interest on the principal amount
hereunder. Subject to Sections 1.2 and 1.4 hereof, the principal amount hereof,
together with interest at the Interest Rate, shall be payable as provided in
Schedule A hereto in twenty-seven (27) quarterly payments of principal and
interest payable on each March 31, June 30, September 30 and December 31,
beginning June 30, 1997 and one balloon payment of all remaining principal and
accrued interest on March 31, 2004. Each payment of principal and interest shall
be made by wire transfer to a bank account designated by the holder to Borrower
in writing.
The further terms and conditions of this Promissory Note are
as follows:
1.0 Seller Financing; Defined Terms.
1.1. Borrower and Lender have entered into that certain
Purchase, Assignment and Assumption Agreement (the "Purchase Agreement") dated
as of April 1, 1997. This Promissory Note is given in respect of certain
obligations as more fully set forth in Section 6 hereof, in connection with
Borrower's acquisition of the Transferred Interests.
1.2. The principal amount of this Promissory Note and the
principal repayments set forth on Schedule A shall be recalculated in accordance
with Section 1.4 hereof to give effect to any reduction to the Purchase Price
pursuant to Section 4(c) or Section 4(d)(ii) of the Purchase Agreement.
1.3. This Promissory Note may be prepaid in whole or in part
at any time without penalty.
1.4. Amounts prepaid pursuant to Sections 1.3 or 3.8 hereof
shall be applied on a pro rata basis to reduce all remaining payments of
principal and the interest payable thereon shall be recalculated based on such
reduced outstanding principal amount in accordance with a mortgage style
amortization schedule determined with reference to the remaining term of this
Promissory Note plus four quarters with a balloon payment due at March 31, 2004.
1.5. Unless otherwise defined herein, terms defined in the
Purchase Agreement are used herein as therein defined, and the following shall
have (unless otherwise provided elsewhere in this Promissory Note) the following
respective meanings (such meanings being equally applicable to both the singular
and plural form of the terms defined):
"Economic Interest" means with respect to a member of Borrower
(i) if such member's capital account is a positive amount, the percentage
obtained by dividing such member's capital account by the total positive capital
accounts of all members of Borrower, (ii) if such member's capital account is
zero or less, a percentage equal to zero, or (iii) if the capital accounts of
all members are zero or less, the percentage interest of such member in
distributions of Borrower's cash flow from operations. The capital account
amounts set forth in the most recently filed Federal income tax return of
Borrower and the cash flow percentages set forth in Borrower's operating
agreement shall be used for the foregoing determination.
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"Equity Dividend Amount" means, (i) for any calendar month
that ends prior to the first Effective Time to occur under the Purchase
Agreement, an amount equal to $41,709, and (ii) for the calendar month in which
the first Effective Time occurs under the Purchase Agreement and for each
calendar month thereafter, an amount equal to $69,516 and for any period that is
less than a calendar month, a proportionate amount thereof calculated using the
same proportion that the number of days in such period bears to thirty days.
"Indebtedness" of any Person means any (i) indebtedness for
borrowed money or for the deferred purchase price of property or services (but
not including obligations to trade creditors incurred in the ordinary course of
business that are not yet due and payable), (ii) obligations evidenced by notes,
bonds, debentures or similar instruments, (iii) indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
acquired property, (iv) capitalized lease obligations of such Person, (v)
obligations guaranteeing, indemnifying, assuming, purchasing or repaying any
indebtedness, lease, dividend, or other obligation of any other Person in any
manner, (vi) indebtedness referred to in clause (i), (ii), (iii), (iv) or (v)
above secured by (or for which the holder of such indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
owned by such Person, or (vii) liabilities under Title IV of ERISA (as such term
is defined in Section 2.11).
"Letter of Credit" means an irrevocable direct-pay letter of
credit issued by a bank (i) whose long term debt obligations are rated "AA" or
better by Thompson's Bankwatch or (ii) that is rated "AA" or better by Standard
& Poor's in the Financial Institutions Rating Service and that is payable upon
presentation by the beneficiary of such Letter of Credit of a sight draft (it
being understood, but without any impairment of the issuing bank's obligations
under such Letter of Credit, that the beneficiary shall not present such sight
draft unless (x) there has been a default under the promissory note secured by
such Letter of Credit or (y) the Letter of Credit would expire within 45 days of
such presentation and an extension of such expiration date shall not have been
granted nor an acceptable replacement Letter of Credit been provided).
"Permitted Investment" means (i) any Permitted SPV Investment
and (ii) (A) any evidence of Indebtedness, maturing not more than one year after
its acquisition by Borrower, issued or unconditionally guaranteed by the United
States Government, (B) commercial paper, maturing not more than twelve months
from the date of issue, which is issued by a Person having a rating of A-1 or
P-1 or the equivalent or higher from at least one of Standard & Poor's Ratings
Services, Moody's Investors Service, Inc., Phoenix Duff & Phelps or Fitch
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Investors Services, (C) any certificate of deposit or bankers acceptance,
maturing not more than one year after its acquisition by Borrower, which is
issued by a commercial banking institution organized under the laws of the
United States that has a combined capital and surplus and undivided profits of
not less than $250,000,000, (D) any repurchase agreement entered into with any
commercial banking institution described in the foregoing clause (C) which is
secured by a security interest in any obligation of a type described in any of
the foregoing clauses (A) through (C), or (E) any money market account or
similar investment account that invests solely in securities of the type
described in clause (A), (B) or (C) of this definition.
"Permitted SPV Indebtedness" means any indebtedness of
Borrower: (i) owed to any Triton LLC, (ii) for monies borrowed solely for the
purpose of (x) funding any maintenance, improvements, additions, refurbishments
or modifications to any Aircraft owned, directly or indirectly, by Borrower or
(y) making payments due and owing to Lender under this Promissory Note, (iii)
evidenced by a note payable to such Triton LLC on demand, bearing interest at a
rate equal to the higher of 12% per annum or Bank of America's prime rate plus
2%, but not exceeding the maximum lawful rate under applicable law and (iv)
guaranteed by TIL and secured by a Letter of Credit in an amount equal to the
outstanding balance of such promissory note plus six months interest thereon
(calculated at 10% per annum), all as provided in the Loan Guaranty.
"Permitted SPV Investment" means a demand loan made: (i) to
any Triton LLC, (ii) solely for the purpose of (a) funding any maintenance,
improvements, additions, refurbishments or modifications to any Aircraft owned,
directly or indirectly, by such Triton LLC or (b) making payments due and owing
to a Polaris Entity by such Triton LLC under a promissory note entered into in
connection with an SPV Purchase Agreement, (iii) evidenced by a promissory note
made by such Triton LLC payable to Borrower on Borrower's demand, (iv) bearing
interest at a rate equal to the higher of 10% per annum or Bank of America's
prime rate plus 2%, but not exceeding the maximum lawful rate under applicable
law and (v) guaranteed by TIL and secured by a Letter of Credit issued in favor
of Borrower in an amount equal to the outstanding balance of such promissory
note plus six months interest thereon (calculated at 10% per annum).
"Polaris Entity" means any of Polaris Aircraft Income Fund II,
Polaris Aircraft Income Fund III, Polaris Aircraft Income Fund IV, Polaris
Aircraft Income Fund V or Polaris Aircraft Income Fund VI, each a California
limited partnership.
"Qualified Holder" means (i) any Person who is Triton
Management, (ii) any Triton Member or (iii) any Person with a consolidated net
worth, net of minority interests and, if such Person is a natural person,
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exclusive of his principal residence, of an amount that is not less than the
greater of (x) $3,000,000 or (y) the product of the aggregate consideration
(including cash, notes or other deferred compensation) paid by such Person for
all ownership interests owned by such Person in Borrower multiplied by two.
"SPV Purchase Agreements" means those certain Purchase,
Assignment and Assumption Agreements, each by and between a Polaris Entity, as
assignor, and a Triton LLC, as assignee, entered into simultaneously with the
Purchase Agreement.
"TAL" means Triton Aviation Limited, a Bermuda corporation.
"TASL" means Triton Aviation Services Limited, a Bermuda
corporation.
"TIL" means Triton Investment Limited, a Bermuda corporation.
"Triton Container" means Triton Container International
Limited, a Bermuda corporation.
"Triton LLC" means any of Triton Aviation Services II LLC,
Triton Aviation Services III LLC, Triton Aviation Services IV LLC or Triton
Aviation Services V LLC, each a California limited liability company.
"Triton Management" means any director, officer or other
member of senior management of TASL, or TIL or any Triton Member.
"Triton Member" means (i) TAL, TASL and Triton Container and
(ii) any other Person 90% or more of the ownership interest in which is held,
directly or indirectly, by TIL and which Person has a consolidated net worth,
net of minority interests, that is not less than the greater of (x) $3,000,000
or (y) the product of the aggregate consideration (including cash, notes or
other deferred compensation) paid by such Person for all ownership interests
owned by such Person in Borrower multiplied by two.
2.0 Representations and Warranties. To induce Lender to accept this
Note and extend seller financing to Borrower, Borrower hereby makes the
following representations and warranties:
2.1. Borrower is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of California
and is duly qualified as a foreign limited liability company and in good
standing under the laws of each
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jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which failure
to so qualify or be in good standing would not have a material adverse effect on
the business, assets, operations, prospects, or financial or other condition of
Borrower (a "Material Adverse Effect")).
2.2. The execution, delivery and performance by Borrower of
this Promissory Note are within Borrower's power, have been duly authorized by
all necessary or proper limited liability company action, are not in
contravention of any provision of Borrower's articles of organization, operating
agreement, or any other such governing document, will not violate any law or
regulation, or any order or decree of any Government Entity, will not conflict
with or result in the breach or termination of, constitute a default under or
accelerate any performance required by, any indenture, mortgage, deed of trust,
lease, agreement, or other instrument to which Borrower is a party or by which
Borrower or its property is bound, and do not require the consent or approval of
any Person except those already obtained. This Promissory Note constitutes the
legal, valid and binding obligation of Borrower enforceable against it 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 Promissory Note, 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).
2.3. The pro forma balance sheet of Borrower as of May 1,
1997, a copy of which has been furnished to Lender, was prepared in accordance
with generally accepted accounting principles ("GAAP") and reflects the
assignment of all Transferred Interests and the seller financing transactions
contemplated hereunder and under the Purchase Agreement as if they had occurred
as at the date of such balance sheet and presents fairly on a pro forma basis
the financial position of Borrower at such date assuming the events specified in
this paragraph had actually occurred on such date. Borrower, as of the date of
this Promissory Note, had no obligations, contingent liabilities or liabilities
for taxes or other charges, long-term leases or unusual forward or long-term
commitments which were not reflected in the aforementioned pro forma balance
sheet of Borrower.
2.4. No dividends or other distributions have been declared,
paid or made upon any membership interest (or any other equity interest) of
Borrower nor have any membership interests (or any other equity interest) of
Borrower been redeemed, retired, purchased or otherwise acquired for value by
Borrower.
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2.5. Borrower owns full, complete and good title to all of its
properties and assets and none of its properties and assets is subject to any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, easement or encumbrance, or
other security agreement of any kind or nature whatsoever (collectively, "Liens"
and individually, a "Lien"), except Permitted Encumbrances (as defined in
Section 4.3 hereof).
2.6. Borrower has insurance on all its properties or assets,
including, without limitation, policies of fire, theft and other casualty and
liability insurance on terms and conditions and in amounts that are customary
for owners of commercial aircraft. All such policies are in full force and
effect and there are no defaults by any party under any provision thereof.
2.7. Borrower is not in default, nor is any third party in
default, under or with respect to any contract, agreement, lease or other
instrument to which Borrower is a party.
2.8. Borrower is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended. The obligations evidenced by this Promissory Note, the repayment
thereof and the consummation of the transactions contemplated by this Promissory
Note will not violate any provision of such Act or any rule, regulation or order
issued by the Securities and Exchange Commission thereunder.
2.9. The seller financing evidenced by this Promissory Note
will be used only for the purposes contemplated hereunder and under the Purchase
Agreement.
2.10. All federal, state, local and foreign tax returns,
reports and statements required to be filed by Borrower have been filed with the
appropriate governmental agencies and all taxes, charges and other impositions
shown thereon to be due and payable have been paid prior to the date on which
any fine, penalty, interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest or late charge has been paid.
Borrower has paid when due and payable all taxes and other charges required to
be paid by it except those contested in good faith by appropriate proceedings,
with adequate reserves made in respect thereof in accordance with and to the
extent required by GAAP.
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2.11. Borrower does not maintain or contribute to and is not
obligated to contribute to, and has not maintained or contributed to and was not
obligated to contribute to, any employee benefit plan as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
2.12. No action, claim or proceeding is now pending or
threatened against Borrower, at law, in equity or otherwise, before any court,
board, commission, agency or instrumentality of any federal, state, or local
government or of any agency or subdivision thereof, or before any arbitrator or
panel of arbitrators nor does a state of facts exist which is reasonably likely
to give rise to such proceedings.
2.13. All representations and warranties made by Borrower in
the Purchase Agreement are true and correct in all material respects on and as
of the date hereof as though made on and as of this date.
3.0 Affirmative Covenants. Borrower covenants and agrees that, unless
Lender shall otherwise consent in writing, from and after the date hereof and
until this Promissory Note is paid in full:
3.1. Borrower shall (i) do or cause to be done all things
necessary to preserve and keep in full force and effect its existence as a
California limited liability company and its rights; (ii) continue to conduct
its business in accordance with its operating agreement and articles of
organization as permitted hereunder; and (iii) at all times use its best efforts
to maintain, preserve and protect, or cause to be maintained, preserved and
protected, all of its property, in use or useful in the conduct of its business
and keep the same in good repair, working order and condition (taking into
consideration ordinary wear and tear).
3.2. Borrower shall (i) pay and discharge or cause to be paid
and discharged all its Indebtedness, including, without limitation, all amounts
outstanding hereunder as and when due and payable, and (ii) except where
contested, in good faith, by proper legal actions or proceedings with adequate
cash reserves therefor, pay and discharge or cause to be paid and discharged
promptly all (A) taxes or other charges imposed upon it, its income and profits,
or any of its real or personal property, whether tangible or intangible, and (B)
lawful claims for labor, materials, supplies and services or otherwise before
any thereof shall become in default.
3.3. Borrower shall deliver to Lender (i) within 60 days after
the end of each of the first three fiscal quarters of Borrower, a copy of the
unaudited balance sheet
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of Borrower as of the end of such fiscal quarter and an unaudited statement of
income and cash flow of Borrower for such fiscal quarter, all prepared in
accordance with GAAP (subject to normal year end adjustment), accompanied by a
certification of the chief executive officer or chief financial officer of the
manager of Borrower that all such financial statements are complete and correct
and present fairly, all in accordance with GAAP (subject to normal year end
adjustments), the financial position, the results of operations and cash flow
statements of Borrower as at the end of such quarter and for the period then
ended and that no Event of Default or event which with the giving of notice or
lapse of time or both would become an Event of Default (a "Default") is in
existence as of such time, (ii) within 120 days after the end of each fiscal
year of Borrower, a copy of the audited balance sheet of Borrower as of the end
of such fiscal year and an audited statement of income and cash flow of Borrower
for such fiscal year, all prepared in accordance with GAAP, accompanied by (x) a
certification of the chief executive officer or chief financial officer of
Borrower that all such financial statements are complete and correct and present
fairly, all in accordance with GAAP, the financial position, the results of
operations and the changes in financial position of Borrower as at the end of
such year and for the period then ended and that no Default or Event of Default
is in existence as of such time and (y) an auditor's report unqualified as to
the scope of the audit and as to the Borrower being a going concern, from KPMG
Peat Marwick LLP, or any other firm of independent certified public accountants
of recognized national standing selected by Borrower and acceptable to Lender,
(iii) copies of any documents relating to or evidencing any Permitted SPV
Indebtedness incurred by or any Permitted SPV Investment made by Borrower, no
later than three (3) business days after Borrower incurring or making, as
applicable, any Permitted SPV Indebtedness or Permitted SPV Investment, (iv)
notice that the Borrower has incurred any other Indebtedness or acquired any
Permitted Investments (other than Permitted SPV Investments) no later than 30
days after Borrower incurring or making, as applicable, any such Indebtedness or
Permitted Investment together with such other information about any Indebtedness
or Permitted Investment as Lender may reasonably request, (v) written notice of
any Keep Well proceeds received by Borrower and of any dividend or distribution
declared or made by Borrower, in each case no later than three (3) business days
after receipt of such proceeds or the declaration or payment of any such
dividend or distribution, as applicable and (vi) written notice of any
transaction by Borrower with an Affiliate setting forth the identity of each
Affiliate that is a party to such transaction, the material terms of such
transaction and any amounts required to be paid by, on behalf of or to Borrower
in respect of such transaction.
3.4. Borrower shall deliver to Lender as soon as practicable,
but in any event within two (2) business days after Borrower becomes aware of
the existence of any Default or Event of Default, or any development or other
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information which would have a Material Adverse Effect, telephonic or facsimile
notice specifying the nature of such Default, Event of Default or development or
information, including the anticipated effect thereof, which notice, if
telephonic, shall be promptly confirmed in writing to Lender within three (3)
business days.
3.5. Borrower shall deliver to Lender such other information
respecting Borrower's business, financial condition or prospects as Lender may,
from time to time, reasonably request including, without limitation, monthly
reports of the outstanding balances of accounts receivable since the last
monthly report; a detailed aged trial balance of all then-existing accounts
receivable by Lessee and specifying the names of account debtors and such other
information relating to the accounts receivable as Lender may reasonably
require; and a certificate of the gross revenues of Borrower for the preceding
month. Lender and any of its officers, employees and/or agents shall have the
right, exercisable as frequently as Lender reasonably determines to be
appropriate, during normal business hours (or at such other times as may
reasonably be requested by Lender), to inspect the properties and facilities of
Borrower and to inspect, audit and make extracts from all of Borrower's records,
files and books of account. Borrower shall deliver any document or instrument
reasonably necessary for Lender to obtain records from any service bureau
maintaining records for Borrower.
3.6. (a) Borrower shall, either directly or indirectly,
procure and maintain insurance policies with reputable insurers, covering all of
its properties or assets, including, without limitation, policies of fire, theft
and other casualty and liability insurance on terms and conditions and for
amounts that are customary for owners of commercial aircraft. Without limiting
the foregoing, Borrower shall, directly or indirectly, procure and maintain, at
all times, (i) all risk hull insurance (including the War and Allied Perils
Endorsement insurance) written by recognized aircraft insurers on each Aircraft
owned, directly or indirectly, by Borrower in an amount equal, at all times, to
the Appraised Value of such Aircraft and (ii) comprehensive liability insurance
written in an amount not less than $500,000,000. Lender shall be named as an
additional insured on all such insurance policies and named as additional
insured on all liability policies.
(b) All such policies of insurance shall provide (i) by means
of endorsements or otherwise, in form and manner satisfactory to Lender, that
such insurance shall not be invalidated by any action or inaction of Borrower
and shall insure Lender, regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by Borrower; (ii) by means
of endorsements or otherwise in form and manner satisfactory to Lender, that if
such insurance is cancelled for any reason whatever, or any substantial change
is made in the coverage which affects the interests of Lender or
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if such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change or lapse shall not be effective as to Lender for 30 days
(or, in the case of any war risks or allied perils coverage, seven (7) days, or
such other period as may from time to time be customarily obtainable in the
industry) after receipt by Lender of written notice from such insurers of such
cancellation, change or lapse; (iii) by means of endorsements or otherwise in
form and manner satisfactory to Lender, that such insurers shall waive any
rights of subrogation against Lender; (iv) that they are primary without right
of contribution from any other insurance which is carried by Lender with respect
to any Aircraft that is owned, directly or indirectly, by Borrower (or any
engines or other parts thereof); and (v) that all provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy with and covering each insured.
(c) Borrower shall arrange for appropriate certification, to
the reasonable satisfaction of Lender, as to the scope and existence of such
insurance and the terms thereof to be made to Lender on or prior to the
occurrence of the first Effective Time under the Purchase Agreement and annually
thereafter, until this Promissory Note is paid in full, and thereafter not later
than fourteen (14) days after the renewal date of each of the insurances by each
insurer (or by a firm of independent insurance brokers of reorganized standing
in the placement of similar coverage) in such form and dealing with such matters
relating to the obligations of Borrower hereunder as Lender may reasonably
require.
3.7. Borrower shall comply with all Federal, state and local
laws and regulations applicable to it, including, without limitation, those
relating to environmental matters and perform, within all required time periods,
all of its obligations and enforce all of its rights under each agreement to
which it is a party. Borrower shall not terminate or modify in any manner
materially adverse to Borrower any provision of any agreement to which it is a
party.
3.8. (a) Borrower shall make a prepayment on this Promissory
Note on the terms hereinafter set forth in the event of any sale or casualty
loss (each a "Prepayment Event") relating to any Aircraft or any property
comprising all or any portion of any Transferred Interest acquired by Borrower
pursuant to the Purchase Agreement (an "Asset") (each such Asset that is the
subject of a Prepayment Event is hereinafter referred to as a "Removed Asset");
provided, however, a Prepayment Event shall not be deemed to include (i) any
sale of an engine or a part if, within 45 days (with respect to engines) or 90
days (with respect to parts) after such sale, Borrower obtains a replacement for
such engine or part that has the same or greater value as the engine or part
that was the subject of such sale, (ii) any sale of obsolete or surplus parts,
at their fair market value, to the
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extent that the aggregate of all such sales in a calendar year do not exceed
$200,000 or (iii) any casualty loss of an engine or any part if Borrower causes
such engine or part to be repaired or replaced, within 45 days (with respect to
engines) or 90 days (with respect to parts) after such casualty loss, and such
repaired or replaced engine or part has the same or greater value as the engine
or part that was the subject of such casualty loss. If a Prepayment Event
relates to a Removed Asset but relates to less than the entire Removed Asset,
Borrower and Lender shall negotiate in good faith to determine the appropriate
percentage of such Removed Asset that was the subject of such Prepayment Event.
Such percentage shall then be multiplied by the appraised value of the entire
Removed Asset (calculated immediately prior to the Prepayment Event), and the
amount therefrom shall be used to calculate the Allocable Portion Percentage (as
defined below) of the Removed Asset.
(b) The amount of the prepayment required as a result of a
Prepayment Event shall be an amount equal to the greater of (1) 100% of the
Allocable Portion Percentage for the Removed Asset multiplied by the then
outstanding principal balance of this Promissory Note and (2) the proceeds
actually received by Borrower in respect of the Removed Asset, net of any
reasonable out of pocket costs and expenses incurred by Borrower in connection
with such Prepayment Event (but not to exceed an amount equal to 120% of the
Allocable Portion Percentage with respect to the Removed Asset multiplied by the
then outstanding principal balance of this Promissory Note). The Allocable
Portion Percentage shall mean, with respect to any Asset, the amount obtained by
dividing the appraised value of the Asset immediately prior to the Prepayment
Event by the sum of the appraised values of all Assets owned, directly or
indirectly, by Borrower immediately prior to the Prepayment Event. For this
purpose, appraised value of an Aircraft owned, directly or indirectly, by
Borrower shall be the Appraised Value. The appraised value of any receivable
that constitutes a Removed Asset shall be the aggregate outstanding amount of
the principal and accrued interest and fees on such receivable as of the date of
the Prepayment Event.
(c) Any prepayment required as a result of a Prepayment Event
shall be due and payable hereunder no later than three (3) days after the date
of the Prepayment Event; provided, that if such Prepayment Event is a casualty
loss that is insured, the portion of the prepayment required as a result of such
Prepayment Event that is payable pursuant to such insurance coverage shall be
due and payable hereunder no later than the first to occur of (i) three (3) days
after receipt by Borrower of such insurance coverage or (ii) 15 days after the
date of the Prepayment Event. Amounts prepaid pursuant to this Section 3.8 shall
be applied as provided in Section 1.4 hereof.
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4.0 Negative Covenants. Borrower covenants and agrees that, without
Lender's prior written consent, from and after the date hereof and until this
Promissory Note is paid in full:
4.1. Borrower shall not, directly or indirectly, by operation
of law or otherwise, merge with, consolidate with, acquire all or substantially
all of the assets or capital stock or other equity interests in, or otherwise
combine with, any Person (excluding the acquisition of the Transferred Interests
pursuant to the Purchase Agreement), nor form any subsidiary.
4.2. (a) Except as otherwise expressly permitted by this
Promissory Note, Borrower shall not create, incur, assume or permit to exist any
Indebtedness except (i) Indebtedness evidenced by this Promissory Note, (ii)
Permitted SPV Indebtedness, (iii) Indebtedness to trade creditors incurred in
the ordinary course of business that is due and payable but is being contested
in good faith, by proper legal actions or proceedings, if Borrower has cash
reserves on hand adequate to pay such Indebtedness, (iv) deferred taxes that are
either not yet due and payable or are being contested in good faith by proper
legal actions or proceedings, if Borrower has cash reserves on hand adequate to
pay such deferred taxes, and (v) Indebtedness, not to exceed $25,000,000, in the
aggregate, during the term of this Promissory Note that is incurred and used
solely to hushkit an Aircraft that is owned, directly or indirectly, by Borrower
(or to refinance any Indebtedness incurred solely to hushkit such Aircraft;
provided, however, that (x) the amount of such Indebtedness does not exceed the
then outstanding principal amount of the Indebtedness being so refinanced and
(y) the term of such Indebtedness does not materially extend beyond the term of
the Indebtedness being so refinanced). Indebtedness incurred by Borrower to
hushkit an Aircraft that is owned, directly or indirectly, by it shall not
exceed the aggregate fair market value of such hushkit equipment and labor costs
necessary to install such hushkit equipment on such Aircraft.
(b) Borrower shall not make investments in, or make
or accrue loans or advances of money through the direct or indirect holding of
securities or otherwise to any Person; provided, however, that Borrower may own
the Transferred Interests and may invest in Permitted Investments. Borrower
shall demand payment under any Permitted SPV Investment (or any guaranty or
Letter of Credit guaranteeing or securing such Permitted SPV Investment) to the
extent Borrower needs funds to make any payments due to Lender under this
Promissory Note.
4.3. Borrower shall not create or permit any Lien on any of
its properties or assets except any of the following ("Permitted Encumbrances"):
13
(A) Liens for taxes or assessments or other governmental charges or levies, not
yet due and payable, (B) Liens in favor of such Owner Trustee pursuant to a
Trust Agreement or, in each case, workers', mechanics', suppliers', carriers',
warehousemen's or other similar Liens arising in the ordinary course of business
and securing obligations that are not yet due and payable, (C) Liens on an
Aircraft securing Indebtedness of Borrower which is permitted by the terms of
this Promissory Note and which is incurred solely to hushkit such Aircraft (a
"Current Loan"); provided, however, that if such Current Loan constitutes an
extension of credit pursuant to an existing financing facility of Borrower,
Borrower may grant, to secure such Current Loan, a Lien on one or more other
Aircraft if each such other Aircraft is at such time subject to a Lien that
secures such existing financing facility, (D) any renewal or replacement of any
Lien permitted by (C) above (in connection with refinancing of Indebtedness
permitted by subsection 4.2(a)(v) hereof); provided, however, that (x) the
amount of Indebtedness secured by any such renewal or replacement Lien does not
exceed the then outstanding principal amount of the Indebtedness being so
refinanced, (y) such renewal or replacement Lien does not spread to cover any
additional asset and (z) the term of the Indebtedness secured by any such
replacement Lien does not materially extend beyond the term of the Indebtedness
being so refinanced; (E) leases of the Aircraft and (F) Liens on Aircraft owned,
directly or indirectly, by Borrower of a type that a lessee of such Aircraft
would customarily be permitted to incur and be required to remove from such
Aircraft.
4.4. Borrower shall not issue or sell or enter into any
agreement, contract or commitment to issue or sell any equity interest (other
than those outstanding as of the date of this Agreement) unless, after giving
effect to such issuance or sale (a) TASL shall remain the sole manager of
Borrower, retaining all responsibilities and duties allocated to TASL as manager
of Borrower pursuant to Borrower's operating agreement or certificate of
formation and shall make no delegation or assignment to any other Person of any
such responsibility or duty except as permitted thereby, (b) the number of
members of Borrower (x) who are not Triton Members or Triton Management shall
not exceed three (3) (y) who are Triton Management shall not exceed five (5) and
(z) who are Triton Members (excluding TAL, TASL and Triton Container) shall not
exceed five (5), (c) the Triton Members shall hold, in the aggregate, at least
50% of the Economic Interests of Borrower, (d) the holder of such equity
interest shall be a Qualified Holder, (e) such Qualified Holder shall expressly
agree to the pledge of such Interests under the Security Agreement and to be
bound by the terms and conditions thereof, and (f) after notice to Lender given
pursuant to the terms of Section 10 hereof, Lender shall consent to such
transfer or issuance (such consent not to be unreasonably withheld); provided,
however, that if Lender does not respond to such notice within ten (10) days
after receipt by Lender of such notice, such consent shall be deemed granted.
14
Notwithstanding the foregoing, no such issuance or sale shall be made if it
would violate any applicable law or cause the Aircraft owned, directly or
indirectly, by Borrower then registered under the Act no longer to be eligible
for registration under the Act.
4.5. Borrower shall not (i) make any changes in its capital
structure (including, without limitation, in the terms of its outstanding
membership interests, stock or any other equity interests, as the case may be)
except as permitted by Section 4.4 or (ii) amend its operating agreement or any
other such governing document (other than amendments (1) with respect to
allocations of (A) profits and losses, (B) tax income or gains or tax losses or
any components thereof or (C) cash distributions among members or (2) to
implement actions permitted under this Promissory Note, provided, however,
notice of amendments to implement such actions shall be given to Lender no later
than ten (10) days prior to their effectiveness).
4.6. Borrower shall not engage in any business or activities
except to the extent permitted by Borrower's articles of organization or
operating agreement.
4.7. Except as otherwise expressly permitted by this
Promissory Note, Borrower shall not (i) pay or enter into any agreement or
transaction to pay to any of its Affiliates any management, advisory,
consulting, service or similar fee or any fee based on or related to Borrower's
operating performance or income or any percentage thereof; or (ii) enter into
any other transaction with any of its Affiliates, except (A) any agreement or
transaction entered into pursuant to the reasonable requirements of Borrower's
ordinary course of business and upon terms that are no less favorable to
Borrower than Borrower could obtain in a comparable arm's length transaction
with a Person not an Affiliate of Borrower and (B) reimbursement to TASL for the
costs and expenses incurred by TASL in connection with the repair and
refurbishment of the aircraft bearing manufacturer's serial numbers 19711 and
20236. Borrower shall not enter into or be a party to any transaction with any
Person except for transactions entered into upon arm's length terms and
conditions that are commercially reasonable and fair to Borrower. Borrower shall
not enter into any employment agreements or pay any management or similar fee to
any Person or become obligated to pay any Person any advisory, consulting or
service fee except in accordance with the reasonable needs of Borrower's
business and operations. Borrower shall not amend or agree to amend the Keep
Well, the Keep Well Guaranty or the Loan Guaranty.
4.8. Borrower shall not make capital expenditures during the
term of this Promissory Note, except for capital expenditures made to fund any
maintenance, improvements, additions, refurbishments or modifications to any
Aircraft owned, directly or indirectly, by Borrower.
15
4.9. (a) Borrower shall not sell, transfer, convey or
otherwise dispose of any assets or properties; provided, however, that the
foregoing shall not prohibit (i) transfers resulting from any casualty or
condemnation of assets or properties or (ii) sales of engines or parts that do
not constitute Prepayment Events pursuant to Section 3.8(a). Notwithstanding the
foregoing, Borrower may, subject to Section 3.8 hereof, sell Assets without the
consent of the holder of this Promissory Note if the proceeds from any such sale
(net of any costs and expenses or other obligations incurred by Borrower in
connection with such sale) equal or exceed 100% of the Allocable Portion
Percentage for such Asset multiplied by the then outstanding balance of this
Promissory Note.
(b) Borrower shall not sell, transfer, convey or
otherwise dispose of all or any portion of any Asset for an amount (net of any
costs, expenses or other obligations incurred by Borrower in connection with
such sale, transfer, conveyance or disposition) less than 100% of the Allocable
Portion Percentage of such Asset multiplied by the then outstanding balance of
this Promissory Note without the prior written consent of the holder of this
Promissory Note unless Borrower has sufficient funds available from (a)
operating cash flow, exclusive of security deposits, maintenance reserves or
other property held by it as collateral, (b) the issuance or sale of equity
interests in Borrower, (c) sale proceeds held by it from the sale of other
Aircraft owned, directly or indirectly by it, (d) funds paid to Borrower by TASL
under the Keep Well if the Asset is disposed of for an amount equal to or
greater than the product of (1) 90% of the Allocable Portion Percentage for such
Asset multiplied by (2) the then outstanding balance of this Promissory Note, or
(e) any combination of the foregoing, which funds, when added to the proceeds of
the disposition of such Asset (net of any costs and expenses or other
obligations incurred by Borrower in connection with such sale, transfer,
conveyance or disposition) will equal the product of (A) 100% of the Allocable
Portion Percentage of such Asset multiplied by (B) the then outstanding balance
of this Promissory Note. If Borrower sells, transfers, conveys or otherwise
disposes of less than 100% of an Asset, the percentage interest sold,
transferred, conveyed or otherwise disposed of shall be multiplied by the
appraised value of the entire Asset and the product thereof shall be used to
calculate the Allocable Portion Percentage of such Asset for the purposes of the
immediately preceding sentence.
4.10. Borrower shall not (A) prepay, defease, redeem, retire
or otherwise acquire any obligation or Indebtedness owed by it except as
permitted by this Promissory Note, as required by Section 3.8 of this Promissory
16
Note or as required by any Permitted SPV Indebtedness, (B) cancel, forgive or
waive any claim, debt or Indebtedness owing to it, (C) declare any dividend or
other distribution or incur any liability in respect thereof, with respect to
the membership interests (or any other equity interest) in Borrower other than
(1) beginning as of April 1, 1997, payable in the next following calendar month,
the Equity Dividend Amount and any accrued and unpaid Equity Dividend Amount for
each month thereafter, (2) amounts equal to equity contributions made pursuant
to the Keep Well which have not been previously recouped through the payment of
any dividend or distribution and (3) amounts equal to any reduction of the Cash
Amount pursuant to Section 4(c) or Section 4(d)(ii) of the Purchase Agreement;
provided, however, that during any period in which any payment under this
Promissory Note is overdue or a Default has occurred and is continuing, Borrower
shall not declare, pay, incur any liability in respect of or make any dividend
or other distribution whatsoever but Borrower may continue to accrue a liability
equal to the Equity Dividend Amount during such period and Borrower may make
payments in respect of any such accrued liability so long as no amounts due and
payable under this Promissory Note are overdue and no Default is continuing and
provided, further, that all dividends or distributions by Borrower shall be
declared, paid or made only in accordance with applicable law, or (D) incur any
liability to, or engage in any purchase, redemption or retirement transaction,
with respect to the membership interests (or any other equity interest) of
Borrower.
4.11. Borrower shall not directly or indirectly enter into any
employee benefit plan as defined in Section 3(3) of ERISA, nor any other
employee benefit arrangements or payroll practices, including, without
limitation, severance pay, sick leave, vacation pay, salary continuation for
disability, consulting or other compensation agreements, retirement, deferred
compensation, bonus, stock purchase, hospitalization, medical insurance, life
insurance or scholarship programs.
5.0 Events of Default. The following shall be Events of Default
hereunder:
5.1. Borrower shall fail to make any payment of principal or
interest owing in respect of this Promissory Note including, without limitation,
any prepayment required pursuant to Section 3.8 hereof, when due and payable.
5.2. Borrower shall fail to make any payment of any other
amount owing in respect of this Promissory Note within five (5) days after such
other amount becomes due and payable.
5.3. Borrower shall fail to perform, keep or observe any of
the covenants contained in Sections 3, 4 or 8 of this Promissory Note.
17
5.4. Borrower shall fail to perform, keep or observe any other
provision of this Promissory Note or any provision of the Security Agreement,
and the same shall remain unremedied for a period of ten (10) days after receipt
of written notice thereof from Lender.
5.5. Any representation or warranty made herein by Borrower or
in any Ancillary Agreement to which it is a party shall be untrue or incorrect
in any material respect as of the date when made.
5.6. Any provision of the Security Agreement, the Keep Well,
the Keep Well Guaranty or the Loan Guaranty shall cease to be valid and
enforceable in any material respect in accordance with its terms.
5.7. Any Person (other than Lender) shall fail or neglect to
perform, keep or observe any provision of any of the Ancillary Agreement to
which it is a party, and the same shall remain unremedied for a period of ten
(10) days after receipt by such Person of written notice thereof from Lender.
5.8. Any other event shall have occurred which would have a
Material Adverse Effect.
5.9. Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $297,480 shall
be rendered against Borrower and the same shall not be fully covered by
insurance or vacated, stayed, bonded, paid or discharged for a period of thirty
(30) days.
5.10. There shall occur any default under any agreement,
document or instrument to which Borrower is a party or by which Borrower or any
of Borrower's property is bound (other than this Promissory Note), and such
default results in the acceleration, maturity, demand or required repayment of
Indebtedness or other obligations due thereunder that singly or in the aggregate
exceeds $297,480.
5.11. Borrower shall fail to maintain insurance as required by
Section 3.6 of this Promissory Note.
5.12. Any of the assets (with value, individually or in the
aggregate, in excess of $297,480) of Borrower shall be attached, seized, levied
upon or subjected to a writ or distress warrant, or come within the possession
of any receiver, trustee, custodian or assignee for the benefit of creditors of
18
Borrower and shall remain unstayed or undismissed for thirty (30) consecutive
days; or any person other than Borrower shall apply for the appointment of a
receiver, trustee or custodian for any of the assets of Borrower and shall
remain unstayed or undismissed for thirty (30) consecutive days; or Borrower
shall have concealed, removed or permitted to be concealed or removed, any part
of the property of Borrower with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any of its property
or the incurring of any obligation which may be fraudulent under bankruptcy,
fraudulent conveyance or other similar law.
5.13. A case or proceeding shall have been commenced against
Borrower in a court having competent jurisdiction seeking a decree or order in
respect of Borrower (i) under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal, state or
foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of Borrower
or of any substantial part of its properties, or (iii) ordering the winding-up
or liquidation of the affairs of Borrower and such case or proceeding shall
remain undismissed or unstayed for thirty (30) consecutive days or such court
shall enter a decree or order granting the relief sought in such case or
proceeding.
5.14. Borrower shall (i) file a petition seeking relief under
title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable Federal, state or foreign bankruptcy or other similar law,
(ii) consent to the institution of proceedings thereunder or to the filing of
any such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
Borrower or of any substantial part of the property of Borrower, (iii) fail
generally to pay its debts as such debts become due or (iv) take any action in
furtherance of the foregoing.
Upon the occurrence and during the continuance of any such
Event of Default under Sections 5.1 through 5.11 hereof, the holder hereof may,
by written notice to Borrower, declare the entire unpaid balance of this
Promissory Note to be immediately due and payable, whereupon the same shall
forthwith mature without presentment, demand, protest or other notice, all of
which are hereby waived. Upon the occurrence and during the continuance of any
Event of Default under Sections 5.12 through 5.14 hereof, this Promissory Note
shall immediately mature and be due and payable without presentment, demand,
protest or other notice, all of which are hereby waived.
19
6.0 Purchase, Assignment and Assumption Agreement. This Promissory Note
represents the Note Amount due under the Purchase Agreement in respect of the
Transferred Interests.
7.0 Security Agreement. All obligations due Lender by Borrower,
including, without limitation, those evidenced by this Promissory Note, shall be
secured pursuant to the Security Agreement.
8.0 Costs and Expenses. Borrower shall reimburse Lender for all of its
costs and expenses (including reasonable attorneys' fees) incurred by it in
connection with the indebtedness evidenced hereby, lien searches and filings,
the Security Agreement and related documents and any amendments thereto or
waivers or modifications thereof; provided, however, that Borrower shall not be
obligated to pay any costs or expenses (including attorney's fees) incurred by
Lender in connection with preparation of this Promissory Note or any other
Ancillary Agreement or any ordinary administrative costs and expenses of Lender
in the absence of a default by Borrower under this Promissory Note or any other
Ancillary Agreement to which it is a party. Borrower shall also reimburse Lender
or any other holder hereof for all costs incurred by it (including reasonable
attorneys' fees) in the enforcement or collection of any amounts due under this
Promissory Note. Borrower shall indemnify and hold Lender harmless from and
against all losses, claims, damages, costs and expenses, arising from the seller
financing evidenced by this Promissory Note or the transactions contemplated
hereby; provided, however, that such indemnity obligation shall not limit or be
deemed to limit Borrower's rights under Section 13 of the Purchase Agreement.
9.0 No Waiver. No delay, failure or omission by the holder hereof in
respect of any default by Borrower to exercise any right or remedy granted to
the holder hereof or allowed to the holder hereof by law shall constitute a
waiver of the right to exercise such right or remedy upon any default or
subsequent default.
10.0 Notices. All notices, demands, declarations and other
communications required by this Promissory Note shall be in writing and shall be
effective (i) if given by facsimile, when transmitted, (ii) if given by
20
registered or certified mail, three (3) 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:
If to Borrower, to:
Triton Aviation Services IV LLC
55 Green Street, Suite 500
San Francisco, CA 94111
Attn: President
Facsimile Number: (415) 398-9184
or to such other address as Borrower shall from time to time designate in
writing to Lender; and
If to Lender, to:
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, CA 94105
Attention: President
Facsimile Number: (415) 284-7460
With a copy to:
c/o Polaris Investment Management Corporation
201 High Ridge Road, 1st Floor
Stamford, CT 06927-4900
Attention: Portfolio Management
Facsimile Number: (203) 357-4585
or to such other address as Lender may from time to time designate in writing to
Borrower.
11.0 Confidentiality. Lender agrees that it shall keep confidential all
information regarding Borrower that it may receive in connection with the
transactions contemplated by this Promissory Note and agrees that it will only
use such information in connection with such transactions and will not disclose
any of such information other than (i) to its directors, officers, employees,
advisors, auditors, agents or representatives who are or are expected to be
involved in the evaluation of such information in connection with such
transactions and who are advised of the confidential nature of such information
21
(and for whose compliance Lender shall be liable), (ii) to the extent such
information presently is or hereafter becomes available to Lender on a
non-confidential basis from a source other than Borrower, (iii) to the extent
such information has been independently acquired or developed by Lender without
violating any of its obligations under this Promissory Note, or (iv) to the
extent disclosure is required by law, regulation or judicial order.
12.0 Permitted Indebtedness. Lender agrees to execute from time to time
a certificate verifying whether or not Lender has declared an Event of Default
that is continuing as of the date of such certificate and stating the
outstanding principal amount of and interest accrued on this Promissory Note as
of the date of such certificate as Borrower may reasonably request in connection
with incurring Indebtedness for hushkit financing that is permitted by the terms
of this Promissory Note.
13.0 No Recourse to Members. Without impairing any of the other rights,
powers, privileges, liens or security interests of Lender hereunder or under any
other Ancillary Agreement (which term for purposes of this Section 13.0 shall
include the Purchase Agreement), Lender and each subsequent holder of this
Promissory Note agrees that (i) the obligations of Borrower under this
Promissory Note and the other Ancillary Agreements, howsoever created, arising
or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due, including, without limitation,
obligations relating to principal, interest or any breach by Borrower of any
representation, warranty, covenant or indemnity made by Borrower, shall be
payable only from the assets of Borrower, and all of the statements,
representations, covenants and agreements made by Borrower herein and in any
other Ancillary Agreement are made and intended only for the purpose of
establishing the existence of rights and remedies which can be exercised and
enforced against the assets of Borrower; and (ii) no recourse shall be had with
respect to any representation, warranty, covenant or indemnity made by this
Promissory Note or any other Ancillary Agreement against any member of Borrower
or any officer, director, employee, trustee, servant or direct or indirect
controlling Person or Persons of any member, and no such Persons shall have any
personal liability for any amounts payable hereunder or under any other
Ancillary Agreement or for any damages for breach thereof; provided, however,
nothing contained in this Section 13.0 shall be construed to limit the exercise
or enforcement, in accordance with the terms hereof or any Ancillary Agreement,
of rights and remedies against the assets of Borrower; and provided further,
however, that nothing in this Section 13.0 shall (A) release any Person
(including, without limitation, any member or the manager of Borrower) from
personal liability for any obligation of such Person under any Ancillary
Agreement to which it is a party, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing,
22
or due or to become due, including, without limitation, obligations relating to
(1) breach by such Person of any representation, warranty, covenant or indemnity
made by such Person or (2) any actual fraud by the manager or any member of
Borrower, or (B) release TIL from personal liability for any breach of its
obligations under or resulting from the breach by TIL of any representation
warranty, covenant or indemnity made by TIL pursuant to the Loan Guaranty or the
Keep Well Guaranty or release TASL from personal liability for any of its
obligations under or resulting from the breach by TASL of any representation,
warranty, covenant or indemnity made by TASL pursuant to the Keep Well or the
Security Agreement. For purposes of this Promissory Note and the Ancillary
Agreements, the assets of Borrower shall in no event include, nor shall Lender
or any subsequent holder have any recourse against or claim to, any deficit
capital account owed to Borrower by a member of Borrower, except to the extent
of distributions made to such member by Borrower in violation of the terms of
this Promissory Note.
14.0 Waiver of Trial by Jury. THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES HEREUNDER, OR UNDER THE SECURITY AGREEMENT.
15.0 Waiver. Borrower and all endorsers and guarantors hereby severally
waive demand, presentment, notice of dishonor, diligence in collection, notice
of protest, notice of intent to accelerate, notice of acceleration, and agree to
all extensions and partial payments before or after maturity, without prejudice
to the holder of this Promissory Note.
23
16.0. Governing Law. THIS PROMISSORY NOTE SHALL BE DEEMED TO BE A
CONTRACT UNDER, AND SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE PRINCIPLES
THEREOF RELATING TO CONFLICT OF LAWS.
TRITON AVIATION SERVICES IV LLC
By: Triton Aviation Services
Limited, Manager
By:/S/JOHN E. FLYNN
------------------------
Name: JOHN E. FLYNN
Title: PRESIDENT
Accepted and Acknowledged by
POLARIS AIRCRAFT INCOME FUND IV
By: Polaris Investment Management
Corporation, General Partner
By:/S/MARC A. MEICHES
----------------------------------
Name: MARC A. MEICHES
Title: VICE PRESIDENT
24
SCHEDULE A
Principal Payments as a Percentage
of Original Balance
Principal Balloon Total
Payments Payment Payments
-------- ------- --------
1.9047% 1.9047%
1.9618% 1.9618%
2.0207% 2.0207%
2.0813% 2.0813%
2.1437% 2.1437%
2.2080% 2.2080%
2.2743% 2.2743%
2.3425% 2.3425%
2.4128% 2.4128%
2.4852% 2.4852%
2.5597% 2.5597%
2.6365% 2.6365%
2.7156% 2.7156%
2.7971% 2.7971%
2.8810% 2.8810%
2.9674% 2.9674%
3.0564% 3.0564%
3.1481% 3.1481%
3.2426% 3.2426%
3.3398% 3.3398%
3.4400% 3.4400%
3.5432% 3.5432%
3.6495% 3.6495%
3.7590% 3.7590%
3.8718% 3.8718%
3.9879% 3.9879%
Principal Payments as a Percentage
of Original Balance
Principal Balloon Total
Payments Payment Payments
-------- ------- --------
4.1076% 4.1076%
4.2308% 18.23% 22.4619%
0.0000% 0.0000% 0.0000%
0.0000% 0.0000% 0.0000%
0.0000% 0.0000% 0.0000%
0.0000% 0.0000% 0.0000%
------- ------- -------
81.7689% 18.2311% 100.0000%