PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of April 1, 1997,
among Triton Aviation Services V LLC, a California limited liability company
("Borrower"), Triton Aviation Services Limited, a Bermuda corporation ("TASL"),
the other parties executing the signature pages hereto as pledgors (Borrower,
TASL, and such other parties, collectively, "Pledgors" and each of them
individually a "Pledgor") and Polaris Aircraft Income Fund V, a California
limited partnership ("Lender").
R E C I T A L S:
WHEREAS, Pledgors are the sole members of Borrower; and
WHEREAS, Pledgors are the record and beneficial owners of the
membership interests described in Schedule I hereto (the "Pledged Interests" of
each such Pledgor) issued by Borrower; and
WHEREAS, Borrower has executed and delivered to Lender a
Promissory Note (as the same may be amended, modified or supplemented from time
to time, the "Note"), pursuant to the Purchase, Assignment and Assumption
Agreement, dated as of April 1, 1997 (the "Purchase Agreement"), between Lender
and Borrower; and
WHEREAS, Pledgors, as the sole members of Borrower, will
derive substantial direct and indirect economic benefit from the transactions
contemplated by the Purchase Agreement and the delivery of the Note to Lender;
and
WHEREAS, in connection with the making of the Purchase
Agreement and the delivery of the Note and as security for all of the
Obligations, Lender is requiring that Pledgors shall have executed and delivered
this Pledge and Security Agreement and granted the security interest
contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained the receipt and sufficiency of which are hereby
agreed and acknowledged and to induce Lender to provide the seller financing
evidenced by the Note, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the Note are
used herein as therein defined, and the following shall have (unless otherwise
provided elsewhere in this Agreement) the following respective meanings (such
meanings being equally applicable to both the singular and plural form of the
terms defined):
"Additional Holder" shall have the meaning assigned to such
term in Section 7(d) hereof.
"Agreement" shall mean this Pledge and Security Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to this Agreement as the same
may be in effect at the time such reference becomes operative.
"Ancillary Agreements" shall have the meaning assigned to it
in the Purchase Agreement.
"Bankruptcy Code" shall mean title 11, United States Code, as
amended from time to time, and any successor statute thereto
"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 $64,760 and (ii) for the calendar month in which
the first Effective Time occurs under the Purchase Agreement and for each
calendar month thereafter, the Purchase Agreement, an amount equal to $107,933,
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.
"General Intangibles" shall mean all "general intangibles" as
such term is defined in Section 9-106 of the Uniform Commercial Code, now owned
or hereafter acquired by any Pledgor relating to the collateral of such Pledgor
pledged hereby.
"Governmental Authority" shall mean (a) any federal, state,
provincial or similar government, and any body, board, department, commission,
court, tribunal, author ity, agency or other instrumentality of any such
government or otherwise exercising any executive, legislative, judicial,
administrative or regulatory functions of such government or (b) any other
government entity having jurisdiction over any matter contemplated by this
Agreement, the Purchase Agreement or any other Ancillary Agreements or relating
to the observance or performance of the obligations of any of the parties hereto
or thereto.
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"Interests" shall mean all shares, options, warrants, general
or limited partnership interests, membership interests, participations or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company or equivalent entity whether voting or nonvoting,
including, without limitation, common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Keep Well" shall mean that certain Keep Well Agreement, dated
as of the date hereof, among TASL, Borrower and Lender.
"Keep Well Guaranty" shall mean that certain Guaranty (Keep
Well), dated as of the date hereof, among TIL, Lender and Borrower.
"Loan Guaranty" shall mean that certain Guaranty (SPV
Indebtedness), dated as of the date hereof, between TIL and Borrower.
"Obligations" shall mean (i) all loans, advances, debts,
liabilities and obligations, for monetary amounts (whether or not such amounts
are liquidated or determinable) owing by Borrower to Lender, and all covenants
and duties regarding such amounts, of any kind or nature, present or future,
whether or not evidenced by any note, agreement or other instrument, arising
under the Purchase Agreement or the Note including, without limitation, all
interest, fees, charges, expenses, attorneys' fees and any other sum chargeable
to Borrower under the Purchase Agreement or the Note, (ii) all obligations of
any kind or nature, present or future, of TASL under the Keep Well, (iii) all
obligations of any kind or nature, present or future, of TIL under the Keep Well
Guaranty and (iv) all obligations of any kind or nature, present or future, of
TIL under the Loan Guaranty.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether Federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Pledged Collateral" shall have the meaning assigned to such
term in Section 2 hereof.
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"Pledged Interests" shall have the meaning assigned to such
term in the recitals hereof.
"Secured Obligations" shall have the meaning assigned to such
term in Section 3 hereof.
"Termination Date" shall mean the date on which all
determinable and liquidated Obligations have been completely discharged.
"TIL" shall mean Triton Investments Limited, a Bermuda
corporation.
"Transferee" shall have the meaning assigned to such term in
Section 7(d) hereof.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as the same may, from time to time, be in effect in the State of
California; provided, however, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of
Lender's security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
California, Uniform Commercial Code shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfec tion or priority and for purposes of definitions
related to such provisions.
2. Pledge. Each Pledgor hereby pledges to Lender, and grants
to Lender, a first priority security interest in, all of the following (the
"Pledged Collateral"):
(a) in the case of each Pledgor other than Borrower, the
Pledged Interests of such Pledgor and all dividends, distributions, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed by Borrower in respect of or in exchange for
any or all of the Pledged Interests of such Pledgor; provided, however, that
Pledged Collateral shall not include any distributions made by Borrower which
are permitted to be made by it under Section 7(b) hereof;
(b) in the case of each Pledgor other than Borrower, all
additional Interests issued by Borrower to such Pledgor or from time to time
acquired by such Pledgor in any manner (which Interests shall be deemed to be
part of the Pledged Interests), and the certificates, if any, representing such
additional Interests, and all dividends, distributions, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such Interests;
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(c) in the case of Borrower, all rights under the Keep Well,
the Keep Well Guaranty and the Loan Guaranty;
(d) in the case of each Pledgor, all General Intangibles; and
(e) all proceeds of any of the foregoing.
3. Security for Obligations. This Agreement secures, and the
Pledged Collateral is security for, the prompt payment in full when due, whether
at stated maturity, by acceleration or otherwise, and performance of the
Obligations, whether for principal, premium, interest, fees, costs and expenses,
and all obligations of Pledgors now or hereafter existing under this Agreement
(collectively, the "Secured Obligations").
4. Delivery of Pledged Collateral. All certificates, if any,
representing or evidencing the Pledged Interests shall be delivered to and held
by or on behalf of Lender pursuant hereto and shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Lender. Lender shall have the right, at any time in
its discretion and without notice to Pledgors, to transfer to or to register in
the name of Lender or any of its nominees, as pledgees, any or all of the
Pledged Interests. In addition, Lender shall have the right at any time to
exchange certificates or instruments representing or evidencing Pledged
Interests for certificates or instruments of smaller or larger denominations.
5. Representations and Warranties. Each Pledgor represents and
warrants to Lender that:
(a) Such Pledgor is, and at the time of delivery of the
Pledged Interests to Lender pursuant to Section 4 hereof will be, the sole
holder of record and the sole beneficial owner of the Pledged Collateral pledged
by such Pledgor free and clear of any Lien thereon or affecting the title
thereto, except for the Lien created by this Agreement.
(b) All of the Pledged Interests of such Pledgor have been
duly authorized, validly issued and are fully paid and nonassessable.
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(c) Such Pledgor has the right and requisite authority to
pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral
pledged by such Pledgor to Lender as provided herein.
(d) None of the Pledged Interests of such Pledgor has been
issued or transferred in violation of the securities registration, securities
disclosure or similar laws of any jurisdiction to which such issuance or
transfer may be subject.
(e) As of the date hereof, the authorized, issued and
outstanding Interests of Borrower consist solely of the membership interests
that are described in Schedule I hereto. As of the date hereof, there are no
existing options, warrants, calls or commitments of any character whatsoever
relating to any Interests of Borrower other than as set forth on Exhibit A
hereto.
(f) No consent, approval, authorization or other order of any
Person and no consent, authorization, approval, or other action by, and no
notice to or filing with, any Governmental Authority, other than as already
obtained, given or filed, is required by Pledgor either (i) for the pledge by
such Pledgor of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement or the Ancillary Agreements
to which such Pledgor is a party, by such Pledgor or (ii) for the exercise by
Lender of the voting or other rights provided for in this Agreement or the
remedies in respect of the Pledged Collateral pursuant to this Agreement, except
as may be required in connection with such disposition by laws affecting the
offering and sale of securities generally.
(g) The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement will create a valid first priority lien on
and a first priority perfected security interest in the Pledged Collateral
pledged by such Pledgor, and the proceeds thereof, securing the payment of the
Secured Obligations.
(h) This Agreement and the Ancillary Agreements to which such
Pledgor is a party have been duly authorized, executed and delivered by such
Pledgor and constitute legal, valid and binding obligations of such Pledgor
enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, or other similar laws affecting the rights of
creditors generally or by the application of general equity principles.
(i) Borrower has no subsidiaries.
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The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Agreement.
6. Covenants.
(a) Each Pledgor jointly and severally covenants and agrees
that until the Termination Date:
(i) Subject to Section 7(d), without the prior
written consent of Lender, such Pledgor will not sell, assign,
transfer, pledge or otherwise encumber any of its rights in or to the
Pledged Collateral pledged by such Pledgor or any unpaid dividends or
other distributions or payments with respect thereto or grant a Lien in
any therein.
(ii) Such Pledgor will, at its expense, promptly
execute, acknowledge and deliver all such instruments and take all such
action as Lender from time to time may reasonably request in order to
ensure to Lender the benefits of the Liens in and to the Pledged
Collateral intended to be created by this Agreement, including the
filing of any necessary Uniform Commercial Code financing statements,
which may be filed by Lender with or without the signature of such
Pledgor, and will cooperate with Lender, at such Pledgor's expense, in
obtaining all necessary governmental approvals and making all necessary
filings under federal or state law in connection with such Liens or any
sale or transfer of the Pledged Collateral.
(iii) Such Pledgor has and will defend the title to
the Pledged Collateral and the Liens of Lender thereon against the
claim of any Person and will maintain and preserve such Liens until the
Termination Date.
(iv) Each of them will, upon obtaining any additional
Interest of Borrower, which Interest is not already Pledged Collateral,
promptly (and in any event within three (3) business days) deliver to
Lender a Pledge Amendment, duly executed by such Pledgor, in
substantially the form of Schedule II hereto (a "Pledge Amendment"), in
respect of the additional Pledged Interests which are to be pledged
pursuant to this Agreement. Each Pledgor hereby authorizes Lender to
attach each Pledge Amendment to this Agreement and agrees that all
Pledged Interests listed on any Pledge Amendment delivered to Lender
shall for all purposes hereunder be considered Pledged Collateral.
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(v) None of them will take any action to amend, alter
or change Borrower's articles of organization or operating agreement
(other than amendments permitted under the Note), the Keep Well, the
Keep Well Guaranty or the Loan Guaranty or permit Borrower to repeal
its articles of organization.
(vi) None of them will take any action that would
authorize or permit Borrower to take any of the actions specified in
Paragraph 2.4 of its operating agreement.
(vii) TASL covenants and agrees that it will cause
Borrower to comply with the terms of and limitations contained in
Borrower's articles of organization or in its operating agreement.
(b) TASL shall deliver to Lender written notice of (i) any
payments made by it to Borrower pursuant to the Keep Well and (ii) any dividend
or distribution received by it from Borrower other than Equity Dividend Amounts,
in each case no later than three (3) business days after disbursing such payment
or the receipt of any such dividend or distribution, as applicable.
(c) TASL covenants and agrees that it will at all times during
the term of this Agreement maintain management personnel who are qualified and
competent to manage and direct the business and operations of Borrower and who
have experience in the commercial aviation industry.
(d) TASL covenants and agrees that, at all times, Triton
Members shall hold, in the aggregate, at least fifty percent (50%) of the
Economic Interests of Borrower. TASL covenants and agrees that, at all times, it
shall be the sole manager of Borrower and shall have all responsibilities and
duties allocated to TASL as manager of Borrower pursuant to Borrower's operating
agreement or articles of organization and shall not make any delegation or
assignment to any other Person of such responsibility or duty except as
permitted thereby.
7. Pledgors' Rights. (a) As long as no Default or Event of
Default shall have occurred and be continuing and until written notice shall be
given to each Pledgor in accordance with Section 8(a) hereof, such Pledgor shall
have the right, from time to time, to vote and give consents with respect to the
Pledged Collateral or any part thereof for all purposes not inconsistent with
the provisions of this Agreement, the Note or any Ancillary Agreement; provided,
however, that no vote shall be cast, and no consent shall be given or action
taken, which would have the effect of impairing the position or interest of
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Lender in respect of the Pledged Collateral or which would authorize or effect
(i) the dissolution or liquidation, in whole or in part, of Borrower, (ii) the
consolidation or merger of Borrower with any other Person, (iii) except as
permitted under this Agreement or the Note, the sale, disposition or encumbrance
of all or substantially all of the assets of Borrower, (iv) except as permitted
by Section 7(d) hereof and Section 4.4 of the Note, any change in the authorized
number of Interests or the stated capital of Borrower and the issuance of any
additional Interests, (v) the alteration of the voting rights with respect to
the Interests of Borrower, or (vi) any change, alteration or modification of
Borrower's articles of organization, operating agreement (other than amendments
permitted under the Note, the Keep Well, the Keep Well Guaranty or the Loan
Guaranty.
(b) No Pledgor shall be entitled to collect and receive any
dividend or other distribution paid in respect of the Pledged Interests whether
paid or payable in cash, instruments or other property other than (1) beginning
as of April 1, 1997, payable in the next calendar month, the Equity Dividend
Amount and any accrued and unpaid Equity Dividend Amount for each month
thereafter, (2) with respect to TASL only, amounts equal to equity contributions
made by TASL pursuant to the Keep Well which have not been previously recouped
through the payment of any dividend or distribution by Borrower 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 the Note is overdue or a Default has occurred and is
continuing, no Pledgor shall be entitled to collect and receive 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 the Note are overdue and no Default thereunder is continuing, and
provided, further, that any permitted dividends or distributions in respect of
the Pledged Interests shall be paid only to the extent permitted by applicable
law.
(c) Other than dividends and distributions permitted to be
received by a Pledgor pursuant to subsection (b) above, all dividends or other
distributions paid in respect of any of the Pledged Interests, whenever paid or
made, shall be delivered to Lender to hold as Pledged Collateral and shall, if
received by such Pledgor, be received in trust for the benefit of Lender, be
segregated from the other property or funds of such Pledgor, and be forthwith
delivered to Lender as Pledged Collateral in the same form as so received (with
any necessary endorsement).
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(d) (i) Borrower shall be permitted to issue additional
Interests to any Person (each, an "Additional Holder") and (ii) each member of
Borrower shall be permitted to sell or otherwise transfer Pledged Interests to
any Person (each, a "Transferee"); provided, in each case that after giving
effect to any such issuance or transfer (A) the number of members of Borrower
who are not Triton Members shall not exceed three (3) as a result of any such
issuance or transfer, (B) the Triton Members shall hold, in the aggregate, at
least 50% of the Economic Interests of Borrower, (C) the Additional Holder or
Transferee of such equity interest shall be a Qualified Holder, (D) such
Additional Holder or Transferee shall expressly agree to the pledge of such
Interests under this Agreement and to be bound by the terms and conditions
hereof by delivery of a duly executed Pledge Amendment, and (E) after notice to
Lender by the applicable Pledgor, pursuant to the terms of Section 19 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. Notwithstanding the foregoing, no such issuance
or transfer shall be permitted if such issuance or transfer would violate any
applicable law or cause the Aircraft owned, directly or indirectly, by Borrower
then registered under the Act to no longer be eligible for registration under
the Act.
8. Defaults and Remedies. (a) Upon the occurrence of an Event
of Default and during the continuation of such Event of Default, then or at any
time after the declaration of such Event of Default (provided that such
declaration is not rescinded by Lender) and following written notice to each
Pledgor, Lender (personally or through an agent) is hereby authorized and
empowered to transfer and register in its name or in the name of its nominee the
whole or any part of the Pledged Collateral, to exercise the voting rights with
respect thereto, to collect and receive all dividends and other distributions
made thereon, to sell in one or more sales after seven (7) days' notice of the
time and place of any public sale or of the time after which a private sale is
to take place (which notice each Pledgor agrees is commercially reasonable), but
without any previous notice or advertisement, the whole or any part of the
Pledged Collateral and to otherwise act with respect to the Pledged Collateral
as though Lender was the outright owner thereof, each Pledgor hereby irrevocably
constituting and appointing Lender as the proxy and attorney-in-fact of such
Pledgor, with full power of substitution to do so; provided, however, Lender
shall not have any duty to exercise any such right or to preserve the same and
shall not be liable for any failure to do so or for any delay in doing so. Any
sale shall be made at a public or private sale at Lender's place of business, or
at any public building in the City and County of San Francisco or elsewhere to
be named in the notice of sale, either for cash or upon credit or for future
delivery at such price as Lender may deem fair, and Lender may be the purchaser
of the whole or any part of the Pledged Collateral so sold and hold the same
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thereafter in its own right free from any claim of such Pledgor or any right of
redemption. Each sale shall be made to the highest bidder, but Lender reserves
the right to reject any and all bids at such sale which, in its discretion, it
shall deem inadequate. Demands of performance, except as otherwise herein
specifically provided for, notices of sale, advertisements and the presence of
property at sale are hereby waived and any sale hereunder may be conducted by an
auctioneer or any officer or agent of Lender.
(b) If, at the original time or times appointed for the sale
of the whole or any part of the Pledged Collateral, the highest bid, if there be
but one sale, shall be inadequate to discharge in full all the Secured
Obligations, or if the Pledged Collateral be offered for sale in lots, if at any
of such sales, the highest bid for the lot offered for sale would indicate to
Lender, in its discretion, the unlikelihood of the proceeds of the sales of the
whole of the Pledged Collateral being sufficient to discharge all the Secured
Obligations, Lender may, on one or more occasions and in its discretion,
postpone any of said sales by public announcement at the time of sale or the
time of previous postponement of sale, and no other notice of such postponement
or postponements of sale need be given, any other notice being hereby waived;
provided, however, that any sale or sales made after such postponement shall be
after seven (7) days' notice to Pledgors.
(c) In the event of any sales hereunder Lender shall, after
deducting all costs or expenses of every kind (including reasonable attorneys'
fees and disbursements) for care, safekeeping, collection, sale, delivery or
otherwise, apply the residue of the proceeds of the sales to the payment or
reduction, either in whole or in part, of the Secured Obligations in accordance
with the agreements and instruments governing and evidencing such Obligations,
returning the surplus, if any, to Pledgors.
(d) If, at any time when Lender shall determine to exercise
its right to sell the whole or any part of the Pledged Collateral hereunder,
such Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act of 1933, as
amended (or any similar statute then in effect) (the "Act"), Lender may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as Lender may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event Lender in its discretion (x) may,
in accordance with applicable securities laws, proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Collateral or part thereof could be or shall have been filed under
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the Act, (y) may approach and negotiate with a single possible purchaser to
effect such sale and (z) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment and not with a view to the distribution or sale of such Pledged
Collateral or part thereof. In addition to a private sale as provided above in
this Section 8, if any of the Pledged Collateral shall not be freely
distributable to the public without registration under the Act at the time of
any proposed sale pursuant to this Section 8, then Lender shall not be required
to effect such registration or cause the same to be effected but, in its
discretion (subject only to applicable requirements of law), may require that
any sale hereunder (including a sale at auction) be conducted subject to
restrictions (i) as to the financial sophistication and ability of any Person
permitted to bid or purchase at any such sale, (ii) as to the content of legends
to be placed upon any certificates representing the Pledged Collateral sold in
such sale, including restrictions on future transfer thereof, (iii) as to the
representations required to be made by each Person bidding or purchasing at such
sale relating to that Person's access to financial information about Pledgors
and such Person's intentions as to the holding of the Pledged Collateral so sold
for investment, for its own account, and not with a view to the distribution
thereof, and (iv) as to such other matters as Lender may, in its discretion,
deem necessary or appropriate in order that such sale (notwithstanding any
failure so to register) may be effected in compliance with the Bankruptcy Code
and other laws affecting the enforcement of creditors' rights and the Act and
all applicable state securities laws.
(e) Each Pledgor recognizes that any such private sale may
result in prices and other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. Lender shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit the registrant to
register such securities for public sale under the Act, or under applicable
state securities laws, even if any Pledgor would agree to do so.
(f) Each Pledgor agrees that following the occurrence and
during the continuance of an Event of Default it will not at any time plead,
claim or take the benefit of any appraisal, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in order to prevent or
delay the enforcement of this Agreement, or the absolute sale of the whole or
any part of the Pledged Collateral or the possession thereof by any purchaser at
any sale hereunder, and each Pledgor waives the benefit of all such laws to the
extent it lawfully may do so. Each Pledgor agrees that it will not interfere
with any right, power and remedy of Lender provided for in this Agreement or now
or hereafter existing at law or in equity or by statute or otherwise, or the
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exercise or beginning of the exercise by Lender of any one or more of such
rights, powers or remedies. No failure or delay on the part of Lender to
exercise any such right, power or remedy and no notice or demand which may be
given to or made upon any Pledgor by Lender with respect to any such remedies
shall operate as a waiver thereof, or limit or impair Lender's right to take any
action or to exercise any power or remedy hereunder, without notice or demand,
or prejudice its rights as against any Pledgor in any respect.
(g) Each Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to Lender,
that Lender has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 8
shall be specifically enforceable against such Pledgor, and such Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that the Secured Obligations
are not then due and payable in accordance with the agreements and instruments
governing and evidencing such obligations.
9. Application of Proceeds. Any cash held by Lender as Pledged
Collateral and all cash proceeds received by Lender in respect of any sale of,
liquidation of, or other realization upon all or any part of the Pledged
Collateral or pursuant to Section 8(g) hereof shall be applied by Lender as
follows:
(a) First, to the payment of the costs and expenses of such
sale, including reasonable compensation to Lender and its agents and counsel,
and all expenses, liabilities and advances made or incurred by Lender in
connection therewith;
(b) Next, to the payment of the Secured Obligations; and
(c) Finally, after payment in full of all Secured Obligations,
to the payment to Pledgors, or their successors or assigns, or to whomsoever may
be lawfully entitled to receive the same or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds.
10. Waiver. No delay on Lender's part in exercising any power
of sale, Lien, option or other right hereunder, and no notice or demand which
may be given to or made upon Pledgors by Lender with respect to any power of
sale, Lien, option or other right hereunder, shall constitute a waiver thereof,
or limit or impair Lender's right to take any action or to exercise any power of
sale, Lien, option, or any other right hereunder, without notice or demand, or
prejudice Lender's rights as against Pledgors in any respect.
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11. Assignment. Lender may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the Note, the Keep Well, the Keep Well Guaranty and the
Loan Guaranty, as applicable, and the holder of such instrument shall be
entitled to the benefits of this Agreement.
12. Termination. Immediately following the payment of all
Secured Obligations, Lender shall deliver to each Pledgor the Pledged Collateral
pledged by such Pledgor at the time subject to this Agreement and all
instruments of assignment executed in connection therewith, free and clear of
the Liens hereof and, except as otherwise provided herein, all of Pledgors'
obligations hereunder shall at such time terminate.
13. Lien Absolute. All rights of Lender hereunder, and all
obligations of Pledgors hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Note, the
Purchase Agreement, the Keep Well, the Keep Well Guaranty, the Loan Guaranty or
any other agreement or instrument governing or evidencing any Secured
Obligations;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any part of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Note, the Keep
Well, the Keep Well Guaranty, the Loan Guaranty or any other agreement or
instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Pledgor.
14. Release. Each Pledgor consents and agrees that Lender may
at any time, or from time to time, in its discretion (a) renew, extend or change
(pursuant to any right to do so provided in the relevant agreement) the time of
payment, and/or the manner, place or terms of payment of all or any part of the
Secured Obligations and (b) exchange, release and/or surrender all or any of the
Pledged Collateral, or any part thereof, by whomsoever deposited, which is now
or may hereafter be held by Lender in connection with all or any of the Secured
Obligations; all in such manner and upon such terms as Lender may deem proper,
14
and without notice to or further assent from such Pledgor, it being hereby
agreed that such Pledgor shall be and remain bound upon this Agreement,
irrespective of the existence, value or condition of any of the Pledged
Collateral, and notwithstanding any such change, exchange, settlement,
compromise, surrender, release, renewal or extension, and notwithstanding also
that the Secured Obligations may, at any time, exceed the aggregate principal
amount thereof set forth in the Note, the Keep Well, the Keep Well Guaranty, the
Loan Guaranty or any other agreement governing any Secured Obligations. Each
Pledgor hereby waives notice of acceptance of this Agreement, and also
presentment, demand, protest and notice of dishonor of any and all of the
Secured Obligations, and promptness in commencing suit against any party hereto
or liable hereon, and in giving any notice to or of making any claim or demand
hereunder upon such Pledgor. No act or omission of any kind on Lender's part
shall in any event affect or impair this Agreement.
15. Indemnification. Each Pledgor jointly and severally agrees
to indemnify and hold Lender harmless from and against any taxes, liabilities,
claims and damages, including reasonable attorney's fees and disbursements, and
other expenses incurred or arising by reason of the taking or the failure to
take action by Lender, in good faith, in respect of any transaction effected
under this Agreement or in connection with the Lien provided for herein,
including, without limitation, any taxes payable in connection with the delivery
or registration of any of the Pledged Collateral as provided herein. Each
Pledgor jointly and severally agrees to promptly reimburse Lender for all actual
reasonable out-of-pocket costs and expenses, including, without limitation,
reasonable counsel fees, incurred by Lender, in connection with the
administration and enforcement of this Agreement and all reasonable fees,
expenses and disbursements, including the reasonable fees of Lender's agents or
representatives, incurred in connection with any lien searches and filings made
by Lender, any amendments hereto or waivers or modifications hereof; provided,
however, that Pledgors shall not be obligated to pay any costs or expenses
(including attorney's fees) incurred by Lender in connection with preparation of
this Agreement or any other Ancillary Agreement or any ordinary administrative
costs and expenses of Lender in the absence of a Default by Borrower under this
Agreement, the Note or any other Ancillary Agreement or a Default by any Pledgor
under this Agreement or any other Ancillary Agreement; and provided, further,
that nothing contained herein shall limit or be deemed to limit any right of
Borrower under Section 13 of the Purchase Agreement. The obligations of Pledgors
under this Section 15 shall survive the termination of this Agreement.
16. Reinstatement. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Pledgor for liquidation or reorganization, should any Pledgor become
15
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of any
Pledgor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
17. Miscellaneous. (a) Lender may execute any of its duties
hereunder by or through agents or employees and shall be entitled to advice of
counsel concerning all matters pertaining to its duties hereunder.
(b) Neither Lender nor any of its officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(c) This Agreement shall be binding upon Pledgors and their
successors and assigns, and shall inure to the benefit of, and be enforceable
by, Lender and its successor and assigns, and shall be governed by, and
construed and enforced in accordance with, the internal laws in effect in the
State of California without giving effect to principles of conflicts of laws,
and none of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for and on behalf of Lender
and Pledgors.
18. Severability. If for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid.
19. Notices. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
16
receipt acknowledged or sent by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by telecopy answerback
addressed as follows:
(a) If to Lender, at
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, CA 94105
Attention: President
Telecopy Number: (415) 284-7460
With copies to
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
201 High Ridge Road, 1st Floor
Stamford, CT 06927-4900
Attention: Portfolio Management
Telecopy Number: (203) 357-4585
(b) If to any Pledgor other than Rosemont Leasing, Inc.,
at
c/o Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Telecopy Number: (415) 398-9184
(c) If to Rosemont Leasing, Inc., at
200 West Madison Street, 42nd Floor
Chicago, Illinois 60606
Attention: Kenneth R. Posner
17
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) business days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
20. Confidentiality. Lender agrees that it will keep
confidential all information regarding Pledgors that it may receive in
connection with the transactions contemplated hereunder 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
(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 a Pledgor, (iii) to the extent
such information has been independently acquired or developed by Lender without
violating any of its obligations under the Purchase Agreement or any Ancillar
Agreement or (iv) to the extent disclosure is required by law, regulation or
judicial order.
21. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
22. Counterparts. This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one
agreement.
23. Limited Recourse. Notwithstanding anything to the contrary
contained herein, in the Ancillary Agreements, the Keep Well, the Keep Well
Guaranty, the Loan Guaranty or any other document or instrument executed and
delivered in connection with the consummation of the transactions contemplated
hereby and thereby (the "Loan Documents"), none of Rosemont Leasing, Inc.,
Edward P. Schneider, Steven C. Wight and John E. Flynn shall have personal
liability for the payment or performance of the Obligations or for the
representations, warranties or covenants contained in the Loan Documents, and
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Lender and each transferee, holder or assignee of all or any part of the Loan
Documents agree not to seek any damages or personal money judgement against any
of Rosemont Leasing, Inc., Edward P. Schneider, Steven C. Wight or John E. Flynn
for any default under any or all of the Loan Documents, but in any such event,
will look solely to the Pledged Collateral. Nothing herein or in any of the Loan
Documents shall be construed to prevent Lender and each transferee, holder or
assignee of any such Loan Document from exercising and enforcing any other
remedy (not involving personal liability) allowed at law or equity or by any
statute. The foregoing exculpation shall not limit or be construed to limit the
personal liability of any Rosemont Leasing, Inc., Edward P. Schneider, Steven C.
Wight or John E. Flynn to the extent that after a default shall have occurred
under one or more of the Loan Documents, any thereof shall collect rents, issues
or profits of any of the property secured by the Loan Documents and shall not
promptly apply the same in the manner required or permitted by the Loan
Documents, it being intended that Rosemont Leasing, Inc., Edward P. Schneider,
Steven C. Wight and John E. Flynn shall be personally liable to the full extent
of such misapplication after a default.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
and Security Agreement to be duly executed as of the date first written above.
TRITON AVIATION SERVICES V LLC
By: Triton Aviation Services Limited, its
Manager
By: /S/ John E. Flynn
---------------------------------------
Title: John E. Flynn, President
TRITON AVIATION SERVICES LIMITED
By: /S/ John E. Flynn
---------------------------------------
Title: John E. Flynn, President
ROSEMONT LEASING INC.
By: /S/ H. Handelsman
---------------------------------------
Title: VP - H. Handelsman
/S/ Edward Schneider
--------------------------------------------
Edward Schneider
/S/ Steven C. Wight
--------------------------------------------
Steven C. Wight
/S/ John E. Flynn
--------------------------------------------
John E. Flynn
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Accepted and Acknowledged by:
POLARIS AIRCRAFT INCOME FUND V
By: Polaris Investment Management
Corporation, General Partner
By: /S/ Marc A. Meiches
--------------------------------------
Title: Marc A. Meiches, Vice President
21
SCHEDULE I
Attached to a d forming a part of that certain Pledge and
Security Agreement dated as of April 1, 1997 among Triton Aviation Services V
LLC, a California limited liability company ("Borrower"), Triton Aviation
Services Limited, a Bermuda corporation ("TASL"), Rosemont Leasing, Inc., a
Delaware corporation, Edward Schneider, Steven C. Wight and John E. Flynn
(collectively, "Pledgors" and each of them individually a "Pledgor") to Polaris
Aircraft Income Fund V, a California limited partnership.
Name and
Address of
Pledgor Interests
- ---------- ---------
Triton Aviation Services Limited 48.5%
55 Green Street, Suite 500
San Francisco, California 94111
Rosemont Leasing, Inc. 48.5%
200 West Madison Street, 42nd Floor
Chicago, Illinois 60606
Edward Schneider 1%
c/o Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, California 94111
Steven C. Wight 1%
c/o Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, California 94111
John E. Flynn 1%
c/o Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, California 94111
SCHEDULE II
to the Pledge and Security Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated ______, 19__ is delivered
pursuant to [Section 6(a)(iv)/Section 7(d)] of the Pledge and Security Agreement
referred to below. The undersigned hereby agrees that this Pledge Amendment may
be attached to that certain Pledge and Security Agreement, dated ________ __,
1997 among the undersigned and others, as Pledgors, to Polaris Aircraft Income
Fund V, a California limited partnership, that the Pledged Interests listed on
this Pledge Amendment shall be and become a part of the Pledged Collateral
referred to in said Pledge and Security Agreement and shall secure all Secured
Obligations referred to in said Pledge and Security Agreement and that the
undersigned shall be deemed to be a Pledgor under said Pledge and Security
Agreement.
[Name of Pledgor]
By:
---------------------------------
Title:
Name and
Address of
Pledgor Interests
- ---------- ---------
EXHIBIT A
Agreement, dated April 2, 1997, by and among Rosemont
Leasing, Inc., Edward P. Schneider, Steven C. Wight and John E. Flynn regarding
mutual options on the Pledged Interests.