$6,400,000
CREDIT AGREEMENT
by and between
AEROCENTURY INVESTMENTS V, LLC
as Borrower
and
LANDSBANKI ISLANDS HF.
as Bank
Dated December 1, 2005
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TABLE OF CONTENTS
<s> <c> <c>
ARTICLE I DEFINITIONS, RULES OF CONSTRUCTION....................................................................1
Section 1.1 Definitions; Rules of Construction..........................................................1
ARTICLE II CREDIT FACILITY.......................................................................................6
Section 2.1. Term Loan..................................................................................6
Section 2.2. Funding Procedures.........................................................................7
Section 2.3. Interest on Obligations....................................................................7
Section 2.4. Issuance of Note...........................................................................7
Section 2.5. Amortization...............................................................................8
Section 2.6. Application of Payments....................................................................8
Section 2.7. Computation of Interest and Fees...........................................................8
Section 2.8. Arrangement Fee............................................................................9
Section 2.9. Use of Proceeds............................................................................9
Section 2.10. Prepayments...............................................................................9
Section 2.11. Payments..................................................................................9
Section 2.12. Taxes.....................................................................................9
Section 2.13. Prepayment Premium.......................................................................10
ARTICLE III CONDITIONS OF LENDING..............................................................................11
Section 3.1. Conditions Precedent to the Initial Borrowing.............................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES......................................................................13
Section 4.1. Existence and Power.......................................................................13
Section 4.2 Authorization for Borrowings; No Conflict as to Law or Agreements..........................13
Section 4.3. Legal Agreements..........................................................................14
Section 4.4. Subsidiaries..............................................................................14
Section 4.5. Financial Condition; No Adverse Change....................................................14
Section 4.6. Litigation................................................................................14
Section 4.7. Regulation U..............................................................................14
Section 4.8. Taxes.....................................................................................15
Section 4.9. Transfer of Aircraft and Aircraft Lease Agreements........................................15
Section 4.10. Citizenship..............................................................................15
Section 4.11. No Default...............................................................................15
Section 4.12. Special Purpose Entity...................................................................15
Section 4.13. Submissions to Bank......................................................................16
Section 4.14. Financial Solvency.......................................................................16
ARTICLE V AFFIRMATIVE COVENANTS OF THE BORROWER................................................................17
Section 5.1. Reporting Requirements....................................................................17
Section 5.2. Books and Records; Inspection and Examination.............................................19
Section 5.3. Compliance with Laws......................................................................19
Section 5.4. Payment of Taxes and Other Claims.........................................................19
Section 5.5. Maintenance of Properties.................................................................19
Section 5.6. Insurance.................................................................................20
Section 5.7. Preservation of Existence.................................................................20
Section 5.8. Financial Covenants.......................................................................20
ARTICLE VI NEGATIVE COVENANTS..................................................................................21
Section 6.1. Liens.....................................................................................21
Section 6.2. Indebtedness..............................................................................21
Section 6.3. Guaranties................................................................................21
Section 6.4. Investments...............................................................................21
Section 6.5. Sale or Transfer of Assets; Suspension of Business Operations.............................21
Section 6.6. Consolidation and Merger..................................................................21
ARTICLE VII REPRESENTATIONS AND COVENANTS WITH RESPECT TO COLLATERAL.............................................21
Section 7.1. Representations and Covenants.............................................................21
ARTICLE VIII EVENTS OF DEFAULT; RIGHTS AND REMEDIES............................................................25
Section 8.1. Events of Default.........................................................................25
Section 8.2. Rights and Remedies.......................................................................27
Section 8.3. Remarketing Period........................................................................28
ARTICLE IX MISCELLANEOUS........................................................................................29
Section 9.1. No Waiver; Cumulative Remedies............................................................29
Section 9.2. Amendments, Requested Waivers, Etc........................................................29
Section 9.3. Addresses for Notices, Etc................................................................29
Section 9.4. Participations............................................................................30
Section 9.5. Disclosure of Information.................................................................30
Section 9.6. Costs and Expenses........................................................................30
Section 9.7. Indemnity.................................................................................30
Section 9.8. Execution in Counterparts.................................................................31
Section 9.9. Governing Law; Jurisdiction; Waiver of Jury Trial.........................................31
Section 9.10. Integration; Inconsistency...............................................................32
Section 9.11. Agreement Effectiveness..................................................................32
Section 9.12. Advice from Independent Counsel..........................................................32
Section 9.13. Judicial Interpretation..................................................................32
Section 9.14. Binding Effect; No Assignment by Borrower................................................32
Section 9.15. Severability of Provisions...............................................................32
Section 9.16. Headings.................................................................................33
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EXHIBITS AND SCHEDULES
EXHIBIT A PROMISSORY NOTE
EXHIBIT B ANNUAL CERTIFICATION OF BORROWER
EXHIBIT C QUARTERLY CERTIFICATION OF BORROWER
CREDIT AGREEMENT
This Credit Agreement is dated as of November 29, 2005 by and
between AEROCENTURY INVESTMENTS V, LLC, a Delaware limited liability company
(the "Borrower"), and LANDSBANKI ISLANDS HF., a banking organization organized
under the laws of Iceland (the "Bank").
BACKGROUND INFORMATION
The Borrower has requested a term credit facility in the
amount of six million four hundred thousand U.S. dollars ($6,400,000).
The Bank is willing to make such a term credit facility
available to the Borrower pursuant to the terms and subject to the conditions
set forth in this Agreement.
ACCORDINGLY, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank hereby agree as follows:
ARTICLE I
DEFINITIONS, RULES OF CONSTRUCTION
Section 1.1 Definitions; Rules of Construction. For all
purposes of this Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the terms defined in the preamble have the meanings
therein assigned to them; (b) the terms defined in this
Article have the meanings assigned to them in this Article,
and include the plural as well as the singular;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) all Financial Covenants, as applied to the Borrower, shall
be determined on a consolidated basis to include the financial
performance of the Borrower's Subsidiaries in accordance with GAAP.
"Affiliate" means, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, five percent (5%) or more of the
membership interests, stock or other equity interests having ordinary voting
power in the election of directors of such Person, or voting power with respect
to matters of governance of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person or (c) each of such
Person's, members, officers, directors, joint venturers and partners. For
purpose of this definition, "control" of a Person shall mean possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise; provided, however, that the term "Affiliate" shall in no
event include the Bank.
"Agreed Value", with respect to an Aircraft, has the meaning
specified in the related Aircraft Lease Agreement.
"Agreement" means this Credit Agreement and all exhibits,
amendments and supplements hereto.
"Aircraft" means either Aircraft (236) or Aircraft (238), as
the context requires.
"Aircraft (236)" means the aircraft leased pursuant to
Aircraft Lease Agreement (236) and shall have the meaning set forth and
described in Aircraft Lease Agreement (236).
"Aircraft (238)" means the aircraft leased pursuant to
Aircraft Lease Agreement (238) and shall have the meaning set forth and
described in Aircraft Lease Agreement (238).
"Aircraft Lease Agreement" means either Aircraft Lease
Agreement (236) or Aircraft Lease Agreement (238), as the context requires.
"Aircraft Lease Agreement (236)" means that certain aircraft
lease agreement dated as of April 28, 2005 by and between the Member, as
predecessor in interest to the Borrower, and the Lessee relating to the lease of
Aircraft (236), as in effect as of the date hereof or as amended with the prior
written consent of the Bank.
"Aircraft Lease Agreement (238)" means that certain aircraft
lease agreement dated as of April 28, 2005 by and between the Member, as
predecessor in interest to the Borrower, and the Lessee relating to the lease of
Aircraft (238), as in effect as of the date hereof or as amended with the prior
written consent of the Bank.
"Amortization Installments" has the meaning specified in
Section 2.5(a).
"Arrangement Fee" has the meaning specified in Section 2.8.
"Assignment of Lease" means each Assignment of Lease from the
Borrower of even date herewith, pursuant to which the Borrower collaterally
assigns, and grants to the Bank a first perfected and prior security interest
in, an Aircraft Lease Agreement to secure payment of the Obligations.
"Aviation Authority" means the Norwegian Civil Aviation
Authority and the Norwegian Civil Aircraft Registry and any and all other
governmental unit, agency, office or department with authority over the
registration, operation, use and air worthiness of civil aircraft registered and
operated in commercial passenger service in Norway.
"Bank" has the meaning specified in the preamble.
"Borrower" has the meaning specified in the preamble.
"Business Day" means any day other than a Saturday or Sunday
on which commercial banks are open for business in Reykjavik, Iceland,
Bulingame, California and New York, New York and, in addition, if such day
relates to a Eurodollar Funding or fixing of a Eurodollar Rate, a day on which
dealings in U.S. dollar deposits are carried on in the London interbank
eurodollar market.
"Change of Control" shall mean the Member shall no longer be
the sole and exclusive member of the Borrower and owner of one hundred percent
(100%) of the entire equity ownership of the Borrower.
"Closing Date" means the date of this Agreement.
"Collateral" means the Aircraft, the Aircraft Lease
Agreements, the entire membership interest in the Borrower and all other assets
related thereto or associated therewith as described in any Security Document.
"Commitment Amount" means six million four hundred thousand
U.S. dollars ($6,400,000).
"Covenant Computation Date" means the last day of each fiscal
quarter of a Person, commencing on December 31, 2005.
"Covenant Computation Period" means the four (4) consecutive
fiscal quarters immediately preceding and ending on a Covenant Computation Date.
"Credit Party" means the Borrower or the Member, as the
context requires.
"Debt" of any Person means, without duplication (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (d) all obligations of such Person as lessee under capital leases
which have been or should be recorded as liabilities on a balance sheet of such
Person in accordance with GAAP, (e) all indebtedness secured by a lien on any
asset of such Person, whether or not such indebtedness has been assumed by such
Person, (f) all indebtedness and other obligations of others guaranteed by such
Person, (g) all obligations of such Person to pay the deferred purchase price
for goods or services, whether or not delivered or accepted (i.e., take-or-pay
and similar obligations), excluding trade accounts payable incurred in the
ordinary course of business, (h) all net obligations of such Person under
currency, commodity or interest rate swap program or any similar agreement,
arrangement or undertaking relating to fluctuations in commodity prices,
currency values or interest rates, (i) all obligations, contingent or otherwise,
with respect to the face amount of letters of credit (whether or now drawn) and
bankers' acceptances issued for the account of such Person, (j) all redeemable
capital stock of such Person, (k) all obligations of such Person arising under
synthetic leases and (l) all obligations of such Person to advance funds to, or
purchase assets, property or services from, any other Person in order to
maintain the financial condition of such Person. For all purposes of this
Agreement, the Debt of any Person shall include the Debt of any partnership or
joint venture in which such Person is a general partner or a joint venturer;
provided, that the portion (if any) of any such Debt which exceeds the amount of
such Debt as to which there is recourse to such Person shall not be included
hereunder as Debt of such Person.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning specified in Section
2.3(a).
"Event of Loss", with respect to an Aircraft, has the meaning
specified in the relevant Aircraft Lease Agreement relating to such Aircraft.
"Event of Default" has the meaning specified in Section 8.1.
"Facility" means the term credit facility being made available
to the Borrower by the Bank pursuant hereto.
"Financial Covenant" shall mean each of the Borrower's
obligations set forth in Sections 5.8.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time applied on a basis consistent with
the accounting practices applied in the financial statements referred to in
Section 4.5.
"Indemnitees" has the meaning specified in Section 9.7.
"Lease Default" means the occurrence of a default or event of
default or a breach under either Aircraft Lease Agreement, howsoever described
or defined.
"Lessee" means Wideroe's Flyveselskap ASA, a Norwegian
corporation having an office at Langstranda 6, 8000 Bodo, Norway.
"Loan" means the term loan in the Commitment Amount being
made by the Bank to the Borrower as contemplated hereby.
"Loan Documents" means this Agreement, the Note and the
Security Documents.
"Material Adverse Effect" means, with respect to any event or
circumstance, a material adverse effect on:
(a) the business, financial condition, operations or prospects
of any Credit Party; (b) the ability of any Person (other than
the Bank) to perform its obligations under any
Loan Document to which it is a party;
(c) the validity, enforceability or collectibility of any Loan
Document; or (d) the status, existence, perfection, priority
or enforceability of any lien or security
interest granted to the Bank pursuant to any Security Document.
"Maturity Date" means November 10, 2008.
"Member" means AeroCentury Corp., a Delaware corporation, the
sole member and owner of the Borrower.
"Mortgages" means the (a) Mortgage Document dated as of
November 30, 2005, pursuant to which the Borrower grants to the Bank a first
priority lien on each Aircraft (236) to secure payment of the Obligations and
(b) (a) Mortgage Document dated as of November 30, 2005, pursuant to which the
Borrower grants to the Bank a first priority lien on each Aircraft (238) to
secure payment of the Obligations.
"Note" means the Borrower's promissory note payable to the
Bank in substantially the form of Exhibit A (as such promissory note may be
amended, extended or otherwise modified from time to time).
"Obligations" means each and every debt, liability and other
obligation of every type and description arising under or in connection with any
of the Loan Documents which the Borrower may now or at any time hereafter owe to
the Bank, whether such debt, liability or obligation now exists or is hereafter
created or incurred, whether it is direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or unliquidated, or
sole, joint, several or joint and several, and including specifically, but not
limited to, all indebtedness, liabilities and obligations of the Borrower
arising under or evidenced by the Note.
"Organizational Documents" means, (i) with respect to any
corporation, the articles of incorporation and bylaws of such corporation, (ii)
with respect to any partnership, the partnership agreement of such partnership,
(iii) with respect to any limited liability company, the articles of
organization and operating agreement of such company, and (iv) with respect to
any entity, any and all other shareholder, partner or member control agreements
and similar organizational documents relating to such entity.
"Permitted Liens" has the meaning specified in Section 6.1.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge Agreement" means the pledge agreement of even date
herewith pursuant to which the Member grants to the Bank a first priority
security interest in the entire equity ownership interest in and to the Borrower
to secure payment of the Obligations.
"Security Documents" means each Assignment of Lease relating
to an Aircraft Lease Agreement, the Mortgage, the Pledge Agreement and each and
every additional agreement entered into by either Credit Party for the benefit
of the Bank to secure payment of the Obligations.
"State of Registration" means Norway or such other country,
state or jurisdiction in or under the laws of which an Aircraft is registered.
"Subsidiary" of a Person means any corporation or limited
liability company of which more than fifty percent (50%) of the outstanding
equity or membership interests or shares of capital stock having general voting
power under ordinary circumstances to elect a majority of the board of directors
(or other governing body) of such entity, (irrespective of whether or not at the
time stock or membership interests of any other class or classes shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned by such Person, by such Person and one or more
Subsidiaries of such Person, or by one or more other Subsidiaries of such
Person.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.9(a) as the state whose laws shall
govern this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
ARTICLE II
CREDIT FACILITY
Section 2.1. Term Loan. The Bank hereby agrees, on the terms
and subject to the conditions herein set forth, to make the Loan to the Borrower
in a single advance in the Commitment Amount on or about the Closing Date. The
Facility is not a revolving facility and, once the Loan is funded, the Bank
shall have no further obligation to make any additional advances to the Borrower
under the Facility, whether or not any amounts are repaid thereunder.
Section 2.2. Funding Procedures. Request for the Loan shall be
made by the Borrower by giving notice to the Bank not later than 9:00 a.m., New
York, New York time, on a Business Day which is at least three (3) Business Days
prior to the date of the requested Loan. Such notice shall be irrevocable, shall
be effective upon receipt by the Bank, shall be in writing or by telephone or
telecopy transmission and shall specify the date funding of such Loan is
requested and the wire instructions for payment thereof to or for the account of
the Borrower.
Section 2.3. Interest on Obligations.
-----------------------
(a) Interest Rate. The Borrower hereby agrees to pay interest
on the unpaid principal amount of the Loan for the period commencing on
the date the Loan is funded by the Bank until the unpaid principal
amount thereof is paid in full, at sum of (i) 7.87 % per annum (the
"Interest Rate"); provided, however, that from and after the occurrence
of an Event of Default and continuing thereafter until such Event of
Default shall be fully and completely remedied, the outstanding
principal balance of the Note shall bear interest, until paid in full,
at 11.87% per annum (the "Default Rate"). In addition, any and all
fees, indemnification obligations and other Obligations not paid when
due hereunder shall bear interest, until paid in full, at the Default
Rate.
(b) Usury Savings Provision. Notwithstanding anything in
Section 2.3(a) to the contrary, at no time shall the Borrower be
obligated or required to pay interest on any Obligation at a rate which
could subject the Bank to either civil or criminal liability as a
result of being in excess of the maximum interest rate which the
Borrower is permitted by applicable law or contract or agreement to
pay. If, under the terms of this Agreement or any other Loan Document,
the Borrower is at any time required or obligated to pay interest on
any Obligation at a rate in excess of such maximum rate, the rate then
in effect shall be deemed to be immediately reduced to such maximum
rate and all previous payments in excess of the maximum rate shall be
deemed to have been payments in reduction of principal and not on
account of any interest thereon due hereunder. All sums paid or agreed
to be paid to the Bank for the use, forbearance or detention of any
Obligation, shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full stated
term of the Obligation to which such payment applies until payment in
full so that the rate or amount of interest on account of any such
Obligation does not exceed the maximum lawful rate of interest from
time to time in effect and applicable to such Obligation for so long as
the Obligation is outstanding.
Section 2.4. Issuance of Note. The Loan made by the Bank
hereunder shall be evidenced by and repayable in accordance with the Note. The
aggregate unpaid principal amount of the Note shall bear interest as provided
herein and shall be payable in installments as set forth in Section 2.5 and on
the Maturity Date or earlier in accordance with Section 8.2.
Section 2.5. Amortization. Outstanding principal evidenced
by the Note shall be repaid as follows:
(a) Regular Amortization of Loan. Principal of and interest on
the Loan shall be payable together in monthly installments
("Amortization Installments") of $114,000 each, on the twenty-second
(22nd) day of each month, commencing on December 22, 2005, and
continuing until and including April 22, 2008. Thereafter, interest
only shall be paid on the twenty second (22nd) day of each month,
commencing on May 22, 2008 and continuing until the Maturity Date, when
all unpaid principal of the Loan, and all accrued interest thereon,
shall be finally due and payable in full.
(b) Additional Amortization of Facility. In addition to
Amortization Installments payable in accordance with subsection (a),
the Loan shall be payable in special additional installments in an
amount equal to fifty percent (50%) of the outstanding principal
balance of the Loan, together with additional compensation computed in
accordance with Section 2.13, upon (i) the occurrence of an Event of
Loss with respect to the airframe of an Aircraft, payable on the
earlier of (A) the date of receipt thereof by the Borrower from the
Lessee (or its insurer) or (B) the forty-fifth (45th) day after the
occurrence of such Event of Loss and (ii) the sale of an Aircraft as
contemplated in Section 8.3 hereof, payable on the day of any such
sale. Upon payment to the Bank of the prepayment amount required under
this subsection (b), the amount thereof shall be applied against the
outstanding principal balance of the Loan, whereupon the regularly
scheduled Amortization Installments due under subsection (a) hereof
shall be automatically reduced to $57,000 per month and the Bank shall
release its security interest in the Aircraft and Aircraft Lease
Agreement with respect to which the repayment amount described above
has been received by the Bank. So long as no Default or Event of
Default has occurred and is continuing hereunder, the excess of the
Agreed Value Amount paid on account of any such Event of Loss or sales
proceeds, as provided above, over the prepayment amount described above
shall be paid to the Borrower and may be distributed by the Borrower to
the Member.
Section 2.6. Application of Payments. Amortization Installments
shall be applied by the Bank first, to accrued and unpaid interest on the
outstanding principal balance of the Loan and the remainder, if any, shall be
applied to reduce the outstanding principal balance of the Loan; provided,
however, that upon the occurrence and during the continuance of an Event of
Default, the Bank shall be entitled to apply any payments received from the
Borrower to such Obligations and in such order of application as the Bank shall
determine in its sole discretion.
Section 2.7. Computation of Interest and Fees. Interest
accruing on the Note shall be computed on the basis of actual number of days
elapsed in a year of three hundred sixty (360) days.
Section 2.8. Arrangement Fee. In consideration for the Loan,
the Borrower agrees to pay to the Bank an arrangement fee of thirty-two thousand
U.S. dollars ($32,000) (the "Arrangement Fee"), payable on the Closing Date,
which Arrangement Fee shall be deemed fully earned and non-refundable as of the
Closing Date.
Section 2.9. Use of Proceeds. Proceeds of the Loan shall be
used by the Borrower to satisfy and pay outstanding indebtedness of the Borrower
secured by the Aircraft Lease Agreements and, to the extent of any excess, for
general corporate purposes.
Section 2.10. Prepayments. The Borrower from time to time may
voluntarily prepay the Loan in whole or in part. Each prepayment of the Loan
shall be made upon not less than three (3) Business days prior written notice
from the Borrower to the Bank and shall be paid to the Bank not later than 1:00
p.m., New York, New York time, on a Business Day, and funds received after that
hour shall be deemed to have been received by the Bank on the next following
Business Day. Each prepayment of the Loan, whether voluntary or mandatory, shall
be accompanied by additional compensation calculated in accordance with Section
2.13.
Section 2.11. Payments.
--------
(a) Making of Payments. All payments of principal of and
interest due and the Arrangement Fee shall be made to the Bank at its
office in Reykjavik, Iceland not later than 11:00 a.m., New York, New
York time, on the date due, in immediately available funds, and funds
received after that hour shall be deemed to have been received by the
Bank on the next following Business Day. All payments shall be directed
to a special pledged collateral account opened by the Borrower with the
Bank. Any amounts from time to time transferred into such collateral
account shall be applied by the Bank in accordance with Section 2.6
hereof.
(b) Setoff. The Borrower agrees that the Bank shall have all
rights of setoff and bankers' lien provided by applicable law, and in
addition thereto, the Borrower agrees that if at any time any
Obligation is due and owing by the Borrower to the Bank under this
Agreement at a time when an Event of Default has occurred and is
continuing hereunder, the Bank may apply any and all balances, credits,
and deposits, accounts or moneys of the Borrower then or thereafter in
the possession of such Bank to the payment thereof.
(c) Due Date Extension. If any payment of principal or
interest or any fees payable hereunder falls due on a day which is not
a Business Day, then such due date shall be extended to the next
following Business Day, and (in the case of principal) additional
interest shall accrue and be payable for the period of such extension.
Section 2.12. Taxes. All payments made by the Borrower to the
Bank under or in connection with this Agreement or the Note shall be made
without any setoff or other counterclaim, and shall be free and clear of and
without deduction for or on account of any present or future taxes now or
hereafter imposed by any governmental or other authority, except to the extent
that any such deduction or withholding is compelled by law. As used herein, the
term "taxes" shall include all income, excise and other taxes of whatever nature
(other than taxes generally assessed on the overall net income of the Bank by
the government or other authority of the country, state or political subdivision
of the Bank's incorporation or in which the office through which the Bank is
acting is located) as well as all levies, imposts, duties, charges, or fees of
whatever nature. If the Borrower is compelled by law to make any deductions or
withholdings on account of any taxes (including any foreign withholding) it
will:
(i) pay to the relevant authorities the full amount required
to be so withheld or deducted; (ii) pay such additional
amounts (including, without limitation, any penalties,
interest or
expenses) (but only to the extent that such Taxes would have been
assessed against a domestic bank under similar situations) as may be
necessary in order that the net amount received by the Bank after such
deductions or withholdings (including any required deduction or
withholding on such additional amounts) shall equal the amount the Bank
would have received had no such deductions or withholdings been made;
and
(iii) promptly forward to the Bank an official receipt or
other documentation satisfactory to the Bank evidencing such payment to
such authorities.
The amount that the Borrower shall be required to pay to the Bank pursuant to
the foregoing clause (ii) shall be reduced, to the extent permitted by
applicable law, by the amount of any offsetting tax benefit which the Bank
receives as the result of the Borrower's payment to the relevant authorities as
reasonably determined by the Bank; provided, however, that if the Bank shall
subsequently determine that it has lost the benefit of all or a portion of such
tax benefit (other than as a result of the Bank's gross negligence or willful
misconduct), the Borrower shall promptly remit to the Bank the amount certified
by the Bank to be the amount necessary to restore the Bank to the position it
would have been in if no payment had been made pursuant to this sentence. If any
taxes otherwise payable by the Borrower pursuant to the foregoing are directly
asserted against the Bank, the Bank may pay such taxes and the Borrower promptly
shall reimburse the Bank to the full extent otherwise required under this
Section 2.12. The obligations of the Borrower under this Section 2.12 shall
survive any termination of this Agreement.
Section 2.13. Prepayment Premium. Upon payment of any
principal of the Loan in excess of the amounts or prior to the scheduled date
for payment thereof, as set forth and described in Section 2.5(a) hereof,
whether any such payment is voluntary or mandatory, shall be accompanied by a
premium, payable to the Bank in consideration of such payment, in an amount
calculated as follows: One-tenth of one percent (0.1%) of the aggregate amount
of the principal being prepaid, multiplied by the number of complete three-month
periods which would have occurred between the date of such prepayment and the
Maturity Date.
ARTICLE III
CONDITIONS OF LENDING
Section 3.1. Conditions Precedent to the Initial Borrowing.
The obligation of the Bank to make the Loan on the Closing Date shall become
effective on and as of the first date on which the following shall have been
delivered, each in form and substance satisfactory to the Bank:
(a) The Note, properly executed on behalf of the Borrower.
(b) The Security Documents, each properly executed on behalf
of the appropriate Credit Party, together with:
(i) properly completed financing statements with
respect to each Credit Party to be filed in each jurisdiction
which, in the opinion of the Bank, is reasonably necessary to
perfect the security interests created by the Security
Documents, to the extent such security interest can be
perfected by filing;
(ii) current searches of appropriate filing offices
in each jurisdiction under which a Credit Party is organized
or otherwise conducts business showing that no state or
federal tax liens have been filed and remain in effect against
any Credit Party, and that no financing statements or other
notifications or filings have been filed and remain in effect
against any Credit Party, other than those for which the Bank
has received an appropriate release, termination or
satisfaction or those constituting Permitted Liens;
(iii) evidence of all insurance required by the terms
of the Security Documents, together with certificates and loss
payable endorsements showing the Bank as additional insured
and loss payee thereunder;
(iv) evidence in all respects satisfactory to the
Bank that all recordings, filings and registrations required
by the Aviation Authority and any other governmental authority
in order to render the Mortgage and the Assignments of Lease
valid, binding, enforceable and perfected have been duly put
into place;
(v) an opinion of counsel in the State of
Registration confirming, among other things, as a matter of
law in the State of Registration, that each Aircraft is or
will be registered in the name of the Borrower free and clear
of all other liens, mortgages, charges, pledges, security
interests, lease, option, title retention agreement,
preferential right or trust or any rights of forfeiture,
confiscation or detention, except for the relevant Aircraft
Lease Agreement and the Mortgage;
(vi) evidence that the Borrower has acquired from the
Member all right, title, claim and interest in and to the
Aircraft and the Aircraft Lease Agreements and has good, legal
and beneficial title thereto;
(vii) fully executed by all appropriate parties,
releases of any existing mortgages, security interests or
other liens affecting each Aircraft, Aircraft Lease Agreement
and all other assets constituting Collateral;
(viii) a power of attorney in favor of the Bank
permitting the Bank, inter alia, to de-register and export
each Aircraft from the State of Registration to such state as
the Bank shall select, in form and content acceptable to the
Bank;
(ix) a report, in form and content acceptable to the
Bank, of a physical inspection and appraisal of each Aircraft,
all log books, records, reports and documentation related
thereto, all documents recorded in the applicable registry of
the State of Registration with respect to each Aircraft and
any documents referred to therein which pertain to the
Aircraft and which are not otherwise so recorded in such
registry, and such other inspection and inquiry as the Bank
may deem appropriate with respect to the condition of each
Aircraft or any component thereof or title thereto;
(x) a consent and agreement from the Lessee,
consenting to transfer of the Aircraft and the Aircraft Lease
Agreements from the Member to the Borrower, acknowledging the
first and prior liens granted therein by the Borrower to the
Bank and containing such representations, warranties,
covenants and agreements as the Bank shall require;
(xi) fully executed, original copies of each Aircraft
Lease Agreement constituting the sole chattel paper copy
thereof, together with a determination by the Bank that no
amendment to either such Aircraft Lease Agreement shall have
been executed or delivered and that no event of default (as
therein defined) shall have occurred and is continuing
thereunder.
(xii) All certificates and instruments representing
the Member's interest in the Borrower, each certificate duly
endorsed, in blank, by signing on said certificate or
instrument or by signing a separate document of assignment or
transfer.
(c) A certificate of the Secretary or Assistant Secretary of
the Borrower certifying (i) that the execution, delivery and
performance of the Loan Documents and other documents contemplated
hereunder to which the Borrower is a party have been duly approved by
all necessary action of the Board of Directors of the Borrower and
attaching true and correct copies of the applicable resolutions
granting such approval, (ii) that attached to such certificate are true
and correct copies of the Organizational Documents of the Borrower,
together with such copies, and (iii) the names of the officers of the
Borrower that are authorized to sign the Loan Documents and other
documents contemplated hereunder, together with the true signatures of
such officers. The Bank may conclusively rely on such certificate until
it shall receive a further certificate of the Secretary or Assistant
Secretary of the Borrower canceling or amending the prior certificate
and submitting the signatures of the officers named in such further
certificate.
(d) A certificate of the Secretary or Assistant Secretary of
the Member certifying (i) that the execution, delivery and performance
of the Pledge Agreement have been duly approved by all necessary action
of the Directors of the Member and attaching true and correct copies of
the applicable resolutions granting such approval, (ii) that attached
to such certificate are true and correct copies of the Organizational
Documents of the Member, together with such copies, and (iii) the names
of the officers of the Member that are authorized to sign the Pledge
Agreement, together with the true signatures of such officers. The Bank
may conclusively rely on such certificate until it shall receive a
further certificate of the Secretary or Assistant Secretary of the
Member canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate.
(e) A favorable opinion of counsel for the Borrower and the
Member, in form and substance acceptable to the Bank.
(f) Payment of all fees and expenses of the Bank due
hereunder and incurred prior to the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank as follows:
Section 4.1. Existence and Power. The Borrower is a Delaware
limited liability company and the Member is a Delaware corporation, in each case
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or formation. The Credit Parties are
each duly licensed or qualified to transact business in all jurisdictions where
the character of the property owned or leased or the nature of the business
transacted by them makes such licensing or qualification necessary and where
failure to obtain such licensing or qualification would have a Material Adverse
Effect. Each Credit Party has all requisite power and authority to conduct its
business, to own its properties and to execute and deliver, and to perform all
of its obligations under, the Loan Documents to which it is a party.
Section 4.2 Authorization for Borrowings; No Conflict as to
Law or Agreements. The execution, delivery and performance by each Credit Party
of the Loan Documents to which it is a party, have been duly authorized by all
necessary action and do not and will not (i) require any consent or approval
which has not been obtained prior to the date hereof, (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof, (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
any Credit Party or of any Credit Party's Organizational Documents, (iv) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which any
Credit Party is a party or by which it or its properties may be bound or
affected, or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the properties now
owned or hereafter acquired by any Credit Party.
Section 4.3. Legal Agreements. Each of the Loan Documents
constitutes the legal, valid and binding obligations and agreements of the
Credit Party or Credit Parties which are a party thereto, enforceable against
such Credit Parties in accordance with its terms, except to the extent that
enforcement thereof may be limited by an applicable bankruptcy, insolvency or
similar laws now or hereafter in effect affecting creditors' rights generally
and by general principles of equity.
Section 4.4. Subsidiaries. The Borrower has no Subsidiaries.
------------
Section 4.5. Financial Condition; No Adverse Change. The
Member has heretofore furnished to the Bank its consolidated audited financial
statements for its fiscal year ended December 31, 2004, and its consolidated
unaudited financial statements for the period ended October 31, 2005, and those
statements fairly present the financial condition of the Member and its
Subsidiaries on the dates thereof and the results of the Member's and its
Subsidiaries' operations and cash flows for the periods then ended (subject to
year-end audit adjustments and without footnotes) and were prepared in
accordance with GAAP. Since the date of the financial statements described
above, there has not occurred any event or circumstance that would have a
Material Adverse Effect.
Section 4.6. Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of the Borrower, threatened against or
affecting any Credit Party or the properties of any Credit Party before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which, if determined adversely to any
Credit Party, could reasonably be expected to have a Material Adverse Effect.
Section 4.7. Regulation U. No Credit Party is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 4.8. Taxes. Each Credit Party has paid or caused to be
paid to the proper authorities when due all federal, state and local taxes
required to be withheld by it. Each Credit Party has filed all federal, state
and local tax returns which to the knowledge of the officers of the Borrower,
are required to be filed, and each Credit Party has paid or caused to be paid to
the respective taxing authorities all taxes as shown on said returns or on any
assessment received by it to the extent such taxes have become due, except for
any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested by a Credit Party in good faith and by proper
proceedings and for which the applicable Credit Party shall have set aside
adequate reserves in accordance with GAAP.
Section 4.9. Transfer of Aircraft and Aircraft Lease
Agreements. The Member has transferred to the Borrower good and absolute title
to both Aircraft and both Aircraft Lease Agreements and all such assets are, as
of the date hereof, owned by the Borrower free and clear of all mortgages,
security interests, liens, encumbrances, covenants, restrictions, rights and
other irregularities in title. The foregoing transfers have been duly noted,
registered, filed or recorded, as required by all applicable law and regulation
of each and every governmental unit with jurisdiction over either Credit Party
or any such assets, including without limitation the State of Registration. No
security agreement, financing statement, equivalent security or lien or
instrument or continuation statement or other lien, whether voluntary or
involuntary, covering all or any part of the Collateral is on file or of record
with any governmental agency or bureau or any political subdivision thereof or
is otherwise in effect with respect to any such Collateral, except (a) such as
may have been filed in connection with the lien of the Bank arising pursuant to
the Security Documents or any of them and (b) such as may be satisfied,
discharged and removed of record in connection with funding of the Loan
hereunder.
Section 4.10. Citizenship. Each Credit Party is a "citizen of
the United States" as that term is used and defined in Section 40102(a)(15) of
Title 49, United States Code, as amended.
Section 4.11. No Default. The Borrower is in full compliance
with all provisions of each Aircraft Lease Agreement and each of the Credit
Parties is in compliance with all provisions of all other agreements,
instruments, decrees and orders to which it is a party or by which it or its
property is bound or affected, the breach or default of which could reasonably
be expected to have a Material Adverse Effect.
Section 4.12. Special Purpose Entity. The Borrower will (a)
own no assets, and not engage in any business, other than the assets and
transactions specifically contemplated by the Loan Documents, (b) not incur any
indebtedness or obligation, secured or unsecured, direct or indirect, absolute
or contingent, other than as contemplated hereby, (c) not make any loans or
advances to any third party, and shall not acquire obligations or securities of
any Affiliate, (d) pay its debts and liabilities (including, as applicable
shared personnel and overhead expenses) only from its own assets, (e) do all
things necessary under applicable law and its organizational documents to
observe organizational formalities and to preserve its existence, and will not
amend, modify or otherwise change its certificate of organization or limited
liability company agreement, or suffer the same to be amended, modified or
otherwise changes, without the prior written consent of the Bank, (f) maintain
all of its books, records, financial statements and bank accounts separate from
those of any Affiliate, (g) be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other entity, including
the Member, correct any known misunderstanding regarding its status as a
separate entity, conduct business in its own name, not identify itself as a
division or part of the Member and maintain and utilize separate stationary,
invoices and checks, (h) maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations, (i) not engage in or suffer any
dissolution, winding-up, liquidation, consolidation or merger in whole or in
part, (j) not commingle its funds or other assets with those of any Affiliate or
any other Person, (k) maintain its assets in such a manner that it will not be
costly or difficult to segregate, ascertain or identify its individual assets
from those of any Affiliate or any other Person, (l) not and will not hold
itself out to be responsible for the debts or obligations of any other Person
and (m) be formed and organized solely for the purpose of holding, directly or
indirectly, the Collateral and not hold or own any assets other than the
Collateral and assets related thereto.
Section 4.13. Submissions to Bank. All financial and other
information provided to the Bank by or on behalf of the Borrower or any other
Credit Party in connection with the Borrower's request for the Loan contemplated
hereby is true and correct in all material respects and, as to projections,
valuations or pro forma financial statements, present a good faith opinion as of
the date made as to such projections, valuations and pro forma condition and
results.
Section 4.14. Financial Solvency. Both before and after giving
effect to the transactions contemplated in the Loan Documents, no Credit Party:
(a) was or will be insolvent, as that term is used and defined
in Section 101(32) of the United States Bankruptcy Code and Section 2
of the Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital and is not engaged or about
to engage in a business or a transaction for which any of its remaining
assets are unreasonably small;
(c) does, by executing, delivering or performing its
obligations under the Loan Documents to which it is a party or by
taking any action with respect thereto, intend to, or believe that it
will, incur debts beyond its ability to pay them as they mature;
(d) does, by executing, delivering or performing its
obligations under the Loan Documents to which it is a party or by
taking any action with respect thereto, intend to hinder, delay or
defraud either its present or future creditors; and
(e) expects to file a petition in bankruptcy or for an
arrangement or reorganization or similar proceeding under any law any
jurisdiction or country, and, to the Borrower's best knowledge, is not
the subject of any bankruptcy or insolvency proceedings or similar
proceedings under any law of any jurisdiction or country threatened or
pending against it.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE BORROWER
So long as the Loan shall remain unpaid or outstanding, the
Borrower will comply with the following requirements, unless the Bank shall
otherwise consent in writing:
Section 5.1. Reporting Requirements. The Borrower will
deliver, or cause to be delivered, to the Bank each of the following, which
shall be in form and detail reasonably acceptable to the Bank:
(a) as soon as available, and in any event within ninety (90)
days after the end of each fiscal year of the Member, audited annual
financial statements of the Member, prepared on a consolidated basis,
with the unqualified opinion of independent certified public
accountants selected by the Member and reasonably acceptable to the
Bank, which annual financial statements shall include the consolidated
balance sheet of the Member as at the end of such fiscal year and the
related consolidated statements of income, retained earnings and cash
flows of the Member, for the fiscal year then ended, all in reasonable
detail and prepared in accordance with GAAP, together with (i) a copy
of the "management letter" from such accountants to the Member as to
the audit then completed (if provided by such accountants), and (ii) a
certificate of the Member, substantially in the form of Exhibit B,
stating that (1) such financial statements have been prepared in
accordance with GAAP, (2) whether or not such officer has knowledge of
the occurrence of any Default or Event of Default hereunder not
theretofore reported and remedied and, if so, stating in reasonable
detail the facts with respect thereto, and (3) all relevant facts in
reasonable detail to evidence, and the computations as to whether or
not the Member is in compliance with the Financial Covenants;
(b) as soon as available, and in any event within ninety (90)
days after the end of each fiscal year of the Borrower, unaudited
annual financial statements of the Borrower, which annual financial
statements shall include the balance sheet of the Borrower as at the
end of such fiscal year and the related statements of income, retained
earnings and cash flows of the Borrower for the fiscal year then ended,
all in reasonable detail and prepared in accordance with GAAP, together
with a certificate of the Borrower, substantially in the form of
Exhibit B, stating that (1) such financial statements have been
prepared in accordance with GAAP and (2) whether or not such officer
has knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto;
(c) as soon as available and in any event within forty-five
(45) days after the end of each fiscal quarter, an unaudited/internal
consolidated balance sheet of each Credit Party as at the end of such
fiscal quarter and related consolidated statements of income, cash flow
and retained earnings of each Credit Party as at the end of such fiscal
quarter and for the year-to-date period then ended, in reasonable
detail and stating in comparative form, the figures for the
corresponding date and periods in the previous year, all prepared in
accordance with GAAP, subject to year-end audit adjustments and without
footnotes; accompanied by a certificate of each Credit Party,
substantially in the form of Exhibit C, stating (i) that such financial
statements have been prepared in accordance with GAAP, subject to
year-end audit adjustments and without footnotes, (ii) whether or not
such officer has knowledge of the occurrence of any Default or Event of
Default hereunder not theretofore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto, and (iii)
(as to the Member) all relevant facts in reasonable detail to evidence,
and the computations as to whether or not the Member is in compliance
with the Financial Covenants;
(d) promptly after the commencement thereof, notice in writing
of all uninsured litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type
described in Section 4.6 or which (i) seek a monetary recovery against
the Borrower in excess of $250,000; or (ii) if determined adversely to
the Borrower, could reasonably be expected to have a Material Adverse
Effect;
(e) promptly after sending or filing thereof, copies of all
regular and periodic financial reports which the Member shall file with
the Securities and Exchange Commission or any national securities
exchange, including (without limitation) each and every Form 8-K issued
by the Member;
(f) as promptly as practicable (but in any event not later
than five (5) Business Days) after an officer of the Borrower obtains
knowledge of the occurrence of a Default or Event of Default hereunder,
notice of such occurrence, together with a detailed statement by a
responsible officer of the Borrower setting forth the steps being taken
by the Borrower to cure the effect of such Default or Event of Default;
(g) promptly upon obtaining knowledge thereof, notice of the
occurrence of any Lease Default, any Event of Loss or the violation by
any Credit Party of any law, rule or regulation, the non-compliance
with which could reasonably be expected to have a Material Adverse
Effect; and
(h) such information (in addition to that specified elsewhere
in this Section) respecting the financial condition of the Borrower or
any other Credit Party as the Bank may from time to time reasonably
request.
Section 5.2. Books and Records; Inspection and Examination.
The Borrower will, and will cause each other Credit Party to, keep accurate
books of record and account for itself pertaining its business and financial
condition in which true and complete entries will be made in accordance with
GAAP consistently applied and, upon request of the Bank, will and will cause
each other Credit Party to permit any officer, employee, attorney or accountant
for the Bank to audit, review, make extracts from or copy any and all corporate
and financial books and records of the Borrower or any other Credit Party at all
reasonable times during ordinary business hours. The Borrower will and will
cause each other Credit Party to permit the Bank or its employees, accountants,
attorneys or agents, to examine and inspect any property of the Borrower or any
other Credit Party at any time during ordinary business hours; provided, that
the Bank will use reasonable efforts to conduct (or have conducted) any such
examination or inspection so as to minimize disruptions to the operations of the
Borrower and the other Credit Parties.
Section 5.3. Compliance with Laws. The Borrower will, and will
cause each other Credit Party to, (a) comply with the requirements of applicable
laws and regulations, the noncompliance with which could reasonably be expected
to have a Material Adverse Effect, and (b) use and keep its assets and require
that others use and keep its assets, only for lawful purposes, without violation
of any federal, state or local law, statute or ordinance, the noncompliance with
which could reasonably be expected to have a Material Adverse Effect.
Section 5.4. Payment of Taxes and Other Claims. The Borrower
will, and will cause each other Credit Party to, pay or discharge, when due, (a)
all taxes, assessments and governmental charges levied or imposed upon it or
upon its income or profits, upon any properties belonging to it prior to the
date on which penalties attach thereto, (b) all federal, state and local taxes
required to be withheld by it, and (c) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a lien or charge upon any
properties of the Borrower or any other Credit Party; provided, that the
Borrower nor any other Credit Party shall be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which the Borrower or
such other Credit Party, as applicable, has set aside adequate reserves in
accordance with GAAP.
Section 5.5. Maintenance of Properties. The Borrower will, and
will cause each other Credit Party to, keep and maintain all of its properties
necessary or useful in its business in good condition, repair and working order
(normal wear and tear excepted); provided, however, that nothing in this Section
5.5 shall prevent any Credit Party from discontinuing the operation and
maintenance of any of its properties if such discontinuance is, in the
reasonable judgment of such Credit Party, desirable in the conduct of such
Credit Party's business and not disadvantageous in any material respect to the
Bank.
Section 5.6. Insurance. The Borrower will, and will cause each
other Credit Party to, obtain and at all times maintain insurance with insurers
believed by it to be responsible and reputable in such amounts and against such
risks (including, without limitation, business interruption) as is usually
carried by companies engaged in similar business and owning similar properties
in the same general areas in which it operates and otherwise satisfactory to the
Bank in its reasonable discretion, which, while the Aircrafts are in operation
by Lessee or other operator shall be at least as broad and in such amount as
required under the Lease Agreements in effect as of such date, and if an
Aircraft is at any time not subject to such Aircraft Lease Agreement, the
Borrower will insure the Aircraft in accordance with such terms and conditions
as the Bank shall require in its reasonable discretion. The Borrower will or
will cause each other Credit Party to deliver policies or certificates
evidencing such insurance to the Bank.
Section 5.7. Preservation of Existence. The Borrower will, and
will cause each other Credit Party to, preserve and maintain its existence and
all of its rights, privileges and franchises necessary or desirable in the
normal conduct of its business and shall conduct its business in an orderly,
efficient and regular manner.
Section 5.8. Financial Covenants. The Borrower will cause the
Member to at all times comply with the following financial covenants (the
"Financial Covenants"):
(a) so long as the Member has senior debt outstanding, the
Member will comply with each and every financial covenant therein
contained unless the Member shall obtain an appropriate waiver from all
holders of such senior debt;
(b) the Member shall provide to the Bank copies of all credit
agreements with the Member's senior lenders, together with all
amendments thereto, and copies of the same financial covenant
computation and compliance certificates, as are required under such
senior debt documents; and
(c) in the event the senior debt of the Member is repaid or
the Member is no longer subject to financial covenants thereunder, the
financial covenants most recently in effect with respect to such senior
debt so repaid or refinanced shall be deemed incorporated into this
Agreement as fully as if such financial covenants were set forth and
described herein and the Borrower shall provide the Bank with a copy
thereof.
From time to time upon request of the Bank, the Borrower shall
obtain and deliver to the Borrower current copies of all then current
senior debt credit agreements applicable to the Member setting forth
all financial covenants to which the Member is subject thereunder.
ARTICLE VI
NEGATIVE COVENANTS
So long as the Note shall remain unpaid or outstanding, the
Borrower will comply with the following requirements, unless the Bank shall
otherwise consent in writing:
Section 6.1. Liens. The Borrower will not create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; excluding from the operation of the
foregoing liens on the Collateral granted to the Bank (herein "Permitted
Liens").
Section 6.2. Indebtedness. The Borrower will not incur,
create, assume, permit or suffer to exist any indebtedness or liability on
account of deposits or advances or any indebtedness for borrowed money, or any
other indebtedness or liability evidenced by notes, bonds, debentures or similar
obligations, except Obligations arising hereunder and trade payables incurred in
the ordinary course of business with respect to the ownership, operation or
maintenance of any Collateral.
Section 6.3. Guaranties. The Borrower will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person.
Section 6.4. Investments. The Borrower will not purchase or
hold beneficially any stock or other securities or evidences of indebtedness of,
make or permit to exist any loans or advances to, or create or acquire any
Subsidiary or make any investment or acquire any interest whatsoever in, any
other Person.
Section 6.5. Sale or Transfer of Assets; Suspension of
Business Operations. The Borrower will not sell, lease, assign, transfer or
otherwise dispose of all or a substantial part of its assets (whether in one
transaction or in a series of transactions) or suspend its usual and ordinary
business activities.
Section 6.6. Consolidation and Merger. The Borrower will not
consolidate with or merge into any Person, or permit any other Person to merge
into it, or acquire (in a transaction analogous in purpose or effect to a
consolidation or merger) substantially all of the assets of any other Person.
ARTICLE VII
REPRESENTATIONS AND COVENANTS WITH RESPECT TO COLLATERAL
Section 7.1. Representations and Covenants. Borrower
represents, warrants, covenants and agrees as follows with respect to the
Collateral:
(a) Aircraft Lease Agreements Enforceable. Each Aircraft Lease
Agreement is in full force and effect, and has been duly authorized by
the Lessee by all necessary corporate action, and constitutes the
legal, valid and binding obligation of the Lessee enforceable against
the Lessee in accordance with its terms, except as limited by
applicable bankruptcy, insolvency and similar laws affecting the right
of creditors generally. The signature of the Lessee on each Aircraft
Lease Agreement is genuine.
(b) Documentation Complete. All existing signed copies of each
Aircraft Lease Agreement conform in all respects to the original copy
thereof which has been delivered to the Bank and the entire agreement
with the respective Lessee is embodied solely in the documentation
furnished to Bank.
(c) Clear Title. Borrower is the 100% owner of each Aircraft
and Aircraft Lease Agreement and has no participants or co-owners
therein. Borrower has good and marketable title to each Aircraft Lease
Agreement free and clear of all security interests, liens, and other
encumbrances and rights, and Borrower has good and marketable title to
the Aircraft free and clear of all security interests, liens and other
encumbrances and rights.
(d) Proper Filings and Registration. Each Aircraft, and to the
extent required under the law of the State of Registration, each
Aircraft Lease Agreement, is registered in the name of the Borrower
with the Aviation Authority and the civil aircraft register of the
State of Registration and the Borrower is noted as owner of the
Aircraft and that the Mortgages granted in favor of the Bank are noted
on such register. The Borrower has effected all necessary registrations
and notices to perfect and protect the Security Documents, including as
may be required from time to time in the State of Registration, to
perfect the Borrower's title to, and the Bank's rights in, the Aircraft
and the Aircraft Lease Agreements in accordance with any law giving
effect to the Convention of the International Recognition of Rights in
Aircraft signed at Geneva, Switzerland on 19 June 1948. If at any time,
with the consent of the Bank, either Aircraft is to be registered
outside the State of Registration, the Borrower shall procure the
re-registration of such Aircraft and the execution and registration of
each Mortgage in favor of the Bank, each Mortgage to be in such form
and content as the Bank may require.
(e) Compliance with Laws. Each Aircraft Lease Agreement
complies with all applicable laws and regulations, and all required
disclosures have been made with respect thereto.
(f) Aspects of Aircraft Lease Agreements. The amount of each
installment of rent to be paid under each Aircraft Lease Agreement and
the scheduled frequency of rental payments (monthly, quarterly, etc.)
is as set forth in the Aircraft Lease Agreements delivered by the
Borrower to the Bank. There is no servicing fee or other amount that
any third party may offset against payment of such rental payments to
the Borrower or the Bank. Each Aircraft Lease Agreement is
noncancellable by the Lessee thereunder during its scheduled term
except as provided in the documents constituting the Aircraft Lease
Agreement furnished to Bank on or before the date the Loan is made.
There are no options to purchase or other agreements whereby the Lessee
of any Aircraft Lease Agreement or any other party has the right to
acquire the related Aircraft at the end of or during the Aircraft Lease
Agreement term other than as provided in the Aircraft Lease Agreement.
The rental payment under each Aircraft Lease Agreement constitutes only
basic rent for use of the related Aircraft and contains no element for
sales or use taxes, maintenance, licensing fee, or any other matter
that is payable to the Borrower or any third party except as separately
disclosed in the Aircraft Lease Agreement by dollar amount.
(g) Payment of Rent to Bank. The amount of each installment of
rent paid under each Aircraft Lease Agreement, together with any and
all other payments, fees, indemnities, reimbursements, prepayments,
insurance proceeds, Agreed Value and all other amounts payable
thereunder, shall be paid by Lessee solely and directly to the Bank for
application to Obligations in accordance with Section 2.6. The Borrower
shall join with the Bank in providing an instruction to the Lessee to
effect the foregoing and the Borrower shall not take any action to
withdraw, rescind or countermand any such instruction unless and until
the Loan and all other Obligations shall have been satisfied and paid
in full.
(h) Aircraft Delivery. The Aircraft covered by each Aircraft
Lease Agreement has been delivered and accepted in a condition
satisfactory to the Lessee, is in existence as of the Closing Date and,
to the best knowledge of the Borrower, no Event of Loss or other
material loss or damage has occurred and is continuing unremedied as of
the Closing Date.
(i) No Default. No payment due under any Aircraft Lease
Agreement is currently past due, no nonpayment default is in existence
under any Aircraft Lease Agreement and Borrower has no knowledge that
the Lessee is asserting or has any basis to assert any defense, setoff,
or counterclaim to its obligations under such Aircraft Lease Agreement.
The Borrower has not granted any extensions or waivers under any
Aircraft Lease Agreement during the period since the term of such
Aircraft Lease Agreement began.
(j) Taxes Paid. All personal property, sales, and use taxes
due and payable with respect to each Aircraft Lease Agreement and the
related Aircraft have been fully paid.
(k) Lessee Consent. No consent of the Lessee is required for
the Borrower to grant a security interest in, and assign and transfer,
the related Aircraft Lease Agreement to the Bank hereunder or, if
required, it has been obtained.
(l) No Changes to Aircraft Lease Agreements; Records. Borrower
will not modify, amend, reduce or terminate the terms of, waive any
provision of, anticipate the rent under, change the rental payment
schedule of, release or accept the surrender of, permit any voluntary
prepayment or payoff from the Lessee of, declare a default under, or
exercise any right or remedy under, either Aircraft Lease Agreement,
without in each case first obtaining the prior written consent of the
Bank. The Borrower shall perform any of its duties and obligations
under each Aircraft Lease Agreement, and keep accurate books, records
and accounts with respect to each Aircraft Lease Agreement.
(m) Original Aircraft Lease Agreement. The Borrower has
delivered to the Bank the original of each Aircraft Lease Agreement.
The Borrower will not execute any copies of an Aircraft Lease Agreement
other than a copy for delivery to the Lessee.
(n) Payment of Taxes. Borrower will pay, or cause to be paid,
all sales, use, personal property and other taxes levied or assessed
against either Aircraft in connection with each Aircraft Lease
Agreement prior to the date on which penalties attach thereto.
(o) Insurance, Maintenance and Registration. The Borrower will
ensure that each Aircraft is insured, maintained and registered, and
kept insured, maintained and registered, in such manner as companies
engaged in a similar business and owning similar properties in the same
general area and otherwise satisfactory to the Bank, and in accordance
with all terms and conditions of the applicable Aircraft Lease
Agreements currently in effect, and if an Aircraft is at any time not
subject to such Aircraft Lease Agreement, the Borrower will insure,
maintain and register the Aircraft in accordance with such terms and
conditions as the Bank shall require in its reasonable discretion. If
at any time either Aircraft is not so insured, maintained and
registered, such Aircraft shall be grounded, insured to the Bank's
satisfaction and stored at a location acceptable to the Bank and in
accordance with the manufacturer's recommendations.
(p) Inspection Rights; Reports. Borrower will permit the Bank
and its agents to examine Borrower's books and records with respect to
each Aircraft Lease Agreement and make extracts therefrom and copies
thereof at any time and from time to time during normal business hours
upon reasonable notice, and Borrower will furnish such information and
reports to the Bank regarding each Aircraft Lease Agreement, and the
related Aircraft as the Bank may from time to time request. Each
Aircraft, together with all applicable reports and records, shall be
physically inspected by an appraiser appointed by the Bank within one
(1) month from the Closing Date and thereafter annually, and upon such
other occasions as the Bank shall reasonably require. The Borrower
shall ensure that the Bank and its agents are afforded all necessary
facilities to inspect and survey each Aircraft, provided the Bank shall
give the Borrower reasonable notice and shall conduct such inspections
or surveys at such times as shall not interfere with the normal
operation of the Aircraft. The Borrower shall pay or reimburse the Bank
for all costs and expenses incurred in connection with any such
inspection; provided, however, that the Bank shall not require
reimbursement for any single inspection in excess of $5,000.
(q) Protection of Aircraft. The Borrower will take all
reasonable actions to prevent any acts which could reasonably be
expected to result in an Aircraft being confiscated, seized, taken in
execution, impounded, forfeited, detained and exercised or purported
exercise of any possessory lien, statutory right or other claim or
otherwise removed from the possession of the Borrower or the Lessee, as
applicable, and if any such confiscation, seizure, execution,
impounding, forfeiture or detention occurs, the Borrower will promptly
so advise the Bank in writing, and will use all reasonable efforts to
procure the immediate release of such Aircraft.
(r) No Disposition of Collateral or Proceeds. Borrower will
not sell, transfer, lease, or grant a security interest in or other
lien on any Aircraft, or pledge, assign, discount or grant a security
interest in any Aircraft Lease Agreement, without in each case the
prior written consent of the Bank. Borrower will keep each Aircraft
Lease Agreement and the related Aircraft free and clear of all liens
and security interests except those created by or arising through Bank
and those and those created by the Aircraft Lease Agreement.
(s) Assignment of Insurance. Borrower hereby assigns to the
Bank, as additional security for payment of the Loan and all other
Obligations under this Agreement, any and all moneys due or to become
due under and all other rights of the Borrower with respect to, any and
all policies of physical damage insurance covering the Aircraft, and
the Borrower directs the issuer of any such policy to pay any such