AIRCRAFT USE AGREEMENT
EXHIBIT
10.31
This
Aircraft Use Agreement, effective as of May 1, 2006 (this “Agreement”)
is
entered into by and between S
M C ADVISORS, INCORPORATED,
a
Kentucky corporation with an address of 0000 Xxxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxx 00000 (“SMC”)
and
CITIZENS
FINANCIAL CORPORATION,
a
Kentucky corporation with an address of The Marketplace, Suite 300, 00000
Xxxxxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (“CFC”).
The
parties acknowledge that they are affiliated through the common control of
Xxxxxxx X. Xxxxx.
RECITALS
WHEREAS,
SMC is the owner of a six and one-quarter percent (6.25%) undivided interest
(the “Interest”)
in a
CitationShares CES 680 (Sovereign) aircraft (the “Aircraft”),
which
Interest enables SMC to use the Aircraft for up to fifty (50) hours per year;
WHEREAS,
SMC has entered into (i) that certain Purchase Agreement (FAR91K) with
CitationShares Sales, Inc. (Revision No. 1 - December 1, 2005) (the
“Purchase
Agreement”)
and
(ii) that certain Management & Dry Lease Exchange Agreement (FAR 91K) with
CitationShares Management, L.L.C. (Revision No. 1 - December 1, 2005) (the
“Management
Agreement”)
(collectively, the Purchase Agreement and the Management Agreement as they
may
be amended from time to time may be referred to hereinafter as the “Operative
Documents”);
WHEREAS,
SMC has delivered authentic copies of the Operative Documents to CFC;
and
WHEREAS,
CFC desires to use the Aircraft for up to ten (10) hours per Contract Year
(as
such term is used in the Operative Documents) of the hours allotted to SMC
and
SMC is willing to permit such use, subject to the rights of the owners of the
remaining interests in the Aircraft as provided in the Operative Documents
(the
“Additional
Interest Owners”),
on
the terms and subject to the conditions set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing, and the representations,
warranties, and conditions set forth below, the parties hereto, intending to
be
legally bound, hereby agree as follows:
1. CFC’s
Use of Aircraft.
1.1 Agreement
to Permit CFC to Use Aircraft.
Subject
to the terms and conditions hereof and of the Operative Documents, CFC shall
be
permitted to use the Aircraft for up to ten (10) hours per year, on demand,
from
the date of this Agreement to April 30, 2008; provided
that if
SMC has not taken possession of the Aircraft as of the date of this Agreement,
the term of this Agreement shall commence on the date that SMC does take
possession of the Aircraft and shall expire on the second anniversary of such
date; and further
provided
that if
SMC disposes of the Interest, this Agreement shall terminate as of the effective
date of such disposition.
1.2 Cost-Sharing
Arrangement.
In
exchange for SMC’s permission to use the Aircraft as set forth in Section 1.1,
CFC agrees that it shall pay the following immediately upon receipt of an
invoice for such costs from SMC (capitalized terms used in this section not
otherwise defined herein shall have the definitions set forth for such terms
in
the Management Agreement):
(a) Twenty
percent (20%) of the Monthly Fixed Costs;
(b) Twenty
percent (20%) of any amounts invoiced to SMC by CitationShares Management,
L.L.C. related to Airworthiness Directives, Service Bulletins, upgrades to
the
Aircraft and regulatory compliance charges;
(c) The
Effective Flight Hourly Rate (which includes both Fixed and Fuel Components
and,
if applicable, any then current Fuel Cost Premium) for each Flight Hour the
Aircraft is used by CFC;
(d) Late
Cancellation Fees and Positioning Fees, if any;
(e) Fees
related to CFC’s use of the aircraft telephone, ground transportation and
catering;
(f) Landing,
handling and international flight fees at both origin and destination airports
for CFC’s Trips;
(g) All
Federal Excise Taxes (FET) or similar taxes related to CFC’s Trips;
(h) Federal,
state, local, airport and fuel taxes for CFC’s Trips; and
(i) Any
other
sums payable by SMC under the Management Agreement related to CFC’s use of the
Aircraft, including without limitation, any amounts invoiced to SMC by
CitationShares Management L.L.C. for extraordinary cleaning, wear and damage
caused by CFC in the course of CFC’s use of the Aircraft.
The
parties acknowledge that the above-referenced fees, including without limitation
the Monthly Fixed Costs as well as the Flight Hourly Rate (Fixed Component
&
Fuel Component), are subject to change from time to time, as specified in the
Management Agreement.
1.3 Capital
Charge.
CFC
agrees that it shall pay a capital charge (the “Capital
Charge”)
to SMC
on a quarterly basis as additional compensation for CFC’s use of the Aircraft.
The Capital Charge shall be included in invoices sent to CFC by SMC and shall
be
computed on the basis of CFC’s pro rata usage of the Aircraft (20%), multiplied
by the Aircraft Interest Purchase Price incurred by SMC ($915,000), or $183,000
(the “Capital
Charge Base”).
The
Capital Charge shall be determined by multiplying the Capital Charge Base by
the
greater
of
[i] six percent (6%) or [ii] the Prime Rate at the opening of business on
the date of this Agreement. The rate per annum shall be reset at the opening
of
business on the first day of each April, July, October and January hereafter
(each an “Adjustment
Date”)
so
that for the calendar
2
quarter
beginning on that day the rate per annum shall equal the greater
of [i]
six
percent (6%) or [ii] the Prime Rate at the opening of business on that day.
The
“Prime
Rate,”
as
used in this Agreement, shall mean that rate of interest announced from time
to
time by National City Bank, Kentucky (the “Bank”)
to be
its prime rate at its principal office in Louisville,
Kentucky, it being understood and agreed that such rate shall not necessarily
be
the lowest rate the Bank then offers to its most creditworthy borrowers. As
of
the date of this Agreement, the Prime Rate of the Bank is seven
and
three-quarters of one percent (7-¾%).
2. Representations
and Warranties
2.1 Representations
and Warranties of SMC.
(a) SMC
is a
corporation validly existing under the laws of the Commonwealth of Kentucky
and
has all power and authority to own or lease its properties and to carry on
its
business where such properties are located and such business is conducted.
(b) SMC
has
the power and authority to enter into this Agreement, to execute, deliver and
receive all other instruments and documents executed and delivered and received
in connection with the transactions herein referred to and to carry out the
transactions contemplated hereunder and thereunder.
(c) There
is
no action, suit or proceeding pending against SMC before or by any court,
administrative agency or other governmental authority that brings into question
the validity of, or in any way legally or financially (in the case of
performance) impairs, the execution, delivery or performance by SMC of this
Agreement.
(d) The
execution and delivery of this Agreement by SMC and the performance by it of
its
obligations hereunder have been duly authorized by all necessary corporate
action of SMC and do not violate or conflict with (i) any provision of SMC’s
Articles of Incorporation or By-Laws, or (ii) any law or any order, writ,
injunction, decree, rule or regulation of any court, administrative agency
or
any other governmental authority.
(e) This
Agreement constitutes the valid and binding obligation of SMC enforceable in
accordance with its terms, subject, however, to (i) laws of general application
affecting creditors’ rights and (ii) judicial discretion, to which equitable
remedies are subject.
(f) SMC
is
not subject to any restriction (that has not been complied with) or agreement
that, with or without the giving of notice, the passage of time, or both,
prohibits or would be violated by, or be in conflict with, the execution,
delivery and performance of this Agreement and the transaction contemplated
hereby.
(g) EXCEPT
AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT, THERE ARE NO WARRANTIES OR
REPRESENTATIONS OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, CONCERNING THE
AIRCRAFT, ITS CONDITION, ITS FITNESS FOR A PARTICULAR PURPOSE, ITS
AIRWORTHINESS, ITS DESIGN, ITS OPERATION, ITS MERCHANTABILITY OR WITH RESPECT
TO
PATENT INFRINGEMENT OR THE LIKE. SMC SHALL, IN NO EVENT, BE LIABLE TO CFC FOR
ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES CAUSED, DIRECTLY OR INDIRECTLY,
BY THE
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AIRCRAFT
OR ANY INADEQUACY THEREOF FOR ANY PURPOSE, OR ANY DEFICIENCY THEREIN, OR THE
USE
OR MAINTENANCE THEREOF, OR ANY REPAIRS, SERVICING OR ADJUSTMENTS THERETO EXCEPT
AS PROVIDED IN THE OPERATIVE DOCUMENTS AND THEN ONLY TO THE EXTENT THAT SMC
HAS
BEEN COMPENSATED FOR ANY SUCH DAMAGES EXPERIENCED BY CFC BY ONE OR MORE THIRD
PARTIES.
2.2 Representations
and Warranties of CFC.
CFC
represents and warrants to, and agrees with, SMC as follows:
(a) CFC
is a
corporation validly existing under the laws of the Commonwealth of Kentucky
and
has all power and authority to own or lease its properties and to carry on
its
business where such properties are located and such business is conducted.
(b) CFC
has
the power and authority to enter into this Agreement, to execute, deliver and
receive all other instruments and documents executed and delivered and received
in connection with the transactions herein referred to and to carry out the
transactions contemplated hereunder and thereunder.
(c) There
is
no action, suit or proceeding pending against CFC before or by any court,
administrative agency or other governmental authority that brings into question
the validity of, or in any way legally or financially (in the case of
performance) impairs, the execution, delivery or performance by CFC of this
Agreement.
(d) The
execution and delivery of this Agreement by CFC and the performance by it of
its
obligations hereunder have been duly authorized by all necessary corporate
action of CFC and do not violate or conflict with (i) any provision of CFC’s
Articles of Incorporation or By-Laws, or (ii) any law or any order, writ,
injunction, decree, rule or regulation of any court, administrative agency
or
any other governmental authority.
(e) This
Agreement constitutes the valid and binding obligation of CFC enforceable in
accordance with its terms, subject, however, to (i) laws of general application
affecting creditors’ rights and (ii) judicial discretion, to which equitable
remedies are subject.
(f) CFC
is
not subject to any restriction (that has not been complied with) or agreement
that, with or without the giving of notice, the passage of time, or both,
prohibits or would be violated by, or be in conflict with, the execution,
delivery and performance of this Agreement and the transaction contemplated
hereby.
3. Indemnification
Each
of
SMC and CFC will indemnify the other and protect, defend and hold it harmless
from and against any and all loss, cost, damage, injury or expense, including,
without limitation, reasonable attorneys’ fees, wheresoever and howsoever
arising that the indemnified party or its stockholders, or any of its, or their,
directors, officers, agents, employees, stockholders or partners, may incur
by
reason of any breach of the indemnifying party of any of its covenants,
representations or obligations set forth in this Agreement. In the event any
claim for indemnification hereunder arises on account of a claim or action
made
or instituted by a third
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person
against the non-indemnifying party, the non-indemnifying party shall notify
the
indemnifying party promptly after receipt of notice by the non-indemnifying
party that such claim was made or that such action was commenced. The
indemnifying party shall be entitled to participate in the defense of any such
claim or action by counsel of its own choosing. If the indemnifying party shall
participate in the defense of such claim or action, the same shall not be
settled without its prior written consent (which consent shall not unreasonably
be withheld) unless the indemnifying party shall deny or fail to confirm after
written request the other’s right to indemnification.
4. Benefits
of Representations, Warranties, Etc.
SMC
hereby assigns to CFC (to the extent assignable and to the extent related to
CFC’s use of the Aircraft) the benefits of all warranties, representations,
covenants and indemnities made to SMC by, or which SMC is entitled to enforce
against, any third parties (including without limitation the manufacturer of
the
Aircraft).
5. Miscellaneous
5.1 Survival.
The
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the consummation of the transactions described
herein.
5.2 Successors
and Assigns.
The
rights and obligations of the parties hereunder shall inure to the benefit
of,
and be binding and enforceable upon, the respective successors, assigns and
permitted transferees of either party.
5.3 Notices.
Any
notice, request or other communication to either party by the other hereunder
shall be given in writing and shall be deemed given on the earlier of the date
the same is (i) personally delivered with receipt acknowledged, or (ii)
telecopied at time of transmission, or (iii) three days after mailed by
certified mail, return receipt requested, postage prepaid and addressed to
the
party for which it is intended at the address as set forth in the introductory
paragraph of this Agreement, together with a copy to any addressee as may be
designated by a party by notice hereunder. The place to which notices or copies
of notices are to be given to either party may be changed from time to time
by
such party by written notice to the other party.
5.4 Entire
Agreement.
This
Agreement constitutes the entire understanding between the parties and there
are
no representations or warranties, conditions, covenants or agreements other
than
as set forth expressly herein and in the Operative Documents, and any changes
or
modifications hereto or thereto must be in writing and signed by authorized
representatives of both parties.
5.5 Governing
Law.
This
Agreement and all actions arising out of or in connection with this Agreement
shall be governed by and construed in accordance with the laws of the
Commonwealth of Kentucky, without regard to the conflicts of law provisions
of
the Commonwealth of Kentucky or of any other state.
5.6 Captions.
Captions used herein are inserted for reference purposes only and shall not
affect the interpretation or construction of this Agreement.
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5.7 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed to be an original, but all of which together shall consti-tute one and
the same instrument.
5.8 Amendments.
This
Agreement may be amended or varied only by documents, in writing, of even or
subsequent date hereof, executed by CFC and SMC.
5.9 Further
Assurances.
Each
party hereto shall execute and deliver all such further instruments and
documents as may reasonably be requested by the other party in order to fully
carry out the intent and accomplish the purposes of the Operative Documents
and
the transactions referred to therein.
5.10 Severability.
Any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforce-able.
IN
WITNESS WHEREOF,
each of
the parties has caused this Agreement to be executed on its behalf as of April
25, 2006.
SMC:
S
M C ADVISORS, INCORPORATED,
a
Kentucky
corporation
By:
s/
Xxxxxxx X. Wells___________________
Xxxxxxx
X. Xxxxx, President
CFC:
CITIZENS
FINANCIAL CORPORATION,
a
Kentucky
corporation
By:
s/
Xxx
X. Schweitzer__________________
Xxx
X. Xxxxxxxxxx,
Vice President, Finance /
CFO
/
Treasurer / Secretary
Authority:
Resolutions of the Board of Directors of
Citizens
Financial Corporation adopted April 12, 2006
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