AIRCRAFT LOAN AGREEMENT
Intending to be legally bound by this Aircraft Loan Agreement
("Agreement"), dated December 29, 1998, BANK OF HAWAII, a Hawaii corporation,
whose address is 000 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000 (the "Bank") and
HAWAIIAN AIRLINES, INC., a Hawaii corporation, whose address is 0000 Xxxxxxx
Xxxxxx, Xxxxx X000, Xxxxxxxx, Xxxxxx 00000 (the "Borrower") agree as follows:
I. TERM LOAN
1.1 LOAN. Subject to the satisfaction of the conditions stated in Article
II of this Agreement, and on and subject to the terms stated in this Agreement,
the Bank shall make a term loan (the "Loan") to the Borrower in the principal
amount of _____________________________. The Loan shall be repaid, with interest
thereon, in accordance with the provisions of this Agreement.
1.2 PURPOSE. The proceeds of the Loan shall be used exclusively to
finance the purchase of the Aircraft by Borrower.
1.3 SECURITY. The Loan shall be secured by liens on or security interests
in the Aircraft, the Assigned Agreements and the other Collateral described in
the Security Agreement, which liens or security interests shall be of first
priority unless otherwise agreed by the Bank.
1.4 INTEREST; REPAYMENT OF THE LOAN.
(a) INTEREST RATE. The Borrower agrees to pay interest on the outstanding
principal balance of the Loan at the rate of _____ per annum.
Interest shall be computed on the basis of the actual number of days
elapsed between payments and on the basis of a 365-day year (or, in leap years,
on the basis of a 366-day year).
In no event shall the Borrower be obligated to pay any amount under
this Agreement that exceeds the maximum amount allowable by law. If any sum is
collected in excess of the applicable maximum amount allowable by law, the
excess collected shall, at the Bank's discretion, be applied to reduce the
principal balance of the Loan or returned to the Borrower.
(b) REPAYMENT OF THE LOAN.
(1) PAYMENT SCHEDULE. The Borrower agrees to make equal monthly
payments of principal and interest, each in the amount of ___________, beginning
with a payment on January 29, 1999, and continuing on the same day of each
subsequent month (each such date, a "Monthly Payment Date").
The Borrower agrees to pay in full on or before December 29, 2005,
all principal and accrued interest then outstanding with respect to the Loan,
not required to have been previously paid.
(2) CURRENCY, PLACE AND DATES OF PAYMENTS. Payments shall be
made in United States money in immediately available funds at the Bank's address
stated below, or at such other place as the Bank shall have designated by
written notice to the Borrower. Any payment due on a day that is not a Business
Day shall be made on the next succeeding Business Day and the extension of time
shall be included in the computation of interest.
(3) EVIDENCE OF MAKING AND REPAYMENT OF THE LOAN. The Bank's
records evidencing the date of disbursements of the Loan and the amounts of all
repayments of principal and payments of interest on the Loan shall constitute
prima facie evidence of the making and repayment of the Loan and of the payment
of such interest. However, the Bank's making of erroneous notations in its
records shall not affect the Borrower's obligation to repay the outstanding
balance of principal under the Loan, and accrued interest thereon, as provided
in this Agreement.
(5) APPLICATION OF PAYMENTS. Payments under this Agreement may
be applied by the Bank to the Loan and the other indebtedness evidenced by this
Agreement in any manner the Bank deems appropriate. The priority of application
elected by the Bank on any one occasion shall not determine any such election in
the future.
(6) PREPAYMENTS. Borrower may make prepayments of principal as
hereinafter provided. Borrower shall give the Bank at least three (3) Business
Days prior written notice of Borrower' intention to prepay principal. On the
date designated in the aforesaid notice, Borrower shall pay: (i) the principal
amount specified in said notice to be prepaid; (ii) the Prepayment Premium on
the principal amount prepaid; and (iii) accrued interest on the principal amount
prepaid. The Prepayment Premium shall also be payable if an Event of Default
occurs and the Bank exercises its right to declare the unpaid principal and
interest of the Loan to be immediately due and payable. To and including the
first anniversary of the date hereof, the "Prepayment Premium" shall be equal to
3% of the principal amount prepaid. From and after the first anniversary of the
date hereof to and including the second anniversary of the date hereof, the
"Prepayment Premium" shall be equal to 2% of the principal amount prepaid. From
and after the second anniversary of the date hereof the "Prepayment Premium"
shall be equal to 1% of the principal amount prepaid. Partial prepayments shall
be applied against required payments of the most remote maturity, and will not
extend the dates or change the amounts of subsequent installment payments.
1.5 EVIDENCE OF INDEBTEDNESS; LOAN DOCUMENTS. The Loan is or is to be
evidenced and/or secured by this Agreement, the Note, the Security Agreement and
all such other documents as the Bank may reasonably require from time to time in
order to effectuate the intent of this Agreement, together with all renewals,
extensions and modifications thereto (the "Loan Documents").
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1.6 THE BORROWER'S OBLIGATIONS. The Borrower's obligations to pay,
observe and perform all indebtedness, liabilities, covenants and other
obligations on the part of the Borrower to be paid, observed and performed under
this Agreement, the Note and all other Loan Documents are herein collectively
called the "Obligations".
1.7 FEES. In respect of the Loan, the Borrower shall pay to the Bank a
non-refundable fee in the amount of ___________, receipt of which is hereby
acknowledged by the Bank.
II. CONDITIONS PRECEDENT
The obligation of the Bank to make the Loan is subject to the satisfaction
of all of the following conditions on or before the date or dates on which the
Bank shall make any disbursement of the Loan proceeds to the Borrower (the
"Closing Date"):
2.1 DOCUMENTS REQUIRED FOR CLOSING. The Bank shall have received, in each
case in form and substance satisfactory to the Bank, such fully executed
originals or certified copies as the Bank may have requested of each of the
following, in each case as amended through the Closing Date:
(a) CLOSING DOCUMENTS. The documents listed on Annex A attached hereto
and made a part hereof.
(b) CONSENTS. Evidence that all parties to the Loan Documents (except the
Bank) have obtained all necessary and appropriate authority, approvals and
consents to execute and deliver the Loan Documents.
(c) ORGANIZATIONAL DOCUMENTS. (1) An officer's certificate from Borrower
(i) certifying Borrower's articles of incorporation, by-laws and resolutions,
with such resolutions authorizing the Loan and Borrower's execution, delivery
and performance of the Loan Documents and (ii) containing an incumbency
certification of Borrower including the name(s), title(s) and specimen
signature(s) of the person(s) authorized on behalf of Borrower to execute the
Loan Documents; and (2) a Certificate of Good Standing with respect to Borrower
from the State of Hawaii Department of Commerce and Consumer Affairs evidencing
Borrower's good standing and authority to conduct its business in the State of
Hawaii.
(d) EVIDENCE OF PRIORITY. Evidence acceptable to the Bank that the Bank's
liens on and/or security interests in the Collateral have the priority required
by the Bank, including, without limitation, a written opinion of Daugherty,
Fowler, Peregrin & Xxxxxx, FAA counsel, and FAA lien searches.
(e) PAYMENT OF TAXES. Evidence of (1) payment of any and all sales,
transfer, use, documentation or similar taxes due in connection with the
acquisition of the Aircraft by Borrower or (2) exemption from the same.
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(f) OPINION(S) OF COUNSEL. An opinion or opinions of counsel for the
Borrower, addressed to the Bank, covering to the Bank's satisfaction (1) the due
authorization, execution, delivery, binding effect, and enforceability of the
Loan Documents; and (2) such other matters as the Bank may require.
(g) INSURANCE. Evidence of the Borrower's compliance with the provisions
stated below in Section 7.1.
2.2 CERTAIN OTHER EVENTS. On the Closing Date:
(a) No event shall have occurred and be continuing that (1) constitutes
an Event of Default, or (2) a Default.
(b) No material adverse change shall have occurred in the financial
condition of the Borrower since the date of its most recent financial statements
submitted to the Bank.
(c) No material adverse change shall have occurred in the physical
condition of the Borrower's assets since the date of this Agreement.
(d) All legal matters incidental to the Closing shall be satisfactory to
legal counsel for the Bank.
(e) The Borrower shall have paid to the Bank all fees described in
Section 1.7 above.
III. REPRESENTATIONS AND WARRANTIES
To induce the Bank to make the Loan, the Borrower makes the following
representations and warranties to the Bank, which representations and warranties
shall survive the execution of this Agreement and continue so long as the
Borrower is indebted to the Bank under the Loan Documents, and until payment in
full of the Loan:
3.1 ORGANIZATION. The Borrower is duly organized, validly existing and in
good standing under the laws of the State of Hawaii and has the lawful power to
own its properties, including, without limitation, the Collateral, and to engage
in the business it conducts.
3.2 NO BREACH. The execution and performance of the Loan Documents will
not immediately, or with the passage of time or the giving of notice, or both:
(a) Violate any law or result in a default under any contract, agreement,
or instrument to which the Borrower is a party or by which the Borrower or its
property is bound; or
(b) Result in the creation or imposition of any security interest in, or
lien or encumbrance on, any of the assets of the Borrower, except in favor of
the Bank.
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3.3 AUTHORIZATION. The Borrower has the power and authority to incur and
perform the Obligations, and has taken all corporate or other action necessary
to authorize the execution and delivery of the Loan Documents and Borrower's
incurring of the Obligations.
3.4 VALIDITY. This Agreement, the Note and Security Agreement are, and
the remainder of the Loan Documents when delivered will be, legal, valid,
binding, and enforceable in accordance with their respective terms.
3.5 FINANCIAL STATEMENTS. All financial statements or reports heretofore
given by the Borrower to the Bank, including any schedules and notes pertaining
thereto, were prepared in accordance GAAP and fully and fairly present the
financial condition of the Borrower at the dates thereof and the results of
operations for the periods covered thereby, except in the case of quarterly
financial statements or reports, which are subject to changes resulting from
normal year-end adjustments, and as of the date of this Agreement there have
been no material adverse changes in the financial condition or business of the
Borrower from the date of the most recent financial statements or reports given
to the Bank.
3.6 TAXES. Except as otherwise permitted by this Agreement and as set
forth on SCHEDULE F hereto, the Borrower has filed all tax returns it was
required by law to have filed prior to the date of this Agreement, has paid or
caused to be paid all taxes, assessments, and other governmental charges that
were due and payable prior to the date of this Agreement, and has made adequate
provision for the payment of such taxes, assessments, or other charges accruing
but not yet payable, and the Borrower has no knowledge of any deficiency or
additional assessment in a materially important amount in connection with any
taxes, assessments, or charges not provided for on its books.
3.7 COMPLIANCE WITH LAW. Except to the extent that the failure to comply
would not materially interfere with the conduct of the business of the Borrower,
the Borrower has complied with all applicable laws in respect of: (1)
restrictions, specifications, or other requirements pertaining to products that
the Borrower sells or to the services it performs; (2) the conduct of its
business; and (3) the use, maintenance, and operation of its properties.
3.8 STATEMENTS AND OMISSIONS. No representation or warranty by the
Borrower contained in this Agreement or in any certificate or other document
furnished by the Borrower pursuant to this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary to make
such representation or warranty not misleading in light of the circumstances
under which it was made.
3.9 NO PENDING ACTIONS. Except as set forth on SCHEDULE F hereto, there
is no pending or to the Borrower's knowledge threatened action or Proceeding
affecting Borrower or any of its properties before any court, governmental
agency or arbitrator which may materially and adversely affect the condition
(financial or otherwise) or
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operations of Borrower or any of its properties or which purports to affect
the validity or enforceability of the Loan Documents.
3.10 CITIZENSHIP. Borrower is on the date hereof domiciled in the United
States and is "a citizen of the United States" as defined in 49 U.S.C.
Section 40102(a)(15).
3.11 SALES TAX. All sales, transfer, use, documentation or similar taxes,
fees or other charges due and payable prior to or as of the date hereof, if any,
have been paid to the extent such are in connection with the sale to and
purchase by Borrower of the Aircraft.
3.12 PRINCIPAL PLACE OF BUSINESS; PRINCIPAL HANGER LOCATION. Borrower's
principal place of business and chief executive office is located at 0000
Xxxxxxx Xxxxxx, Xxxxx X000, Xxxxxxxx, Xxxxxx 00000-0000 and has been located at
such address for a period no less than five (5) months prior to the date hereof.
The principal hangar location of the Aircraft is in Los Angeles, California.
3.13 TITLE. Borrower owns good and marketable title to the Collateral and
the Collateral is free and clear of all Liens (except for Permitted
Encumbrances).
3.14 CONDITION OF AIRCRAFT. The Aircraft is in good condition and is
ready for operation.
3.15 FIRST PRIORITY SECURITY INTEREST. Uniform Commercial Code financing
statements naming Borrower as debtor and Bank as secured party and covering the
Collateral subject to this Agreement and the Security Agreement will be filed in
the Bureau of Conveyances of the State of Hawaii and with the Secretary of State
for the State of California. The Security Agreement will be filed with the FAA.
The filing of all such financing statements and the Security Agreement will
create a valid perfected first priority security interest (subject only to
Permitted Encumbrances) in the Collateral, securing the payment and performance
of the Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interests will have been taken. On the Closing
Date, no Person other than Bank will hold any security interest affecting the
Collateral, except for Permitted Encumbrances. No effective security instrument
or other instrument similar in effect covering all or any part of the Collateral
will be on file on the Closing Date in any recording office or with the FAA,
except such as may have been filed in favor of Bank relating to this Agreement
and the Security Agreement.
3.16 ERISA. Borrower has not incurred any accumulated unfunded deficiency
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended from time to time ("ERISA") nor has Borrower incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC") established under
such Act (or any successor thereto under such Act) in connection with any Plan.
Borrower and its Subsidiaries are in compliance in all material respects with
those provisions of ERISA and the regulations and public interpretations
thereunder which are applicable to Borrower and its Subsidiaries, except for
such noncompliance as would not have a
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material adverse effect on the financial condition of Borrower and its
Subsidiaries taken as a whole.
3.17 INVESTMENT COMPANY; HOLDING COMPANY. Borrower (i) is not an
"investment company" as such term is defined in, or otherwise subject to
regulations under, the Investment Company Act of 1940 and (ii) is not a "holding
company" as that term is defined in, and is not otherwise subject to regulations
under, the Public Utility Holding Company Act of 1935.
3.18 OFFER TO SELL. Borrower has not sold, extended any offer to sell nor
accepted any offer to purchase any of Borrower's interest in the Collateral or
with respect to the transactions described in any Security Instrument or the
Note.
IV. AFFIRMATIVE COVENANTS
For so long as any of the Obligations remains outstanding, the Borrower
will, unless otherwise permitted by the Bank in writing:
4.1 PAYMENTS. Punctually pay when due all sums which may be due under the
Loan Documents.
4.2 PERFORMANCE OF OTHER OBLIGATIONS; NO LIENS. (1) Duly and punctually
perform its Obligations; (2) maintain the Liens and security interests created
by this Agreement, the Security Agreement and each other Security Instrument to
which it is a party as valid and perfected Liens on and security interests in
all of the Collateral, prior in right to any other Lien, security interest,
claim or other encumbrance other than Permitted Encumbrances; (3) warrant and
defend its interest in, and to, the Collateral against the claims and demands of
all Persons; provided that Borrower may engage in Permitted Contests; (4)
maintain good and marketable title to the Collateral, free and clear of any
Liens, security interests, charges or encumbrances except for Permitted
Encumbrances; and (5) defend, at Borrower's cost, any action, claim or
Proceeding affecting the Collateral.
4.3 ACCOUNTING RECORDS. Maintain accurate and proper accounting records
and books in accordance with GAAP, and provide the Bank with access to such
books and accounting records at the Bank's request during the Bank's normal
business hours.
4.4 FINANCIAL REPORTING. Furnish the Bank with financial reports,
certified as true and correct by the Chief Financial Officer of the Borrower, in
reasonable detail and form approved by the Bank, as follows:
(a) Not later than 120 days after the end of each fiscal year of
Borrower, a financial report for the Borrower and its Consolidated Subsidiaries
for such year, including therein a balance sheet of Borrower and its
Consolidated Subsidiaries as of the end of such fiscal year and related
statements of income and retained earnings and changes in financial position of
the Borrower and its Consolidated Subsidiaries for such
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fiscal year, setting forth in each case in comparative form corresponding
figures for the preceding fiscal year, all in reasonable detail and as
certified by the Borrower's public accountants, including their certificate
and accompanying comments;
(b) Not later than 60 days after the end of each of the first three
fiscal quarters, an unaudited balance sheet of the Borrower and its Consolidated
Subsidiaries, as of the end of such quarter and related unaudited statements of
income and retained earnings of the Borrower and its Consolidated Subsidiaries,
setting forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year;
(c) The financial reports required pursuant to clauses (a) and (b) shall
be accompanied by a compliance certificate in the form attached as SCHEDULE C
certifying (i) the financial ratios and other requirements referred to in
Section 4.10, (ii) that the financial reports delivered to the Bank concurrently
therewith were prepared in accordance GAAP and fully and fairly present the
financial condition of the Borrower at the dates thereof and the results of
operations for the periods covered thereby, except in the case of quarterly
financial reports, which are subject to changes resulting from normal year-end
adjustments, and that, as of the date of such certificate, there have been no
material adverse changes in the financial condition or business of the Borrower
from the date of the financial reports delivered concurrently therewith, and
(iii) that no Default or Event of Default has occurred or is continuing
(d) As soon as available, quarterly and year-end unaudited Reports of
Financial and Operating Statistics for Large Certified Air Carriers (U.S.
Department of Transportation Form 41 Schedule A);
(e) Promptly upon their becoming available, one copy of each financial
statement, report, notice or proxy statement sent by Borrower to stockholders
generally and of each regular or periodic report, registration statement or
prospectus filed by Borrower with any securities exchange or the Securities and
Exchange Commission or any successor agency, and of any order issued by any
governmental authority in any proceeding in which Borrower is a party;
(f) As soon as available, and in any event within 120 days after the end
of each fiscal year of Borrower, 3-year operating forecasts and projections; and
(g) From time to time such other information as the Bank may reasonably
request.
4.5 EXISTENCE. Except as permitted by Section 5.5, preserve and maintain
the Borrower's legal existence, remain duly qualified to do business and in good
standing in each jurisdiction in which the Collateral now or hereafter is
principally hangared or in which the failure to be in good standing would have a
material adverse effect on the business or operations of Borrower and timely
file all necessary and appropriate documents and exhibits and pay all
appropriate fees and charges in
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connection therewith, except where the failure to file or pay would not have
a material adverse effect on the business or operations of Borrower.
4.6 OBSERVANCE OF LAWS. Conduct the Borrower's business activities in an
orderly, efficient and regular manner and comply with all applicable laws,
rules, regulations and orders regarding the operation of Borrower's business,
except those which would not have a material adverse effect on the Borrower, and
otherwise relating to the Aircraft; and preserve and maintain all federal, state
and local licenses, privileges, franchises, certificates and other permits
necessary for the operation of its business, except those which would not have a
material adverse effect on the Borrower, and the operation of the Aircraft
(including without limitation the registration of the Aircraft with the FAA and
the certificate of airworthiness issued by the FAA) and promptly notify Bank of
any change in the FAA registration number of the Aircraft.
4.7 INSPECTION. (a) Permit Bank to inspect the Airframe and the Engines
at all reasonable times wherever located; (b) upon the request of the Bank,
confirm, or cause to be confirmed, to the Bank the location of the Airframe and
the Engines; (c) at any reasonable time, and upon reasonable notice, make the
Airframe and the Engines, and all books and records pertaining to the Airframe
and the Engines, available to the Bank for inspection; provided, however, that
such inspection shall not interfere with the Borrower's normal operation and
scheduling of the Aircraft; provided, further, that during the term of any lease
permitted hereunder reasonable inspection rights will be provided
notwithstanding the schedule operated by the lessee in the event such lessee's
schedule would otherwise practically preclude inspections hereunder; provided,
further, that following any notice to Borrower under Section 9.8 hereof with
respect to Borrower's (or any lessee's) failure to perform a maintenance
obligation of Borrower under Section 6.1(a) hereof until such failure has been
corrected to the extent required under Section 6.1(a) hereof, Bank shall have
the right to inspect the Aircraft, upon twenty-four (24) hours' prior notice, at
Borrower's (or such lessee's) place of business where the Aircraft is located,
and any such inspection of the Aircraft or Engines shall include a "walk
around", but shall not include the opening of any bays and panels unless a
Default or Event of Default shall have occurred and be continuing, and in any
case, shall not interfere with the operation or maintenance of the Aircraft; and
(d) pay for the cost of Bank's inspection if Borrower shall not promptly
commence any required repair discovered during Bank's inspection; in the case of
any inspection by Bank pursuant to this Section 4.7, Bank shall indemnify and
hold harmless Borrower from any claims, losses, damages, liabilities, actions or
suits arising from the death or personal injury of any person conducting an
inspection on behalf of Bank or any of Bank's authorized representatives.
4.8 FACILITIES. Keep all of the Borrower's property and business premises
in a good state of repair and condition, make all necessary repairs, renewals
and replacements thereto from time to time so that such property and business
premises shall be fully and efficiently preserved and maintained.
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4.9 TAXES AND OTHER LIABILITIES. Pay and discharge when due (1) all of
the Borrower's indebtedness, obligations, assessments and taxes, (2) all taxes
and any other governmental charges or levies which are at any time or from time
to time levied upon or assessed against the Collateral or are otherwise
associated with the ownership, use or operation of the Collateral and (3) all
claims (including without limitation claims for labor, materials and supplies)
against the Collateral, subject to any Permitted Contest and subject to the
contest described in SCHEDULE F hereto.
4.10 NOTICE TO THE BANK. Promptly give notice to the Bank of (a) the
occurrence of any Default or Event of Default of which Borrower has knowledge,
(b) any change in the name or organizational structure of the Borrower, (c) any
uninsured loss of the Collateral through fire, theft, liability or property
damage exceeding ___________, (d) any Proceeding against Borrower if such
Proceeding reasonably would be expected to, in the event of an unfavorable
outcome, cause an Event of Default, have a material adverse effect on Borrower's
financial condition or operations, affect the validity or enforceability of the
Loan Documents or affect priority or enforceability of Bank's security interest
in any of the Collateral, (e) any event which could have a material adverse
effect on the ability of the Borrower to continue its business operations in the
ordinary course, (f) any change in the Borrower's principal place of business,
(g) any change in the principal hangar location of the Aircraft.
4.11 FINANCIAL CONDITION. Maintain the Borrower's financial condition
according to the following standards, in each such case determined in accordance
with GAAP:
(a), (b), and (c) REDACTED IN ITS ENTIRETY.
4.12 HAZARDOUS MATERIALS. Abide at all times by all applicable hazardous
material laws, rules and regulations and immediately notify the Bank of any
claim or threatened claim affecting any property owned, leased or occupied by
the Borrower.
4.13 ERISA. (1) At all times, make prompt payment of all contributions
required under its Plans and required to meet the minimum funding standard set
forth in ERISA with respect to its Plans; (2) notify Bank immediately of any
fact, including, but not limited to, any Reportable Event (as defined in ERISA)
arising in connection with any of its Plans, which might constitute grounds, for
termination thereof by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Plan, together with a
statement, if requested by the Bank, as to the reason therefor and the action,
if any, proposed to be taken with respect therefor; and (iii) furnish to Bank
upon its request, such additional information concerning any of its Plans as may
be reasonably requested.
4.14 PERMITTED CONTESTS. In connection with any Permitted Contest,
Borrower shall pay, and save Bank harmless against, any and all losses,
judgments, decrees and costs (including, without limitation, all reasonable
attorneys' fees and expenses) in connection with any such contest and shall
promptly after the final settlement, compromise or determination (including any
appeals) of such contest, fully pay and
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discharge the amounts which shall be levied, assessed, charged or imposed or
be determined to be payable therein or in connection therewith, together with
all penalties, fines, interest, costs and expenses thereof or in connection
therewith, and perform all acts, the performance of which shall be ordered or
decreed as a result thereof.
V. NEGATIVE COVENANTS
For so long as any of the Obligations remains outstanding, the Borrower
will not, without the prior written consent of the Bank:
5.1 USE OF FUNDS. Use any of the proceeds of the Loan for any purpose
except as set forth in Section 1.2 of this Agreement.
5.2 CONVEYANCE OF INTEREST IN COLLATERAL. Except as otherwise permitted
herein and except for Permitted Encumbrances, sell, lease, assign, transfer,
convey, Grant an interest in, exchange or otherwise dispose of any of the
Collateral, any part thereof or any interest therein or otherwise cause or
permit any of the foregoing to occur.
5.3 LIENS. Create or suffer to exist any Lien affecting the Collateral or
any part thereof, other than Permitted Encumbrances.
5.4 REDUCTIONS IN PAYMENT ON NOTE. As against Bank, claim any credit on,
or make any deduction from, the principal or interest payable on the Note,
whether by reason of the payment of any taxes levied or assessed upon any of the
Collateral, or otherwise.
5.5 MERGER, CONSOLIDATION, SALE OF STOCK OR ASSETS. Consolidate with or
merge into any other Person or convey, transfer or lease all or substantially
all of its assets as an entirety to any Person without written consent of Bank
(which shall not be unreasonably withheld and for which no fee or other amount
in excess of _________ (exclusive of expenses payable pursuant to Section 9.7)
shall be charged) unless:
(a) such Person shall execute and deliver to the Bank an agreement in
form and substance reasonably satisfactory to Bank containing an assumption by
such successor Person of the due and punctual performance of each covenant and
condition of the Loan Documents;
(b) such Person is organized under the laws of the United States or a
state thereof or is otherwise a United States citizen;
(c) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and
(d) the Borrower shall have delivered to the Bank a certificate of an
authorized officer of the Borrower and an opinion, of Borrower's counsel or
other counsel reasonably satisfactory to the Bank, reasonably satisfactory in
form and scope
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to Bank, to the effect that such consolidation, merger, conveyance, transfer
or lease and the assumption agreement referred to in clause (a) above comply
with this Section 5.5 and that all conditions herein provided for relating to
such transaction have been complied with in all respects.
Upon any consolidation or merger, or any conveyance, transfer or lease of all or
substantially all of the assets of Borrower as an entirety in accordance with
this Section 5.5, the successor Person, formed by such consolidation or into
which Borrower is merged or the Person to which such conveyance, transfer or
lease is made, shall succeed to, and be substituted for, Borrower hereunder with
the same effect as if such successor Person had been named as the Borrower
herein. No such conveyance, transfer or lease of all or substantially all of the
assets of Borrower as an entirety shall have the effect of releasing Borrower or
any successor Person which shall theretofore have become such in the manner
prescribed in this Section 5.5 from its liability hereunder.
5.6 BUSINESS. Materially change the character of the Borrower's business
from that business in which it is currently engaged or in any business
reasonably related thereto, or engage in any type of business other than the
Borrower's current business or in any business reasonably related thereto.
VI. MAINTENANCE AND OPERATION; POSSESSION
6.1 REGISTRATION, MAINTENANCE AND OPERATION; POSSESSION MARKINGS
(a) REGISTRATION, MAINTENANCE AND OPERATION. The Borrower, at its own
cost and expense, shall, and shall cause each permitted lessee to: (i) cause the
Aircraft to be duly registered, and at all times thereafter to remain duly
registered, in the name of the Borrower (except as otherwise required by the
Federal Aviation Act) under the Federal Aviation Act and shall not register the
Aircraft under the laws of any other country if such registration shall
invalidate or adversely affect registration under the Federal Aviation Act; (ii)
maintain, service, repair, overhaul and test the Airframe and each Engine so as
to keep the Airframe and each Engine in as good operating condition, ordinary
wear and tear excepted; and (iii) maintain all records, logs and other materials
required by the FAA to be maintained in respect of the Airframe and each Engine.
The Borrower, at its own cost and expense shall: (a) perform or cause to be
performed all mandatory service, repair, maintenance, overhaul, and testing of
the Aircraft (i) as may be necessary and required under applicable FAA Rules and
Regulations and (ii) in the same manner and with the same care as shall be the
case with similar aircraft owned or operated by the Borrower, (b) not allow the
Aircraft to be maintained, used or operated in violation of any law or rule,
regulation or order of any government or governmental authority (domestic or
foreign) having jurisdiction, (c) keep the Aircraft in such condition as is
necessary to enable the airworthiness certificate, license or registration of
such Aircraft issued by any such authority to be maintained in good standing at
all times under the Federal Aviation Act and any other applicable law
12
or regulation, and (d) maintain all records, logs and other materials
required by the FAA or any other governmental entity to be maintained in
respect of the Aircraft. In the event that any such law, rule, regulation or
order requires alteration of the Aircraft, the Borrower will conform thereto
or obtain conformance therewith (except as otherwise provided herein in
Section 6.2(c)) and will maintain the Aircraft in proper operating condition
under such laws, rules, regulations and orders. The Borrower also agrees not
to operate or locate the Aircraft, or suffer the Aircraft to be operated or
located: (i) in any area not included in coverage under any insurance policy
required by the terms of Section 7.1 hereof, except in the case of a
Requisition of Use by the United States government or any instrumentality or
agency thereof, if the Borrower obtains insurance or an indemnity from the
United States government against the risks and in the amount required by
Section 7.1 hereof covering such areas; or (ii) in any recognized or
threatened area of hostility (including the United States of America or
Canada, if either of them becomes such an area of hostility) unless fully
covered, to the Bank's reasonable satisfaction, by "war risk" insurance, or
unless such Aircraft is operated or used under contract with the United
States government or any instrumentality or agency thereof under which
contract the United States of America assumes liability for any damage, loss,
destruction or failure to return possession of such Aircraft at the end of
the term of such contract or for injury to Persons or damage to property of
others. Except as permitted by the preceding sentence, the Borrower also
agrees not to use or permit the Aircraft to be used in any manner or for any
purpose excepted from or contrary to any insurance policy or policies
required to be carried or maintained under the Security Instruments or for
any purpose or for the carriage or any goods of any description excepted or
exempted from or contrary to such insurance policies, or to do any other act
or permit anything to be done which could reasonably be expected to
invalidate or limit any such insurance policies or which could in any way
render or cause Bank's interest in the Aircraft to be in any way jeopardized,
made unenforceable or unperfected or in any way invalid as against Borrower
or any third parties.
(b) POSSESSION. The Borrower will not, without the prior written consent
of the Bank, which consent will not be unreasonably withheld and for which no
fee or other amount (other than as expressly provided for hereunder) will be
required, lease or otherwise in any manner deliver, transfer or relinquish
possession of the Aircraft, Airframe or any Engine or any part thereof or any
part of the Borrower's rights hereunder to any Person or install any Engine, or
permit any Engine to be installed, on any airframe other than the Airframe;
PROVIDED, HOWEVER, that, so long as no Default or Event of Default shall have
occurred and be continuing, and so long as the Borrower shall comply with the
provisions of Section 7.1 hereof, the Borrower may, without the prior written
consent of the Bank:
(1) subject any Engine or Part to normal interchange or pooling
agreements or arrangements, in each case customary in the airline
industry and entered into by Borrower in the ordinary course of
its business, PROVIDED no such agreement or arrangement
contemplates or requires the transfer of title to such Engine or
Part and PROVIDED FURTHER that, if Borrower relinquishes
possession of an Engine under such an
13
agreement or arrangement for a continuous period of more than
180 days, an Event of Loss shall be deemed to have occurred
with respect thereto and Borrower shall comply with Section 7.2;
(2) deliver possession of the Aircraft, Airframe or any Engine to the
manufacturer thereof or to overhaul agencies for testing or other
similar purposes or to any organization for services, repair,
maintenance or overhaul work on the Aircraft, Airframe or any
Engine or any part thereof or for alterations or modifications in
or additions to the Airframe or any Engine to the extent required
or permitted by the terms of Section 6.2(c) hereof;
(3) transfer possession of the Aircraft, Airframe or any Engine to the
United States government or any instrumentality or agency thereof
pursuant to a lease required to be entered into in accordance with
applicable laws, rulings, regulations or orders, a copy of which
lease shall be furnished to the Bank;
(4) transfer possession of the Aircraft, Airframe or any Engine to the
United States government or any instrumentality or agency thereof
when required in accordance with applicable laws, ruling,
regulations or order;
(5) install an Engine on an airframe owned by the Borrower free and
clear of all Liens, except (A) those described in clauses (ii) and
(iii) of the definition of Permitted Encumbrances, (B) those which
apply only to the engines (other than Engines), appliances, parts,
instruments, appurtenances, accessories, furnishings and other
equipment (other than Parts) installed on such airframe (but not
to the airframe as an entirety), and (C) the rights of other
United States certificated air carriers under normal interchange
or pooling agreements or arrangements which are customary in the
airline industry, and which do not contemplate, permit or require
the transfer of title to such airframe or the engines installed
on such Airframe;
(6) install an Engine on an airframe leased to the Borrower or
purchased by the Borrower subject to a conditional sale or other
security agreement; PROVIDED, HOWEVER, that (A) such airframe is
free and clear of all Liens except the rights of the parties to
the lease or conditional sale or other security agreement covering
such airframe which insofar as they relate to such Engine are
subordinate to the rights of the Bank hereunder or which expressly
and effectively provide that each Engine shall not become subject
to the lien thereof as to any rights of any party thereunder other
than the Borrower, and (B) the Borrower shall have received from
the lessor or secured party of such airframe a written agreement
(which may be the lease or conditional sale or other security
agreement covering such airframe), a copy of which shall be
provided to the Bank, whereby such lessor or secured party agrees
that neither it
14
nor its successors or assigns will acquire or claim any right,
title or interest in any Engine by reason of such Engine being
installed on such airframe at any time while such Engine is
subject to the Lien of the Security Agreement;
(7) install an Engine on an airframe owned by the Borrower, leased to
the Borrower or purchased by the Borrower subject to a conditional
sale or other security agreement under circumstances where neither
subsection (5) nor subsection (6) of this Section 6.1(b) is
applicable; PROVIDED, HOWEVER, that such installation shall be
deemed an Event of Loss with respect to such Engine and the
Borrower shall comply with Section 7.2 hereof with respect to such
Event of Loss, the Bank not intending hereby to waive any right or
interest it may have to or in such Engine under applicable law
until compliance by the Borrower with said Section 7.2;
(8) lease any engine or the Aircraft, Airframe and any Engines or
engines then installed on such Airframe in the ordinary course of
business to (A) a United States Certificated Air Carrier (a
"PERMITTED AIR CARRIER") not the subject of petition filed under
the Federal bankruptcy laws or other insolvency laws now or
hereinafter in effect for use by such United States Certificated
Permitted Air Carrier on its regularly scheduled or charter
routes, or (B) a foreign permitted air carrier (as described in
SCHEDULE E hereto (a "FOREIGN PERMITTED AIR CARRIER")) not the
subject of a petition filed under bankruptcy or other insolvency
laws now or hereafter in effect, for use by such Foreign Permitted
Carrier in its regularly scheduled or charter routes; provided,
however, that the Bank, upon request, shall receive satisfactory
legal opinions to the effect that, upon such lease, the Bank's
rights under the Loan Documents will remain fully perfected; and
(9) enter into a wet lease or charter (whereby the Borrower provides
flight crew, maintenance, ground crew, etc. for the benefit of any
lessee) in the ordinary course of Borrower's business which shall
not be considered a transfer of possession hereunder, provided
that the Borrower's obligations under the Loan Documents shall
continue in full force and effect notwithstanding any such wet
lease or charter;
PROVIDED, FURTHER, that the rights of any transferee who receives possession by
reason of a transfer permitted by this Section (other than the transfer of an
Engine which is deemed an Event of Loss) shall be subject and subordinate to,
and any lease permitted by this Section shall expressly prohibit any lease of
the Airframe or such Engine by the lessee and shall be made expressly subject
and subordinate to, all the terms of the Loan Documents, including, without
limitation, the covenants contained in this Section, the Bank's rights to
repossession pursuant to the Loan Documents, and Borrower shall remain primarily
liable hereunder for the performance of all of the terms hereof to the same
extent as if such transfer or lease had not occurred. No interchange agreement,
15
lease or other relinquishment of possession of the Airframe or any Engine shall
in any way discharge or diminish any of the Borrower's obligations to the Bank
hereunder. In the event the Borrower shall have received from the lessor or
secured party of any airframe leased to the Borrower or purchased by the
Borrower subject to a conditional sale or other security agreement a written
agreement complying with subsection (6) of this Section 6.1(b), and the lease or
conditional sale or other security agreement covering such airframe also covers
an engine or engines owned by the lessor under such lease or subject to a
security interest in favor of the secured party under such conditional sale or
other security agreement, the Bank hereby agrees for the benefit of such lessor
or secured party that the Bank will not acquire or claim, as against such lessor
or secured party, any right, title or interest in any such engine as the result
of such engine being installed on the Airframe at any time while such engine is
subject to such lease or conditional sale or other security agreement and owned
by such lessor or subject to a security interest in favor of such secured party.
The Bank also hereby agrees for the benefit of the mortgagee under any mortgage
complying with clause (A) of subsection (6) of this Section 6.1(b) that the Bank
will not acquire or claim, as against such mortgagee, any right, title or
interest in any engine subject to the lien of such mortgage as the result of
such engine being installed on the Airframe at any time while such engine is
subject to the lien of such mortgage. In the case of any transferee that
receives possession by reason of a transfer permitted by Section 6.1(b) (other
than the transfer of an Engine which is deemed to have been an Event of Loss),
(1) the rights of such transferee shall be subject and subordinate to, and any
lease permitted by this Section 6.1(b) shall be made expressly subordinate to,
all the terms of the Loan Documents; (2) the Borrower shall remain primarily
liable hereunder for the performance of all of the terms of the Loan Documents
to the same extent as if such lease or transfer had not occurred; and (3)
without limiting the effect of the preceding clause (2), any such lease shall
include appropriate provisions (by requiring such obligations to be performed by
the lessee) for the operation, maintenance and insurance of the Airframe and the
Engines leased thereby in accordance with the terms hereof; and PROVIDED,
FURTHER, that any such lease shall expressly prohibit any assignment or sublease
(other than as permitted by subsection (1) of this Section 6.1(b)) of the
subject Aircraft, Airframe or any Engine and any of the rights under such lease.
Borrower may identify the Aircraft to be allocated to the Civil Reserve Air
Fleet Program ("CRAF") only so long as (i) Borrower has delivered a true and
complete copy of the agreement relating to CRAF between Borrower and the United
States Government to Bank and (ii) the United States Government has agreed to
indemnify Borrower and Bank for any loss or damage to the Aircraft while the
Aircraft is being used under CRAF.
As security for the due and punctual payment of all amounts payable by the
Borrower hereunder and the performance and observance by the Borrower of all of
the covenants made by it in the Loan Documents, the Borrower hereby grants to
the Bank a security interest in all of the Borrower's right, title and interest
in and to each lease of the Aircraft, whenever entered into, together with all
renewals of any such lease executed from time to time, and all payments of rent
and all other amounts due and to become due thereunder; and the Borrower shall
take such actions as the Bank may reasonably request for the purpose of
perfecting, preserving or otherwise protecting such security interest.
16
(c) MARKINGS. The Borrower agrees, at its own cost and expense, to cause
the Airframe and the Engines to be kept numbered with the identification or
serial numbers therefor as specified in SCHEDULE A.
(d) ASSIGNMENTS. Except as permitted by Sections 5.5 and 6.1(b), all or
any part of the Borrower's rights hereunder or in the Airframe or any Engine
shall not be assigned, let or conveyed by the Borrower to any Person without the
Bank's prior written consent, and any such purported assignment, lease or
conveyance shall be void.
(d) MAINTENANCE OF CERTAIN ENGINES. Notwithstanding anything to the
contrary contained in this Loan Agreement, an engine which is not an Engine, but
which is installed on the Airframe, shall be maintained in accordance with
Section 6.1(a).
(f) RECORDS CONCERNING MAINTENANCE. Throughout the term of the Loan, the
Borrower shall keep accurate, complete and current records (in accordance with
(i) the applicable requirements of the FAA or any other governmental body having
jurisdiction from time to time in effect, and (ii) the mandatory recommendations
of the manufacturer of the Aircraft) of all maintenance carried out with respect
to the Aircraft and shall permit the Bank or its respective agents to examine
such records at any reasonable time provided that such examination shall not
interfere with the Borrower's normal operation and scheduling of the Aircraft.
The records, logs and documents so kept or maintained shall be part of the
Manuals and Technical Records (and the definitions of "AIRCRAFT" and "MANUALS
AND TECHNICAL RECORDS" in Article X shall be construed accordingly).
6.2 REPLACEMENT AND POOLING OF PARTS; IMPROVEMENTS.
(a) REPLACEMENT OF PARTS. The Borrower, at its own cost and expense, will
promptly replace all Parts, which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine and which may from time
to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use for any reason whatsoever,
except as otherwise provided in paragraph (c) of this Section (such substituted
parts being hereinafter called "REPLACEMENT PARTS"). The Borrower shall notify
the Bank of any Replacement Parts having a per item cost of ___________ or more.
In addition, the Borrower may, at its own cost and expense, remove in the
ordinary course of maintenance, service, repair, overhaul or testing any Parts,
whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use; PROVIDED, HOWEVER, that the
Borrower, except as otherwise provided in paragraph (c) of this Section, will,
at its own cost and expense, replace such Parts as promptly as possible. All
Replacement Parts shall be free and clear of all Liens (except for pooling
arrangements to the extent permitted by paragraph (b) of this Section) and shall
be in as good operating condition as, and shall have a value and utility at
least equal to, the Parts replaced assuming such replaced Parts were in the
condition and repair required to be maintained by the terms hereof. Bank's
security interest shall continue in all Parts
17
at any time removed from the Airframe or any Engine, no matter where located,
until such time as such Parts shall be replaced by parts which have been
incorporated or installed in or attached to the Airframe or any Engine and
which meet the requirements for Replacement Parts specified above.
Immediately upon any Replacement Part becoming incorporated or installed in
or attached to the Airframe or any Engine as above provided, without further
act, (i) Bank's security interest in the replaced Part shall be released, and
such replaced Part shall no longer be deemed a Part hereunder, and (ii) such
Replacement Part shall become a Part subject to Bank's security interest and
be deemed part of the Airframe or such Engine for all purposes hereof to the
same extent as the parts originally incorporated or installed in or attached
to the Airframe or such Engine.
(b) POOLING OF PARTS. So long as no Default or Event of Default shall
have occurred or be continuing hereunder, any Part removed from the Airframe or
any Engine as provided in paragraph (a) of this Section may be subjected by the
Borrower to a normal pooling arrangement customary in the airline industry
entered into in the ordinary course of the Borrower's business with Permitted
Air Carriers or the manufacturer of such Part; PROVIDED, HOWEVER, that the
Replacement Part shall be incorporated or installed in or attached to the
Airframe or Engine in accordance with paragraph (a) of this Section as promptly
as possible after the removal of such removed Part. In addition, any Replacement
Part when incorporated or installed in or attached to the Airframe or any Engine
in accordance with paragraph (a) of this Section may be owned by a Permitted Air
Carrier subject to such a normal pooling arrangement; PROVIDED, HOWEVER, that
the Borrower, at its expense, as promptly thereafter as possible, either (i)
causes such Replacement Part to be subject to Bank's security interest in
accordance with paragraph (a) of this Section or (ii) replaces such Replacement
Part by incorporating or installing in or attaching to the Airframe or such
Engine a further Replacement Part owned by the Borrower free and clear of all
Liens and by causing such further Replacement Part to be subject to Bank's
security interest in accordance with paragraph (a) of this Section.
(c) IMPROVEMENTS. The Borrower, at its own expense, shall affix or
install any accessory, equipment or device to or on the Airframe or an Engine or
make such alterations, modifications and additions to the Airframe or the
Engines (any such accessory, installed equipment or device, improvement,
modification, alteration or addition affixed or installed pursuant to this
paragraph being herein referred to as an "IMPROVEMENT") as may be required from
time to time to meet the standards of the FAA or other governmental authority
having jurisdiction and as may be required to permit the full and unrestricted
use of the Aircraft in the service now and from time to time provided by the
Borrower, including but not limited to operating noise level standards or other
standards under the regulations of the FAA for which compliance is required.
In addition, the Borrower, at its own expense, may from time to time
make such Improvements to the Airframe or any Engine as the Borrower may deem
desirable in the proper conduct of its business; PROVIDED, HOWEVER, that no such
Improvement shall diminish the value or utility of the Airframe or any such
Engine, or impair the condition or airworthiness thereof, below the value,
utility, condition and airworthiness
18
thereof immediately prior to such Improvement assuming the Airframe or any
such Engine was then of the value or utility and in the condition and
airworthiness required to be maintained by the terms of this Agreement. All
Parts constituting Improvements shall, without further act, become subject to
Bank's security interest. Notwithstanding the foregoing sentence of this
paragraph, so long as no Default or Event of Default shall have occurred and
be continuing, the Borrower may, at any time, remove any Improvement;
PROVIDED, HOWEVER, that (i) such Improvement is in addition to, and not in
replacement of or substitution for, any Part originally incorporated or
installed in or attached to the Airframe or such Engine or any Improvement in
replacement of, or substitution for any such Improvement, (ii) such
Improvement is not required to be incorporated or installed in or attached or
added to the Airframe or any such Engine pursuant to the terms of this
Section, and (iii) such Improvement can be removed from the Airframe or such
Engine without diminishing or impairing the value, utility, condition or
airworthiness required to be maintained by the terms of this Agreement which
the Airframe or such Engine would have had at such time had such alteration,
modification or addition not occurred. Upon the removal by the Borrower of
any Improvement as above provided, Bank's security interest in such
Improvement shall, without further act, be released and such Improvement
shall no longer be deemed part of the Airframe or Engine from which it was
removed.
VII. INSURANCE, TRANSFER, CONDEMENATION AND EVENT OF LOSS
7.1 INSURANCE.
(a) LIABILITY INSURANCE. During the term of this Agreement (and
regardless of whether the Aircraft remains in the possession of or the property
of Borrower), Borrower shall maintain (or cause to be maintained) at no expense
to Bank the following insurance on a worldwide basis (except for Iraq and
Kuwait) with no territorial restrictions (other than such territorial
restrictions as may be applicable to War Risks Liability Coverage (AV52C or its
equivalent)), with insurers of recognized responsibility through nationally
recognized aviation insurance brokers: comprehensive aviation liability
insurance (including third party legal liability, public liability, passenger
legal liability, personal injury liability, passenger's baggage and personal
effects (checked and unchecked) liability, cargo legal liability, mail legal
liability, premises liability, products/completed operations, hangarkeepers
(ground and in-flight) liability and war risks liability (Lloyd's of London
Clause AV.52 or its equivalent)), insurance of the indemnification obligations
set forth in Section 9.6 hereof, and property damage liability insurance with
respect to the Aircraft in an amount not less than that carried by Borrower on
similar equipment owned or leased by Borrower, PROVIDED that such liability
insurance shall in no event be less than _______________ for any one occurrence
or offense in the aggregate annually as respects Personal Injury (Passenger
Only) Product Complete Operation Liability. Borrower shall not self-insure with
respect to any public liability coverage, except by way of such deductibles as
may apply to baggage and personal effects, cargo legal, mail legal (if
applicable) and hangar keepers liabilities as are usual and customary in the
worldwide aviation insurance marketplace. Any policies of insurance carried in
accordance with this Section 7.1(a) and any policies taken out in substitution
or replacement for any of such policies shall: (1) name Bank and its
19
affiliates and directors, officers, employees, servants and agents as an
additional insured (each such Person, an "ADDITIONAL INSURED"), as its
interests may appear (2) provide that in respect of the interest of each
Additional Insured in such policies, the insurance shall not be invalidated
by any action or inaction of Borrower or any other insured and shall insure
each Additional Insured regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by Borrower;
(3) provide that if the insurers cancel such insurance for any reason
whatever, or if there is any material change in policy terms and conditions
or coverage, such cancellation, lapse or change shall not be effective as to
any Additional Insured until thirty days (seven days, or such other period as
may from time to time be customarily obtainable in the industry, in the case
of war risk and allied perils coverage) after receipt by such Additional
Insured of written notice from such insurers of such cancellation, lapse or
change; and (4) provide that no Additional Insured shall have any obligation
or liability for premiums, commissions, assessments or calls in connection
with such insurance. Each liability policy shall (i) be primary without right
of contribution from any other insurance which is carried by any Additional
Insured, (ii) expressly provide that all of the provisions thereof, except
the limits of liability, shall operate in the same manner as if there were a
separate policy covering any Additional Insured, and (iii) waive any right of
the insurers to any subrogation, set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability of
any Additional Insured or Borrower to the extent of any moneys due to such
Additional Insureds.
(b) ALL RISK HULL INSURANCE During the term of this Agreement, Borrower
shall maintain (or cause to be maintained) at no expense to Bank the following
insurance on a worldwide basis (except for Iraq and Kuwait) with no territorial
restrictions (other than territorial restrictions as may be applicable to
Aviation Hull War Risks Coverage), with insurers of recognized responsibility
through nationally recognized aviation insurance brokers (A) all-risks (ground,
taxiing, flight and ingestion) hull insurance covering the Aircraft; and (B) all
risks (including transit) Aviation Spare Parts (including Engine and Equipment)
Insurance and (C) at all times that any Aircraft or any Engine is not covered by
the insurance described in Section 7.1(c), coverage against the perils of (i)
strikes, riots, civil commotions or labor disturbances, (ii) any vandalism,
malicious act or act of sabotage, and (iii) hijacking, or any unlawful seizure
or wrongful exercise of control of the Aircraft or crew in flight made by any
person or persons on board such Aircraft without the consent of the insured
other than hijacking committed by persons engaged in a program of irregular
warfare for terrorist purposes, in each case to the extent insured by the
standard "buy-back" provisions to the Common North American Airline War
Exclusion Clause as currently available in the United States aviation insurance
market. Such insurance shall be for an Agreed Value basis which shall be in an
amount not less than the unpaid principal balance of the Loan. With the consent
of Bank, which will not be unreasonably withheld, Borrower may self-insure, only
by way of deductible, the risks required to be insured against pursuant to the
preceding two sentences in such amounts as are reasonably acceptable to Bank.
"Fleet Aggregate" deductions shall not be applicable in respect of claims
payable to Bank pursuant to the policies required to be carried pursuant to this
Section 7.1(b). Any policies carried in accordance with this Section 7.1(b)
covering the Aircraft
20
and any policies taken out in substitution or replacement for any such
policies shall (1) name Bank as loss payee as its interests may appear; (2)
provide that the entire amount of any loss shall be paid to Bank; (3) provide
that if such insurance is cancelled for any reason whatsoever, or any
substantial change is made in policy terms, conditions or coverage, or the
same is allowed to lapse for non-payment of premium, such cancellation,
change or lapse shall not be effective as to Bank until thirty days (seven
days or such other period as may from time to time be customarily obtainable
in the industry, in the case of war risk and allied perils coverage), after
receipt by Bank of written notice from such insurers of such cancellation or
lapse or change in policy terms, conditions or coverage; (4) provide that
losses in excess of __________ shall be adjusted with Bank; (5) provide that
in respect of Bank, such insurance shall not be invalidated by any action or
inaction of Borrower or any other insured and shall insure such parties
regardless of any breach contained in such policies by Borrower or any other
insured; (6) be primary without right of contribution from any other
insurance which is carried by Bank with respect to its interest in the
Aircraft; (7) waive any right of subrogation of the insurers against Bank;
(8) waive any right of the insurers to set-off or counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any liability of
Borrower or Bank to the extent of any moneys due to Bank; and (9) provide
that Bank shall not have any obligation or liability for premiums,
commissions, assessments or calls in connection with such insurance. If the
insurance required to be carried pursuant to Sections 7.1(b) and 7.1(c) is
effected under separate policies, the insurers shall agree that if a
disagreement arises as to whether a claim is covered by the all-risk
insurance or the war-risk insurance, the insurers will settle such claims on
the basis of a 50-50 claim funding arrangement.
(c) WAR-RISK INSURANCE. Borrower shall maintain (or cause to be
maintained), at no expense to Bank, the following insurance on a worldwide basis
(except for Iraq and Kuwait) with insurers of recognized responsibility through
nationally recognized insurance brokers, War-Risk and Allied Perils Aviation
Hull (including Spare Parts, Engines and Equipment) Insurance on an Agreed Value
basis, which shall be not less than the Unpaid Principal Balance. Such policy
shall (i) insure against those perils excluded under Borrower's All Risks Hull
and Spares policy(ies) by virtue of Lloyd's of London Exclusion Clause AVN.48B
("War, Hijacking and Other Perils Exclusion Clause") or its equivalent (other
than paragraph (b) thereof relating to nuclear perils), (ii) provide for payment
in U.S. Dollars, (iii) contain a 50/50 clause in accordance with Lloyd's of
London Aviation Clause AVS.103 or its equivalent, (iv) be endorsed to include
coverage for confiscation, requisition, nationalization, seizure, restraint,
detention, appropriation, requisition of title or for use by any governmental
authority (except for the government of registry) of the Aircraft, (v) provide
coverage on a worldwide basis (subject only to such geographical limits as may
be imposed by the hull, war and allied perils insurance) and (vi) be endorsed to
include provisions identical to those contained in clauses (1), (2), (3), (4),
(5), (6), (7), (8), (9) of Section 7.1(b).
(d) OTHER INSURANCE. In addition to the insurance described above,
Borrower shall obtain, maintain and keep in force such other insurance of the
types and amounts
21
required by applicable law or regulation to be carried by Borrower,
including, but not limited to, workers' compensation insurance.
(e) MISCELLANEOUS. The Borrower shall arrange to the extent procurable
for appropriate certification and broker's letter of undertaking as to the
satisfaction of the requirements set forth above in Sections 7.1(a), (b) and (c)
to be delivered promptly (and in any case not later than the Closing Date) to
the Bank by each insurer with respect thereto. Policies of insurance procured in
accordance with Sections 7.1(a), (b) and (c) inuring to the benefit of the Bank
shall be amended to name as additional named insureds all successors and assigns
of the Bank.
(f) REPORTS, ETC On or before the Closing Date and thereafter during the
term of this Agreement on the anniversary date of the policy or within thirty
(30) days thereafter, (but in any event prior to the expiration of any insurance
required pursuant to this Section 7.1) the Borrower shall furnish to the Bank a
report signed by a firm of independent aircraft insurance brokers of recognized
standing, appointed by the Bank, stating the conclusion of such firm that such
insurance as of the date of such report carried and maintained on the Aircraft
complies with the terms of this Section. The Borrower will cause the insurers to
advise the Bank in writing promptly of any default in the payment of any premium
and of any other act or omission on the part of the Borrower which might
invalidate or render unenforceable, in whole or in part, any insurance on the
Aircraft. Upon the request of the Bank, the Borrower will furnish to the extent
procurable and if the Borrower is not prohibited from so procuring to such
party, within a reasonable period after such request (after the same are
available to the Borrower), a copy of the policy or policies evidencing the
insurance carried and maintained pursuant to this Section. The Borrower will
also cause the applicable insurer to advise the Bank in writing at least 30 days
prior to the expiration or termination date of any insurance carried and
maintained on the Aircraft pursuant to this Section. In the event that the
Borrower shall fail to maintain insurance as herein provided, the Bank may at
its sole option provide such insurance and, in such event, the Borrower shall,
upon demand, reimburse the Bank for the cost thereof, without waiver of any
other rights the Bank may have.
7.2 CERTAIN EVENTS OF LOSS. Upon the occurrence of an Event of Loss with
respect to the Aircraft, (a) Borrower shall pay Bank on the earlier of (i) the
Monthly Payment Date on or immediately succeeding the 90th day following the
date of occurrence of such Event of Loss and (ii) the Monthly Payment Date
immediately succeeding the date of receipt of insurance proceeds with respect to
such Event of Loss, an amount equal to the sum of the outstanding principal
balance of the Loan and the accrued interest on the Note and all other
obligations owing hereunder as of such date, and (b) Bank shall release its Lien
on the Collateral on the date of receipt of all such amounts. Upon the
occurrence of an Event of Loss with respect to an Engine under circumstances in
which there has not occurred an Event of Loss with respect to the Airframe, the
Borrower shall (i) give the Bank prompt written notice thereof, (ii) within 15
days after the date of occurrence of such Event of Loss, take such actions as
are necessary to ensure that such Engine shall be replaced as soon as possible,
and
22
(iii) within 60 days after the date of occurrence of such Event of Loss,
cause, as replacement for the Engine with respect to which such Event of Loss
occurred, another General Electric CF6-50C2 engine (or engine of the same or
another manufacturer, of the same or improved utility, performance and
efficiency and suitable for installation and use on the Airframe in
conjunction with the remaining Engines installed on the Aircraft) owned by
the Borrower free and clear of all Liens and having a value and utility at
least equal to, and being in as good operating condition as, the Engine with
respect to which such Event of Loss occurred, assuming such Engine was of the
value and utility and in the condition and repair required by the terms
hereof immediately prior to the occurrence of such Event of Loss to be
subjected to Bank's security interest hereunder and under the Security
Agreement. Prior to or at the time of any such conveyance, the Borrower, at
its own expense, will (i) cause a supplement to the Security Agreement, in
form and substance satisfactory to the Bank, to be duly executed by the
Borrower and recorded pursuant to the Federal Aviation Act, (ii) execute and,
if necessary, file such documents as may be reasonably required by the Bank
to confirm the Bank's security interest in such replacement engine, (iii)
furnish the Bank with such evidence of compliance with the insurance
provisions of Section 7.1 hereof with respect to such replacement engine as
the Bank may reasonably request, and (iv) furnish the Bank with an opinion of
counsel (and such other evidence of security interest as the Bank may
reasonably request) to the effect that, upon the execution of such
supplement, the Bank will acquire a first priority security interest in such
replacement engine to the same extent as the Engine replaced thereby. Upon
full compliance by the Borrower with the terms of this paragraph, the Bank
will release its security interest in the Engine with respect to which such
Event of Loss occurred. For all purposes hereof, each such replacement engine
shall, after such conveyance, be deemed part of the Collateral shall be
deemed an "Engine" as defined herein and shall be deemed part of the Aircraft.
VIII. THE BANK'S RIGHTS UPON DEFAULT
8.1 EVENTS OF DEFAULT. Each of the following events is an "Event of
Default" under this Agreement:
(a) The Borrower's failure to pay within five (5) Business Days after the
same becomes due any sum payable to the Bank under the Loan Documents or under
any other agreement or note between the Bank and Borrower;
(b) The Borrower shall fail to carry and maintain insurance on or with
respect to the Aircraft in accordance with the provisions of Section 7.1 hereof;
provided, that in the case of insurance with respect to which cancellation,
change or lapse for nonpayment of premium shall not be effective as to Bank for
30 days (seven days in the case of any war risk and allied perils coverage)
after receipt of notice by Bank of such cancellation, change or lapse, no such
failure to carry and maintain insurance shall constitute a Default or an Event
of Default hereunder until the earlier of (i) the date such insurance is no
longer in effect as to Bank, (ii) the date such failure shall have continued
unremedied for a period of 20 days (five (5) days in the case of any war risk
and allied perils coverage) after receipt by Bank of the notice of cancellation,
change or lapse; or
23
(c) The Borrower shall operate the Aircraft at a time when, or at a place
in which, any of the insurance required by the provisions of Section 7.1 hereof
shall not be in effect, except in the case of a Requisition of Use by the United
States government or any instrumentality or agency thereof, if the Borrower
obtains insurance or an indemnity from the United States government against the
risks and in the amount required by Section 7.1 hereof covering such time and
areas; or
(d) The Borrower shall (except as expressly permitted by the provisions
of this Agreement) attempt to remove, sell, transfer, encumber, part with
possession of, assign or let the Airframe or any Engine; or
(e) Any representation or warranty made by the Borrower in this Agreement
or any agreement, document or certificate delivered by the Borrower in
connection herewith or therewith shall prove to have been incorrect in any
material respect when any such representation or warranty was made or given and
remains material and incorrect at the time of discovery and is not cured within
30 days of written notice to Borrower by Bank; or
(f) The Borrower shall consent to the appointment of a receiver, trustee
or liquidator of itself or of a substantial part of its property, or the
Borrower shall admit in writing its inability to pay its debts generally as they
come due, or shall make a general assignment for the benefit of creditors; or
(g) The Borrower shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization in a proceeding under any
bankruptcy laws (as now or hereafter in effect) or an answer admitting the
material allegations of a petition filed against the Borrower in any such
proceeding, or the Borrower shall, by voluntary petition, answer or consent,
seek relief under the provisions of any other now existing or future bankruptcy
or other similar law (other than a law which does not provide for or permit the
readjustment or alteration of the Borrower's obligations hereunder) providing
for the reorganization or liquidation of corporations, or providing for an
agreement, composition, extension or adjustment with its creditors and such
proceedings are not stayed within 60 days; or
(h) An order, judgment or decree shall be entered in any proceeding by
any court of competent jurisdiction appointing, without the consent of the
Borrower, a receiver, trustee or liquidator of the Borrower or of any
substantial part of its property, or sequestering any substantial part of the
property of the Borrower, and any such order, judgment or decree of appointment
or sequestration shall remain in force undismissed, unstayed or unvacated for a
period of 60 days after the date of entry thereof; or
(i) A petition against the Borrower in a proceeding under applicable
bankruptcy laws or other insolvency laws (other than any law which does not
provide for or permit any readjustment or alteration of the Borrower's
obligations hereunder in each case), as now or hereafter in effect, shall be
filed and shall not be withdrawn or dismissed within 60 days thereafter, or if,
under the provisions of any law (other than any law which does not provide for
or permit any readjustment or alteration of the
24
Borrower's obligations hereunder in each case) providing for reorganization
or liquidation of corporations which may apply to the Borrower, any court of
competent jurisdiction shall assume jurisdiction, custody or control of the
Borrower or of any substantial part of its property and such jurisdiction,
custody or control shall remain in force unrelinquished, unstayed or
unterminated for a period of 60 days; or
(j) The Borrower shall fail to remain a duly certificated "air carrier"
within the meaning of the Federal Aviation Act; or
(k) The Borrower shall voluntarily suspend for more than 30 days (other
than on a temporary basis as a result of a labor dispute) all or substantially
all of its commercial airline operations or the franchises, concessions,
permits, rights or privileges required for the conduct of the business and
operations of the Borrower shall be revoked, cancelled or otherwise terminated
or the free and continued use and exercise thereof curtailed or prevented, and
as a result thereof the preponderant business activity of the Borrower shall
cease to be that of a commercial airline; or
(l) The Borrower shall fail to maintain in good standing an airworthiness
certification for the Aircraft, or shall fail to maintain the registration of
the Aircraft in the name of the Borrower, under the Federal Aviation Act; or
(m) The Security Agreement shall, for any reason, except for Permitted
Encumbrances and to the extent permitted by the terms hereof and thereof, cease
to create a valid first priority Lien on and perfected first priority security
interest in any of the Collateral purported to be covered thereby;
(n) Any third party obtains a court order enjoining or prohibiting the
Borrower from performing any of its respective obligations under the Loan
Documents and such order is not stayed or, within 30 days after entry of the
same, vacated or dismissed or the subject of a Permitted Contest; or
(o) The Borrower shall default in its obligations under Sections 4.5,
4.10., 5.1 or 5.6 hereof; or
(p) The Borrower shall fail to perform or observe any other covenant,
condition or agreement to be performed or observed by it under this Agreement
(other than a covenant, condition or agreement failure in the performance of
which is elsewhere in this Section specifically dealt with) or any agreement,
document or certificate delivered by the Borrower in connection herewith or
therewith, and (1) such failure shall continue for 30 days after written notice
thereof from the Bank to the Borrower or (2) if such failure is, in the Bank's
sole discretion, curable but not reasonably curable within 30 days after written
notice thereof from the Bank to Borrower, Borrower has not promptly commenced
and, in Bank's sole determination, is not diligently pursuing such cure.
25
8.2 THE BANK'S RIGHTS.
(a) REMEDIES. If an Event of Default shall occur and be continuing the
Bank shall have, in addition to any and all other rights and remedies, legal or
equitable, available to the Bank under any and all of the Loan Documents or at
law, the following additional rights and remedies:
(1) The absolute right to deny to the Borrower any further
disbursement of the Loan proceeds or other funds (the Bank's
obligation to extend any further credit to the Borrower shall
immediately terminate);
(2) The right, at the option of the Bank, to declare, without notice,
the entire principal amount and accrued interest for the Loan,
plus any fees and charges reasonably incurred by the Bank under
any of the Loan Documents, immediately due and payable;
(3) The right, at the option of the Bank, to charge interest on any
principal amount outstanding under this Agreement at the rate of
12% per year or four (4) percentage points above the Base Rate
from time to time in effect, whichever is greater;
(4) The right to the EX PARTE appointment without bond of a receiver,
without regard to the value of any collateral or solvency of any
party liable for payment, observance or performance of the
Obligations and regardless of whether the Bank has any adequate
remedy at law.
(5) The right to exercise, in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under any applicable body of law and also (1) require
Borrower to, and Borrower hereby agrees that it will at its
expense and upon the request of Bank forthwith, assemble all or
part of the Collateral as directed by Bank and make it available
to Bank at a place to be designated by Bank and (2) without notice
except as specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at any of Bank's
offices or elsewhere, for cash, on credit or for future delivery,
and upon such other terms as Bank may deem commercially
reasonable. Borrower agrees that, to the extent notice of sale
shall be required by law, at least fifteen (15) days' notice to
Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. Bank shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given.
Bank may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to
which it was so adjourned;
26
(6) The right, to the extent permitted by applicable law, bring suit
at law, in equity or through other appropriate Proceedings,
whether for the specific performance of any covenant or agreement
contained in this Agreement or any of the other Security
Instruments, for an injunction against a violation of any of the
terms hereof or thereof, in aid of the exercise of any power
Granted hereby or thereby, or by law, to recover judgment for any
and all amounts due on the Note, this Agreement, any of the other
Security Instruments or otherwise, including, without limitation,
any deficiency remaining after foreclosure hereunder;
(7) The right to exclude Borrower from the Collateral and take
immediate possession of interest therein, and, at the expense of
Borrower, maintain, repair, alter, use, add to, improve, insure,
lease, operate and manage the Collateral in such manner as Bank
shall see fit; and
(8) The right to take any other appropriate action to protect and
enforce the rights and remedies of Bank hereunder, or under or in
respect of any other Security Instrument, or otherwise under
applicable law;
(b) STATEMENT OF UNPAID AMOUNTS. The unpaid principal balance of the Loan
and all accrued interest and other sums payable under this Agreement shall be
forthwith payable upon a sale of any portion of the Collateral pursuant to
subsection (5) of this Section 8.2(a), notwithstanding any provision to the
contrary contained in this Agreement, the Note or any other Security Instrument.
All earnings, revenues, proceeds, rents, issues, profits and income derived
pursuant to subsection (7) of this Section 8.2(a) (after deducting costs and
expenses of operation and other proper charges), all proceeds of any such sale
and all other money and property received or recovered by the Bank pursuant to
this Section 8.2 shall be held and applied as set forth in Section 8.3 hereof.
(c) POWER OF SALE. The power to effect any sale under this Section 8.2
shall not be exhausted by any one or more sales as to any portion of the
Collateral remaining unsold, but shall continue unimpaired until all of the
Collateral shall have been sold or all of the Obligations shall have been paid
in full.
(d) PURCHASE BY BANK. Bank may bid for and acquire any portion of the
Collateral in connection with a sale thereof under this Section 8.2, and may pay
all or part of the purchase price by crediting against amounts owing on the
Obligations, all or part of the net proceeds of such sale after deducting the
costs, charges and expenses incurred by Bank in connection with such sale. The
Note need not be produced in order to complete any such sale or effect such
credit. Bank may hold, lease, operate, manage or otherwise deal with any
property so acquired in any manner permitted by law.
(e) BANK TO TRANSFER ITS INTEREST IN COLLATERAL. Bank shall execute and
deliver an appropriate instrument of conveyance transferring its interest in any
portion of the Collateral in connection with a sale thereof under this Section
8.2;
27
(f) OTHER RIGHTS. Bank's right to seek and recover judgment on the
Obligations shall not be affected by the seeking, obtaining or application of
any other relief under or with respect to this Agreement. Neither the Lien of
the Security Agreement nor any rights or remedies of Bank shall be impaired by
the recovery of any judgment by Bank against Borrower or by the levy.
8.3 PROCEEDS OF COLLATERAL. All cash proceeds received by Bank in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral shall be held by Bank as collateral for, and then promptly
thereafter applied by Bank against, all or any part of the amounts due under the
Note and the other Obligations in such order as Bank shall elect. Any surplus of
such cash or cash proceeds held by Bank and remaining after payment in full of
all the Obligations shall be paid over to Borrower or to whomsoever may be
lawfully entitled to receive such surplus.
8.4 WAIVER OF RIGHTS. To the extent permitted by law, Borrower hereby
waives its right to seek, and hereby agrees that it will not seek or derive any
benefit or advantage from, any of the following whether now existing or
hereafter in effect:
(a) any stay, extension, moratorium or similar law with respect to the
Collateral or the Obligations;
(b) any law allowing for the redemption of any portion of the Collateral
after a sale thereof under Section 8.2 hereof; and
(c) any right to have any portion of the Collateral after an Event of
Default shall have occurred.
Borrower covenants not to hinder, delay or impede the exercise of any right or
remedy of Bank under or in respect of this Agreement and agrees to suffer and
permit the exercise of such remedy.
IX. MISCELLANEOUS
9.1 FURTHER ASSURANCE. From time to time within five (5) Business Days
after the Bank's demand, the Borrower will execute and deliver such additional
documents and provide such additional information as may be reasonably requested
by the Bank to carry out the intent of this Agreement. Without limiting the
generality of the foregoing, Borrower will: xxxx conspicuously each of its
records pertaining to the Collateral with a legend in form and substance
satisfactory to Bank, indicating that such Collateral is subject to the security
interest Granted by the Security Agreement; and execute and file such documents
with the FAA , such financing or continuation statements, or amendments hereto
or thereto, and such other instruments or notices, as may be necessary or
reasonably desirable, or as Bank may reasonably request, in order to perfect and
preserve the security interests Granted or purported to be Granted by the
Security Agreement.
28
9.2 REPORTS, ETC. Borrower will furnish to Bank from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Bank may reasonably
request, all in reasonable detail.
9.3 BANK MAY PERFORM. If Borrower fails to perform any agreement
contained herein, then Bank may itself perform, or cause performance of, such
agreement, and the expenses of Bank incurred in connection therewith shall be
payable by Borrower; provided, that to the extent practicable and permitted by
law, Bank shall give Borrower prior notice of its intention to perform for
Borrower.
9.4 BANK'S DUTIES. The powers conferred on Bank hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Bank shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against other parties or
any other rights pertaining to any Collateral.
9.5 ENFORCEMENT AND WAIVER BY THE BANK. The Bank shall have the right at
all times to enforce the provisions of the Loan Documents as they may be amended
from time to time, in strict accordance with their terms, notwithstanding any
conduct or custom on the part of the Bank in refraining from so doing at any
time or times. The failure of the Bank at any time or times to enforce its
rights under such provisions, strictly in accordance with the same, shall not be
construed as having created a custom in any way or manner contrary to specific
provisions of the Loan Documents or as having in any way or manner modified or
waived the same. All rights and remedies of the Bank are cumulative and
concurrent and the exercise of one right or remedy shall not be deemed a waiver
or release of any other right or remedy.
9.6 GENERAL INDEMNITY. The Borrower agrees to indemnify, protect and hold
harmless the Bank, and its assigns, directors, officers, employees, agents or
representatives (each an "Indemnified Party") from and against all losses,
damages, injuries, liabilities, claims, suits, obligations, penalties, actions,
judgments, costs, interest and demands of any kind or nature whatsoever (all the
foregoing losses, damages etc. are the "indemnified liabilities"), and expenses
in connection therewith (including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnified Party in connection with any
investigative, administrative or judicial proceeding, whether or not such
Indemnified Party shall be designated a party thereto, and the expenses of
investigation by engineers, environmental consultants and similar technical
personnel; provided, that Borrower shall not be liable for the fees, costs and
expenses of more than one separate counsel (unless additional counsels are
reasonably necessary as a result of a conflict between the Indemnified Parties)
at the same time for all Indemnified Parties indemnified hereunder in connection
with the same action and any separate but substantially similar or related
action in the same jurisdiction) arising out of, in connection with, or as the
result of (i) any claim for personal injury or property damage arising from the
manufacture, construction, purchase, acceptance, rejection, operation, use,
modification, maintenance, registration, condition, possession, storage or
repossession of the Collateral, or any claim relating to
29
any laws, rules or regulations, (including, without limitation, environmental
control, noise and pollution laws, rules or regulations), (ii) the entering
into or performance of this Agreement, the Note, the Security Instruments and
the other Loan Documents, (iii) the enforcement of any rights thereunder or
(iv) the retention by the Bank of a security interest in the Collateral, and
in each case arising during the period of any operation, use, delivery,
rejection, storage or repossession of the Aircraft while a security interest
therein remains in the Bank or during the exercise of the remedies of Bank
pursuant to any of the provisions of this Agreement; provided, however, that
the Borrower shall have no obligation to so indemnify any Indemnified Party
for any indemnified liabilities arising solely from the willful misconduct or
gross negligence of such Indemnified Party. The foregoing indemnity shall
survive the termination of this Agreement, the Note and the Security
Instruments and payment in full of the Obligations.
9.7 EXPENSES OF THE BANK. The Borrower will, on demand, reimburse to the
Bank all reasonable expenses, including reasonable attorneys' fees (including
allocated costs of the Bank's in-house counsel), incurred by the Bank in
connection with the administration (including, without limitation, expenses
relating to any consent requested by Borrower under the Loan Documents),
amendment, modification, workout or enforcement of the Loan Documents and the
collection or attempted collection of the indebtedness evidenced by the Loan
Documents, whether or not legal proceedings are commenced.
9.8 NOTICES. Any notices or consents required or permitted by this
Agreement or the remainder of the Loan Documents shall be in writing and shall
be deemed delivered if delivered in person or if sent by certified mail, postage
prepaid, return receipt requested, or by facsimile, at the addresses or
facsimile numbers noted below, unless such address or facsimile number is
changed by written notice hereunder:
BORROWER BANK
HAWAIIAN AIRLINES, INC. BANK OF HAWAII
ATTN: Vice President - Finance ATTN: Mr. Xxxxx Xx, Vice
and Treasurer President
0000 Xxxxxxx Xxxxxx, Xxxxx X000 Corporate Bank Hawaii
Xxxxxxxx, Xxxxxx 00000 000 Xxxxxxxx Xxxxxx
PHONE: ____________ Xxxxxxxx, Xxxxxx 00000
FAX: ____________ PHONE: ____________
FAX: ____________
9.9 WAIVER AND RELEASE BY THE BORROWER. To the maximum extent permitted
by applicable law, the Borrower:
(a) Waives notice and opportunity to be heard, after acceleration of the
indebtedness evidenced by the Loan Documents, before exercise by the Bank of the
remedy of setoff or of any other remedy or procedure permitted by any applicable
law or
30
by any prior agreement with the Borrower, and, except where specifically
required by this Agreement or by any applicable law, notice of any other
action taken by the Bank; and
(b) Waives presentment, demand for payment, notice of dishonor, and any
and all other notices or demands in connection with the delivery, acceptance,
performance, or enforcement of this Agreement, and consents to any extension of
time (and even multiple extensions of time for longer than the original term),
renewals, releases of any person or organization liable for the payment of the
Obligations under this Agreement, and waivers or modifications or other
indulgences that may be granted or consented to by the Bank in respect of the
Loan and other extensions of credit evidenced by this Agreement; and
(c) Releases the Bank and its officers, agents and employees from all
claims for loss or damage caused by any act or omission on the part of any of
them except willful misconduct or gross negligence.
9.10 RISK OF LOSS. Borrower shall bear all risk of any loss of or damage
to the Collateral so long as any amount remains outstanding under this Agreement
or the Note, and in no event shall Bank be liable for such loss or damage.
9.11 SALES AND PARTICIPATIONS. The Borrower consents to the Bank's
negotiation, offer, and sale to other third parties ("Participants") of the Loan
or participating interests in the Loan, to any and all discussions and
agreements heretofore or hereafter made between the Bank and any Participant or
prospective Participant regarding the interest rate, fees, and other terms and
provisions applicable to the Loan, and to the Bank's disclosure to any
Participant or prospective Participant, from time to time, of such financial and
other information pertaining to the Borrower and the Loan as the Bank and such
Participant or prospective Participant may deem appropriate (whether public or
non-public, confidential or non-confidential, and including information relating
to any insurance required to be carried by the Borrower and any financial or
other information bearing on the Borrower's creditworthiness and the value of
any Collateral); provided, however, that such disclosure shall be on a
confidential basis as to any information that is non-public or confidential and
subject to a confidentiality agreement executed by the Participant or
prospective Participant with respect to any information that is non-public or
confidential; provided, further, that the Bank shall provide to the Borrower
prior written notice of such intended disclosure and the identity of the
Participant or prospective Participant to whom such disclosure will be made;
provided, further, that if two or more parties hold an interest in the Loan,
they shall designate a lead lender or agent to act on behalf of all Participants
and the Bank with respect to the Loan. The Borrower acknowledges that the Bank's
disclosure of such information to any Participant or prospective Participant
constitutes an ordinary and necessary part of the process of effectuating and
servicing the Loan.
9.12 APPLICABLE LAW; CONSENT TO JURISDICTION AND VENUE; WAIVER OF JURY
TRIAL. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND ALL MATTERS
RELATING THERETO ARE DELIVERED IN THE
31
STATE OF HAWAII AND SHALL, EXCEPT TO THE EXTENT OTHERWISE REQUIRED BY
APPLICABLE LAW, BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF HAWAII WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES. BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION AND
VENUE OF THE STATE AND FEDERAL COURTS OF HAWAII AND AGREES THAT BANK MAY, AT
ITS OPTION, ENFORCE ITS RIGHTS HEREUNDER AND UNDER THE NOTE AND OTHER
SECURITY INSTRUMENTS IN SUCH COURTS. BORROWER HEREBY IRREVOCABLY WAIVES THE
DEFENSE OF AN INCONVENIENT FORUM TO MAINTENANCE OF ANY ACTION OR PROCEEDING
BY BANK IN SUCH COURTS. BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING
TO THIS AGREEMENT, THE NOTE OR ANY OTHER SECURITY INSTRUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
9.13 BINDING EFFECT. This Agreement shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns, and shall
be binding on the parties hereto and their respective successors and assigns.
9.14 MERGER. This Agreement and the remainder of the Loan Documents
constitute the full and complete agreement between the Bank and the Borrower
with respect to the Loan, and all prior oral and written agreements, commitments
and undertakings shall be deemed to have been merged into the Loan Documents and
such prior oral and written agreements, commitments and undertakings shall have
no further force or effect except to the extent expressly incorporated in the
Loan Documents.
9.15 AMENDMENTS; CONSENTS. No amendment, modification, supplement,
termination, or waiver of any provision of this Agreement or the other Loan
Documents, and no consent to any departure by the Borrower therefrom, may in any
event be effective unless in writing signed by the Bank, and then only in the
specific instance and for the specific purpose given.
9.16 ASSIGNMENTS.
(a) Except as set forth in Section 5.5, the Borrower shall have no right
to assign any of its rights or obligations under the Loan Documents without the
prior written consent of the Bank.
(b) The Bank may sell participations in the Loan, as contemplated by
Section 9.11 above, and the Bank may assign the Loan Documents (or the
receivables evidenced thereby) to a Federal Reserve Bank or to any other agency
or instrumentality of the United States of America to support borrowings of
Federal funds.
9.17 SEVERABILITY. If any provision of any of the Loan Documents shall be
held invalid under any applicable law, such invalidity shall not affect any
other provision of the Loan Documents that can be given effect without the
invalid provision, and, to this end, the provisions of the Loan Documents are
severable.
32
9.18 SURVIVAL. All agreements, covenants, representations, warranties and
conditions contained in this Agreement or made pursuant to the provisions hereof
shall survive the execution and delivery of this Agreement until the Obligations
shall have been paid and performed in full. All statements by Borrower contained
in any certificate or other instrument delivered pursuant to the provisions of
this Agreement or any other Security Instrument shall constitute the
representations and warranties of Borrower.
9.19 THE BANK'S RIGHT OF SETOFF; SECURITY INTEREST IN ACCOUNTS. At any
time the Bank may set off obligations owed by the Bank to the Borrower (such as
balances in checking and savings accounts) against the Obligations, whether or
not a Default or an Event of Default shall have occurred or shall have been
declared, and without first resorting to other Collateral. To secure the
Obligations, the Borrower grants to the Bank a security interest in all
checking, savings and other deposit accounts now or hereafter maintained by the
Borrower with the Bank.
9.20 TIME IS OF THE ESSENCE. Time is of the essence under and in respect
of this Agreement.
9.21 HEADINGS. The headings of the various provisions of this Agreement
are inserted for convenience of reference only and shall not affect the meaning
or construction of any provision.
9.22 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original instrument and all of which shall together constitute
one and the same agreement.
9.23 DISPUTE RESOLUTION. Any controversy or claim arising out of or
relating to this Agreement or any of the other Loan Documents shall, at the
request of either party, be decided by binding arbitration conducted in the
State of Hawaii without a judge or jury, under the auspices of the American
Arbitration Association or Dispute Prevention and Resolution, Inc. in accordance
with Chapter 658 of the Hawaii Revised Statutes and the respective and
applicable rules of the aforementioned organizations. The arbitrator will apply
any applicable statute of limitations and will determine any controversy
concerning whether an issue is arbitrable. Judgment upon the arbitration award
may be entered in any court having jurisdiction. The prevailing party will be
entitled to recover its reasonable attorneys' fees and costs as determined by
the arbitrator. This agreement to arbitrate shall not limit or restrict the
right, if any, of any party to exercise before, during or following any
arbitration proceeding, with respect to any claim or controversy, self help
remedies such as setoff, to foreclose a mortgage or lien or other security
interest in any Collateral judicially or by power of sale, or to obtain
provisional or ancillary remedies such as injunctive relief from a court having
jurisdiction. Either party may seek those remedies without waiving the right to
submit the controversy or claim in question to arbitration.
9.24 COURT ORDER AFFECTING BANK. If any third party obtains a court order
enjoing or prohibiting Bank from performing its obligations under the Loan
Documents, the Bank may, at its option, cease the performance of such
obligations.
33
X. DEFINITIONS
When used in this Agreement, the following capitalized terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
10.1 ADDITIONAL INSUREDS shall have the meaning set forth in Section 7.1.
10.2 AGREEMENT shall have the meaning set forth in the first paragraph
hereof.
10.3 AIRCRAFT shall mean the Airframe together with the Engines (or any
Engine which may from time to time be substituted, pursuant to Section 7.2
hereof, for any of such Engines), whether or not any of such initial or
substituted Engines may from time to time be installed on such Airframe or may
be installed on any other airframe or on any other aircraft, and where the
context permits, references to the "AIRCRAFT" shall include the Manuals and
Technical Records. The Aircraft is more particularly described in SCHEDULE A
hereto.
10.4 AIRFRAME shall mean (i) the XxXxxxxxx Xxxxxxx XX00-00 Aircraft
(except Engines or engines from time to time installed thereon) to be sold by
Seller to the Borrower pursuant to the Lease and (ii) any and all Parts so long
as the same shall be incorporated or installed in or attached to such airframe,
or so long as Bank maintains a security interest in such Parts in accordance
with the terms of Section 6.2(a) hereof, after removal from such airframe.
10.5 ASSIGNED AGREEMENT shall have the meaning set forth in the Security
Agreement.
10.6 BANK shall have the meaning set forth in the first paragraph hereof.
10.7 BASE RATE means the primary index rate established from time to time
by the Bank in the ordinary course of its business and with due consideration of
the money market, and published by intrabank memoranda for the guidance of its
loan officers in pricing all of is loans which float with the Base Rate.
10.8 BUSINESS DAY means any day on which the Bank is open to the public
for carrying on substantially all of its banking functions.
10.9 BILLS OF SALE means two (2) bills of sale for the Aircraft, each
duly executed by Seller, in favor of Borrower, one of which is a Federal
Aviation Administration form Xxxx of Sale on AC Form 8050-2 to be filed with the
Federal Aviation Administration, and the other of which is a warranty xxxx of
sale executed by Seller for the benefit of Borrower, specifically referring to
the Engines and the Airframe.
10.10 BORROWER shall have the meaning set forth in the first paragraph
hereof.
10.11 CAPITAL LEASE shall mean, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in
34
accordance with GAAP, is or should be accounted for as a capital lease on the
balance sheet of such Person.
10.12 CAPITAL STOCK of any person shall mean any and all shares,
partnership and other interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated) the
equity of such person.
10.13 CASH FLOW means Borrower's EBITDA, less Maintenance Capital
Expenditures.
10.14 CERTIFICATED CARRIER means any certificated air carrier with respect
to which the protection of Section 1110 of Title 11 of the United States Code,
or any successor statute providing protection to lessors and secured parties of
aircraft in airline bankruptcies, is generally available.
10.15 CLOSING DATE shall have the meaning given in Article II.
10.16 COLLATERAL shall have the meaning given in the Security Agreement.
10.17 CONSOLIDATED SUBSIDIARIES shall mean, for any person, all
subsidiaries of such person that should be consolidated with such person for
financial reporting purposes in accordance with GAAP.
10.18 DEBT SERVICE shall mean, for any period, the sum of all scheduled
and of all required payments during such period in respect of all Funded Debt.
10.19 DEBT SERVICE COVERAGE RATIO means the ratio of Borrower's Cash Flow
for the four fiscal quarters immediately preceding the date of determination
(including the Cash Flow of Borrower's Consolidated Subsidiaries) to Borrower's
Debt Service (including the Debt Service of Borrower's Consolidated
Subsidiaries) for the same period.
10.20 DEFAULT shall mean an event or occurrence which upon the giving of
notice and/or the passage of time shall constitute an Event of Default.
10.21 DISQUALIFIED STOCK of any person shall mean (a) any Capital Stock of
such person which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable), upon the happening
of any event or otherwise (i) matures or is mandatorily redeemable or subject to
any mandatory repurchase requirement, pursuant to a sinking fund obligation or
otherwise, (ii) is convertible into or exchangeable or exercisable for
Indebtedness or Disqualified Stock or (iii) is redeemable or subject to any
mandatory repurchase requirement at the option of the holder thereof, in whole
or in part, in each case on or prior to the seventh anniversary of the Closing
Date and (b) any Preferred Stock of such person.
10.22 EBITDA shall mean, for any period, (a) Net Income for such period,
PLUS, (b) the following to the extent deducted in computing such Net Income: (i)
interest
35
expense, (ii) tax expense, (iii) depreciation and amortization of tangible
and intangible assets and (iv) other non-cash charges or non-cash losses,
MINUS, to the extent not already deducted in computing such Net Income: (i)
dividends paid and (ii) extraordinary items, all determined in accordance
with GAAP.
10.23 ENGINE shall mean each of the three General Electric CF6-50C2
engines listed by manufacturer's serial numbers on SCHEDULE A attached hereto
relating to the Airframe, whether or not from time to time installed on such
Airframe or installed on any other airframe or on any other aircraft, and (ii)
any engine which may from time to time be substituted, pursuant to Section 7.2
hereof, for an Engine; together in each case with any and all Parts incorporated
or installed in or attached thereto or any and all Parts removed therefrom so
long as Bank maintains a security interest in such Parts in accordance with the
terms of Section 6.2 hereof after removal from such Engine. The term "ENGINES"
shall mean, as of any date of determination, all Engines hereunder.
10.24 ERISA shall have the meaning set forth in Section 3.16 hereof.
10.25 EVENT OF DEFAULT shall have the meaning given in Section 8.1.
10.26 EVENT OF LOSS with respect to the Aircraft, the Airframe or any
Engine shall mean any of the following events with respect to such property: (i)
loss of such property or the use thereof due to theft, disappearance,
destruction, damage beyond repair or rendition of such property permanently
unfit for normal use for any reason whatsoever; (ii) any damage to such property
which results in an insurance settlement with respect to such property on the
basis of a total loss; (iii) requisition of title by any government or
governmental agency or requisition of use ("REQUISITION FOR USE") by any
government or governmental agency (other than the United States of America or
any agency or subdivision thereof) for more than 90 days; (iv) as a result of
any rule, regulation, order or other action by the FAA or other governmental
body (including, without limitation, any foreign governmental body) having
jurisdiction, the use of such property in the normal course of business of air
transportation shall have been prohibited, or such property shall have been
declared unfit for use, for a period of six consecutive months, unless the
Borrower, prior to the expiration of such six-month period, shall have
undertaken and, in the opinion of Bank, shall be diligently carrying forward all
steps which are necessary or desirable to permit the normal use of such property
by the Borrower or, in any event, if use shall have been prohibited, or such
property shall have been declared unfit for use, for a period of eighteen
consecutive months; and (v) with respect to the Aircraft, the operation or
location of the Aircraft while under Requisition of Use by the United States
government, or any state or local authority within the United States or any
instrumentality or agency of the foregoing, in any area excluded from coverage
by any insurance policy in effect with respect to the Aircraft required by the
terms of Section 7.1 hereof, if the Borrower is unable to obtain indemnity in
lieu thereof from such government, authority, instrumentality or agency or if
the Borrower is unable to effect such special insurance coverage as the Bank may
reasonably require. The date of occurrence of such Event of Loss shall be the
date of such theft, disappearance, destruction, damage, Requisition of Use or
prohibition of, or
36
unfitness for use, for the stated period. An Event of Loss with respect to
the Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe. An Event of Loss with respect to any Engine shall
not, without loss of the Airframe, be deemed an Event of Loss with respect to
the Aircraft.
10.27 FAA means the United States Federal Aviation Administration and any
successor agency or agencies thereto.
10.28 FAA RULES AND REGULATIONS mean the rules and regulations of the FAA
now or hereafter in effect.
10.29 FEDERAL AVIATION ACT shall mean Title 49, Subtitle VII of the United
States Code.
10.30 FOREIGN PERMITTED AIR CARRIER shall have the meaning set forth in
Section 6.1(b) hereof.
10.31 FUNDED DEBT means, on and as of the date of calculation thereof, the
aggregate principal amount, determined in accordance with GAAP, of all
obligations for borrowed money, all recourse obligations on investments, all
obligations evidenced by bonds, debentures, notes or other similar instruments,
and all obligations under Capital Leases.
10.32 FUNDED DEBT TO CASH FLOW RATIO means the ratio of Borrower's Funded
Debt as of the date of determination (including the Funded Debt of Borrower's
Consolidated Subsidiaries) to Borrower's Cash Flow (including the Cash Flow of
Borrower's Consolidated Subsidiaries) for the four fiscal quarters immediately
preceding the date of determination.
10.33 GAAP shall mean generally accepted accounting principles, applied on
a consistent basis.
10.34 GRANT means to grant, bargain, sell, warrant, remise, release,
convey, assign, transfer, mortgage, pledge, deposit, set over, confirm or create
a security interest under any applicable body of law, including without
limitation, the FAA Rules and Regulations, as applicable. A grant with respect
to any instrument, document or agreement shall include all rights, powers and
options (but none of the obligations) of the granting party thereunder,
including without limitation the right to generally do anything which the
granting party then is or thereafter may be entitled to do thereunder or with
respect thereto.
10.35 HAWAII UCC means the Hawaii Uniform Commercial Code, Articles 1-11,
as now in effect and as hereafter amended from time to time.
10.36 IMPROVEMENTS shall have the meaning set forth in Section 6.2(c)
hereof.
10.37 INDEMNIFIED PARTY shall have the meaning set forth in Section 7.1
hereof.
37
10.38 INTANGIBLE ASSETS means the amount (to the extent reflected in
determining such consolidated stockholders' equity as set forth in (a) above) of
(i) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of assets of a going concern business made within 12
months after the acquisition of such business) subsequent to June 30, 1998 in
the book value of any assets owned by Borrower or Consolidated Subsidiaries and
(ii) all goodwill, patents, trademarks, service marks, trade names, copyrights,
organization or developmental expenses and other intangible assets.
10.39 LEASE means the Aircraft Lease dated as of November 17, 1998 between
the Borrower and Seller, as amended, modified, supplemented restated and or
replaced prior to the date hereof.
10.40 LIEN means any lien, claim, charge, security interest, mortgage,
pledge and/or other encumbrance of any nature whatsoever.
10.41 LOAN shall have the meaning given in Section 1.1.
10.42 LOAN DOCUMENTS shall have the meaning given in Section 1.5.
10.43 MAINTENANCE CAPITAL EXPENDITURES shall mean, for any period, the sum
of all amounts that would, in accordance with GAAP, be included capital
expenditures with respect to the repair and maintenance of Borrower's aircraft
on a consolidated statement of cash flows for the Borrower and its Consolidated
Subsidiaries during such period (including the amount of assets leased under any
Capital Lease). Notwithstanding the foregoing, the term "Maintenance Capital
Expenditures" shall not include capital expenditures related to induction,
renovation and major maintenance for aircraft new to Borrower's fleet during the
first twelve months following the acquisition of such aircraft.
10.44 MANUALS AND TECHNICAL RECORDS means all records, logs, manuals,
technical data, inspection, modification and overhaul records and other
materials and documents (whether kept or to be kept in compliance with any
regulation of the FAA or any other governmental body having jurisdiction) or
otherwise relating to the Aircraft including but not limited to those manuals
and technical records set out in SCHEDULE D hereto.
10.45 NOTE means Borrower's Promissory Note in the original principal
amount of ________________________________ payable to Bank, substantially in the
form of SCHEDULE B attached hereto.
10.46 NET INCOME shall mean, for any period, net income (or loss) of the
Borrower and its Consolidated Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
10.47 OBLIGATIONS shall have the meaning given in Section 1.6.
38
10.48 PARTICIPANTS shall have the meaning given in Section 9.11.
10.49 PARTS shall mean all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than
complete Engines or engines), which may from time to time be incorporated or
installed in or attached to the Airframe or any Engine.
10.50 PBGC shall have the meaning set forth in Section 3.16 hereof.
10.51 PERMITTED AIR CARRIER shall have the meaning set forth in Section
6.1(b) hereof.
10.52 PERMITTED CONTEST means any contest by Borrower with respect to any
Lien or taxes (including, without limitation, income, sales, use, franchise,
gross receipts taxes), so long as Borrower shall contest, in good faith and at
its expense, the existence, the amount or the validity thereof, the amount of
the damages caused thereby, or the extent of its liability therefor, by
appropriate Proceedings and (a) such contest shall not involve any material
danger of (i) the sale, forfeiture or loss of the Aircraft or any material part
thereof or (ii) any interference with the use of the Aircraft or any material
part thereof or (b) Borrower shall have provided to Bank adequate assurances in
Bank's reasonable judgement for the payment of such amounts being contested.
With respect to Section 8.1(n) hereof, PERMITTED CONTEST means any contest by
Borrower with respect to such court order, so long as Borrower shall contest, in
good faith and at its expense, the existence and validity of such order, by
appropriate Proceeding and such contest shall not (a) involve any material
danger of (i) the sale, forfeiture or loss of the Aircraft or any material part
thereof or (ii) any interference with the use of the Aircraft or any material
part thereof or (b) result in a Default or Event of Default described in
Sections 8.1(a) through (m) or in Section 8.1(o).
10.53 PERMITTED ENCUMBRANCES, with respect to the Collateral, means (i)
the Security Agreement, this Agreement and any assignment by or in favor of Bank
permitted hereby, (ii) Liens for taxes either not yet due or being diligently
contested by the Lessee in good faith (and for the payment of which adequate
reserves have been provided) by appropriate proceedings, if counsel for the Bank
shall have determined that the nonpayment of any such tax or the contest of any
such payment in such proceedings does not, in the opinion of such counsel,
involve any material danger of the sale, forfeiture or loss of the Airframe or
any Engine, title thereto or any interest therein, (iii) inchoate materialmen's,
mechanics', workmen's, repairmen's and employees' or other like Liens arising in
the ordinary course of business and for amounts the payment of which is either
not yet due or being contested by the Borrower in good faith (and for the
payment of which adequate reserves have been provided) with due diligence and by
appropriate proceedings, if counsel for the Bank shall have determined that the
nonpayment of such amount or the contest of such payment does not, in the
opinion of such counsel, involve any material danger of the sale, forfeiture or
loss of the Airframe or any Engine, title thereto or any interest therein, (iv)
so long as no Event of Default shall have occurred and is continuing, Liens
arising out of judgments or awards against Borrower not covered by insurance
with respect to which at the time an appeal or
39
proceeding for review is being prosecuted in good faith and with respect to
which there shall have been secured a stay of execution pending such appeal
or proceeding for review, (v) purchase money security interests in connection
with Parts installed on the Aircraft or any Engine provided that such Parts
supplement rather than replace existing Parts, can be removed without
damaging the Aircraft or Engines or diminishing their value below their
value, utility, condition and airworthiness prior to the incorporation,
installation, attachment or addition of such Parts and provided that such
security interests do not attach to the Aircraft, any Engine or any other
Part of the aircraft, (vi) Liens permitted by Section 6.1(b) and Section
6.2(b) hereof, and (vii) such other Liens as may be consented to in writing
by the Bank.
10.54 PERSON means an individual or a corporation, limited liability
company, partnership, trust, association, joint venture, joint stock company,
firm or other enterprise or government (or a political subdivision or any
agency, department or instrumentality thereof) or other entity of any kind.
10.55 PLAN means any "employee benefit pension plan" or other "plan"
(including a "multiemployer plan" as defined in Section 3(37) of ERISA)
established or maintained, as to which contributions have been made, by Borrower
or any Subsidiary or Affiliate of Borrower for their respective employees and
which is covered by Title IV of ERISA or to which Section 412 of the Internal
Revenue Code of 1986, as amended applies.
10.56 PREFERRED STOCK, as applied to the Capital Stock of any corporation,
shall mean Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
10.57 PREPAYMENT PREMIUM shall have the meaning set forth in Section
1.4(6).
10.58 PROCEEDING means any suit in equity, action at law or other judicial
or administrative proceeding.
10.59 REPLACEMENT PARTS shall have the meaning set forth in Section 6.2(a)
hereof.
40
10.60 REQUISITION OF USE shall have the meaning set forth in the
definition of Event of Loss.
10.61 SECURITY AGREEMENT shall mean the Aircraft Security Agreement dated
as of the date hereof between Bank and Borrower.
10.62 SECURITY INSTRUMENT means each of this Agreement, the Security
Agreement and any other instrument, document, financing statement or agreement
with respect to which any right or interest in or with respect to the Collateral
has been Granted to Bank.
10.63 SELLER means Fin 3 Limited, an Irish limited liability company.
10.64 SUBSIDIARY means any corporation more than fifty percent (50%) of
the outstanding voting stock of which at the time is owned directly or
indirectly by a Person and/or one of its Subsidiaries.
10.65 TANGIBLE NET WORTH shall mean, as of any date, (a) the total of all
amounts which would, in accordance with GAAP, be included on a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of such date
as (i) the par or stated value of all outstanding Capital Stock of the Borrower,
(ii) paid-in capital or capital surplus relating to such Capital Stock and (iii)
any retained earnings or earned surplus, less (1) any accumulated deficit and
(2) any amounts attributable to Disqualified Stock MINUS (b) Intangible Assets.
IN WITNESS WHEREOF, the Borrower and the Bank have duly executed this
Agreement.
HAWAIIAN AIRLINES, INC. BANK OF HAWAII
By: /S/ By: /S/
------------------------------- ------------------------------
Its ___________________________ Its __________________________
Bank
By: /S/
-------------------------------
Its ___________________________
Borrower
41
SCHEDULE A
TO
AIRCRAFT LOAN AGREEMENT
Dated December 29, 1998
between
Hawaiian Airlines, Inc., as Borrower, and
Bank of Hawaii, as Bank
DESCRIPTION OF AIRCRAFT
One (1) XxXxxxxxx Xxxxxxx XX00-00 Aircraft which consists of the following
components:
(a) airframe: FAA Registration Xxxx N140AA; manufacturer's serial
no. 46712;
(b) engines: three (3) General Electric CF6-50C2 engines bearing,
respectively, manufacturer's serial nos. 455235, 455297 and 455392 (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of
such horsepower); and
(c) standard accessories and equipment and such other items fitted or
installed on the Aircraft.
SCHEDULE B
TO
AIRCRAFT LOAN AGREEMENT
Dated December 29, 1998
between
Hawaiian Airlines, Inc., as Borrower, and
Bank of Hawaii, as Bank
PROMISSORY NOTE
_________________ DECEMBER ___, 1998
The undersigned ("Borrower") promises to pay to the order of
__________________ ("Bank") the principal amount of __________________ or so
much thereof as shall have been disbursed by Bank and may remain outstanding,
together with interest on outstanding balances of principal, in accordance with
and under the terms of that certain Aircraft Loan Agreement of even date,
between Bank and Borrower, relating to the Loan therein described.
HAWAIIAN AIRLINES, INC.
By /S/
---------------------------
Its ______________________
By /S/
---------------------------
Its _____________________
Borrower
SCHEDULE C
TO
AIRCRAFT LOAN AGREEMENT
Dated December 29, 1998
between
Hawaiian Airlines, Inc., as Borrower, and
Bank of Hawaii, as Bank
COMPLIANCE CERTIFICATE
DATE:_______________________
TO: Bank of Hawaii
Attn: Mr. Xxxxx Xx, Vice President
Corporate Bank Hawaii
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Facsimile No.: (000) 000-0000
SUBJECT: Aircraft Loan Agreement (the "Agreement") dated December 29,
1998, between BANK OF HAWAII (the "Bank") and HAWAIIAN
AIRLINES (the "Borrower").
Pursuant to Section 4.4(c) of the Agreement, the Borrower hereby certifies
as follows (capitalized terms not defined herein shall have the respective
meanings assigned in the Agreement):
1. The information furnished in Attachment A hereto is true and correct as
the last day of the fiscal quarter preceding the date of this Compliance
Certificate.
2. The financial reports delivered to the Bank concurrently herewith were
prepared in accordance GAAP and fully and fairly present the financial condition
of the Borrower at the dates thereof and the results of operations for the
periods covered thereby, except in the case of quarterly financial reports,
which are subject to changes resulting from normal year-end adjustments, and as
of the date of this certificate, there have been no material adverse changes in
the financial condition or business of the Borrower from the date of the
financial reports delivered concurrently herewith.
3. As of the date hereof, no event has occurred and is continuing that
constitutes an Event of Default or a Default. The Borrower has observed and
performed all of Borrower's covenants and other agreements, and satisfied every
condition, contained in the Agreement and in the other Loan Documents, to be
observed, performed or satisfied by Borrower.
HAWAIIAN AIRLINES
By ______________________
Its
Borrower
Attachment A
To Compliance Certificate
Dated ___________
FUNDED DEBT TO CASH FLOW RATIO (attach calculation):
Permitted maximum: ___ to one _________________
TANGIBLE NET WORTH (attach calculation):
Required minimum: __________ plus the amount equal to (1) ____ of any
additional equity or capital stock issued by Borrower after June 30,
1998, plus (2) _____ of Net Income (if and only if positive) each
fiscal quarter commencing after June 30, 1998, to and including fiscal
quarter ended ____________ $
----------------------------------
DEBT SERVICE COVERAGE RATIO (attach calculation):
Required minimum: _____ to one for
financial reporting periods through
December 31, 2000 and 2.0 to one
thereafter
----------------------------------
SCHEDULE D
TO
AIRCRAFT LOAN AGREEMENT
Dated December 29, 1998
between
Hawaiian Airlines, Inc., as Borrower, and
Bank of Hawaii, as Bank
MANUALS AND TECHNICAL RECORDS:
MANUALS
1 FAA APPROVED AIRCRAFT FLIGHT MANUAL
2 AIRCRAFT MAINTENANCE MANUAL
3 AIRCRAFT OVERHAUL MANUAL
4 AIRCRAFT WIRING MANUAL
5 AIRCRAFT STRUCTURAL REPAIR MANUAL
6 AIRCRAFT WEIGHT & BALANCE MANUAL, LOADING MANUAL, BASIS AND SUPPLEMENT
7 XXX & CDL
8 CF6 MAINTENANCE MANUAL
9 XX0 XXXXXXXX MANUAL
10 CF6 IPC
11 CF6 SB LIST
12 MAINTENANCE CHECK MANUAL
13 ENGINEERING SPECIFICATION MANUAL
DOCUMENTS
1 CERTIFICATE OF AIRWORTHINESS
2 CERTIFICATE OF REGISTRATION
3 SANITARY CERTIFICATE
RECORDS
1 ALL PREVIOUSLY SUPPLIED AA RECORDS
2 IAI PERFORMED TRANSIT CHECKS
3 IAI PERFORMED A CHECKS
4 IAI PERFORMED B CHECKS
5 VENDOR PERFORMED C CHECKS
6 IAI APPROVED COMPLIANCE AIRWORTHINESS DIRECTIVES RECORDS FOR ENGINES,
AIRFRAME AND APPLIANCES
7 IAI APPROVED COMPLIANCE SERVICE BULLETIN RECORDS FOR ENGINES, AIRFRAME
AND APPLIANCES
8 IAI PREDICTIVE REPORT (REPORT NBR 10) FOR ALL TIME CONTROLLED
TASKS/COMPONENTS
SCHEDULE E
TO
AIRCRAFT LOAN AGREEMENT
Dated December 29, 1998
between
Hawaiian Airlines, Inc., as Borrower, and
Bank of Hawaii, as Bank
FOREIGN PERMITTED AIR CARRIERS
Aeromexico
British Airways
Canadian Airways
Iberia
Japan Air Lines
Japan Air System
Varig
SCHEDULE F
TO
AIRCRAFT LOAN AGREEMENT
Dated December 29, 1998
between
Hawaiian Airlines, Inc., as Borrower, and
Bank of Hawaii, as Bank
The Department of Taxation, State of Hawaii (the "DOT"), has been in
discussions with Borrower regarding a potential assessment of general excise tax
payments ("GET") on lease rents paid since 1989 to lessors of DC9 aircraft used
by Borrower intrastate. Pursuant to the respective leases, Borrower as lessee
would be liable for such assessment. Borrower has asserted that any such
assessment would be relevant only to lease rent paid under operating leases (not
capitol leases), that Borrower would not be liable for any assessment for
periods prior to its 1994 discharge in bankruptcy, and that any assessment would
be subject to various other defenses. The DOT has recently indicated that
capitol leases may be treated as sale transactions, also subject to GET.
The matter is under negotiation with the DOT.
ANNEX A
TO
AIRCRAFT LOAN AGREEMENT
Dated December 29, 1998
between
Hawaiian Airlines, Inc., as Borrower, and
Bank of Hawaii,
as Bank
CLOSING DOCUMENTS
1. The original of the Note;
2. The original of the Loan Agreement;
3. The original of the Security Agreement;
4. Copies of the Bills of Sale;
5. The FAA Aircraft Registration Application; and
6. Uniform Commercial Code filings as deemed appropriate by Bank's counsel
duly executed by Borrower and necessary third parties.
