SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 5, 1999
Fine Air Services Corp.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-59359 65-083857
---------------- ------------ ------------------
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
2261 N.W. 67th Avenue
Building 700
Miami, Florida 33122
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 871-6606
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
CURRENT REPORT ON FORM 8-K
FINE AIR SERVICES CORP.
February 5, 1999
Item 5. Other Events.
On February 5, 1999 the Company entered into an agreement of purchase and
sale of assets (the "Asset Purchase Agreement") with International Air Leases of
PR, Inc., a Puerto Rico Corporation ("IALPR") and Anthony Tirri ("Tirri"), the
principal stockholder of IALPR. On the same date, the Company entered into a
separate stock purchase agreement (the "Stock Purchase Agreement") with IALPR
and the stockholders of IALPR. Under the terms of such agreements, the Company
agreed to purchase 100% of the capital stock (the "Arrow Stock") of Arrow Air,
Inc. ("Arrow"), a Florida Corporation and a Florida based international cargo
airline and certain assets generally consisting of (i) specified aircraft
consisting of three cargo L1011-200 aircraft, one passenger L1011-500 aircraft,
and twelve cargo DC8 aircraft and one passenger DC8 aircraft, (ii) servicable
and repairable Pratt & Whitney JT3D and JT8D aircraft engines, Rolls Royce RB211
aircraft engines and General Electric CF6 aircraft engines, (iii) inventories of
aircraft and engine parts and (iv) all inventories, parts, and related equipment
used in the operations of Arrow's airline business (collectively, the "Assets").
The purchase price for the Arrow Stock and the Assets is $115.0 million.
Under the terms of the Asset Purchase Agreement, IALPR agreed, at the
option of the Company to market the sale of certain of the Assets which the
Company may elect to sell prior to June 8, 1999, and further agreed upon certain
values to be attributable to specified categories of such Assets. In the event
that the Company timely elects to sell such specified Assets and does not
receive the agreed upon minimum values (essentially 90% of the agreed upon
estimated fair market value of such Assets), then, within 90 days of the date on
which such Assets were offered for sale, IALPR has agreed to "make whole" the
Company for any short-fall in the actual net proceeds received from the sale of
such Assets. To secure such "make whole" obligation, the Company received first
mortgages on two Pratt & Whitney DC8 aircraft and one Pratt & Whitney DC10
aircraft which were not included in the purchased Assets.
Arrow and the Assets to be acquired by the Company were formerly owned by
subsidiaries of International Air Leases, Inc. ("IAL"), a Delaware Corporation,
and its affiliated companies. Consummation of the transactions between the
Company and IALPR were subject to IALPR acquiring the capital stock of IAL and
its affiliates under a purchase agreement with the former owner of such
businesses, as well as obtaining certain government regulatory approvals.
<PAGE>
In order to assist IALPR and its stockholders in completing its
acquisition of IAL and its affiliates, on February 10, 1999 the Company provided
IALPR with a $115.0 million loan (the "Loan") secured by first liens on all of
the Assets to be purchased under the Asset Purchase Agreement, certain other
aircraft, the personal guarantees of the IALPR stockholders, and a pledge of
100% of the capital stock of IALPR and all of its subsidiaries, including IAL
and its corporate affiliates. The Loan was evidenced by a 10% note (the "IALPR
Note") due on the earlier of April 1, 1999 or five business days following the
expiration or the termination of the waiting period under the Hart Scott Rodino
Antitrust Improvements Act of 1976 ("Hart Scott").
IALPR consummated its acquisition of IAL and its affiliates on February
10, 1999. Following receipt of notice of early termination of the waiting period
under Hart Scott, on March 10, 1999, the Company completed the acquisition of
the Assets by cancellation of $100.0 million of principal amount of the IALPR
Note. The remaining $15.0 million outstanding on the IALPR Note and accrued
interest thereon will be retired at such time as the Company acquires the Arrow
Stock. The completion of the purchase of the Arrow Stock is subject only to
approval by the United States Department of Transportation (the "DOT") of the
change of ownership and transfer of Arrow's airline route certification. The
Company anticipates that DOT approval will be obtained prior to April 30, 1999.
The terms of the Asset Purchase Agreement, the Stock Purchase Agreement,
the Loan, the IALPR Note and all transactions contemplated thereby, were
determined as a result of arm's-length negotiations between the parties to such
agreements and instruments.
The information set forth above is qualified in its entirety by reference
to the following documents, each of which are incorporated in this Item 5 by
reference: (i) the Asset Purchase Agreement, and amendments thereto, a copy of
which is filed herewith as Exhibit 99.1; (ii) the Stock Purchase Agreement, a
copy of which is filed herewith as Exhibit 99.2; and (iii) the Loan Agreement, a
copy of which is filed herewith as Exhibit 99.3.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable
(c) Exhibits.
<PAGE>
Exhibit No. Description
- ----------- -----------
99.1 Agreement of Purchase and Sale of Assets, dated as of February
5, 1999, as amended March 10, 1999 by and among Fine Air
Services Corp, International Air Leases of PR, Inc. and
Anthony Tirri.
99.2 Stock Purchase Agreement, dated as of February 5, 1999, by and
between Fine Air Services Corp, International Air Leases of
PR, Inc., Anthony Tirri, Jean Tirri, and John Ebert.
99.3 Loan Agreement dated as of February 5, 1999, by and between
Fine Air Services Corp., International Air Leases of PR, Inc.
and Anthony Tirri.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 25, 1999
FINE AIR SERVICES CORP.
By: /s/ Orlando Machado
--------------------------------
Orlando Machado
Senior Vice President and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Agreement of Purchase and Sale of Assets, dated as of February
5, 1999, as amended March 10, 1999 by and among Fine Air
Services Corp, International Air Leases of PR, Inc. and
Anthony Tirri.
99.2 Stock Purchase Agreement, dated as of February 5, 1999, by and
between Fine Air Services Corp, International Air Leases of
PR, Inc., Anthony Tirri, Jean Tirri, and John Ebert.
99.3 Loan Agreement dated as of February 5, 1999, by and between
Fine Air Services Corp., International Air Leases of PR, Inc.
and Anthony Tirri.
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement of Purchase and Sale of Assets (this "Agreement") is
entered into as of February 5, 1999 by and among FINE AIR SERVICES CORP., a
Delaware corporation or its wholly owned Subsidiary ("Purchaser"); INTERNATIONAL
AIR LEASES OF PR, INC., a Puerto Rico corporation ("Parent"); and ANTHONY C.
TIRRI ("Tirri).
RECITALS
This Agreement is being entered into with reference to the following:
A. Parent and Tirri have entered into an agreement dated November 12, 1998
(the "Acquisition Agreement") with George E. Batchelor ("Batchelor"), the sole
shareholder of International Air Leases, inch, a Delaware corporation ("IAL"),
Aircraft Leasing, Inc., a Delaware corporation ("ALI"), and N304 Corp., a
Delaware corporation (`Y304 Corp."), pursuant to which the Parent will acquire
from Batchelor, all of the outstanding capital stock of each of IAL, ALI and
N304 Corp., on the terms and subject to the Conditions contained in the
Acquisition Agreement.
B. Immediately following the Parent's acquisition of the capital stock of
IAL, ALI and N304 Corp., the Purchaser will acquire from Air Flue Operations,
Inc., a Delaware corporation (the "Stockholder"), and the Parent and Tirri shall
cause the Stockholder to sell to the Purchaser, all of the issued and
outstanding shares of capital stock (the "Arrow Stock") of Arrow Air, Inc., a
Florida corporation ("Arrow"), all on the terms and subject to the conditions
contained in a stock purchase agreement among the Purchaser, the Parent and
Tirri, dated of even date herewith (the "Stock Purchase Agreement").
C. Simultaneous with the consummation of the Purchaser's acquisition of
the Arrow Stock pursuant to the Stock Purchase Agreement, it is contemplated
that on the "Closing Date" (as defined in this Agreement and in the Stock
Purchase Agreement) Tirri and the Parent shall cause the Stockholder, IAL, ALI
and N304 Corp. (collectively, the "Companies"), and each of their direct and
indirect subsidiaries or partnerships in which the Companies or such
subsidiaries have a beneficial interest who shall own or operate the "Assets"
specified in this Agreement, including, without limitation, AAA Interair, Inc.
(collectively, with the Companies, the "Asset Owners") to sell, transfer and
assign to the Purchaser, and Purchaser shall (in addition to the Arrow Stock),
purchase and acquire from the Asset Owners all of their respective right, title
and interest in and to the Assets specified herein and in the Exhibits to this
Agreement, all on the terms and subject to the conditions contained in this
Agreement.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants and
agreements contained herein. the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE ASSETS AND LIABILITIES: CLOSING AND PURCHASE PRICE
1.1 Purchase and Sue of Assets. Subject to the terms and conditions of
this Agreement, at the Closing (as defined in Section 12), Purchaser shall
acquire from the Asset Owners, and the Asset Owners shall sell, convey,
transfer, assign and deliver (collectively, "Transfer") to Purchaser or its
permitted assignees (other than those assets owned by Arrow, the possession of
which will be transferred pursuant to the Stock Purchase Agreement), all, and
not less than all, of (i) the equipment, aircraft, engines, inventories,
components, pans, rotables, spare parts and the other assets and properties
which shall be specified on Exhibit A annexed hereto and made a part hereof, and
(ii) all other assets and properties, tangible, intangible, real, personal or
mixed, which are owned or leased by the Asset Owners and used in connection with
Arrow's airline business and operations, including, but not limited to, all
spare engines and inventories, all ground support equipment, all cargo handling
equipment and all other assets and business processes (infrastructure)
supporting the airline operations, including Arrow's operating certificate,
route authorities, computer systems, leaseholds and leasehold improvements,
including, without limitation, those assets specifically listed on Exhibit A
attached hereto, wherever located (hereinafter collectively referred to as the
"Assets"). The Assets shall not include the "Excluded Assets" defined in Section
1.4 hereof. The Assets shall be Transferred to the Purchaser on the Closing
Dote, free and clear of any and all Liens (as defined hereafter).
(a) On the "Closing Date" (as herein defined), as a result of its
purchase of the Arrow Stock pursuant to the Stock Purchase Agreement and the
Assets pursuant to this Agreement, it is contemplated hat the Purchaser would
acquire good and marketable ownership and title to:
(i) three (3) L1011-200F aircraft, one (1) L1011-500P aircraft and
thirteen (13) DC8 aircraft,
(ii) one (1) complete and airworthy Burbank Stage III hushkit,
(iii) ninety-seven (97) serviceable and repairable Pratt & Whitney
JT3D engines (as set forth on Exhibit B) together with new
JT3D engine parts; and
(iv) all other "serviceable," "repairable" or in process of repair
Pratt & Whitney JT8D, Rolls Royce RB211 and General Electric
CF6 aircraft engines, including but not limited to those set
forth on Exhibit B-2 annexed hereto and any other aircraft
engines not specifically referred to in the Excluded Assets,
and
(b) To the extent any of the Assets arc currently leased from IAL or
any of the other Asset Owners, such leases shall terminate at Closing and
unencumbered title to the Assets would be conveyed to the Purchaser.
2
<PAGE>
(c) The Assets shall be acquired by the Purchaser on an "as is"
basis; and no warranty of their condition, merchantability or suitability for
any specific use shall be extended to the Purchaser in connection therewith,
except for such warranty of title, free of liens, as is represented and
warranted in Section 2.1.
1.2 Closing. Subject to the terms and conditions of this Agreement, the
parties hereto shall use their best efforts to consummate the transactions
contemplated hereby and pursuant to the Stock Purchase Agreement (the "Closing")
on or before March 15, 1999, but in no event later than April 1, 1999 (unless
such claw shall be extended pursuant to the provisions hereof), at the offices
of Greenberg Traurig, P.A. in Miami, Florida, or such oilier time and place as
the parties may otherwise agree. The date on. which the Closing occurs shall be
herein referred to as the "Closing Date." The Closing of the purchase of the
Assets shall occur simultaneous with the closing of the purchase of the Arrow
Stock under the Stock Purchase Agreement, and such Closings shall take place on
a date which shall be within five Business Days immediately following the
expiration or termination of the waiting period under the HSR Act, or receipt of
an approval from the Federal Trade Commission, the Department of Justice or any
other court or governmental authority in form and substance satisfactory to
counsel to the Purchaser, to the effect that consummation of the transactions
contemplated by this Agreement and the Stock Purchase Agreement shall not
violate the HSR Act; provided, that, absent mutual agreement of the Parent and
the Purchaser to extend such date, the Closing Date shall not occur later than
April 1, 1999
1.3 Purchase Price.
(a) The aggregate consideration (the "Purchase Price") that will be
paid by Purchaser to the Asset Owners at the Closing in exchange for the Assets
shall be equal to $115,000,000, less the sum of (i) the consideration paid to
the Stockholder for the Arrow Stock pursuant to the Stock Purchase Agreement,
(ii) any amounts required to be paid by the Purchaser on the Closing Date or
thereafter to satisfy any Liens on the Assets and (iii) any adjustments as may
be determined pursuant to subsection 1.3(b) below.
(b) In the event that on or after November 12, 1998 and prior to the
Closing Date JAL, ALI, N304 Corp. or Arrow sells, disposes of, or otherwise
ceases to possess any of its equipment, aircraft, engines, inventory,
components, parts, rotables, spare parts, spare engines, ground support
equipment, cargo handling equipment and business processes (infrastructure)
supporting the airline operations, computer systems or other assets of the type
listed on Exhibit A, the Purchase Price shall be decreased, dollar for dollar,
for the amount of sales or other related proceeds received by such Company or
Companies in connection with such sale (or, in the event of a disposition or
other instance where the Company cents to possess such asset(s), at the Closing
Date, the Purchase Price shall be decreased dollar for dollar by the fair market
value at the time of the disposition of the asset(s) disposed of). To the extent
the Purchase Price, pursuant to this subsection 1.3(b) should have been adjusted
(or adjusted further) but, as of the Closing Date was not, both Parent and Tirri
shall each be jointly and severally obligated to pay to Purchaser, via wire
transfer or certified check, the amount of such adjustment (or increased
adjustment) within 5 days of Purchaser's demand of such payment (the "Post
Closing
3
<PAGE>
Adjustment"). In connection therewith, the parties hereto agree that Purchasers
right to demand, and Parent and Tirri's obligation to pay, a Post Closing
Adjustment hereunder shall survive for a period of six (6) months after the
Closing Date.
(c) The Purchase Price shall be payable at Closing in cash via wire
transfer or certified check in the amount of the Purchase Price.
1.4 Excluded Assets. The Assets to be acquired by the Purchaser on the
Closing Date shall expressly exclude the following (the "Excluded Assets"): (a)
all cash, marketable securities, bank accounts and related cash items of Arrow
and the Asset Owners; (b) all accounts receivable or other rights of the Arrow
and/or Asset Owners to receive payments from customers or lessees as of the
Closing Date (the "Receivables"); provided, however, that the Receivables shall
not include any lease obligations or other debts, accruals or liabilities in
existence prior to Closing owed to any Asset Owner (i) by Arrow under any
operating or capitalized lease to which Arrow shall be the lessee, or (ii)
otherwise relating to the Assets, all of which shall be deemed to be Excluded
Liabilities hereunder and (c) those fourteen (14) Pratt & Whitney engines set
forth at Exhibit B-3. All such Excluded Assets shall be retained by the
applicable Asset Owners on and following the Closing Date.
1.5 Assumed Liabilities. On the Closing Date, the Purchaser shall assume
and be responsible to pay for and perform only the obligation to pay for all "C"
checks, "D" checks, and overhauls and repairs on engines and/or rotables which
are in process as at the Closing (the "Assumed Liabilities"); provided, that all
such Assumed Liabilities with respect to such work in process shall be specified
with respect to the specific aircraft, engines and rotables in question on
Schedule 1.5 to the Disclosure Schedule annexed hereto as Exhibit C and made a
part hereof (the "Disclosure Schedule").
1.6 Excluded Liabilities. Except for the Assumed Liabilities expressly set
forth in Section 1.5 above and on Schedule 1-5 to the Disclosure Schedule,
neither the Purchaser, Arrow, nor any other subsidiary, division or other
"Affiliate" (as that term is herein defined) of the Purchaser shall assume or
otherwise be liable or responsible to pay or perform any obligations, claims,
liabilities, costs, debts, charges, accruals penalties, fines, expenses or other
obligations of any kind or description relating to (a) the ownership and/or
operation of the Parent, the Companies, and any other direct or indirect
Subsidiary of the Parent at any time, whether prior to or following the Closing
Date, or (6) the ownership or operation of the Assets, ox the business of Arrow
at any time up to and including the Closing Date (collectively, the "Excluded
Liabilities"). The Excluded Liabilities shall include, without limitation, all
accounts payable, accrued expenses, indebtedness for money borrowed, capitalized
lease obligations, and any accrued obligations to pay for all "C" checks, "D"
checks, and overhauls and repairs on engines and/or rotables which have been
completed as at the Closing (the
1.7 Delivery of Assets. At the Closing, against payment by the Purchaser
of the Purchase Price payable pursuant to Section 1.3 above, the Parent and
Tirri shall cause the Asset Owners to deliver to the Purchaser, pursuant to such
bills of sale, assignments, deeds, leases and other instrument of transfer as
shall be required by Purchaser and its counsel (the
4
<PAGE>
"Conveyancing Documents") good and marketable title in and to all, and not less
than all, of the Assets, free and clear of any and all Liens.
ARTICLE II
As a material inducement to the Purchaser to enter into this Agreement and
to consummate the transactions contemplated hereby and pursuant to the Stock
Purchase Agreement, as of the dare hereof and the Closing Date, the Parent
hereby makes the following representations and warranties to the Purchaser:
2.1 Title to Assets.
(a) As of the date hereof, and on the Closing Date. The Asset Owners
is and will be record and beneficial owners of all of the Assets free and clear
of any Lien. The Conveyancing Documents to be delivered by the Asset Owners to
the Purchaser at the Closing will be sufficient to transfer all of the Asset
Owners' right, title and interest, legal and beneficial, in the Assets to the
Purchaser;
(b) As of the date hereof, the Asset Owners will own, free and clear
of any Liens, all of the Assets to be purchased by the Purchaser under this
Agreement.
2.2 Enforceability. This Agreement has been duly executed and delivered by
each of the Parent and Tirri and constitutes a legal, valid and binding
obligation of the Parent and Tirri, enforceable against each of them in
accordance with its terms.
2.3 No Other Rights. No Person, other than the Asset Owners as at the date
hereof, and at the Closing will possess any rights, options, calls, leasehold
interests, easements, or other agreements and understandings with respect to the
ownership of or rights to use any of the Assets.
2.4 Organization, Good Standing and Qualification.
(a) The Parent is & corporation duly organized, mildly existing and
in good standing under the laws of Puerto Rico and the Asset Owners are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation or organization.
(b) Arrow has and on the Closing Date will have all requisite power
and authority to carry on its business as now conducted and as proposed to be
conducted. The Parent and Tin has all requisite power and authority to enter
into this Agreement.
(c) Subject to consummation of the transactions contemplated by the
Acquisition Agreement, on the Closing Date both the Parent and the Asset Owners
shall have all
5
<PAGE>
requisite power and authority to sell the Assets to Purchaser and otherwise
perform this Agreement and the transactions contemplated hereby.
(d) Arrow is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify could have a
material adverse effect on the business, properties, operations, earnings,
assets, liabilities, condition (financial or otherwise) or prospects of Arrow
and its consolidated subsidiaries, when taken as a collective whole (a "Material
Adverse Effect").
2.5 Requisite Consents: Nonviolation.
Except as set forth in Section 2.5 of the Disclosure Schedule or where the
failure to comply with any of the provisions of this Section 2.5 would not,
individually or in the aggregate, have a Material Adverse Effect, the execution,
delivery and performance of this Agreement and the consummation by the Asset
Owners of the Transactions contemplated hereby and thereby (including, without
limitation, the offer, sale and delivery of the Arrow Stock) will not:
(a) require the consent, license, permit, waiver, approval,
authorization or other action of, by or with respect to, or registration,
declaration or filing with, any court or governmental authority, department,
commission, board, bureau agency or instrumentality, domestic or foreign
("Governmental Authority"), including without limitation, the Federal Aviation
Authority ("FAA") or the Department of Transportation ("DOT") or any other
individual, Partnership, corporation, unincorporated organization or
association, limited liability company, trust or other entity (collectively, a
"Person");
(b) violate or conflict with any provision of the Certificate of
Incorporation or the By-laws of the Asset Owners or Arrow, complete and correct
copies of which has been provided to counsel to the Purchaser; or
(c) constitute a default (with or without notice or lapse of dine or
both) under, violate or conflict with or give rise to a right of termination,
cancellation or acceleration or to a loss of a material benefit under any Law
(as defined in Section 2.8 below), Permit (as defined in Section 2.8 below),
Order (as defined in Section 2.8 below), or contract, agreement, arrangement or
understanding, written or oral, to which either the Asset Owners or Arrow is or
hereafter may be a party or by which the Asset Owners. Arrow or their respective
properties are or hereafter may be bound.
2.6 Subsidiaries. Except as disclosed in Section 2.6 of the Disclosure
Schedule, prior to the Closing the Asset Owners will not, own or control,
directly or indirectly, any partnership interests, stock or other equity
interests in any partnership, corporation or other entity or any voting rights
or right to control the policies and direction of any partnership, corporation
or other entity.
2.7 Litigation. Except as set forth in Section 2.7 of the Disclosure
Schedule, there is no action, suit, proceeding, investigation or governmental
approval process (collectively,
6
<PAGE>
"Actions") pending or, to the best knowledge of the Parent, threatened against
the Asset Owners, or affecting any of the Assets (including, without limitation,
any of its Permits) which individually or in the aggregate would have a Material
Adverse Effect, nor to the knowledge of the Parent is there any basis for any
such Action. To the best knowledge of the Parent, there is no Action against any
of the Asset Owner's directors, officers or employees in connection with its
business which, in the event of an adverse judgment against any such Person,
would have a Material Adverse Effect, nor is there any basis for any such
Action. The foregoing includes, without limitation, any Action pending or, to
the Parent's best knowledge, threatened (or any basis therefor known to the
Asset Owners) involving the prior employment of any employees of the Asset
Owners, their use in connection with the Asset of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. To the best knowledge of the Parent,
neither the Asset Owners nor any of their respective Assets, nor, in connection
with their businesses, any of the Asset Owners' directors, officers or
employees, is subject to any order, judgment, writ, injunction, decree, ruling
or decision (collectively, an "Order") of any Governmental Authority which could
have a Material Adverse Effect. There is no Action by any of the Asset Owners
currently pending or which Arrow intends to initiate which could have a Material
Adverse Effect.
2.8 Compliance with Laws: Permits.
(a) Assuming compliance with the HSR Act, the sale of the Assets by
the Asset Owners to the Purchaser will be in compliance with all applicable
federal and state securities laws.
(b) To the best knowledge of the Parent. the Asset Owners have has
not violated or failed to comply with any statute, law, ordinance, rule,
regulation or policy of any Governmental Authority (collectively, "laws") to
which they or any of their Assets is subject, except where non-compliance with
any such Laws would nor, individually or in the aggregate, have a Material
Adverse Effect.
(c) Schedule 2.8 to the Disclosure Schedule lists all permits,
licenses, orders, certificates, authorizations and approvals of any Governmental
Authority, including without limitation. all DOT route authorities, operating
certificates and consent decrees and FAA certifications and consent decrees
enabling Arrow to operate art airline (collectively, the "Laws") owned or
otherwise possessed by the Asset Owners, To the best knowledge of the Parent the
Permits listed on Schedule 2.8 represent all of the Permits that are required
for the operation and use of the Assets for the conduct of Arrow's business as
presently conducted.
(d) All Permits listed on Schedule 28 are, and as of the Closing
will be, in full force and effect, no violations or notices of failure to comply
have been issued or recorded in respect of any such Permits; and the Parent has
no knowledge of any reason why such Permits may be revoked or suspended, except
in each case, where not compliance with this sentence would not, individually or
in the aggregate, have a Material Adverse Effect. Except where non-compliance
with the following would not, individually or in the aggregate, have a Material
Adverse Effect, all applications, reports, notices and other documents required
to be filed by
7
<PAGE>
Arrow with all Governmental Authorities have been timely filed and are complete
and correct in all material respects as filed or as amended prior to the date
hereof. Wit respect to any consents, if any, which may be required to be
obtained in respect to the continuation of any Permits (including any DOT or FAA
consents, if any, which may in the opinion of legal counsel, be required), the
Parent knows of no reason why such Permits or consents thereto should not be
approved and granted by the appropriate Governmental Authority. To the best
knowledge of the Parent, neither the Asset Owners nor, to the best knowledge of
the Asset Owners, any of its officers, employees or agents has made any illegal
or improper payments to, or provided any illegal or improper inducement for, any
governmental official or other Person in an attempt to influence any such Person
to take or to refrain from taking any action relating to the Asset Owners.
2.9 Absence of Certain Changes or Events. To the best knowledge of the
Parent, other than the effect of those transactions consummated by this
Agreement, the Stock Purchase Agreement and the Acquisition Agreement, there has
been no change in the business, properties, operations, earnings, assets,
liabilities, condition (financial or otherwise) or prospects of the Asset
Owners, except for (a) changes in the ordinary course of business consistent
with past practice, or (b) as disclosed in the Disclosure Schedule, but in each
case, which have not had a Material Adverse Effect on Arrow or Assets.
2.10 Contracts. True and correct copies of all contracts, agreements,
notes, instruments, franchises, leases, licenses, commitments, arrangements or
understanding, written or, to the knowledge of the Parent, oral (collectively,
"Contracts") to which the Asset Owners are a party which are material to the
Assets or the business of Arrow and which are in the possession of the Parent
have been made available to the Purchaser and are listed on Schedule 2.10 to the
Disclosure Schedule. To the best knowledge of the Parent, except where
non-compliance with any of the following would not individually or in the
aggregate, have a Material Adverse Effect (a) all of the Contracts are in full
force and effect and constitute legal, valid and binding obligations of Asset
Owners, Arrow and the other parties thereto; (b) the Asset Owners, Arrow and
each other party to the Contracts, has performed in all material respects all
obligations required to be performed by it or them under the Contracts, and (c)
no material violation or default exists in respect thereof, nor any event that
with notice or lapse of time, or both, would constitute a default thereof, on
the part of the Asset Owners, Arrow or any other party thereto; (d) none of the
Contracts is currently being renegotiated; and (e) the validity, effectiveness
and continuation of all Contracts will not be materially adversely affected by
the transactions contemplated by this Agreement or the Stock Purchase Agreement.
2.11 Insurance. The Asset Owners have in full force and effect all
insurance policies as are required for the ownership, operation or use of the
Assets, except where the failure to maintain such insurance would not,
individually or in the aggregate, have a Material Adverse Effect. Schedule 2.10
to the Disclosure Schedule lists or describes all insurance policies, the
carrier, the deductible and the policy limits on all insurance policies
applicable to the Assets.
2.12 Labor Union Activities. Except as disclosed on Section 2.12 of the
Disclosure Schedule, no employee of any of the Asset Owners is represented by
any
8
<PAGE>
labor union or covered by any collective bargaining agreement; nor, to the best
knowledge of the Parent, has any labor union sought to represent any of its
employees of the Asset Owners. There is no strike or other labor dispute
involving the Asset Owners pending, or to the best knowledge of the Parent,
threatened. To the best knowledge of the Parent, no officer or key employee
intends to terminate his employment with the Asset Owners. To the best knowledge
of the Parent, no officer or key employee of it is a party to or bound by any
Contract, or subject to any restrictions (including, without limitation, any
non-competition restriction), which would restrict the right of such person to
participate in the affairs of the Asset Owners.
2.13 ERISA. Except as disclosed on Section 2.14 of the Disclosure
Schedule, to the best knowledge of the Parent none of the Asset Owners maintains
(nor have ever maintained during the past seven years) nor do they have (nor
have they during the past seven years ever had) any obligation under (including,
without limitation, any obligation to contribute to) an employee benefit plan as
described in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
2.14 Taxes. Except as disclosed on Section 2.14 of the Disclosure
Schedule, to the best knowledge of the Parent: (a) all federal, state, city,
county, local and foreign income, franchise, sales, use and value added tax
returns and reports, and all other material tax returns and reports required to
be filed by the Assets Owners with respect to the Assets in any jurisdiction
have within the past seven years been timely filed (collectively, "Returns"),
(b) all such Returns are true, correct and complete, except where the
inaccuracies in any such Return would not, individually or in the aggregate,
have a Material Adverse Effect, (c) all taxes, assessments, fees, interest,
penalties and other charges with respect thereto (collectively, "Taxes") due or
claimed to be due have been paid except to the extent reserved against on Asset
Owners' financial statements, (d) no such income tax return has been audited by
the applicable Governmental Authority, and there are in effect no waivers of the
applicable statute of limitations for Taxes in any jurisdiction for any period.
2.15 Environmental Matters. Except as disclosed in Section 2.15 of the
Disclosure Schedule, or where a breach or violation of any of the following
would not, individually or in the aggregate, have a Material Adverse Effect, to
the best knowledge of the Parent: (a) the Assets have been operated and
maintained in compliance with all applicable federal, state, city, county and
local environmental protection laws and regulations (collectively, the
"Environmental Laws"), (b) no event has occurred which, with or without the
passage of time or the giving of notice, or both, would constitute
non-compliance with, or a violation by any of the Asset Owners of, the
Environmental Laws, and (c) the Asset Owners has not caused or permitted to
exist, as a result of an intentional or unintentional act or omission, a
disposal, discharge or release of solid wastes, pollutants or hazardous
substances, on or from any site which currently is or formerly was owned,
leased, occupied or used by it, except where such disposal, discharge or release
was in compliance with the Environmental Laws.
2.16 Fines end Penalties. To the best knowledge of the Parent, all fines,
penalties or assessments by the DOT, the FAA or any related state or federal
agency (including but riot limited to Department of Justice fines and penalties)
having jurisdiction over the use of the
9
<PAGE>
Assets or the operation of the airline business of Arrow have been fully paid by
Arrow and the Asset Owners. Schedule 2.16 to the Disclosure Schedule lists and
describes all such fines or penalties imposed upon Arrow or the Asset Owners by
such Governmental Agencies in the last three years.
2.17 No Brokers. the Parent, Tirri or any of their respective Affiliates
(as defined) has entered or will enter into any agreement pursuant to which
Arrow or the Purchaser will be liable, as a result of the transactions
contemplated by this Agreement or the Stock Purchase Agreement, for any claim of
any person for any commission, fee or other compensation as finder or broker and
the Parent agrees to indemnify the Purchaser for any liability resulting from
any such agreement.
2.18 Definition of Knowledge As used in this Article II, the term "know,"
"knowledge" or "to the best knowledge," when applied to the Parent, means the
actual knowledge of Tirri or any other executive officer, legal or financial
representative of the Parent or Tirri, or oilier Person engaged by Tirri or the
Parent to conduct a business, legal or financial due diligence investigation
relative to the Assets, in connection with the transactions contemplated by the
Acquisition Agreement.
ARTICLE III
As a material inducement to the Parent and Tirri to enter into this
Agreement and to consummate the transactions contemplated hereby, as of the daze
hereof and the Closing Date, the Purchaser makes the following representations
and warranties to the Seller:
3.1 Corporate Status. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
3.2 Corporate Power and Authority. Purchaser has the corporate power and
authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
Purchaser has taken all action necessary to authorize its execution and delivery
of this Agreement, the performance of its respective obligations hereunder and
the consummation of the transactions contemplated hereby.
3.3 Enforceability. This Agreement has been duly executed and delivered by
Purchaser and constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms.
3.4 No Violation. The execution and delivery of this Agreement by the
Purchaser, (be performance by it of its obligations hereunder and the
consummation by them of the transactions contemplated by this Agreement will not
(3) contravene any provision of the organizational documents of the Purchaser,
(ii) violate or conflict with any law, statute, ordinance, rule, regulation,
decree, writ, injunction, judgment or order of any governmental
10
<PAGE>
authority or of any arbitration award which is either applicable to, binding
upon or enforceable against the Purchaser, (iii) except as disclosed on Schedule
3.4 of the Disclosure Schedule, conflict with, result in any breach of, or
constitute a Default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to a right
to terminate, amend, modify, abandon or accelerate, any instrument or contract
which is applicable to, binding upon or enforceable against the Purchaser, (iv)
result in or require the creation or imposition of any Lien upon or with respect
to any of the property or assets of the Purchaser, or (v) except as disclosed on
Schedule 3.4 of the Disclosure Schedule, require the consent, approval,
authorization or permit of, or filing with or notification to, any governmental
authority, any court or tribunal or any other person, except any applicable
filings required under the HSR Act.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 Conduct of Business by the Asset Owners Pending the Closing. The
Parent covenants and agrees that, between the date of this Agreement and the
Closing Date, the business of Arrow and the ownership, use and operation of the
Assets by the Asset Owners shall be conducted only an, and shall not take any
action except in, the ordinary course of business consistent with past practice,
except with respect to (i) those actions outside the ordinary course of business
and inconsistent with pest practice as to which the Parent provided notice to
and received the consent of the Purchaser (such consent not to be unreasonably
withheld) and (ii) the accelerated repayment of indebtedness and the
satisfaction and payment of budgeted items.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Further Assurances: Compliance with Covenants. Each party shall
execute and deliver such additional instruments and other documents and shall
take such further actions as may be necessary or appropriate to effectuate,
carry out and comply with oil of the terms of this Agreement and the
transactions contemplated hereby.
5.2 Cooperation: No Disposition of Arrow Stock or Assets.
(a) Each of the parties agrees (i) to cooperate with the other in
the preparation and filing of all forms, notifications, reports and information,
if any, required or reasonably deemed advisable pursuant to any law, rule or
regulation in connection with the transactions contemplated by this Agreement,
(ii) to use its respective best efforts to agree jointly on a method to overcome
any objections by any governmental authority to any such transactions and (in)
to cooperate with the tax planning objectives of the other party so long as such
cooperation will not adversely impact such party.
11
<PAGE>
(b) Neither the Parent nor Tirri shall commit to the sale,
disposition, hypothecation or encumbrance of any Arrow Stock or Assets of the
Asset Owners prior to the consummation of this Agreement without the written
consent of the Purchaser, and neither the Parent nor Tirri is under any
obligation to dispose of, commit to dispose of, encumber or commit to encumber
the Arrow Stock or any Assets of the Asset Owners prior to the consummation of
this Agreement.
5.3 HSR Act and Other Action. Each of the parties hereto shall (i) make
promptly (and in no event later than the execution of this Agreement) its
respective filings, if any, and thereafter make any other required submissions,
under the HSR Act (as defined hereafter)1 with respect to the transactions
contemplated hereby, and (ii) take all appropriate actions, and do, or cause to
be done, all things necessary, proper or advisable under any applicable laws,
regulations and contracts to consummate and make effective the transactions
contemplated herein, including, without limitation, seeking all licenses,
permits, consents, approvals, authorizations, qualifications and orders of any
governmental authority or applicable financial institution.
5.4 Confidentiality; Publicity. Except as may be required by law or as
otherwise permitted below, prior to the Closing Date, no party hereto or their
respective affiliate; employees, agents, attorneys, financial advisors and
representatives shall disclose to any third party this Agreement or the subject
matter or terms hereof without the prior consent of the other parties. During
the period that this Agreement is in effect, the Purchaser may disclose this
Agreement and related financial information concerning the Companies only to
Warburg Dillon Read, LLC, provided that any such. financial institution executes
a confidentiality agreement satisfactory to the Parent. In the event this
Agreement is not consummated, all documents containing any confidential
information received in connection with the performance of this Agreement shall
be immediately returned to the providing party and no copies thereof shall be
retained by the returning party. Prior to the Closing Date, no press release or
other public announcement related to this Agreement or the transactions
contemplated hereby shall be issued by any party hereto without the prior
approval of the other parties.
5.5 Certain Tax Matter. The Parent shall enforce the provisions of Section
5.5 of the Acquisition Agreement and shall comply with its obligations under
such Section 55. In addition, the Parent shall provide the Purchaser and shall
cause the Asset Owners and each of the Asset Owners to provide the Purchaser
with such information and records as reasonably may be requested by Purchaser in
connection with the preparation of any such tax return, in the same manner as
Tirri and the Parent is required to provide such information to Batchelor under
the Acquisition Agreement.
5.6 Make Whole Obligations of the Parent and the Asset Owners. Each of the
Parent and the Asset Owners do hereby covenant and agree with the Purchaser to
the following terms and conditions related to the Assets:
(a) The Purchaser, the Parent and urn have jointly agreed that the
specified Assets set forth below have the agreed upon fair marker values set
forth in the following table:
12
<PAGE>
<TABLE>
<CAPTION>
Asset item No. Agreed Upon
in Exhibit A Quantity Asset Description Value
- -------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
No. 7 Two (2) DC8-62 Aircraft N42086 and $ 8,000,O00
N66656
No. 10 Ninety Seven Aircraft engines JT3D and new
JT3D engine parts $35,000,000
Subtotal $43,000,000
No. 26 and One (1) Engine Shop IAL engine shop
No. 11 and residual engines
and spare parts not
listed above $10,000,000
No. 27 One (1) Wheel and brake shop $ 5,000,000
No. 29 Inventories AAA Interair new
and used inventories
of aircraft and
engine parts not
listed above $25,000,000
-----------
Subtotal $40,000,000
Total $83,000,000
===========
</TABLE>
(b) The Purchaser shall have the right (but not the obligation) to
require the Parent and each of the Asset Owners (collectively, the "Tirri
Group"), to offer, on behalf of the Purchaser, some or all of the Assets
specified in Section 5.6(a) above, for sale & their agreed upon fair market
values, in the event and to the extent that Purchaser notifies the Tirri Group
not later than ninety (90) days following the Closing Date that it desires that
the Tirri Group offer any or all of the above specified Assets for sale (the
"Purchaser Sale Notice"), the Tirri Group will, on behalf of the Purchaser,
promptly offer such Assets for sale. The Purchaser Sale Notice shall specify
which of the above Assets are to be offered for sale. The Tirri Group agrees not
to offer any of the above specified Assets for sale at prices which shall be
Less than the "Agreed Upon Price" (as herein defined). The Agreed Upon Price
shall be equal to ninety (90%) percent of the agreed upon fair market values
attributable to such Assets, as set forth in the table in Section 5.6(a) above
(the "Agreed Upon Value"), unless otherwise agreed to by the Purchaser. To the
extent that the Purchaser does not provide the Tirri Group with a Purchaser Sale
Notice instructing the Tirri Group to sell any of the above specified Assets
within the aforesaid ninety (90) -day period following the Closing Daze, such
Assets will not be subject to the "Make Whole" obligations of the Tirri Group
set forth herein. As used herein, an "offer for sale" shall mean and include (I)
offering any or all of the above Assets for sale to any other participant in the
airline industry, either directly or through recognized industry brokers of such
Assets or other agents, (ii) advertising such Assets as being for sale in any
recognized industry publications, or (iii) such other additional procedures as
Fine Air and the Tirri Group may mutually agree upon.
13
<PAGE>
Unless otherwise agreed to by the Purchaser, all offers for sale for any of the
above-specified Assets shall be in all-cash transactions only and the entire
proceeds from such sale, including but not limited to any amounts in excess of
the Agreed Upon Price, shall be the property of the Purchaser.
(c) In the event and to the extent dun any or all of the Assets
specified in Section 5.6(a) hereof are timely offered for sale by the Tirri
Group on behalf of the Purchaser (the "Offered Assets") and by a date which
shall be not later than ninety (90) days from the date of the Purchaser Sale
Notice (the "Make Whole Payment Date"), the Purchaser shall not have been able
to either (i) consummate a cash sale of the Offered Assets, or (ii) have entered
into a binding cash sale agreement with a financially reputable acquiror of such
Offered Assets, in either case, at a purchase price for the Offered Assets which
shall be equal to or greater than the Agreed Upon Price, then the Tirri Group
shall pay to the Purchaser by not later than the Make Whole Payment Date, the
cash amount (the "Make Whole Amount") as shall be equal to the amount by which
the actual price paid or committed to be paid for such Asset(s) shall be less
than the Agreed Upon Price(s) for such Asset(s).
Notwithstanding the foregoing, the Make Whole Amount with respect to the
Engine Shop, the Wheel and Brake Shop and the inventories described in Section
5.6(d) below shall be calculated only (i) if such specified Assets shall be
Offered Assets, and (ii) to the extent that the aggregate amounts received from
the sale of such Offered Assets in the aggregate shall be less than the $36
million aggregate Agreed Upon Price for all such specified Assets. it is further
understood and agreed that the Agreed Upon Value of the AAA Interair, Inc. new
and used inventories of aircraft and engine parts referred to in Section 5.6(a)
and not otherwise listed in Asset Item No. 10 of Exhibit A (the "AAA Interair
Inventories") shall be increased or decreased, as the case may be, and the
applicable Agreed Upon Prices therefor shall similarly be increased or
decreased, to the extent of any purchases and dispositions (and, to the extent
the Purchaser wishes to retain certain of such assets, it being expressly agreed
by the parties chat such retention shall be treated as a disposition by the
Purchaser for purposes of adjusting the Agreed Upon Prices set forth herein) of
such AAA Interair Inventories between the Closing Date and the Make Whole
Payment Date. Similarly, it is further understood and agreed that the Agreed
Upon Value of each of the items numbers "7" (the two DC8-62 Aircraft) and "10"
(the ninety-seven aircraft engines) listed in the "Asset Item No." column of
Section 5.6(a) above shall be increased or decreased, as the case may be, and
the Applicable Agreed Upon Prices therefor shall similarly be increased or
decreased, to the extent of any purchases and dispositions of such assets
between the Closing Date and the Make Whole Payment Date.
(d) In the even! and to the extent that the Tirri Group shall, for
any reason, fail or refuse to pay the Make Whole Amount in cash by the Make
Whole Date, in addition to Purchaser's right to retain the specific Assets
indicated in Column "A" of the chart below, the Tirri Group shall deliver to the
Purchaser good and marketable title, free of all Liens, to the specific
additional aircraft specified in Column "C" of the chart below (the "Additional
Assets"); it being understood that delivery of the Additional Assets shall
constitute payment by the Tirri Group of the applicable Make Whole Amounts which
shall be allocated and attributable to the specified Asset(s) described below.
Such Additional Assets are as follows:
14
<PAGE>
<TABLE>
<CAPTION>
A B C
- - -
Make Whole Amount
Additional Assets (as
more full set forth
Asset Description on Exhibit B-4)
- ------------------ ------------------- ------------- ---------------------
<S> <C> <C> <C>
DC8-62 Aircraft N42084 and N66656 DC8-62 aircraft
(reg. no.
N8974U)
Aircraft engines JT3D and new parts DC8-63F aircraft
(reg. no.
N345JW)
Engine Shop LAL engine shop and
residual engines and
spare parts and
Wheel and Brake and
Shop
Inventories AAA Interair new and DC10-30CF PP-
used inventories of VMU
aircraft and engine parts (reg. no. 47842)
</TABLE>
5.7 The Security Agreement. As collateral security to secure payment and
performance by the Tirri Group of the Make Whole Obligations set forth in
Section 5.6, the Parent and the Asset Owners obligation to indemnify the
Purchaser, Arrow and others pursuant to Article VIII hereof, Parent and
Stockholders' obligation to indemnify the Purchaser and Arrow pursuant to
Article VIII of the Stock Purchase Agreement, on the Closing Date, the Tirri
Group shall grant to the Purchaser a first priority Lien and security interest
in and to the Additional Assets designated as the DC8-62 (Registration No.
N8974U), DC8-63F (Registration No. N345JW) and DC10-30F PP-VMU (Registration No.
47842), all pursuant to the terms and conditions of the Mortgage and Security
Agreement, in the form of Exhibit D annexed hereto and made a part hereof (the
"Security Agreement"), The Security Agreement shall terminate as provided in
Section 8.4(c) hereof.
5.8 Management Agreement On the Closing Date, the Parent and the Asset
Owners shall enter into management agreement(s) with Arrow and the Purchaser, in
substantially the form of Exhibit E annexed hereto (the "Management Agreement"),
pursuant to which the Purchaser and Arrow shall for the term of such Management
Agreement:
15
<PAGE>
(a) collect (or the account of the Parent and the Asset Owners, the
Receivables applicable to Arrow and its customers, and AAA Interair and
its customers and
(b) pay or remit to the applicable creditor of Arrow and/or AAA
Interair (as the case may be) all accounts payable, accrued expenses and
accrued obligations applicable to all "C" checks, "D" checks and overhauls
and repairs of engines and/or rotables which have been completed as at the
Closing Date, which are Excluded Liabilities hereunder.
5.9 Extension of Representations, Warranties and Covenants. On the Closing
Date, Tirri and each of the Asset Owners shall execute and deliver to the
Purchaser a joinder and assumption agreement, in the form of Exhibit F annexed
hereto and made a part hereof (the "Joinder and Assumption Agreement"), pursuant
to which (a) Tirri and each of the Asset Owners shall confirm the accuracy of
all of the foregoing representations and warranties of the Parent, and (b) each
of the Asset Owners shall join in and assume, jointly and severally with the
Parent, all of the various covenants, undertakings and agreements of the Parent
contained in this Agreement and in each Exhibit hereto, including, without
limitation the Make Whole obligations set forth in Section 5.6 above and in the
Management Agreement.
5.10 Hialeah Lease. On the Closing Date, Purchaser, as subtenant, shall
enter into a sublease agreement with Parent for the sublease of the property
located at 950 S.E. 12th Street, Hialeah, Florida 33010 (the "Premises") for a
one (1) year period commencing on the Closing Date at an annual rental of
$600,000, payable in equal monthly installments. In connection with said
sublease, in the event Parent shall have an option to purchase said Premises,
Parent agrees to grant to Purchaser a "back to back" option to purchase said
Premises upon the same terms and conditions contained in Parent's Option, and,
in the event Parent shall have such Option, Purchaser may require Parent to
exercise said Option simultaneously with Purchasers exercise of its Option
ARTICLE VI
CONDITIONS TO THE OBLIGATION OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing of the
following conditions, any or all of which may be waived in whole or in part in
writing by Purchaser:
6.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Parent and (at the Closing)
of Purchaser and the Asset Owners contained in this Agreement shall be true and
correct at and as of the Closing with the same force and effect as though trade
at and as of that time. Parent shall have performed and complied with all of his
obligations required by this Agreement to be performed or complied with at or
prior to the Closing. Parent and Asset Owners shall have delivered to the
Purchaser a
16
<PAGE>
certificate, dated as of the Closing Date, certifying that such representations
and warranties are true and correct and that all such obligations have been
complied with and performed.
6.2 Delivery of the Assets. At the Closing, the Asset Owners shall duly
endorse for transfer and deliver to the Purchaser (or its assignee) the Assets
and such other Conveyancing Documents as are necessary to transfer to Purchaser
(or its assignee) good and marketable title to the Assets free and clear of any
Liens.
6.3 HSR Act Waiting Period. Any applicable HSR Act waiting period shall
have expired or been terminated, or the Purchaser shall have received an
approval from the Federal Trade Commission, the Deportment of Justice or any
other court or governmental authority in form and substance satisfactory to
counsel to the Purchaser, to the effect that consummation of the transactions
contemplated by this Agreement and the Stock Purchase Agreement shall not
violate the HSR Act.
6.4 Consummation of Transactions Under Stock Purchase Agreement. The
acquisition of the Arrow Stock and other transactions contemplated by the Stock
Purchase Agreement shall have been consummated on the Closing Date, in a manner
which shall be satisfactory to the Purchaser,
6.5 Opinion of Counsel. The Purchaser shall have received an opinion dated
as of the Closing Date from counsel for the Parent, in form and substance
acceptable to Purchaser, to the effect that:
(i) The Asset Owners and the Parent have obtained all
necessary authorizations and consents of its Board of Directors and
shareholders to effect the transactions contemplated hereby;
(ii) The execution of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any agreement or instrument to which the Parent, the Asset
Owners. Arrow, any of their subsidiaries as bound or to which any of the
property or assets of such entities and person is subject, nor will such
actions result in any violation of the provisions of the Articles of
Incorporation or Bylaws (or other organizational documents of the Parent,
the Asset Owners or Arrow or any statute or any order, rule or regulation
of any court or governmental agency or body of the United States, the
State of Florida or the Commonwealth of Puerto Rico having jurisdiction
over the Parent, the Asset Owners, Arrow, any of their subsidiaries or any
of their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the consummation of this Agreement;
provided, however, that any opinion with respect to any agreement or
instrument may be limited to the knowledge of such counsel after due
inquiry.
17
<PAGE>
(iii) Such counsel does nor know or have reason to believe
that there is arty litigation, proceeding or investigation pending or
threatened which might result in any Material Adverse Effect on the
Parent, the Asset Owners or Arrow, or which questions the validity of this
Agreement;
(iv) Such counsel does not know or have reason to believe that
any event has occurred or state of facts exists which would constitute &
breach of any of the representations and warranties made by the Parent or
the Asset Owners pursuant to Article II of this Agreement; and
(v) This Agreement is a valid and binding obligation of the
Parent, Tirri and the Asset Owners and enforceable against each of them
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors' rights generally or general equitable
principles.
6.6 Execution and Delivery of Exhibits and Conveyancing Documents. On the
Closing Date, each of the Parent, Tirri and the Asset Owners, as applicable,
shall have executed and delivered to the Purchaser the Security Agreement the
Management Agreement and the Joinder and Assumption Agreement In addition, on
the Closing Date, each of the Asset Owners shall have executed and delivered to
the Purchaser or its permitted assignee & bill of sale and such other
Conveyancing Documents transferring title to the Assets, all in form and
substance satisfactory to the Purchaser and its counsel.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PARENT AND TERRI
The obligations of the Parent and Tirri to effect the transactions
contemplated hereby shall be subject to the fulfillment at or prior to the
Closing of the following conditions, any or all of which may be waived in whole
or in part in writing by Tint
7.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing with the same force
and effect as though made at and as of that time. Purchaser shall have performed
and complied with all of its obligations required by this Agreement to be
performed or complied with at or prior to the Closing. Purchaser shall have
delivered to the Parent a certificate, dated as of the Closing Date, certifying
that such representations and warranties are true and correct and that all such
obligations have been complied with and performed.
18
<PAGE>
7.2 Payment of Consideration.
(a) At the Closing, Purchaser shall have paid the Purchase Price for
the Assets under this Agreement and the purchase price for the Arrow Stock under
the Stock Purchase Agreement, to the Asset Owners and to the Stockholder, as
contemplated hereby and thereby.
(b) Notwithstanding the provisions of Section 7.2(a) or anything
else to the contrary contain in this Agreement or in the Stock Purchase
Agreement, in the event and to the extent that the Purchaser shall have funded
the bridge loan contemplated by the Loan Agreement prior to the Closing, the
Parent and Tirri hereby mutually covenant and agree that Purchaser shall receive
on the Closing Date, a dollar-for-dollar credit against the Purchase Price for
the Assets and the purchase price for the Arrow Stock under the Stock Purchase
Agreement to the extent of the principal amount of all loans and advances made
to the Parent under the Loan Agreement. which shall thereby be deemed satisfied
in final form.
7.3 HSR Act Waiting Period. Any applicable HSR Act waiting period shall
have expired or been terminated, or the Purchaser shall have received an
approval from the Federal Trade Commission, the Department of Justice or any
other court or governmental authority in form and substance satisfactory to
counsel to the Purchaser, to the effect that consummation of the transactions
contemplated by this Agreement and the Stock Purchase Agreement shall not
violate the HSR Act.
7.4 Opinion of counsel. The Parent and Tirri shall have received an
opinion dated as of the Closing Date from counsel for the Purchaser, in form and
substance acceptable to the Parent, to the effect that:
(i) The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware is
deemed a United States citizen under the Federal Aviation Act of 1958. as
amended, together with the Aviation Regulations of the Federal Aviation
Administration and recodified in Subtitle VII of Tide 49 of the United
States Code, and is authorized to carry on the business now conducted by
it and to own or lease the properties now owned or leased by it;
(ii) The Purchaser has have obtained all necessary
authorizations and consents of its Board of Directors and shareholders to
effect the transactions contemplated hereby;
(iii) The execution of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any agreement or instrument to which the Purchaser, any of
its subsidiaries is bound or to which any of the property or assets of
such entities and person is subject, or, to the extent required, any
requisite consents have been obtained, nor will such actions result in any
violation of the provisions of the Articles of Incorporation or Bylaws (or
other organizational documents) of the Purchaser or any statute or any
order, rule or regulation of any court
19
<PAGE>
or governmental agency or body of the United States or (he State of
Delaware having jurisdiction over the Purchaser, any of their subsidiaries
or any of is properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the consummation of this Agreement;
provided, however, that any opinion with respect to any agreement or
instrument may be limited to the knowledge of such counsel after due
inquiry.
(iv) Such counsel does not know or have reason to believe that
there is any litigation, proceeding or investigation pending or threatened
which might result in any Material Adverse Effect on the Purchaser, or
which questions the validity of this Agreement;
(v) Such counsel does not know or have reason to believe that
any event has occurred or state of facts exists which would constitute a
breach of any of the representations and warranties made by the Purchaser
pursuant to Article III of this Agreement; and
(vi) This Agreement is a valid and binding obligation of the
Purchaser, and enforceable against the Purchaser in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally or general equitable principals.
ARTICLE VIII
INDEMNIFICATION
8.1 By the Parent and the Asset Owners. The Parent hereby agrees that on
and after the Closing Date the Parent and the Asset Owners shall jointly and
severally indemnify, protect, save and keep harmless the Purchaser and Arrow and
the officers and directors of the Purchaser and Arrow from and against, and on
written demand to pay or to reimburse the Purchaser and Arrow and the officers
and directors of the Purchaser and Arrow for the payment of, any and all
liabilities, obligations, losses, damages, deficiencies, interest, penalties,
additional amounts, claims (including, without limitation, claims arising out of
negligence or involving strict liability in tort or claims for any tax
liabilities), suits, actions, costs, expenses and disbursements (including,
without limitation, legal fees, costs and related expenses), of whatsoever kind
and nature ("Expenses") imposed on, incurred by or asserted against the
Purchaser, Arrow or either of them after the Closing Date (a) relating to any
breach of a representation or warranty or any covenant or agreement made by the
Parent or the Asset Owners in or pursuant to this Agreement, (b) arising
directly or indirectly out of or in any way connected with the ownership.
possession, operation or control of any of the Assets or of the business of
Arrow at any time up to or including the Closing Date) or (c) arising directly
or indirectly out of or in any way connected with the Excluded Assets or
Excluded Liabilities. The amount of any indemnification payment from the Parent
or the Asset Owners to the Purchaser, Arrow or any officer or director of the
Purchaser or Arrow shall be equal to the amount that, after the payment
20
<PAGE>
of all taxes imposed thereon, is equal to the amount of the Expenses incurred
by the Purchaser or Arrow.
8.2 By the Purchaser. The Purchaser hereby agrees to indemnify, protect,
save and keep harmless the Parent and the Asset Owners from and against, and on
written demand to pay, or to reimburse the Parent or the Asset Owners for the
payment of, any and all Expenses imposed on, incurred by or asserted against
Parent or the Asset Owners after the Closing Date relating to any breach of a
representation or warranty made by the Purchaser in this Agreement, or arising
directly or indirectly out of or in any way connected with the ownership,
possession, operation or control of any of the Assets or of the business of
Arrow at any time following the Closing Date. The amount of any indemnification
payment from Purchaser to the Parent or the Asset Owners shall be equal to the
amount that, after the payment of all taxes imposed thereon, is equal to the
amount of the Expenses incurred by the Parent or the Asset Owners.
8.3 Indemnification Procedures. The indemnification obligations under this
Agreement shall be subject to the following procedures:
(a) Third Party Claims. A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement is
referred to herein as the "Indemnifying Party" and the other party or parties
claiming indemnity is referred to as the Indemnified Party." Promptly after
receipt by an Indemnified Party of notice of the commencement of any action
against it, such Indemnified Party will, if a claim is to be made against the
Indemnifying Party under such Section, give notice to the Indemnifying Party of
the commencement of such action, but the failure to notify the Indemnifying
Party will not relieve the Indemnifying Party of any liability that it may have
to any Indemnified Parry, except to the extent that the Indemnifying Party
demonstrates that the defense of such action is prejudiced by the Indemnified
Party's failure to give such notice. With respect to any such action, the
Indemnifying Party will be entitled to participate and be kept informed and, to
the extent that it wishes (unless (i) the Indemnifying Party is also a party to
such action and the Indemnified Party determines in good faith that joint
representation would be inappropriate, or (ii) the Indemnifying Party fails to
provide reasonable assurance to the Indemnified Party of its financial capacity
to defend such action and provide indemnification with respect to such action),
to assume the defense of such action with counsel satisfactory to the
Indemnified Parry and, after notice from the Indemnifying Parry to the
Indemnified Party of its election to assume the defense of such action, the
Indemnifying Party will not, as long as it diligently conducts such defense, be
liable to the Indemnified Party for any fees of other counsel or any other
expenses with respect to the defense of such action, in each case subsequently
incurred by the Indemnified Party in connection with the defense of such action,
other than reasonable costs of investigation. If the Indemnifying Party assumes
the defense of an action, (i) no compromise or settlement of such claims may be
effected by the Indemnifying Party without the Indemnified Party's consent
unless (A) there is no finding or admission of any violation of law or any
violation of the rights of any Person and no effect on any other claims that may
be made against the Indemnified Party, and (B) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party; and (ii) the
indemnified Party will have no liability with respect to any compromise or
settlement of such claims effected without its consent (which may not be
unreasonably withheld). If notice
21
<PAGE>
is given to the Indemnifying Party of the commencement of any action and the
Indemnifying Parry does not, within thirty (30) days after the Indemnified
Party's notice is given, give notice to the Indemnified Party of its election to
assume the defense of such action, the Indemnifying Party will be bound by any
determination made in such action or any reasonable compromise or settlement
effected by the Indemnified Party. Notwithstanding the foregoing, if an
Indemnified Party determines in good faith that there is a reasonable
probability that an action may adversely affect it or its affiliates other than
as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Party may. by notice to
the Indemnifying Party, assume the exclusive right to defend, compromise, or
settle such action, but the Indemnifying Party will not be bound by any
determination of an action so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
(b) Other Claims. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the appropriate
party.
8.4 Survival.
(a) Each of the representations and warranties of the Parent and
Tirri made in this Agreement shall survive for a period of five (5) years from
and after the Closing Date; provided, that the Parent's representations and
warranties contained in Section 2.13(ERISA), Section 214 (Taxes) and Section
2.15 (Environmental Matters) shall survive for the duration of the applicable
statute(s) of limitations relative to such matters.
(b) The indemnification obligations of each of the Parent and the
Asset Owners, on the one hand, and the Purchaser, on the other hand, in respect
of Excluded Liabilities (which shall be the sole responsibility of the Parent
and the Asset Owners) and the Assumed Liabilities (which shall be the sole
responsibility of the Purchase) shall survive the Closing Date indefinitely.
(c) The Security Agreement providing the Purchaser with collateral
to secure the indemnification obligations of the Parent and the Asset Owners set
forth in this Agreement shall terminate and Purchase's Lien on the Additional
Assets described therein shall terminate on a date which shall be the later to
expire of (i) the payment and performance of all "Make Whole" obligations of the
parent and the Asset Owners pursuant to Section 5.6 of this Agreement, or (ii)
March 30,2000.
ARTICLE IX
DEFINITIONS
"Affiliate" shall mean, with respect to any Person, any other Person who
shall directly or indirectly control, be controlled by or be under common
control with such Person..
22
<PAGE>
"Code" means the Internal Revenue Code of 1986, as needed, and treasury
regulations promulgated thereunder.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Loan Agreement" means the loan agreement, dated February 5, 1999, between
the Parent, Tirri and the Purchaser, pursuant to which the Purchaser has agreed,
as an advance and deposit against the purchase prices set forth in this
Agreement and in the Stock Purchase Agreement, to extend a short-term bridge
loan to the Parent, all pursuant to the terms and subject to the conditions set
forth in such Loan Agreement and the Exhibits thereto
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including) but not limited to, any conditional sale or other
title retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge) other than as expressly created
under this Agreement or any agreement or instrument attached as an Exhibit
hereto; provided, however, that a leasehold interest shall not be deemed a
"Lien".
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes.
ARTICLE X
10.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date: (a) by mutual written consent of the parties hereto at any
time prior to the Closing; or (b) by either the Purchaser or the Parent if the
Closing shall not have occurred on or before March 15, 1999; provided, that if
the waiting period under the HSR Act shall not have expired or terminated by
March 15, 1999, subject only to (i) the Purchaser extending a loan to the Parent
pursuant to the Loan Agreement dated of even date herewith and (ii) the Parent's
consummation of the transactions contemplated by the Acquisition Agreement with
Batchelor, the parties hereto shall extend such Closing hereunder to a date
which shall be within five (5) business days after the expiration or termination
of such HSR waiting period, or receipt of an approval from the Federal Trade
Commission, the Department of Justice or any other court or governmental
authority in form and substance satisfactory to counsel to the Purchaser, to the
effect that consummation of the transactions contemplated by this Agreement and
the Stock Purchase Agreement shall riot violate the HSR Act; provided, chat,
absent mutual agreement of the Parent and the Purchaser to extend such date, the
Closing Date shall not occur later than April 1, 1999.
23
<PAGE>
10.2 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 10.1, this Agreement, except for the agreements contained in
Section 5.4 herein, shall forthwith become void and of no further force and
effect and the parties shall be released from any and all obligations hereunder.
10.3 Specific Performance. In the event that for any reason the Purchaser
shall be prevented or delayed from consummating the Closing hereunder on the
Closing Date by reason of any act of omission or commission by Tirri, the Parent
or any Subsidiary of the Parent. the parties hereto do hereby agree that the
Purchaser would have no adequate remedy and law. Accordingly, in such event and
in addition to any other rights at law or in equity under this Agreement, the
Stock Purchase Agreement or the Loan Agreement, the Purchaser shall have the
right to apply to and obtain from any court of competent jurisdiction an order
of specific performance to compel the Parent and Tirri and any Subsidiary of the
Parent to consummate all of the transactions contemplated by this Agreement and
by the Stock Purchase Agreement.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices, requests. demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
(a) if to Parent and Terri to:
International Air Leases of PR Inc.
Caribbean Airport Facilities, Inc.
150 Carr. Sector Central, Suite #3
I.M.M. Int'l Airport
Carolina, P.R. 00979-1536
Attn: Anthony C. Tirri
Telephone: 787-791-4545
Telecopy: 787-791-6470
24
<PAGE>
with a copy to:
Jorge Souss
Goldman Antonetti & Cordova
American International Plaza
14th Floor
250 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
Telephone: 757-759-4201
Telecopy: 787-767-8660
(b) if to the Purchaser to:
J. Frank Fine
Fine Air Services Corp.
2261 N.W. 67th Avenue
Building 700
P.O. Box 523726
Miami, Florida 33152
Telephone: 305-871-6606
Telecopy: 305-8714232
with a copy to:
Stephen A. Weiss
Greenberg Traurig.
200 Park Avenue
New York, New York 10166
Telephone: 212-801-9253
Telecopy: 212-801-6400
Notice shall be deemed given on the date sent if sent by facsimile
transmission and on the date delivered (or the date of refusal of delivery) if
sent by overnight delivery or certified or registered mail.
11.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the exhibits and schedules attached hereto) and other documents
delivered at the Closing pursuant hereto, contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings (oral or written) between or among the parties with respect
to such subject matter. The parties agree that prior drafts of this Agreement
shall not be deemed to provide any evidence as to the meaning of any provision
hereof or the intent of the parties with respect thereto. This Agreement is not
intended to confer upon any Person, other than the parties hereto, any rights or
remedies hereunder.
25
<PAGE>
11.3 Expenses. Each of the Purchaser and the Parent and Tirri shall be
responsible for and pay their own fees and expenses, including their own counsel
fees, incurred in connection with this Agreement or any transaction contemplated
hereby.
11.4 Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right.
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be art extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
11.5 Binding Effect: Assignment
(a) The rights and obligations of this Agreement shall bind and
inure to the benefit of the parties and their respective successors and assigns.
Nothing expressed or implied herein shall be construed to give any other person
any legal or equitable rights hereunder other than the officers and directors of
the Companies as specifically set forth in Article VII hereto and their
respective successors and permitted assigns.
(b) The rights and obligations of this Agreement may be assigned by
Purchaser to any affiliate, successor or subsidiary controlled by, controlling
or under common control with Purchaser; provided, that such permitted
assignments shall not relieve Purchase of its obligations hereunder. Except as
expressly provided herein, the rights and obligations under this Agreement may
not be assigned by the Parent or Tirri, without the prior written consent of
Purchaser.
11.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. A telecopy signature of any party shall
be considered to have the same binding legal effect as an original signature.
11.7 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules.
11.8 Governing Law; Jurisdiction; Severability. This Agreement shall be
construed in accordance with and governed for all purposes by the laws of the
State of Florida applicable to
26
<PAGE>
contracts executed and to be wholly performed within such Stare. With respect to
any action that may arise under this Agreement, the parties hereto irrevocably
submit and consent to the exclusive jurisdiction of the federal court located
within Miami-Dade County, State of Florida (or if such court lacks jurisdiction,
the state court located therein). if any word, phrase, sentence, clause,
section, subsection or provision of this Agreement as applied to any party or to
any circumstance is adjudged by a court to be invalid or unenforceable, the same
will in no way affect any other circumstance or the validity or enforceability
of any other word, phrase, sentence, clause, section, subsection or provision of
this Agreement. If any provision of this Agreement, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision,
and/or to delete specific words or phrases, and in its reduced form, such
provision shall then be enforceable and shall be enforced.
11.9 Arm's Length Negotiations. Each party herein expressly represents and
warrants to all other parties hereto that (a) before executing this Agreement,
said party has Dilly informed itself of the terms, contents, conditions and
effects of this Agreement; (b) said party has relied solely and completely upon
its own judgment in executing this Agreement; (c) said party has had the
opportunity to seek and has obtained the advice of counsel before executing this
Agreement; (d) said party has acted voluntarily and of its own free will in
executing this Agreement; (e) said party is not acting under duress, whether
economic or physical, in executing this Agreement; and (f) this Agreement is the
result of arm's length negotiations conducted by and among the panics and their
respective counsel.
11.10 Waiver of Jury Trial. IN ANY CIVIL ACTION, COUNTERCLAIM, OR
PROCEEDING, WHETHER AT LAW OR IN EQUITY, WHICH ARISES OUT OF, CONCERNS OR
RELATES TO THIS AGREEMENT, ANY TRANSACTIONS CONTEMPLATED HEREUNDER, THE
PERFORMANCE HEREOF OR THE RELATIONSHIP CREATED HEREBY, WHETHER SOUNDING IN
CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, TRIAL SHALL BE TO A COURT OF
COMPETENT JURISDICTION AND NOT TO A JURY. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT (STATUTORY, CONSTITUTIONAL, COMMON LAW OR OTHERWISE) IT MAY HAVE TO A
TRIAL BY JURY. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE OTHER PARTIES'
RIGHT TO TRIAL BY JURY. NO PARTY HAS MADE OR RELIED UPON ANY ORAL
REPRESENTATIONS BY ANY OTHER PARTY REGARDING THE ENFORCEABILITY OF THIS
PROVISION. EACH PARTY HAS READ AND UNDERSTANDS THE EFFECT OF THIS JURY WAIVER
PROVISION.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
INTERNATIONAL AIR LEASES OF PR, INC.
By: /s/ Anthony C. Tirri
---------------------------------
Anthony C. Tirri, President
/s/ Anthony C. Tirri
-------------------------------------
Anthony C. Tirri
FINE AIR SERVICES CORP.
By: /s/ J. Frank Fine
---------------------------------
J. Frank Fine, Chairman
28
<PAGE>
FIRST AMENDMENT TO
AGREEMENT OF PURCHASE AND SALE OF ASSETS
FIRST AMENDMENT, dated as of March 10th, 1999 (the "Amendment"), to the
Agreement of Purchase and Sale of Assets dated February 5, 1999 by and among
Fine Air Services, Corp., a Delaware corporation, ("Fine Air") International Air
Leases of PR, Inc., a Puerto Rico corporation ("IALPR"), and Anthony C. Tirri
("Tirri") (the "Asset Purchase Agreement").
W I T N E S S E T H:
WHEREAS, the parties hereto are all of the parties to the Asset Purchase
Agreement;
WHEREAS, pursuant to the Asset Purchase Agreement, Fine Air intends to
purchase certain assets of IALPR and its subsidiaries and affiliates; and
WHEREAS, Pursuant to Section 11.4 of the Asset Purchase Agreement, the
parties hereto wish to amend certain provisions of that agreement.
NOW, THEREFORE, the parties hereto hereby agree that the Asset Purchase
Agreement be amended as follows:
1. Definitions; References; Continuation of Agreement. Unless otherwise
specified herein, each capitalized term used herein that is defined in the Asset
Purchase Agreement shall have the meaning assigned to such term in the Asset
Purchase Agreement. Each reference herein to a "Section" refers to that numbered
Section of the Asset Purchase Agreement. Each reference to "hereof,"
"hereunder," "herein," and "hereby" and each other similar reference, contained
in this Amendment shall from and after the date hereof refer to the Asset
Purchase Agreement as amended hereby. Except as amended hereby, all terms and
provisions of the Asset Purchase Agreement shall continue and remain in full
force and effect.
2. Section 1.3 is hereby amended by the addition of the following
subsection:
(d) The Purchase Price shall be deemed paid, dollar for dollar, by
the dollar amount of indebtedness that is cancelled by Fine Air under that
certain $115.0 million Loan Agreement by and among Fine Air, as Lender,
IALPR, as Borrower and Tirri, as evidenced by that certain $115 million
Promissory Note dated February 10, 1999 and executed by IALPR, as debtor,
which amount of cancellation of indebtedness is equal to $100 Million. In
connection with such cancellation, IALPR as Borrower and Tirri agree to
execute a new Promissory Note which shall evidence the remaining balance
payable under that certain loan agreement referenced herein.
3. Section 1.1(a)(iii) is hereby deleted and the following substituted in
its place:
"(iii) ninety-nine (99) serviceable and repairable Pratt &
Whitney JT3D engines (as set forth on Exhibit B) together with
<PAGE>
the contents of a "Stockroom" of new, serviceable and overhauled
engine parts located at 950 SE 12th Street, Hialeah, Florida, and"
4. The chart in Section 5.6 is hereby deleted and the following
substituted in its place:
Asset Item
No. in Agreed Upon
Exhibit A Quantity Asset Description Value
- ----------- ---------- ----------- ------------------------ --------------
No. 15 and Two (2) DC8-62 N42086 and N66656 $8,000,000
16 Aircraft
No. 19 Ninety Aircraft JT3D engines and the
Nine (99) engines contents of the "engine
parts" stockroom of new,
overhauled and
serviceable engine parts
located at 950 SE 12th
Street, Hialeah, Florida $35,000,000
-----------
Subtotal $43,000,000
No. 36 One (1) Engine Shop IAL engine shop and
residual engines and
spare parts not listed
above $10,000,000
No. 37 One (1) Wheel and W&B Shop and Inventories $5,000,000
brake Shop
No. 39 Inventories AAA Interair and IAL new
and used inventories of
aircraft and engine
parts not listed above,
wherever located,
including the inventory
located at 950 SE 12th
Street, Hialeah, Florida $25,000,000
-----------
Subtotal $40,000,000
Total $83,000,000
===========
5. The reference to Asset Item No. 10 in the second sentence of the second
paragraph of Section 5.6(c) is hereby deleted and the following substituted in
its place: "Asset Item No. 19."
6. The reference to "items Numbers 7" in the 3rd sentence of the second
paragraph of Section 5.6(c) is hereby deleted and the following substituted in
its place: "Items numbered 15 and 16" and the reference to "10" in that sentence
is hereby deleted and the Number "19" substituted in its place.
7. The reference to "Aircraft Engines" in the "Asset Column" of the chart
in section 5.6 of the Agreement is hereby deleted and the following substituted
in its place: '99 JT3D
2
<PAGE>
Aircraft Engines". Additionally, the description of said assets contained in the
"Description" column of said chart ("JT3D and new parts") is hereby deleted and
the following substituted in its place "the contents of the 'stockroom' of new,
overhauled and serviceable engine parts located at 950 SE 12th Street, Hialeah,
Florida."
8. Exhibits "B" "B-2" and "B-3" and Schedule 1.5 of the Agreement are
hereby deleted and Exhibits "B", "B-2" and "B-3" and Schedule 1.5 attached
hereto as exhibits are hereby respectively substituted in their places.
9. The description of Item 19 of Exhibit "A" to the Agreement is hereby
deleted and the following substituted in its place:
"Ninety-nine (99) serviceable and repairable JT3D engines (see
Exhibit B) together with the contents of the stockroom of new,
overhauled and serviceable engine parts located at 950 SE 12th
Street, Hialeah, Florida"
10. The description of item 39 on Exhibit "A" to the Agreement is hereby
deleted and the following substituted in its place:
"AAA Interair and IAL new & used inventories of aircraft and
engine parts, wherever located, including, but not limited to the
"stock room" of inventory located at 950 SE 12th Street, Hialeah,
Florida and rotables at outside vendors and rotables on exchange to
customers."
11. Counterparts. This Amendment may be executed in counterparts and may
not be amended or waived except in the manner provided in the Asset Purchase
Agreement. This Amendment may be executed by facsimile.
12. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Florida.
[Signatures are on the following page.]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
FINE AIR SERVICES CORP.
By: /s/ Orlando M. Machado
----------------------
Name: Orlando M. Machado
Title: Senior V.P.
INTERNATIONAL AIR LEASES OF PR, INC.
By: /s/ Anthony C. Tirri
----------------------
Name: Anthony C. Tirri
Title: President
By: /s/ Anthony C. Tirri
----------------------
Anthony C. Tirri
4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
February 5, 1999 by and among FINE AIR SERVICES CORP., a Delaware corporation or
its wholly owned subsidiary ("Purchaser"); INTERNATIONAL AIR LEASES OF PR, INC.,
a Puerto Rico corporation ("Parent"), ANTHONY C. TIRRI ("Tirri"), JEAN TIRRI
("J. Tirri") and JOHN EBERT ("Ebert"). Tirri, J. Tirri and Ebert are hereinafter
collectively referred to as the "Parent Stockholders.".
RECITALS
This Agreement is being entered into with reference to the following:
A. Parent and Tirri have entered into an agreement dated November 12, 1998
(the "Acquisition Agreement") with George E. Batchelor ("Batchelor"), the sole
shareholder of International Air Leases, Inc., a Delaware corporation ("IAL"),
Aircraft Leasing, Inc., a Delaware corporation ("ALI"), and N304 Corp., a
Delaware corporation ("N304 Corp."), pursuant to which the Parent will acquire
from Batchelor, all of the outstanding capital stock of each of IAL, ALI and
N304 Corp., on the terms and subject to the conditions contained in the
Acquisition Agreement.
B. Air Flite Operations, Inc., a Delaware corporation (the "Stockholder")
and a wholly-owned subsidiary of IAL owns 100% of the issued and outstanding
capital stock of Arrow Air, Inc., a Florida corporation ("Arrow").
C. Immediately following the Parent's acquisition of the capital stock of
IAL, ALI and N304 Corp., the Purchaser desires to acquire from the Stockholder,
and the Parent and Tirri desire to cause the Stockholder to sell to the
Purchaser, all of the issued and outstanding shares of capital stock of Arrow
(the "Arrow Stock'), all on the terms and subject to the conditions contained in
this Agreement.
D. Simultaneous with the execution and delivery of this Agreement, the
Purchaser has entered into an agreement of purchase and sale of assets with
Tirri and the Parent, dated of even date herewith (the "Asset Purchase
Agreement"), pursuant to which it is contemplated that on the "Closing Date" (as
defined in this Agreement and in the Asset Purchase Agreement) Tirri and the
Parent shall cause IAL, ALI, N304 Corp. (collectively, the "Companies"), their
direct and indirect subsidiaries or partnerships in which the Companies or such
subsidiaries have a beneficial interest who own the "Assets" specified in the
Asset Purchase Agreement (collectively, with the Companies, the "Asset Owners")
to sell, transfer and assign to the Purchaser, and Purchaser shall in addition
to the Arrow Stock, purchase and acquire from the Asset Owners all of their
right, title and interest in and to the Assets, all on the terms and subject to
the conditions contained in the Asset Purchase Agreement.
E. The Parent Stockholders own in the aggregate 100% of the shares of
capital stock of the Parent.
<PAGE>
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE STOCK PURCHASE
1.1 Purchase and Sale of Arrow Stock. Subject to the terms and conditions
of this Agreement, at the Closing (as defined in Section 1.2), Purchaser shall
acquire and the Stockholder shall sell, convey, transfer, assign and deliver to
Purchaser all of the issued and outstanding Arrow Stock, free and clear of any
Liens (as defined hereafter).
1.2 Closing. Subject to the terms and conditions of this Agreement, the
parties hereto shall use their best efforts to consummate the transactions
contemplated hereby and pursuant to the Asset Purchase Agreement (the "Closing")
on or before February 10, 1999, but in no event later than April 1, 1999 (unless
such date shall be extended pursuant to the provisions hereof), at the offices
of Greenberg Traurig, P.A. in Miami, Florida, or such other time and place as
the parties may otherwise agree. The date on which the Closing occurs shall be
herein referred to as the "Closing Date." The Closing of the purchase of the
Arrow Stock shall occur simultaneous with the acquisition of the Assets pursuant
to the Asset Purchase Agreement, and such Closings shall take place on a date
which shall be the Business Day immediately following the expiration or
termination of the waiting period under the HSR Act, or receipt of an approval
from the Federal Trade Commission, the Department of Justice or any other court
or governmental authority in form and substance satisfactory to counsel to the
Purchaser, to the effect that consummation of the transactions contemplated by
this Agreement and the Stock Purchase Agreement shall not violate the HSR Act;
provided, that, absent mutual agreement of the Parent and the Purchaser to
extend such date, the Closing Date shall not occur later than April 1, 1999.
1.3 Purchase Price.
(a) The aggregate consideration (the "Purchase Price") that will be
paid by Purchaser to the Stockholder at the Closing in exchange for the Arrow
Stock shall be equal to Five Million ($5,000,000) Dollars.
(b) The Purchase Price shall be payable at Closing in cash via wire
transfer or certified check in the amount of the Purchase Price.
1.4 Delivery of Arrow Stock. At the Closing, the Parent and Tirri shall
cause the Stockholder to deliver to the Purchaser all, and not less than all, of
the Arrow Stock duly endorsed for transfer, with the signature of the record
owner, and Purchaser shall pay to the Seller the Purchase Price payable pursuant
to Section 1.3.
2
<PAGE>
1.5 Corporate Records. At the Closing, in addition to the Arrow Stock, the
Parent and Tirri shall cause the Stockholder to deliver to the Purchaser all
corporate records, tax records, and minute and stock books and records relating
to Arrow.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND PARENT STOCKHOLDERS.
As a material inducement to the Purchaser to enter into this Agreement and
to consummate the transactions contemplated hereby as of the date hereof and as
of the Closing Date and pursuant to the Asset Purchase Agreement, the Parent and
the Parent Stockholders hereby jointly and severally make the following
representations and warranties to the Purchaser:
2.1 Title to Arrow Stock and Certain Assets.
(a) As of the date hereof, and on the Closing Date (i) the Parent
Stockholders own 100% of the issued and outstanding shares of capital stock of
the Parent, (ii) the Stockholder is and will be a wholly-owned subsidiary of IAL
and the record and beneficial owner of all issued and outstanding Arrow Stock,
and (iii) the Stockholder owns and will own the Arrow Stock free and clear of
any Lien. The assignments, endorsements, stock powers and other instruments of
transfer to be delivered by the Stockholder to the Purchaser at the Closing will
be sufficient to transfer all of the Stockholder's right, title and interest,
legal and beneficial, in the Arrow Stock to the Purchaser;
(b) As of the date hereof, the Asset Owners will own, free and clear
of any Liens (other than the Liens specifically identified in the Asset Purchase
Agreement), all of the Assets to be purchased by the Purchaser under the Asset
Purchase Agreement.
2.2 Enforceability. This Agreement has been duly executed and delivered by
each of the Parent and the Parent Stockholders and constitutes a legal, valid
and binding obligation of the Parent and the Parent Stockholders, enforceable
against each of them in accordance with its terms.
2.3 No Other Rights. The Arrow Stock represents and at the Closing will
represent 100% of the issued and outstanding shares of capital stock of Arrow,
and as at the date hereof there are not, and at the Closing there will not be
authorized, issued or otherwise committed to be issued any options, warrants, or
other rights exercisable for any shares of Arrow capital stock, or notes,
debentures, preferred stock or other securities convertible into any shares of
Arrow capital stock.
2.4 Organization, Good Standing and Qualification.
(a) The Parent is a corporation duly organized, validly existing and
in good standing under the laws of Puerto Rico, the Stockholder is a corporation
duly organized, validly
3
<PAGE>
existing and in good standing under the laws of the State of Delaware and Arrow
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Florida.
(b) Arrow has and on the Closing Date will have all requisite power
and authority to carry on its business as now conducted and as proposed to be
conducted. Each of the Parent and Tirri has all requisite power and authority to
enter into this Agreement.
(c) Subject to consummation of the transactions contemplated by the
Acquisition Agreement, on the Closing Date both the Parent and the Stockholder
shall have all requisite power and authority to sell the Arrow Stock to
Purchaser and otherwise perform this Agreement and the transactions contemplated
hereby.
(d) Arrow is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify could have a
material adverse effect on the business, properties, operations, earnings,
assets, liabilities, condition (financial or otherwise) or prospects of Arrow
and its consolidated subsidiaries, when taken as a collective whole (a "Material
Adverse Effect").
2.5 Requisite Consents; Nonviolation.
Except as set forth in Section 2.5 of the Disclosure Schedule annexed
hereto as Exhibit A and made a part hereof (the "Disclosure Schedule") or where
the failure to comply with any of the provisions of this Section 2.5 would not,
individually or in the aggregate, have a Material Adverse Effect, the execution,
delivery and performance of this Agreement and the consummation by the
Stockholder of the transactions contemplated hereby and thereby (including,
without limitation, the offer, sale and delivery of the Arrow Stock) will not:
(a) require the consent, license, permit, waiver, approval,
authorization or other action of, by or with respect to, or registration,
declaration or filing with, any court or governmental authority, department,
commission, board, bureau, agency or instrumentality, domestic or foreign
("Governmental Authority"), including without limitation, the Federal Aviation
Authority ("FAA") or the Department of Transportation ("DOT") or any other
individual, partnership, corporation, unincorporated organization or
association, limited liability company, trust or other entity (collectively, a
"Person");
(b) violate or conflict with any provision of the Certificate
of Incorporation or the By-laws of the Stockholder or Arrow, a complete and
correct copy of which has been provided to counsel to the Purchaser; or
(c) constitute a default (with or without notice or lapse of time
or both) under, violate or conflict with, or give rise to a right of
termination, cancellation or acceleration or to a loss of a material benefit
under any Law (as defined in Section 2.8 below), Permit (as defined in Section
2.8 below), Order (as defined in Section 2.8 below), or contract, agreement,
arrangement or understanding, written or oral, to which either the Stockholder
or Arrow is or hereafter may be a party or by which the Stockholder, Arrow or
their respective properties are or hereafter may be bound.
4
<PAGE>
2.6 Subsidiaries. Except as disclosed in Section 2.6 of the Disclosure
Schedule, Arrow has no subsidiaries and does not, and prior to the Closing will
not, own or control, directly or indirectly, any partnership interests, stock or
other equity interests in any partnership, corporation or other entity or any
voting rights or right to control the policies and direction of any partnership,
corporation or other entity.
2.7 Litigation. Except as set forth in Section 2.7 of the Disclosure
Schedule, there is no action, suit, proceeding, investigation or governmental
approval process (collectively, "Actions") pending or, to the best knowledge of
the Parent, threatened against Arrow, or affecting any of its properties or
assets (including, without limitation, any of its Permits) which individually or
in the aggregate would have a Material Adverse Effect, nor is there any basis
for any such Action. To the best knowledge of the Parent, there is no Action
against any of Arrow's directors, officers or employees in connection with its
business which, in the event of an adverse judgment against any such Person,
would have a Material Adverse Effect, nor is there any basis for any such
Action. The foregoing includes, without limitation, any Action pending or, to
the Parent's best knowledge, threatened (or any basis therefor known to Arrow)
involving the prior employment of any employees of Arrow, their use in
connection with the business of Arrow of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. To the best knowledge of the Parent, neither
Arrow nor any of its assets or properties, nor, in connection with its business,
the Stockholder or any of Arrow's directors, officers or employees, is subject
to any order, judgment, writ, injunction, decree, ruling or decision
(collectively, an "Order") of any Governmental Authority which could have a
Material Adverse Effect. There is no Action by Arrow currently pending or which
Arrow intends to initiate which could have a Material Adverse Effect.
2.8 Compliance with Laws; Permits.
(a) Assuming the accuracy of the representations made by the
Purchaser pursuant to Section 3 hereof, the offer and sale of the Arrow Stock by
the Stockholder to the Purchaser will be in compliance with all applicable
federal and state securities laws.
(b) To the best knowledge of the Parent, Arrow has not violated or
failed to comply with any statute, law, ordinance, rule, regulation or policy of
any Governmental Authority (collectively, "Laws") to which it or any of its
properties or assets is subject, except where non-compliance with any such Laws
would not, individually or in the aggregate, have a Material Adverse Effect.
(c) Schedule 2.8 to the Disclosure Schedule lists all permits,
licenses, orders, certificates, authorizations and approvals of any Governmental
Authority, including without limitation, all DOT route authorities operating
certificates and consent decrees and FAA certifications and consent decrees
enabling Arrow to operate an airline (collectively, the "Permits") owned or
otherwise possessed by Arrow. To the best knowledge of the Parent the Permits
listed on Schedule 2.8 represent all of the Permits that are required by Arrow
for the conduct of its business as presently conducted.
5
<PAGE>
(d) All Permits listed on Schedule 2.8 are, and as of the Closing
will be, in full force and effect; no violations or notices of failure to comply
have been issued or recorded in respect of any such Permits; and the Parent has
no knowledge of any reason why such Permits may be revoked or suspended, except
in each case, where not compliance with this sentence would not, individually or
in the aggregate, have a Material Adverse Effect. Except where non-compliance
with the following would not, individually or in the aggregate, have a Material
Adverse Effect, all applications, reports, notices and other documents required
to be filed by Arrow with all Governmental Authorities have been timely filed
and are complete and correct in all material respects as filed or as amended
prior to the date hereof. With respect to any consents, if any, which may be
required to be obtained in respect to the continuation of any Permits (including
any DOT or FAA consents, if any, which may in the opinion of legal counsel, be
required), the Parent knows of no reason why such Permits or consents thereto
should not be approved and granted by the appropriate Governmental Authority. To
the best knowledge of the Parent, neither Arrow nor, to the best knowledge of
Arrow, any of its officers, employees or agents has made any illegal or improper
payments to, or provided any illegal or improper inducement for, any
governmental official or other Person in an attempt to influence any such Person
to take or to refrain from taking any action relating to Arrow.
2.9 Arrow Financial Statements; Absence of Certain Changes or Events.
The Parent has provided to the Purchaser true copies of all financial statements
relating to Arrow which are in the possession of the Purchaser, copies of which
are attached to the Disclosure Schedule, as Schedule 2.9. Since the date of the
most recent financial statement of Arrow set forth on Schedule 2.9 of the
Disclosure Schedules (the Arrow Financial Statements"), to the best knowledge of
the Parent, there has been no change in the business, properties, operations,
earnings, assets, liabilities, condition (financial or otherwise) or prospects
of Arrow, except for (a) changes in the ordinary course of business consistent
with past practice, or (b) as disclosed in the Disclosure Schedule, but in each
case, which have not had a Material Adverse Effect on Arrow.
2.10 Contracts. True and correct copies of all contracts, agreements,
notes, instruments, franchises, leases, licenses, commitments, arrangements or
understanding, written or oral (collectively, "Contracts") which are material to
the business of Arrow are listed on Schedule 2.10 to the Disclosure Schedule. To
the best knowledge of the Parent, except where non-compliance with any of the
following would not, individually or in the aggregate, have a Material Adverse
Effect (a) all of the Contracts are in full force and effect and constitute
legal, valid and binding obligations of Arrow and the other parties thereto; (b)
Arrow and each other party to the Contracts, has performed in all material
respects all obligations required to be performed by it or them under the
Contracts, and (c) no material violation or default exists in respect thereof,
nor any event that with notice or lapse of time, or both, would constitute a
default thereof, on the part of Arrow or any other party thereto; (d) none of
the Contracts is currently being renegotiated; and (e) the validity,
effectiveness and continuation of all Contracts will not be materially adversely
affected by the transactions contemplated by this Agreement or the Asset
Purchase Agreement.
6
<PAGE>
2.11 Insurance. Arrow has in full force and effect all insurance
policies as are required for the operations of its business, except where the
failure to maintain such insurance would not, individually or in the aggregate,
have a Material Adverse Effect. Schedule 2.10 to the Disclosure Schedule lists
or describes all insurance policies, the carrier, the deductible and the policy
limits on all insurance policies applicable to the business of Arrow.
2.12 Labor Union Activities; Employee Relations. Except as disclosed on
Section 2.12 of the Disclosure Schedule, no employee of Arrow is represented by
any labor union or covered by any collective bargaining agreement; nor, to the
best knowledge of the Parent, has any labor union sought to represent any of its
employees of Arrow. There is no strike or other labor dispute involving Arrow
pending, or to the best knowledge of the Parent, threatened. To the best
knowledge of the Parent, no officer or key employee intends to terminate his
employment with Arrow. To the best knowledge of the Parent, no officer or key
employee of it is a party to or bound by any Contract, or subject to any
restrictions (including, without limitation, any non-competition restriction),
which would restrict the right of such person to participate in the affairs of
Arrow.
2.13 ERISA. Except as disclosed on Section 2.13 of the Disclosure
Schedule, to the best knowledge of the Parent Arrow does not maintain (nor has
it during the past seven years ever maintained) nor does it have (nor has it
during the past seven years ever had) any obligation under (including, without
limitation, any obligation to contribute to) an employee benefit plan as
described in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
2.14 Taxes. Except as disclosed in on Section 2.14 of the Disclosure
Schedule, to the best knowledge of the Parent: (a) all federal, state, city,
county, local and foreign income, franchise, sales, use and value added tax
returns and reports, and all other material tax returns and reports required to
be filed by Arrow in those or in any other jurisdiction (collectively,
"Returns") have within the past seven years been timely filed, (b) all such
Returns are true, correct and complete, except where the inaccuracies in any
such Return would not, individually or in the aggregate, have a Material Adverse
Effect, (c) all taxes, assessments, fees, interest, penalties and other charges
with respect thereto (collectively, "Taxes") due or claimed to be due from Arrow
have been paid except to the extent reserved against on Arrow's financial
statements, (d) no income tax return of Arrow has been audited by the applicable
Governmental Authority, and there are in effect no waivers of the applicable
statute of limitations for Taxes in any jurisdiction for Arrow for any period.
2.15 Environmental Matters. Except as disclosed in Section 2.15 of the
Disclosure Schedule, or where a breach or violation of any of the following
would not, individually or in the aggregate, have a Material Adverse Effect, to
the best knowledge of the Parent: (a) the business, assets and properties of
Arrow are and have been operated and maintained in compliance with all
applicable federal, state, city, county and local environmental protection laws
and regulations (collectively, the "Environmental Laws"), (b) no event has
occurred which, with or without the passage of time or the giving of notice, or
both, would constitute non-compliance by Arrow with, or a violation by Arrow of,
the Environmental Laws, and (c) Arrow has not caused or permitted
7
<PAGE>
to exist, as a result of an intentional or unintentional act or omission, a
disposal, discharge or release of solid wastes, pollutants or hazardous
substances, on or from any site which currently is or formerly was owned,
leased, occupied or used by it, except where such disposal, discharge or release
was in compliance with the Environmental Laws.
2.16 Books and Records. To the best knowledge of the Parent, the books
of account, ledgers and records of Arrow accurately and completely reflect in
all material respects all information relating to its business, the nature,
acquisition, maintenance, location and collection of its assets, and the nature
of all transactions giving rise to its obligations or accounts receivable. The
minute books of Arrow fully set forth all action taken by its Board of
Directors, stockholders and, if any, executive committee (or other committee
thereof).
2.17 Brokers. Neither the Parent, Tirri or any of their respective
Affiliates (as that term is defined in the Securities Act of 1933, as amended,
or the rules and regulations promulgated thereunder) has entered or will enter
into any agreement pursuant to which Arrow or the Purchaser will be liable, as a
result of the transactions contemplated by this Agreement or the Asset Purchase
Agreement, for any claim of any person for any commission, fee or other
compensation as finder or broker and the Parent agrees to indemnify the
Purchaser for any liability resulting from any such agreement.
2.18 Definition of Knowledge. As used in this Article II, the term
"know," "knowledge" or "to the best knowledge," when applied to the Parent,
means the actual knowledge of Tirri or any other executive officer, legal or
financial representative of the Parent, Tirri, or Arrow or other Person engaged
by Tirri or the Parent to conduct a business, legal or financial due diligence
investigation relative to Arrow, its assets, business, properties, financial
condition and prospects, in connection with the transactions contemplated by the
Acquisition Agreement.
2.19 Extension of Representations and Warranties to Stockholder. On the
Closing Date, the Stockholder shall execute and deliver to the Purchaser a
joinder agreement, in the form of Exhibit B annexed hereto and made a part
hereof, pursuant to which the Stockholder shall (a) confirm the accuracy of all
of the foregoing representations and warranties of the Parent, and (b) shall
join and assume, jointly and severally with the Parent, all such representations
and warranties as at the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to the Parent and Tirri to enter into this
Agreement and to consummate the transactions contemplated hereby, as of the date
hereof and the Closing Date the Purchaser makes the following representations
and warranties to the Seller:
3.1 Corporate Status. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
8
<PAGE>
3.2 Corporate Power and Authority. Purchaser has the corporate power and
authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
Purchaser has taken all action necessary to authorize its execution and delivery
of this Agreement, the performance of its respective obligations hereunder and
the consummation of the transactions contemplated hereby.
3.3 Enforceability. This Agreement has been duly executed and delivered
by Purchaser and constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms.
3.4 No Violation. The execution and delivery of this Agreement by the
Purchaser, the performance by it of its obligations hereunder and the
consummation by them of the transactions contemplated by this Agreement will not
(i) contravene any provision of the organizational documents of the Purchaser,
(ii) violate or conflict with any law, statute, ordinance, rule, regulation,
decree, writ, injunction, judgment or order of any governmental authority or of
any arbitration award which is either applicable to, binding upon or enforceable
against the Purchaser, (iii) except as disclosed on Schedule 3.4 of the
Disclosure Schedule, conflict with, result in any breach of, or constitute a
default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any instrument or contract
which is applicable to, binding upon or enforceable against the Purchaser, (iv)
result in or require the creation or imposition of any Lien upon or with respect
to any of the property or assets of the Purchaser, or (v) except as disclosed on
Schedule 3.4 of the Disclosure Schedule, require the consent, approval,
authorization or permit of, or filing with or notification to, any governmental
authority, any court or tribunal or any other person, except any applicable
filings required under the HSR Act.
3.5 Status and Knowledge.
(i) The Arrow Stock acquired pursuant to this Agreement is being
acquired for Purchaser's own account and not with a view to, or intention of,
distribution thereof in violation of the Securities Act of 1933, as amended (the
"Act"), or any applicable state securities laws, and the Arrow Stock will not be
disposed of in contravention of the Act or any applicable state securities laws.
(ii) Purchaser is an "Accredited Investor" as defined in Rule 501 of
Regulation D promulgated under the Act.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 Conduct of Business Pending the Closing. The Parent and the Parent
Stockholders jointly and severally covenant and agree that, between the date of
this Agreement and the Closing Date, the business of Arrow shall be conducted
only in, and shall not take any
9
<PAGE>
action except in, the ordinary course of business consistent with past practice,
except with respect to (i) those actions outside the ordinary course of business
and inconsistent with past practice as to which the Parent provided notice to
and received the consent of the Purchaser (such consent not to be unreasonably
withheld) and (ii) the accelerated repayment of indebtedness and the
satisfaction and payment of budgeted items.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Further Assurances; Compliance with Covenants. Each party shall
execute and deliver such additional instruments and other documents and shall
take such further actions as may be necessary or appropriate to effectuate,
carry out and comply with all of the terms of this Agreement and the
transactions contemplated hereby.
5.2 Cooperation; No Disposition of Arrow Stock or Assets.
(a) Each of the parties agrees (i) to cooperate with the other in
the preparation and filing of all forms, notifications, reports and information,
if any, required or reasonably deemed advisable pursuant to any law, rule or
regulation in connection with the transactions contemplated by this Agreement,
(ii) to use its respective best efforts to agree jointly on a method to overcome
any objections by any governmental authority to any such transactions and (iii)
to cooperate with the tax planning objectives of the other party so long as such
cooperation will not adversely impact such party.
(b) Neither the Parent nor any of the Parent Stockholders shall
commit to the sale, disposition, hypothecation or encumbrance of any Arrow Stock
or Assets of the Asset Owners prior to the consummation of this Agreement
without the written consent of the Purchaser, and neither the Parent nor any of
the Parent Stockholders is under any obligation to dispose of, commit to dispose
of, encumber or commit to encumber the Arrow Stock or any Assets of the Asset
Owners prior to the consummation of this Agreement.
5.3 HSR Act and Other Actions. Each of the parties hereto shall (i) make
promptly (and in no event later than the execution of this Agreement) its
respective filings, if any, and thereafter make any other required submissions,
under the HSR Act (as defined hereafter), with respect to the transactions
contemplated hereby, and (ii) take all appropriate actions, and do, or cause to
be done, all things necessary, proper or advisable under any applicable laws,
regulations and contracts to consummate and make effective the transactions
contemplated herein, including, without limitation, seeking all licenses,
permits, consents, approvals, authorizations, qualifications and orders of any
governmental authority or applicable financial institution.
5.4 Confidentiality; Publicity. Except as may be required by law or as
otherwise permitted below, no party hereto or their respective affiliates,
employees, attorneys and advisors agents and representatives shall disclose to
any third party this Agreement or the subject matter or terms hereof without the
prior consent of the other parties. During the period that this
10
<PAGE>
Agreement is in effect, the Purchaser may disclose this Agreement and related
financial information concerning the Companies only to Warburg Dillon Reade LLC,
provided that any such financial institution executes a confidentiality
agreement satisfactory to the Parent. In the event this Agreement is not
consummated, all documents containing any confidential information received in
connection with the performance of this Agreement shall be immediately returned
to the providing party and no copies thereof shall be retained by the returning
party. No press release or other public announcement related to this Agreement
or the transactions contemplated hereby shall be issued by any party hereto
without the prior approval of the other parties.
5.5 Certain Tax Matters. The Parent shall enforce the provisions of
Section 5.5 of the Acquisition Agreement and shall comply with its obligations
under such Section 5.5. In addition, the Parent shall provide the Purchaser, and
shall cause the Stockholder and each of the Asset Owners to provide the
Purchaser with such information and records as reasonably may be requested by
Purchaser in connection with the preparation of any such tax return, in the same
manner as Tirri and the Parent is required to provide such information to
Batchelor under the Acquisition Agreement.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing of the
following conditions, any or all of which may be waived in whole or in part in
writing by Purchaser:
6.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Parent and the Parent
Stockholders and (at the Closing) of the Stockholder contained in this Agreement
shall be true and correct at and as of the Closing with the same force and
effect as though made at and as of that time. Parent and the Parent Stockholders
shall have performed and complied with all of its and their respective
obligations required by this Agreement to be performed or complied with at or
prior to the Closing. Parent and Tirri shall have delivered to the Purchaser a
certificate, dated as of the Closing Date, certifying that such representations
and warranties are true and correct and that all such obligations have been
complied with and performed.
6.2 Delivery of the Arrow Stock. At the Closing, the Stockholder shall
duly endorse for transfer and deliver to the Purchaser (or its assignee) the
Arrow Stock and such other instruments of transfer of title as are necessary to
transfer to Purchaser (or its assignee) good and marketable title to the Arrow
Stock free and clear of any Liens.
6.3 HSR Act Waiting Period. Any applicable HSR Act waiting period shall
have expired or been terminated, or the Purchaser shall have received an
approval from the Federal Trade Commission., the Department of Justice or any
other court or governmental authority in form and substance satisfactory to
counsel to the Purchaser, to the effect that consummation of
11
<PAGE>
the transactions contemplated by this Agreement and the Asset Purchase Agreement
shall not violate the HSR Act.
6.4 Consummation of Transactions Under Asset Purchase Agreement. The
acquisition of the Assets and other transactions contemplated by the Asset
Purchase Agreement shall have been consummated on the Closing Date, in a manner
which shall be satisfactory to the Purchaser.
6.5 Opinion of Counsel. The Purchaser shall have received an opinion
dated as of the Closing Date from counsel for the Parent, in form and substance
acceptable to Purchaser, to the effect that:
(i) Arrow is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida, is deemed a
United States citizen under the Federal Aviation Act of 1958, as amended,
together with the Aviation Regulations of the Federal Aviation
Administration and recodified in Subtitle VII of Title 49 of the United
States Code, and is authorized to carry on the business now conducted by
it and to own or lease the properties now owned or leased by it;
(ii) The Stockholder and the Parent have obtained all
necessary authorizations and consents of its Board of Directors and
shareholders to effect the transactions contemplated hereby;
(iii) The execution of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any agreement or instrument to which the Parent, the
Stockholder, Arrow, any of their subsidiaries is bound or to which any of
the property or assets of such entities and person is subject, nor will
such actions result in any violation of the provisions of the Articles of
Incorporation or Bylaws (or other organizational documents) of the Parent,
the Stockholder or Arrow or any statute or any order, rule or regulation
of any court or governmental agency or body of the United States, the
State of Florida, the Commonwealth of Puerto Rico having jurisdiction over
the Parent, the Stockholder, Arrow, any of their subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the consummation of this Agreement;
provided, however, that any opinion with respect to any agreement or
instrument may be limited to the knowledge of such counsel after due
inquiry.
(iv) Such counsel does not know or have reason to believe that
there is any litigation, proceeding or investigation pending or threatened
which might result in any Material Adverse Effect on the Parent, the
Stockholder or Arrow, or which questions the validity of this Agreement;
12
<PAGE>
(v) Such counsel does not know or have reason to believe that
any event has occurred or state of facts exists which would constitute a
breach of any of the representations and warranties made by the Parent or
the Stockholder pursuant to Article II of this Agreement; and
(vi) This Agreement is a valid and binding obligation of the
Parent and the Parent Stockholders, and enforceable against the Parent and
the Parent Stockholders in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally or general equitable principles.
Provided, however, that counsel for Parent may rely on opinions by counsel
for Arrow with respect to all opinions regarding Arrow.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PARENT AND PARENT STOCKHOLDERS
The obligations of the Parent and the Parent Stockholders to effect the
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing of the following conditions, any or all of which may be waived in
whole or in part in writing by the Parent Stockholders:
7.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing with the same force
and effect as though made at and as of that time. Purchaser shall have performed
and complied with all of its obligations required by this Agreement to be
performed or complied with at or prior to the Closing. Purchaser shall have
delivered to the Parent a certificate, dated as of the Closing Date, certifying
that such representations and warranties are true and correct and that all such
obligations have been complied with and performed.
7.2 Consideration. At the Closing, Purchaser shall have paid the
Purchase Price for the Arrow Stock and the purchase price for the Assets under
the Asset Purchase Agreement to the Stockholder and to the Asset Owners, as
contemplated hereby and thereby.
7.3 HSR Act Waiting Period. Any applicable HSR Act waiting period shall
have expired or been terminated, or the Purchaser shall have received an
approval from the Federal Trade Commission., the Department of Justice or any
other court or governmental authority in form and substance satisfactory to
counsel to the Purchaser, to the effect that consummation of the transactions
contemplated by this Agreement and the Asset Purchase Agreement shall not
violate the HSR Act.
13
<PAGE>
7.4 Opinion of Counsel. The Parent and the Parent Stockholders shall
have received an opinion dated as of the Closing Date from counsel for the
Purchaser, in form and substance acceptable to the Parent, to the effect that:
(i) The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware is
deemed a United States citizen under the Federal Aviation Act of 1958, as
amended, together with the Aviation Regulations of the Federal Aviation
Administration and recodified in Subtitle VII of Title 49 of the United
States Code, and is authorized to carry on the business now conducted by
it and to own or lease the properties now owned or leased by it;
(ii) The Purchaser has have obtained all necessary
authorizations and consents of its Board of Directors and shareholders to
effect the transactions contemplated hereby;
(iii) The execution of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any agreement or instrument to which the Purchaser, any of
its subsidiaries is bound or to which any of the property or assets of
such entities and person is subject, or, to the extent required, any
requisite consents have been obtained, nor will such actions result in any
violation of the provisions of the Articles of Incorporation or Bylaws (or
other organizational documents) of the Purchaser or any statute or any
order, rule or regulation of any court or governmental agency or body of
the United States or the State of Delaware having jurisdiction over the
Purchaser, any of their subsidiaries or any of its properties; and no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
consummation of this Agreement; provided, however, that any opinion with
respect to any agreement or instrument may be limited to the knowledge of
such counsel after due inquiry.
(iv) Such counsel does not know or have reason to believe that
there is any litigation, proceeding or investigation pending or threatened
which might result in any Material Adverse Effect on the Purchaser, or
which questions the validity of this Agreement;
(v) Such counsel does not know or have reason to believe that
any event has occurred or state of facts exists which would constitute a
breach of any of the representations and warranties made by the Purchaser
pursuant to Article III of this Agreement; and
(vi) This Agreement is a valid and binding obligation of the
Purchaser, and enforceable against the Purchaser in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
14
<PAGE>
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally or general equitable principles.
ARTICLE VIII
INDEMNIFICATION
8.1 By the Parent and the Stockholder. The Parent hereby agrees that on
or after the Closing Date the Parent and the Stockholder shall jointly and
severally indemnify, protect, save and keep harmless the Purchaser and Arrow and
the officers and directors of the Purchaser and Arrow from and against, and on
written demand to pay or to reimburse the Purchaser and Arrow and the officers
and directors of the Purchaser and Arrow for the payment of, any and all
liabilities, obligations, losses, damages, deficiencies, interest, penalties,
additional amounts, claims (including, without limitation, claims arising out of
negligence or involving strict liability in tort or claims for any tax
liabilities), suits, actions, costs, expenses and disbursements (including,
without limitation, legal fees, costs and related expenses), of whatsoever kind
and nature ("Expenses") imposed on, incurred by or asserted against the
Purchaser, Arrow or either of them after the Closing Date (a) relating to any
breach of a representation or warranty or any covenant or agreement made by the
Parent or the Stockholder in or pursuant to this Agreement or (b) arising
directly or indirectly out of or in any way connected with the ownership,
possession, operation or control of any of the Arrow Stock or of the business of
Arrow at any time up to or including the Closing Date. The amount of any
indemnification payment from the Parent or the Stockholder to the Purchaser,
Arrow or any officer or director of the Purchaser or Arrow shall be equal to the
amount that, after the payment of all taxes imposed thereon, is equal to the
amount of the Expenses incurred by the Purchaser or Arrow.
8.2 By the Purchaser. The Purchaser hereby agrees to indemnify, protect,
save and keep harmless the Parent and the Stockholder from and against, and on
written demand to pay, or to reimburse the Parent or the Stockholder for the
payment of, any and all Expenses imposed on, incurred by or asserted against
Parent or the Stockholder after the Closing Date (a) relating to any breach of a
representation or warranty made by the Purchaser in this Agreement; or (b)
arising directly or indirectly out of or in any way connected with the
ownership, possession, operation or control of any of the Arrow Stock or of the
business of Arrow at any time following the Closing Date; provided, however,
that such Expenses are not judicially determined to have been attributable to
any breach of a representation, warranty or covenant of the Parent or the
Stockholder contained herein or any fraud or theft committed by the Parent or
the Stockholder. The amount of any indemnification payment from Purchaser to the
Parent or the Stockholder shall be equal to the amount that, after the payment
of all taxes imposed thereon, is equal to the amount of the Expenses incurred by
the Parent or the Stockholder.
15
<PAGE>
8.3 Indemnification Procedures. The indemnification obligations under
this Agreement shall be subject to the following procedures:
(a) Third Party Claims. A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement is
referred to herein as the "Indemnifying Party" and the other party or parties
claiming indemnity is referred to as the "Indemnified Party." Promptly after
receipt by an Indemnified Party of notice of the commencement of any action
against it, such Indemnified Party will, if a claim is to be made against the
Indemnifying Party under such Section, give notice to the Indemnifying Party of
the commencement of such action, but the failure to notify the Indemnifying
Party will not relieve the Indemnifying Party of any liability that it may have
to any Indemnified Party, except to the extent that the Indemnifying Party
demonstrates that the defense of such action is prejudiced by the Indemnified
Party's failure to give such notice. With respect to any such action, the
Indemnifying Party will be entitled to participate and be kept informed and, to
the extent that it wishes (unless (i) the Indemnifying Party is also a party to
such action and the Indemnified Party determines in good faith that joint
representation would be inappropriate, or (ii) the Indemnifying Party fails to
provide reasonable assurance to the Indemnified Party of its financial capacity
to defend such action and provide indemnification with respect to such action),
to assume the defense of such action with counsel satisfactory to the
Indemnified Party and, after notice from the Indemnifying Party to the
Indemnified Party of its election to assume the defense of such action, the
Indemnifying Party will not, as long as it diligently conducts such defense, be
liable to the Indemnified Party for any fees of other counsel or any other
expenses with respect to the defense of such action, in each case subsequently
incurred by the Indemnified Party in connection with the defense of such action,
other than reasonable costs of investigation. If the Indemnifying Party assumes
the defense of an action, (i) no compromise or settlement of such claims may be
effected by the Indemnifying Party without the Indemnified Party's consent
unless (A) there is no finding or admission of any violation of law or any
violation of the rights of any Person and no effect on any other claims that may
be made against the Indemnified Party, and (B) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party; and (ii) the
Indemnified Party will have no liability with respect to any compromise or
settlement of such claims effected without its consent (which may not be
unreasonably withheld). If notice is given to the Indemnifying Party of the
commencement of any action and the Indemnifying Party does not, within thirty
(30) days after the Indemnified Party's notice is given, give notice to the
Indemnified Party of its election to assume the defense of such action, the
Indemnifying Party will be bound by any determination made in such action or any
reasonable compromise or settlement effected by the Indemnified Party.
Notwithstanding the foregoing, if an Indemnified Party determines in good faith
that there is a reasonable probability that an action may adversely affect it or
its affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the Indemnified Party may, by
notice to the Indemnifying Party, assume the exclusive right to defend,
compromise, or settle such action, but the Indemnifying Party will not be bound
by any determination of an action so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
16
<PAGE>
(b) Other Claims. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the appropriate
party.
8.4 Survival. (a) Each of the representations and warranties made by
Parents, Parent, Stockholders and Pruchaser made in this Agreement shall survive
for a period of five (5) years from and after the Closing Date.
(b) The indemnification obligations of each of the parties
hereto in respect of their respective covenants and agreements hereunder shall
survive the Closing Date indefinitely.
ARTICLE IX
DEFINITIONS
"Code" means the Internal Revenue Code of 1986, as amended, and treasury
regulations promulgated thereunder.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, but not limited to, any conditional sale or other
title retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge) other than as expressly created
under this Agreement or any agreement or instrument attached as an Exhibit
hereto; provided, however, that a leasehold interest shall not be deemed a
"Lien".
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date: (a) by mutual written consent of the parties hereto at any
time prior to the Closing; or (b) by either the Purchaser or the Parent if the
Closing shall not have occurred on or before Match 15, 1999; provided, that if
the waiting period under the HSR Act shall not have expired or terminated by
March 15, 1999 subject only to (i) the Purchaser extending a loan to the Parent
pursuant to the Loan Agreement dated of even date herewith and (ii) the Parent's
consummation of the transactions contemplated by the Acquisition Agreement with
Batchelor, the parties hereto shall extend such Closing hereunder to a date
which shall be twenty-four (24) hours after the
17
<PAGE>
expiration or termination of such HSR waiting period, or receipt of an approval
from the Federal Trade Commission., the Department of Justice or any other court
or governmental authority in form and substance satisfactory to counsel to the
Purchaser, to the effect that consummation of the transactions contemplated by
this Agreement and the Stock Purchase Agreement shall not violate the HSR Act;
provided, that, absent mutual agreement of the Parent and the Purchaser to
extend such date, the Closing Date shall not occur later than April 1, 1999.
10.2 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 9.1, this Agreement, except for the agreements contained in
Section 5.4 herein, shall forthwith become void and of no further force and
effect and the parties shall be released from any and all obligations hereunder.
10.3 Specific Performance. In the event that for any reason the Purchaser
shall be prevented or delayed from consummating the Closing hereunder on the
Closing Date by reason of any act of omission or commission by any of the Parent
Stockholders, the Parent or any Subsidiary of the Parent, the parties hereto do
hereby agree that the Purchaser would have no adequate remedy and law.
Accordingly, in such event and in addition to any other rights at law or in
equity under this Agreement, the Stock Purchase Agreement or the Loan Agreement,
the Purchaser shall have the right to apply to and obtain from any court of
competent jurisdiction an order of specific performance to compel the Parent and
the Parent Stockholders and any Subsidiary of the Parent to consummate all of
the transactions contemplated by this Agreement and by the Asset Purchase
Agreement.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
(a) if to Parent and the Parent Stockholders to:
International Air Leases of PR, Inc.
Caribbean Airport Facilities, Inc.
150 Carr. Sector Central, Suite #3
I.M.M. Int'l Airport
Carolina, P.R. 00979-1536
Attn: Anthony C. Tirri
Telephone: 787-791-4545
Telecopy: 787-791-6470
18
<PAGE>
with a copy to:
Jorge Souss
Goldman Antonetti & Cordova
American International Plaza
14th Floor
250 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
Telephone: 787-759-4201
Telecopy: 787-767-8660
(b) if to the Purchaser to:
J. Frank Fine
Fine Air Services Corp.
2261 N.W. 67th Avenue
Building 700
P.O. Box 523726
Miami, Florida 33152
Telephone: 305-871-6606
Telecopy: 305-871-4232
with a copy to:
Stephen A. Weiss
Greenberg Traurig.
200 Park Avenue
New York, New York 10166
Telephone: 212-801-9253
Telecopy: 212-801-6400
Notice shall be deemed given on the date sent if sent by facsimile
transmission and on the date delivered (or the date of refusal of delivery) if
sent by overnight delivery or certified or registered mail.
11.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the exhibits and schedules attached hereto) and other documents
delivered at the Closing pursuant hereto, contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings (oral or written) between or among the parties with respect
to such subject matter. The parties agree that prior drafts of this Agreement
shall not be deemed to provide any evidence as to the meaning of any provision
hereof or the intent of the parties with respect thereto. This Agreement is not
intended to confer upon any Person, other than the parties hereto, any rights or
remedies hereunder.
19
<PAGE>
11.3 Expenses. Each of the Purchaser and the Parent and Tirri shall be
responsible for and pay their own fees and expenses, including their own counsel
fees, incurred in connection with this Agreement or any transaction contemplated
hereby.
11.4 Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
11.5 Binding Effect; Assignment.
(a) The rights and obligations of this Agreement shall bind and
inure to the benefit of the parties and their respective successors and assigns.
Nothing expressed or implied herein shall be construed to give any other person
any legal or equitable rights hereunder other than the officers and directors of
the Companies as specifically set forth in Article VII hereto and their
respective successors and permitted assigns.
(b) The rights and obligations of this Agreement may be assigned
by Purchaser to any successor or subsidiary controlled by Purchaser. Except as
expressly provided herein, the rights and obligations under this Agreement may
not be assigned by the Parent or Tirri, without the prior written consent of
Purchaser.
11.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. A telecopy signature of any party shall
be considered to have the same binding legal effect as an original signature.
11.7 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules.
11.8 Governing Law; Jurisdiction; Severability. This Agreement shall be
construed in accordance with and governed for all purposes by the laws of the
State of Florida applicable to contracts executed and to be wholly performed
within such State. With respect to any action that may arise under this
Agreement, the parties hereto irrevocably submit and consent to the exclusive
jurisdiction of the federal court located within Miami-Dade County, State of
Florida
20
<PAGE>
(or if such court lacks jurisdiction, the state court located therein). If any
word, phrase, sentence, clause, section, subsection or provision of this
Agreement as applied to any party or to any circumstance is adjudged by a court
to be invalid or unenforceable, the same will in no way affect any other
circumstance or the validity or enforceability of any other word, phrase,
sentence, clause, section, subsection or provision of this Agreement. If any
provision of this Agreement, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered thereby, the
parties agree that the court making such determination shall have the power to
reduce the duration and/or area of such provision, and/or to delete specific
words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.
11.9 Arm's Length Negotiations. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement and, with respect to Parent and the Parent
Stockholders, had consulted with attorneys and accountants concerning the
domestic and foreign legal and financial consequences of entering into this
Agreement; (d) said party has acted voluntarily and of its own free will in
executing this Agreement; (e) said party is not acting under duress, whether
economic or physical, in executing this Agreement; and (f) this Agreement is the
result of arm's length negotiations conducted by and among the parties and their
respective counsel.
11.10 Waiver of Jury Trial. IN ANY CIVIL ACTION, COUNTERCLAIM, OR
PROCEEDING, WHETHER AT LAW OR IN EQUITY, WHICH ARISES OUT OF, CONCERNS OR
RELATES TO THIS AGREEMENT, ANY TRANSACTIONS CONTEMPLATED HEREUNDER, THE
PERFORMANCE HEREOF OR THE RELATIONSHIP CREATED HEREBY, WHETHER SOUNDING IN
CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, TRIAL SHALL BE TO A COURT OF
COMPETENT JURISDICTION AND NOT TO A JURY. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT (STATUTORY, CONSTITUTIONAL, COMMON LAW OR OTHERWISE) IT MAY HAVE TO A
TRIAL BY JURY. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE OTHER PARTIES'
RIGHT TO TRIAL BY JURY. NO PARTY HAS MADE OR RELIED UPON ANY ORAL
REPRESENTATIONS BY ANY OTHER PARTY REGARDING THE ENFORCEABILITY OF THIS
PROVISION. EACH PARTY HAS READ AND UNDERSTANDS THE EFFECT OF THIS JURY WAIVER
PROVISION.
[Signatures On Following Page]
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
INTERNATIONAL AIR LEASES OF PR, INC.
By: /s/ Anthony C. Tirri
--------------------------------------
Anthony C. Tirri, President
The Parent Stockholders:
/s/ Anthony C. Tirri
-----------------------------------------
Anthony C. Tirri
/s/ Jean M. Tirri
-----------------------------------------
Jean M. Tirri
/s/ John W. Ebert
-----------------------------------------
John W. Ebert
FINE AIR SERVICES CORP.
By: /s/ J. Frank Fine
--------------------------------------
J. Frank Fine, Chairman
LOAN AGREEMENT
LOAN AGREEMENT (this "Agreement"), is made and entered into as of the 5th
day of February 1999, by and between FINE AIR SERVICES CORP., a Delaware
corporation (the "Lender"); INTERNATIONAL AIR LEASES OF PR, INC., a corporation
organized and existing under the laws of the Commonwealth of Puerto Rico (the
"Borrower"); and ANTHONY C. TIRRI, an individual ("Tirri").
W I T N E S S E T H :
WHEREAS, the Borrower and Tirri have entered into a stock purchase
agreement dated as of November 12, 1998 (the "Acquisition Agreement") with
George Batchelor, an individual ("Batchelor"), pursuant to which the Borrower
has agreed to purchase from Batchelor, and Batchelor has agreed to sell to the
Borrower for $475.0 million, all of the shares of capital stock of International
Air Leases, Inc., a Delaware corporation ("IAL"), Aircraft Leasing, Inc., a
Delaware corporation ("ALI") and N304 Corp., a Delaware corporation ("N304");
and
WHEREAS, through their direct and indirect Subsidiaries, IAL, ALI and N304
(collectively referred to herein as the "Companies") are engaged in the business
of owning, leasing, operating and otherwise dealing in airframes, aircraft
engines, components, rotables, accessories and parts for aircraft, airframes and
aircraft engines of all types and descriptions, and, through the Arrow Air, Inc.
("Arrow") subsidiary of Air Flite Operations, Inc., operating a cargo airline
(collectively, the "Business Operations"); and
WHEREAS, on February 5, 1999, the Borrower and Tirri entered into a stock
purchase agreement with the Lender (the "Stock Purchase Agreement"), pursuant
and subject to the terms and conditions of which, the Lender agreed to purchase
from Air Flite Operations, Inc., the sole stockholder of Arrow and a Subsidiary
of IAL (the "Stockholder") 100% of the capital stock of Arrow (the "Arrow
Stock") for $5.0 million, and the Borrower and Tirri agreed (subject only to
consummation of the transactions contemplated by the Acquisition Agreement) to
cause the Stockholder to sell the Arrow Stock to the Lender; and
WHEREAS, on February 5, 1999, the Borrower and Tirri entered into an
agreement of purchase and sale of assets with the Lender (the "Asset Purchase
Agreement"), pursuant and subject to the terms and conditions of which, the
Lender agreed to purchase from the Borrower, the Companies and such other direct
and indirect Subsidiaries of the Companies, including AAA Interair, Inc. ("AAA
Interair") who shall own record and beneficial title to the "Assets," as defined
in such Asset Purchase Agreement (the "Asset Owners"), for $110.0 million, and
the Borrower and Tirri agreed (subject only to consummation of the transactions
contemplated by the Acquisition Agreement) to cause the Asset Owners to sell the
Assets to the Lender; and
WHEREAS, the Borrower and the Guarantors have requested the Lender provide
to the Borrower a deposit against and advance of the purchase prices for the
Arrow Stock and Assets, in the form of a short-term loan in the aggregate amount
of $115,000,000 (the "Loan"), the
<PAGE>
proceeds of which Loan will be used by the Borrower to pay a portion to the
purchase price to Batchelor under the Acquisition Agreement; and
WHEREAS, it is the intention of the Borrower, the Guarantors and the
Lender that the Loan shall be deemed to have been fully repaid by Borrower upon
the delivery at the "Transaction Closing" (hereinafter defined) of the Arrow
Stock and the Assets to the Lender, free and clear of all Liens and otherwise in
accordance with the provisions of the Stock Purchase Agreement and the Asset
Purchase Agreement; which Transaction Closing is conditioned only upon early
termination of the waiting period under the Hart Scott Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") or the consent of the
Federal Trade Commission or Department of Justice (as the case may be) to
consummation of such Transaction Closings; and
WHEREAS, the Lender is willing and able to make such Loan to the Borrower
on the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
I. DEFINITIONS
Section 1.01 Defined Terms. In addition to the other terms defined
elsewhere in this Agreement, as used herein, the following terms shall have the
following meanings:
"Affiliate" shall mean, with respect to any Person, any other Person
in control of, controlled by, or under common control with the first Person, and
any other Person who has a substantial interest, direct or indirect, in the
first Person or any of its Affiliates, including, without limitation, any
officer or director of the first Person or any of its Affiliates; for the
purpose of this definition, a "substantial interest" shall mean the direct or
indirect legal or beneficial ownership of more than five (5%) percent of any
class of stock or similar interest.
"Agreement" shall mean this Loan Agreement as it may from time to
time be amended and/or supplemented.
"Agreement Date" shall mean the date this Agreement is executed by
the Lender, being the date set forth opposite the signature of the Lender on the
signature page hereof.
"Applicable Law" shall mean all applicable provisions of all (a)
constitutions, statutes, ordinances, rules, regulations and orders of all
governmental and/or quasi-governmental bodies, (b) Government Approvals, and (c)
order, judgments and decrees of all courts and arbitrators.
"Batchelor Collateral Agreements" shall mean, collectively, the
Mortgage and Security Agreement, the $125.0 million Series A Secured Promissory
Note, the Irrevocable and Unconditional Guaranty and the Pledge and Security
Agreement, all dated of even date herewith, which have been delivered by the
Borrower, the Guarantor and/or the Companies or their direct
2
<PAGE>
or indirect Subsidiaries to and in favor of Batchelor pursuant to the
Acquisition Agreement, and all other agreements and instruments executed and
delivered pursuant to the Acquisition Agreement to secure deferred obligations
of the Borrower and the Guarantor to Batchelor pursuant to the terms thereof.
"Batchelor Debt" shall mean all indebtedness for money borrowed and
other liabilities of the Borrower and Tirri to Batchelor under the Acquisition
Agreement and/or the Batchelor Collateral Agreements.
"Borrower Stockholders" shall mean the collective reference to
Tirri, Jean M. Tirri, John Ebert and the other Persons listed on Exhibit A
annexed hereto and made a part hereof, who collectively are the record and
beneficial owners of 100% of the issued and outstanding capital stock of the
Borrowers, all in the amounts set forth on such Exhibit A.
"Business Day" shall mean a day other than (a) a Saturday, (b) a
Sunday, or (c) in the case of a day on which any payment hereunder is to be made
in the State of New York, a day on which commercial banks in the State of New
York are authorized or required by law to close.
"Capital Expenditures" shall mean with respect to any Person, all
expenditures of such Person for tangible assets which are capitalized, and the
fair value of any tangible assets leased by such Person under any lease which
would be a Capitalized Lease, determined in accordance with GAAP, including all
amounts paid or accrued by such Person in connection with the purchase (whether
on a cash or deferred payment basis) or lease (including Capitalized Lease
Obligations) of any machinery, equipment, tooling, real property, improvements
to real property (including leasehold improvements), or any other tangible asset
of the Borrower which is required, in accordance with GAAP, to be treated as a
fixed asset on the consolidated balance sheet of such Person.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee thereunder in accordance with
GAAP.
"Capitalized Lease Obligation" shall mean with respect to any
Person, the amount of the liability which reflects the amount of future payments
under all Capitalized Leases of such Person as at any date, determined in
accordance with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, and the rules
and regulations promulgated thereunder, as in effect from time to time.
"Contract" shall mean any indenture, agreement (other than this
Agreement), other contract lease, license, instrument, or certificates of
incorporation, in which the Borrower, any of the Companies or any direct or
indirect Subsidiary of any of the Companies is a party, a lessor, lessee, or
licensee.
3
<PAGE>
"Default" shall mean any of the events specified in Article VII
hereof, whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"DOT" shall mean the United States Department of Transportation.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as in effect from time to time.
"ERISA Affiliate" shall mean, with respect to any Person, any other
Person which is under common control with the first Person within the meaning of
Section 414(b) or 414(c) of the Code.
"Event of Default" shall mean any of the events specified in Article
VII hereof, provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"FAA" shall mean the Federal Aviation Authority.
"Fiscal Year" shall mean the fiscal year of the Borrower and its
consolidated Subsidiaries which ends on December 31st of each year.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, consistently applied, unless the context otherwise
requires, with respect to any financial terms, ratios or covenants contained
herein, as then in effect with respect to the preparation of financial
statements.
"Guarantors" shall mean Tirri and the other Persons who shall have
executed the Guaranty in favor of the Lender.
"Guaranty" shall mean the unconditional and irrevocable guaranty
executed by each of (a) Tirri, Jean Tirri and John Ebert, individually and
collectively, and as the record and beneficial owners of 49%, 2% and 49%,
respectively, of the issued and outstanding shares of capital stock of the
Borrower, (b) the Companies, and (c) each of the other direct and indirect
Subsidiaries of the Companies, all in the form of Exhibit B annexed hereto and
made a part hereof.
"Government Approval" shall mean an authorization, consent,
non-action, approval, license or exemption of, registration or filing with, or
report to, any governmental or quasi-governmental department, agency, body or
other unit, including without limitation, approval by the governmental authority
having jurisdiction over the Borrower's HSR Act filing and approval of the FAA
and the DOT.
"Guaranteed" or to "Guarantee", as applied to any Indebtedness or
Liability, shall mean and include: (a) a guaranty, directly or indirectly, in
any manner, including by way of endorsement (other than endorsements of
negotiable instruments for collection in the ordinary
4
<PAGE>
course of business), of any part or all of such obligation, and (b) an
agreement, contingent or otherwise, and whether or not constituting a guaranty,
assuring, or intended or the practical effect of which is to assure, the payment
or performance (or payment of damages in the event of non-performance) of any
part or all of such obligation whether by (i) the purchase of securities or
obligations, (ii) the purchase, sale or lease (as lessee or lessor) of property,
or the purchase or sale of services, primarily for the purpose of enabling the
obligor with respect to such obligation to make any payment or performance (or
payment of damages in the event of non-performance) of or on account of any part
or all of such obligation, or to assure the owner of such obligation against
loss, (iii) the supplying of funds to or in any other manner investing in the
obligor with respect to such obligation, (iv) the repayment of amounts drawn
down by beneficiaries of letters of credit not arising out of the import of
goods, (v) the supplying of funds to or investing in a Person on account of all
or any part of such Person's obligation under a Guaranty of any such obligation
or indemnifying or holding harmless, in any way, such Person against any part or
all of such obligation, or (vi) otherwise.
"Investment", as applied to the Borrower or any Subsidiary, shall
mean: (a) any shares of capital stock, assets, evidence of Indebtedness or other
security issued by any other Person to the Borrower or any Subsidiary, (b) any
loan, advance or extension of credit to, or contribution to the capital of, any
other Person, other than credit terms extended to customers in the ordinary
course of business, (c) any Guaranty of any indebtedness or liability of any
other Person, (d) any obligation owed to the Borrower or any Subsidiary secured
by a Lien on, or payable out of the proceeds of production from, any property of
any other Person, whether or not such obligation shall have been assumed by such
Person, (e) any other investment by the Borrower or any Subsidiary in any assets
or securities of any other Person, and (f) any commitment to make any
Investment.
"Joinder and Assumption Agreement" shall mean the Joinder and
Assumption Agreement to be entered into on the date of the Transaction Closings
between the Lender and the Companies, AAA Interair and the other Asset Owners
who are Subsidiaries of the Borrower.
"Lien", as applied to the property or assets (or the income or
profits therefrom) of the Borrower or any Subsidiary, shall mean (in each case,
whether the same is consensual or nonconsensual or arises by contract, operation
of law, legal process or otherwise): (a) any mortgage, lien, pledge, attachment,
assignment, deposit arrangement, encumbrance, charge, lease constituting a
Capitalized Lease Obligation, conditional sale or other title retention
agreement, or other security interest or encumbrance of any kind in respect of
any property (including, without limitation, stock of any Subsidiary) of the
Borrower or any Subsidiary, or upon the income or profits therefrom, (b) any
arrangement, express or implied, under which any property of the Borrower or any
Subsidiary is transferred, sequestered or otherwise identified for the purpose
of subjecting or making available the same for the payment of indebtedness or
the performance of any other liability in priority to the payment of the
general, unsecured creditors of the Borrower or any Subsidiary, (c) any
indebtedness which remains unpaid more than five (5) calendar days after the
same shall have become due and payable and which, if unpaid, might by law
(including but not limited to bankruptcy or insolvency laws) or otherwise be
given any priority whatsoever over the general, unsecured creditors of the
Borrower or any Subsidiary, (d) any agreement (other
5
<PAGE>
than this Agreement) or other arrangement, express or implied, which, directly
or indirectly, prohibits the Borrower or any Subsidiary from creating or
incurring any Lien on any of its properties or assets or which conditions the
ability to do so on the security, on a pro rata or other basis, of indebtedness
other than indebtedness outstanding under this Agreement, and (e) any
arrangement, express or implied, under which any right or claim of the Borrower
or any Subsidiary is subject or subordinated in any way to any right or claim of
any other Person.
"Loan" shall mean the loan in the principal amount of $115,000,000
to be made by the Lender to the Borrower pursuant to this Agreement.
"Loan Documents" shall mean the collective reference to this
Agreement, the Note, the Guaranty, the Mortgage and Security Agreement and the
Pledge Agreement.
"Management Agreement" shall mean the Management Agreement to be
entered into on the date of the Transaction Closings between the Lender and the
Borrower and certain Subsidiaries of the Borrower.
"Maturity Date" shall mean the earlier to occur of (a) the date on
which the Transaction Closings shall occur, or (b) April 1, 1999.
"Mortgage and Security Agreements" shall mean the Mortgage and
Security Agreements, dated of even date herewith, among those of the Companies
and the Asset Owners who own title to the Assets, granting to the Lender a first
priority Lien on the Assets and the Additional Assets (as defined in the Asset
Purchase Agreement), all in the form of Exhibit C annexed hereto and made a part
hereof.
"Note" shall mean the Promissory Note, dated the Agreement Date, in
the principal amount of $115,000,000 issued by the Borrower and payable to the
order of the Lender, to represent the Loan, in substantially the form of Exhibit
D annexed hereto, as same may be amended or supplemented from time to time in
accordance therewith.
"Obligations" shall mean the collective reference to all
indebtedness and other liabilities and obligations of every kind and description
owed by the Borrower, the Guarantors, the Companies and/or the Asset Owners to
the Lender from time to time under or pursuant to this Agreement, the Note, the
Stock Purchase Agreement, the Asset Purchase Agreement any exhibit or schedule
hereto and thereto, however evidenced, created or incurred, fixed or contingent,
now or hereafter existing, due or to become due.
"Permitted Liens" shall mean those Liens expressly permitted
pursuant to Section 6.02 below.
"Person" shall mean any individual, partnership, corporation,
limited liability company, banking association, business trust, joint stock
company, trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
6
<PAGE>
"Pledge Agreement" shall mean the Pledge Agreement between each of
the Borrower Stockholders, the Borrower and the record owners of 100% of the
shares of capital stock of the Subsidiaries of the Borrower, as pledgors, and
the Lender, as pledgee, substantially in the form of Exhibit E annexed hereto
and made a part hereof.
"Subsidiary" or "Subsidiaries" shall mean the individual or
collective reference to any corporation, limited liability company or other
entity of which 50% or more of the outstanding shares of stock or other equity
interests of each class having ordinary voting power and/or rights to profits
(other than stock having such power only by reason of the happening of a
contingency) is at the time owned by the Borrower, directly or indirectly
through one or more Subsidiaries of the Borrower.
"Transaction Closings" shall mean the date of the Closings of the
Lender's purchase of the Arrow Stock and the Assets following the date hereof,
in accordance with the provisions of the Stock Purchase Agreement and the Asset
Purchase Agreement; which Transaction Closings shall be conditioned only upon
receipt of written notice of early termination of the applicable waiting period
under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") or the consent of the Federal Trade Commission or Department of
Justice (as the case may be) to consummation of such Transaction Closings (the
"HSR Condition").
"Transaction Security Agreement" shall mean the Mortgage and
Security Agreements, to be dated the date of the Transaction Closings, and to be
delivered under the Asset Purchase Agreement, in substantially the form of
Exhibit D to the Asset Purchase Agreement.
Section 1.02 Use of Defined Terms. All terms not otherwise defined in this
Agreement shall have their defined meanings when used in the Asset Purchase
Agreement and all certificates, reports or other documents made or delivered
pursuant to his Agreement, unless otherwise defined therein or unless the
specific context shall otherwise require.
Section 1.03 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.
II. GENERAL TERMS
Section 2.01 The Loan.
(a) Subject at all times to all of the terms and conditions of
this Agreement, the Lender hereby agrees to make a single loan to the Borrower,
in the principal amount of $115,000,000. The entire principal balance of the
Loan shall be due and payable in a single payment (together with any unpaid
accrued interest) on the Maturity Date, except to the extent sooner due and
payable in accordance with any other provisions of this Agreement.
(b) The Borrower shall pay the Lender interest on the Loan at the
rate(s) per annum as in effect from time to time in accordance with the Note.
Such interest shall be payable, in accordance with the Note, monthly in arrears
on the last day of each calendar month
7
<PAGE>
commencing February 28, 1999 (or sooner as provided in the Note), and shall be
computed on the unpaid principal balance of the Loan, based on a three hundred
sixty (360) day year counting the actual number of days in each month.
(c) The Borrower shall have the right to prepay the Loan in whole
or in part, without premium or penalty, at any time and from time to time. Each
such prepayment shall be accompanied by payment of all unpaid accrued interest
on the principal amount being prepaid, accrued to the date of prepayment. Any
amounts prepaid may not be reborrowed.
(d) Subject to the requirement of earlier payment by reason of an
Event of Default, the Borrower shall pay the Note in full, together with all
accrued interest thereon, on or prior to the Maturity Date.
(e) The Loan shall be evidenced by the Note, the terms and
conditions of which are hereby incorporated herein by reference and made a part
hereof.
Section 2.02 Use of Proceeds. The Borrower shall utilize the proceeds of
the Loan solely to pay a portion of the purchase price for the capital stock of
IAL, ALI and N304 from Batchelor pursuant to the Acquisition Agreement.
Section 2.03 Further Obligations. With respect to all Obligations for
which the interest rate is not otherwise specified herein (whether such
Obligations arise hereunder, pursuant to the Note, or otherwise), such
Obligations shall bear interest at the rate(s) in effect from time to time
pursuant to the Note.
Section 2.04 Obligations Unconditional. The payment and performance of the
Note and all other Obligations shall constitute the absolute and unconditional
obligations of the Borrower and the Guarantors, and shall be independent of any
defense or rights of set-off, recoupment or counterclaim which the Borrower or
any of the Guarantors might otherwise have against the Lender. All payments
required to be paid to the Lender under this Agreement and/or the Note, the
Stock Purchase Agreement or the Asset Purchase Agreement shall be paid free of
any deductions or withholdings and without abatement, diminution or set-off,
except as otherwise provided in the Note.
Section 2.05 Reversal of Payments. To the extent that any payment or
payments made to or received by the Lender pursuant to this Agreement or the
Note are subsequently invalidated, declared to be fraudulent or preferential,
set aside, or required to be repaid to any trustee, receiver or other person
under any state or federal bankruptcy or other such law, then, to the extent
thereof, such amounts shall be revived as Obligations and continue in full force
and effect hereunder as if such payment or payments had not been received by the
Lender.
III. REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes, on behalf of itself and each of the Guarantors,
the following representations and warranties to the Lender, all of which
representations and warranties shall
8
<PAGE>
survive the Agreement Date, the delivery of the Note and the making of the Loan,
and are as follows:
Section 3.01 Financial Matters.
(a) The Borrower has heretofore furnished to the Lender audited
consolidated financial statements (including balance sheets, statements of
income and statements of cash flows) of the Companies and their Subsidiaries as
at December 31, 1996 and December 31, 1997, and the internal unaudited
consolidated financial statements of the Companies and their Subsidiaries as of
September 30, 1998 and for the nine (9) months then ended (collectively, the
"Financial Statements").
(b) The Financial Statements have been prepared in accordance with
GAAP on a consistent basis for all periods (subject, in the case of unaudited
statements, to the absence of full footnote disclosures, and to normal audit
adjustments which are not expected to be material), are complete and correct in
all material respects, and fairly present the consolidated financial condition
of the Companies and their Subsidiaries as at said dates, and the results of
their operations for the periods stated. The books of account and other
financial records of the Borrower and its Subsidiaries have been maintained in
accordance with sound business practices.
(c) The Borrower, the Companies and their Subsidiaries do not have
any liabilities, obligations or commitments of any kind or nature whatsoever,
whether absolute, accrued, contingent or otherwise (collectively "Liabilities
and Contingencies"), including, without limitation, Liabilities and
Contingencies under employment agreements and with respect to any "earn-outs",
stock appreciation rights, or related compensation obligations, except: (i)
Liabilities and Contingencies disclosed in the Financial Statements or footnotes
thereto, (ii) Liabilities and Contingencies owed to Batchelor, all of which are
disclosed in the Acquisition Agreement and exhibits thereto (true copies of
which have been furnished to Lender); (iii) Liabilities and Contingencies not
incurred in the ordinary course of the Business Operations, all of which (and
the amounts thereof, to the extent determinable), to the extent in excess of
$500,000 in the aggregate as to all such Liabilities and Contingencies, are
disclosed on Schedules to this Agreement or to the Asset Purchase Agreement,
(iv) Liabilities and Contingencies incurred in the ordinary course of business
and consistent with past practice since the date of the most recent Financial
Statements, which are not required to be disclosed on Schedules to this
Agreement, or (v) those Liabilities and Contingencies which are not required to
be disclosed under GAAP.
(d) Since the date of the most recent Financial Statements and
except as set forth on Schedule 1 annexed hereto, there has been no material
adverse change in the condition (financial or otherwise), assets, liabilities,
reserves, business, prospects, management or Business Operations of the
Borrower, the Companies or any of their Subsidiaries, including, without
limitation, the following:
(i) there has been no change, claim, fine, levy, injunction,
grounding or other action taken, made or asserted against the Borrower, any of
the Companies or any of
9
<PAGE>
their Subsidiaries by the FAA, the DOT or any other federal or state agency
regulating the aviation industry or the Business which has not been fully paid
or satisfied;
(ii) no debts, other than intercompany debts, have been
cancelled, no claims or rights of substantial value have been waived and no
properties or assets (real, personal or mixed, tangible or intangible) have been
sold, transferred, or otherwise disposed of by the Borrower, the Companies or
any Subsidiary except in the ordinary course of business and consistent with
past practice;
(iii) there has been no change in any method of accounting or
accounting practice utilized by the Borrower, the Companies or any Subsidiary;
(iv) no material casualty, loss or damage has been suffered by
the Borrower, the Companies or any Subsidiary, regardless of whether such
casualty, loss or damage is or was covered by insurance; and
(v) no action described in this Section 3.01(e) has been
agreed to be taken by the Borrower or any Subsidiary.
Section 3.02 Organization; Corporate Existence.
(a) The Borrower (i) is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Puerto Rico,
(ii) has all requisite corporate power and authority to own its properties and
to carry on its business as now conducted and as proposed hereafter to be
conducted, (iii) is not required to be qualified to do business as a foreign
corporation in any jurisdiction in which the failure to be so qualified would
have a material adverse effect on the business, operations, properties, assets
or condition, financial or otherwise, of the Borrower or any Subsidiary, and
(iv) has all requisite corporate power and authority to execute and deliver, and
perform all of its obligations under, this Agreement and the Note. True and
complete copies of the Certificate of Incorporation of the Borrower and each
Subsidiary, as amended and restated to date, and the By-Laws of the Borrower and
each Subsidiary, together with all amendments thereto, have been furnished to
the Lender.
(b) Schedule 2 annexed hereto sets forth, with respect to each
Subsidiary on the Agreement Date, (i) its proper legal name, (ii) its
jurisdiction of incorporation or formation, (iii) the jurisdictions in which it
is qualified to do business as a foreign entity, (iv) the number of shares of
capital stock or ownership interests outstanding, and (v) the owner(s) of such
outstanding capital stock or other ownership interests. Each of the Subsidiaries
(A) is an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, (B) has all
requisite power and authority to own its properties and to carry on its business
as now conducted and as proposed hereafter to be conducted, and (C) and is not
required to be qualified to do business as a foreign entity in any jurisdiction
in which it is not so qualified and the failure to be so qualified would
reasonably be expected to have a material adverse effect on the business,
financial condition, assets or properties of such Subsidiary. True
10
<PAGE>
and complete copies of the organizational documents of each Subsidiary, together
with all amendments thereto to the date hereof, have been furnished to the
Lender.
Section 3.03 Authorization. The execution, delivery and performance by
the Borrower and each of the Guarantors of their respective Obligations under
each of the Loan Documents have been duly authorized by all requisite corporate
action and will not, either prior to or as a result of the consummation of the
transactions contemplated by this Agreement: (a) violate any provision of
Applicable Law, any order of any court or other agency of government, any
provision of the Certificate of Incorporation or By-Laws of the Borrower or any
organizational document of any of the Subsidiaries, or any Contract, indenture,
agreement or other instrument to which the Borrower or any of the Subsidiaries
is a party, or by which the Borrower or any of the Subsidiaries or any of its
assets or properties are bound, or (b) be in conflict with, result in a breach
of, or constitute (after the giving of notice of lapse of time or both) a
default under, or, except as may be provided in this Agreement, result in the
creation or imposition of any Lien of any nature whatsoever upon any of the
property or assets of the Borrower or any of the Subsidiaries pursuant to, any
such Contract, indenture, agreement or other instrument. Neither the Borrower
nor any of the Subsidiaries is required to obtain any Government Approval,
consent or authorization from, or to file any declaration or statement with, any
governmental instrumentality or agency in connection with or as a condition to
the execution, delivery or performance of the Loan Documents.
Section 3.04 Litigation. Except as disclosed on Schedule 3 annexed
hereto, there is no action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or other agency now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of the Subsidiaries or any of their respective assets, which, if adversely
determined, would have a material adverse effect on any of such assets or on the
business, operations, properties, assets or condition, financial or otherwise,
of the Borrower or any Subsidiary.
Section 3.05 Material Contracts.
(a) Except as disclosed on Schedule 4 annexed hereto, neither the
Borrower nor any of the Subsidiaries is a party to any Contract, agreement or
instrument or subject to any charter or other corporate or organizational
restriction materially adversely affecting its business, properties, assets,
operations or condition, financial or otherwise, or subject to any liability or
obligation under or relating to any collective bargaining agreement, or in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contract, agreement or instrument to
which it is a party or by which any of its assets or properties is bound, which
default, individually or in the aggregate, would materially adversely affect the
assets or properties of the Borrower or such Subsidiary.
(b) Without limitation of Section 3.05(a), there does not exist
any "Default" or "Event of Default" in connection with payment of the Batchelor
Debt or under and as defined in the Batchelor Collateral Agreements.
11
<PAGE>
(c) Each of the Stock Purchase Agreement and the Asset Purchase
Agreement are in full force and effect, and there is no existing default
thereunder on the part of any party thereto.
Section 3.06 Title to Properties. The Borrower and each of the
Subsidiaries has good and marketable title to all of its properties and assets,
free and clear of all mortgages, security interests, restrictions, encumbrances
or other Liens of any kind, except for restrictions on the nature of use thereof
imposed by Applicable Law, and except for (a) those Liens in favor of Batchelor
on the specific assets and properties of Borrower and its Subsidiaries which are
listed on Schedule 5 annexed hereto, and Permitted Liens, none of which
materially interfere with the use and enjoyment of such properties and assets in
the normal course of the Business Operations as presently conducted, or
materially impair the value of such properties and assets for the purpose of
such business.
Section 3.07 Real Property. Schedule 6 annexed hereto sets forth a correct
and complete list of all Real Properties currently owned, leased or occupied by
the Borrower and/or any of the Subsidiaries. Neither the Borrower nor any of the
Subsidiaries owns any Real Properties. The Borrower and each Subsidiary has a
valid lessee's interest in each Real Property currently leased or occupied by
the Borrower or such Subsidiary. Neither the Borrower, any Subsidiary, or, to
the Borrower's or each Subsidiary's knowledge, any other party thereto, is in
material breach or violation of any requirements of any such lease; and such
Real Properties are adequate for the current and proposed businesses of the
Borrower and the Subsidiaries.
Section 3.08 Machinery and Equipment. To the best of Borrower's knowledge,
the aircraft, engines, other personal property used in the Business, including
the machinery and equipment owned and/or used by the Borrower and the
Subsidiaries is, as to each individual material item of machinery and equipment,
and in the aggregate as to all such machinery and equipment, in good and usable
condition and in a state of good maintenance and repair (reasonable wear and
tear excepted), and adequate for its use in the Business Operations.
Section 3.09 Capitalization. Except as set forth in Schedule 7 annexed
hereto, the Borrower does not, directly or indirectly, own any capital stock of
or any form of equity interest in any other Person.
Section 3.10 Solvency. The borrowing made or to be made by the Borrower
under this Agreement does not and will not render the Borrower insolvent or with
unreasonably small capital for its business; the fair saleable value of all of
the assets and properties of the Borrower does now, and will, upon the funding
of the Loan and the other Batchelor Debt contemplated hereby and pursuant to the
Acquisition Agreement, exceed the aggregate consolidated liabilities and
Indebtedness of the Borrower (including contingent liabilities); neither the
Borrower nor any Subsidiary is contemplating either the filing of a petition
under any state or federal bankruptcy or insolvency law, or the liquidation of
all or any substantial portion of its assets or property; the Borrower has no
knowledge of any Person contemplating the filing of any such petition against
12
<PAGE>
the Borrower or any Subsidiary; and the Borrower reasonably anticipates that it
and each of its Subsidiaries will be able to pay their respective debts as they
mature.
Section 3.11 Full Disclosure. No statement of fact made by or on behalf of
the Borrower in this Agreement, or in any information memorandum, business
summary, agreement, certificate, schedule or other statement (written or oral)
furnished to the Lender pursuant hereto, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary to make any statements contained herein or therein not misleading.
Except for matters of a general economic or political nature which do not affect
the Borrower or any Subsidiary uniquely, there is no fact presently known to the
Borrower or any Subsidiary which has not been disclosed to the Lender, which
materially adversely affects, or so far as the Borrower or any Subsidiary can
foresee, will materially adversely affect, the Borrower's or any Subsidiary's
property, business, operations or condition (financial or otherwise).
Section 3.12 No Investment Company. The Borrower is not an "investment
company", or a company "controlled" by an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended.
Section 3.13 Margin Securities. The Borrower does not own or have any
present intention of acquiring any "margin security" within the meaning of
Regulation G (12 CFR Part 207), or any "margin stock" within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve
System (herein called "margin security" and "margin stock"). None of the
proceeds of the Loan will be used, directly or indirectly, for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any margin
security or margin stock or for any other purpose which might constitute the
transactions contemplated hereby a "purpose credit" within the meaning of said
Regulation G or Regulation U, or cause this Agreement to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934, as amended, or any rules or regulations
promulgated under such statutes.
Section 3.14 ERISA. Neither the Borrower nor any ERISA Affiliate of the
Borrower maintains or has any obligation to make any contributions to any
pension, profit sharing or other similar plan providing for deferred
compensation to any employee. With respect to any such plan(s) as may now exist
or may hereafter be established by the Borrower or any ERISA Affiliate of the
Borrower, and which constitutes an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA (a) the Borrower or the subject ERISA Affiliate
has paid and shall cause to be paid when due all amounts necessary to fund such
plan(s) in accordance with its terms, (b) except for normal premiums payable by
the Borrower to the Pension Benefit Guaranty Corporation ("PBGC"), the Borrower
or the subject ERISA Affiliate has not taken and shall not take any action which
could result in any Liability to the PBGC, or any of its successors or assigns,
(c) the present value of all accrued benefits thereunder shall not at any time
exceed the value of the assets of such plan(s) allocable to such accrued
benefits, (d) there have not been and there shall not be any transactions such
as would cause the imposition of any tax or penalty under Section 4975 of the
Code or under Section 502 of ERISA, which would adversely affect the funded
benefits attributable to the Borrower or the subject ERISA Affiliate, (e) there
has not
13
<PAGE>
been and there shall not be any termination or partial termination thereof
(other than a partial termination resulting solely from a reduction in the
number of employees of the Borrower or an ERISA Affiliate of the Borrower, which
reduction is not anticipated by the Borrower), and there has not been and there
shall not be any "reportable event" (as such term is defined in Section 4043(b)
of ERISA) on or after the effective date of Section 4043(b) of ERISA with
respect to any such plan(s) subject to Title IV of ERISA, (f) no "accumulated
funding deficiency" (as defined in Section 412 of the Code) has been or shall be
incurred on or after the effective date of Section 412 of the Code, (g) except
as otherwise reflected on Schedule 6, such plan(s) have been and shall be
determined to be "qualified" within the meaning of Section 401(a) of the Code,
and have been and shall be duly administered in compliance with ERISA and the
Code, and (h) the Borrower is not aware of any fact, event, condition or cause
which might adversely affect the qualified status thereof. As respects any
"multi-employer plan" (as such term is defined in Section 3(37) of ERISA) to
which the Borrower or any ERISA Affiliate thereof has heretofore been, is now,
or may hereafter be required to make contributions, the Borrower or such ERISA
Affiliate has made and shall make all required contributions thereto, and there
has not been and shall not be any "complete withdrawal" or "partial withdrawal"
(as such terms are respectively defined in Sections 4203 and 4205 of ERISA)
therefrom on the part of the Borrower or such ERISA Affiliate.
Section 3.15 Compliance with Laws. The Borrower and the Subsidiaries are
in compliance in all material respects with all occupational safety, health,
wage and hour, employment discrimination, environmental, flammability, labeling
and other Applicable Law which are material to the Business Operations, and
neither the Borrower nor any Subsidiary is aware of any state of facts, events,
conditions or occurrences which may now or hereafter constitute or result in a
violation of any of such Applicable Law, or which may give rise to the assertion
of any such violation, the effect of which could have a material adverse effect
on the Borrower or any Subsidiary.
Section 3.16 Licenses and Permits. The Borrower and each Subsidiary has
all federal, state and local licenses and permits required to be maintained in
connection with and material to the Business Operations, including, without
limitation, all DOT Route Certificates and FAA Certifications to own and operate
an airline which may be required to be possessed by Arrow to operate its
business, and all such licenses and permits are valid and in full force and
effect. There is no circumstance or condition that would cause or permit any of
such licenses or permits to be voided, revoked or withdrawn.
Section 3.17 Environmental Laws.
(a) The Borrower and each Subsidiary has complied in all material
respects with all Environmental Laws relating to its business and properties,
and there exist no Hazardous Substances or underground storage tanks on any
properties now owned or occupied by the Borrower or any Subsidiary the existence
of which would have a material adverse effect on the business, properties,
assets, operations or condition, financial or otherwise, of the Borrower or any
Subsidiary, except those that are stored and used in compliance with Applicable
Laws.
14
<PAGE>
(b) To the best of the Borrower or any Subsidiary's knowledge,
there exist no past or present violations of Environmental Laws which will
result in a material adverse effect on the business, operations, prospects,
assets, property or condition (financial or otherwise) of the Borrower or any
Subsidiary.
(c) During the term of this Agreement, and for so long as any
Obligations remain outstanding, the Borrower shall, and shall cause each
Subsidiary to, comply in all material respects with all applicable Environmental
Laws, and shall, in addition, promptly notify the Lender of any and all claims,
demands or Notices received under any Environmental Laws and the Borrower's or
any Subsidiary's response thereto.
(d) As used in this Section 3.18 and in Section 5.11 below, the
following terms have the following meanings:
"Environmental Laws" include all federal, state, and local laws,
rules, regulations, ordinances, permits, orders, and consent decrees agreed to
by the Borrower or any Subsidiary, relating to health, safety, and environmental
matters applicable to the business and property of the Borrower or any
Subsidiary. Such laws and regulations include but are not limited to the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss.6901 et seq., as
amended; the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), 42 U.S.C. ss.9601 et seq., as amended; the Toxic Substances
Control Act ("TSCA"), 15 U.S.C. ss.2601 et seq., as amended; and the Clean Water
Act, 33 U.S.C. ss.1331 et seq., as amended.
"Hazardous Substances", "Release", "Respond" and "Response" shall
have the meanings assigned to them in CERCLA, 42 U.S.C. ss.9601, as amended.
"Notice" means any summons, citation, directive, information
request, notice of potential responsibility, notice of violation or deficiency,
order, claim, complaint, investigation, proceeding, judgment, letter, or other
communication, written or oral, actual or threatened, from the United States
Environmental Protection Agency or other federal, state, or local agency or
authority, or any other entity or individual, public or private, concerning any
intentional or unintentional act or omission which involves management of
Hazardous Substances on or off any Real Properties; the imposition of any lien
on any Real Properties, including but not limited to liens asserted by
government entities in connection with any Borrower's or Subsidiary's response
to the presence or Release of Hazardous Substances; and any alleged violation of
or responsibility under any Environmental Laws.
IV. CONDITIONS OF MAKING THE LOANS
The obligation of the Lender to make the Loan hereunder and to consummate
the other transactions contemplated hereby are subject to the following
conditions precedent:
Section 4.01 Representations and Warranties. The representations and
warranties set forth in Article III hereof shall be true and correct on and as
of the date of the funding of the Loan.
15
<PAGE>
Section 4.02 Loan Documents. The Borrower, the Guarantors, the Companies,
and the applicable Subsidiaries shall have duly executed and/or delivered to the
Lender, upon the execution of this Agreement, all of the following:
(a) The various Loan Documents, including (i) the Note duly
executed by the Borrower, (ii) the Guaranty duly executed by the Guarantors,
(iii) the Mortgage and Security Agreements duly executed by each of the Asset
Owners and owners of the Additional Assets, and (iv) the Pledge Agreement duly
executed by each of the Borrower Stockholders, the Borrower and the record
owners of 100% of the shares of capital stock of each of the Companies and other
Subsidiaries of the Borrower;
(b) A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the vote of the Board of Directors of the Borrower,
authorizing and directing the execution and delivery of this Agreement, the
Note, and all further agreements, instruments, certificates and other documents
pursuant hereto and thereto;
(c) A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names of the officers of the Borrower who are
authorized to execute and deliver this Agreement, the Note, and all Loan
Documents, instruments, certificates and other documents to be delivered
pursuant hereto and thereto, together with the true signatures of such officers.
The Lender may conclusively rely on such certificate until the Lender shall
receive any further such certificate canceling or amending the prior certificate
and submitting the signatures of the officers named in such further certificate;
(d) Such other agreements, instruments, documents and certificates
as the Lender or its counsel may reasonably request.
Section 4.03 Legal Opinion. The Lender shall have received the favorable
written opinion of legal counsel to the Borrower, and/or other such counsel
acceptable to the Lender, dated the Agreement Date, satisfactory to the Lender
and its counsel in scope and substance.
Section 4.04 Closing under Acquisition Agreement. The closing of the
acquisition by Borrower of the capital stock of the Companies and the other
transactions contemplated by the Acquisition Agreement shall have been
consummated in a manner satisfactory to the Borrower.
Section 4.05 Execution of Stock Purchase Agreement, Asset Purchase
Agreement and Transaction Closing Documents. The Borrower and Tirri shall have
(a) executed and delivered to the Lender the Stock Purchase Agreement and the
Asset Purchase Agreement, together with all exhibits and schedules thereto and
(b) executed and delivered the Management Agreement, and shall have caused the
applicable Subsidiaries of Borrower to have executed and delivered the
Transaction Security Agreement, the Joinder and Assumption Agreement and such
other and further documents and instruments to be executed and delivered at the
Transaction Closings in favor of the Lender (the "Transaction Closing
Documents"); which Transaction Closing Documents shall be held in escrow by
Greenberg Traurig, counsel to the Lender, pending satisfaction of the HSR
Condition.
16
<PAGE>
Section 4.06 Further Matters. All legal matters, and the form and
substance of all documents, incident to the transactions contemplated hereby
shall be satisfactory to counsel for the Lender.
Section 4.07 HSR Act Filing. The Borrower and its "ultimate parent
entit(ies)" if any, shall (a) have completed to the satisfaction of the Lender
all applications and forms required to file under the HSR Act, (b) paid or
delivered to Lender, a check in the amount of $45,000 to defray a portion of
Lender's HSR Act filing fees, and (c) executed and delivered all such other and
further documents and supporting materials which Lender shall reasonably request
in order to promptly make all filings under the HSR Act on behalf of the Lender
and the Borrower (or their ultimate parent entities) and seek early termination
of the waiting period thereunder.
Section 4.08 No Default. No Default or Event of Default shall have
occurred and be continuing.
V. AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, from the date hereof and
until all Obligations (whether now existing or hereafter arising) have been paid
in full, the Borrower shall, and shall cause each of its Subsidiaries to:
Section 5.01 Corporate and Insurance. Do or cause to be done all things
necessary to at all times (a) preserve, renew and keep in full force and effect
its corporate or other legal existence, rights, licenses, permits and
franchises, (b) comply with this Agreement and any other agreements and
instruments executed and delivered hereunder (to the extent a party thereto),
(c) maintain, preserve and protect all of its franchises and material trade
names, and preserve all of its material property used or useful in the conduct
of its business and keep the same in good repair, working order and condition
(reasonable wear and tear excepted), and from time to time make, or cause to be
made, all needed and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the Business Operations carried on in connection
therewith may be properly and advantageously conducted at all times, (d)
maintain such insurance as may be required under the Batchelor Collateral
Agreements and the Mortgage and Security Agreement from time to time, and, with
respect to all liability coverages included therein, name the Lender as an
additional insured as its interests appear and provide for the Lender to receive
written notice thereof at least thirty (30) days prior to any cancellation,
modification or non-renewal of the subject policy, and (e) comply with all
Applicable Law material to its Business Operations, whether now in effect or
hereafter enacted, promulgated or issued. The Borrower will provide to the
Lender a certificate of the foregoing insurance, promptly upon request.
Section 5.02 Payment of Taxes. File, pay and discharge, or cause to be
paid and discharged, all taxes, assessments and governmental charges or levies
imposed upon the Borrower and/or any Subsidiary or upon its income and profits
or upon any of its property (real, personal or mixed) or upon any part thereof,
before the same shall become in default, as well as all lawful claims for labor,
materials, supplies and otherwise, which, if unpaid when due, might become a
Lien or charge upon such property or any part thereof; provided, however, that
neither
17
<PAGE>
the Borrower nor any Subsidiary shall be required to pay and discharge or cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as (a) the validity thereof shall be contested in good faith by appropriate
proceedings and the Borrower or such Subsidiary shall have set aside on its
books adequate reserves with respect to any such tax, assessment, charge, levy
or claim so contested, and (b) payment with respect to any such tax, assessment,
charge, levy or claim shall be made before any of the Borrower's or such
Subsidiary's property shall be seized or sold in satisfaction thereof.
Section 5.03 Notice of Proceedings. Give prompt written notice to the
Lender of (a) any proceedings instituted against the Borrower or any Subsidiary
in any federal or state court or before any commission or other regulatory body,
whether federal, state or local, which, if adversely determined, could have a
material adverse effect upon the Borrower's or any Subsidiary's business,
operations, properties, assets or condition, financial or otherwise, (b) the
occurrence of any Default or Event of Default, and the action that the Borrower
has taken, is taking, or proposes to take with respect thereto, and (c) the
occurrence of any "Default" or "Event of Default" in payment of the Batchelor
Debt or under and as defined in the Batchelor Collateral Agreements, and the
action taken, being taken or proposed to be taken with respect thereto.
Section 5.04 Periodic Reports. Furnish to the Lender:
(a) Within thirty (30) calendar days after the end of each
calendar month, consolidated and consolidating unaudited balance sheets,
statements of income and statements of cash flows of the Borrower and its
Subsidiaries, together with supporting schedules thereto, prepared by the
Borrower and certified by the Borrower's Chairman, President, Executive Vice
President, Chief Financial Officer or Chief Accounting Officer, such balance
sheets to be as of the close of such calendar month and such statements of
income and statements of cash flows to be for the period from the beginning of
the then-current calendar month to the end of such fiscal quarter, together with
comparative statements of income and cash flows for the corresponding period in
the immediately preceding Fiscal Year, in each case subject to normal audit and
year-end adjustments which shall not be material;
(b) Concurrently with the delivery of each of the financial
statements required by Section 5.04(a) above, a certificate on behalf of the
Borrower (signed by the Chairman, President, Executive Vice President, Chief
Financial Officer or Chief Accounting Officer of the Borrower), certifying that
he has examined the provisions of this Agreement and that no Default or Event of
Default has occurred and/or is continuing; and
(c) Promptly, from time to time, such other information regarding
the Borrower's or any Subsidiary's operations, assets, business, affairs and
financial condition, as the Lender may reasonably request.
Section 5.05 Books and Records; Inspection. Maintain centralized books and
records regarding all of the Business Operations at the Borrower's principal
place of business, and permit agents or representatives of the Lender to
inspect, at any time during normal business hours,
18
<PAGE>
upon reasonable notice, all of the Borrower's and its Subsidiaries' Business
Operations, and books and records, and to make copies, abstracts and/or
reproductions thereof.
Section 5.06 Accounting. Maintain a standard system of accounting in order
to permit the preparation of financial statements in accordance with GAAP.
Section 5.07 Reimbursements. Pay or reimburse the Lender or other
appropriate Persons on demand for all costs, expenses and other charges incurred
or payable in connection with the transactions contemplated by this Agreement,
regardless of whether the transactions are in fact consummated, including but
not limited to any and all search fees, recording fees and legal fees.
Section 5.08 Environmental Response. In the event of any discharge, spill,
injection, escape, emission, disposal, leak or other Release of Hazardous
Substances on any Real Property owned or leased by the Borrower or any
Subsidiary, which is not authorized by a permit or other approval issued by the
appropriate governmental agencies, and which requires notification to or the
filing of any report with any federal or state governmental agency, the Borrower
shall promptly: (i) notify the Lender; and (ii) comply with the notice
requirements of the Environmental Protection Agency and applicable state
agencies, and take all steps necessary to promptly clean up such discharge,
spill, injection, escape, emission, disposal, leak or other Release in
accordance with all applicable Environmental Laws and the Federal National
Contingency Plan, and, if required, receive a certification from all applicable
state agencies or the Environmental Protection Agency, that such Real Property
has been cleaned up to the satisfaction of such agency(ies).
Section 5.09 Business Operations. Obtain the prior written approval of the
Lender before (a) making any material changes in the Business Operations of the
Borrower or any Subsidiary outside of the ordinary course of the Business
Operations, or (b) with respect to Arrow, the Assets or the operation of the
cargo airline business conducted by Arrow, making any Capital Expenditures,
route changes, entering into any Contracts involving a commitment of $50,000 or
more, rescheduling employees or otherwise making any changes not consistent with
past practice.
Section 5.10 Use of Proceeds. Cause all proceeds of the Loan to be
utilized solely in the manner and for the purposes set forth in Section 2.02
hereof.
Section 5.11 Board of Directors. At any and all times when the Lender or
any of its Affiliates shall hold any shares of capital stock of the Borrower or
any Subsidiaries under the Pledge Agreement or otherwise: (a) provide to the
Lender notice of all meetings of the Boards of Directors or other governing
bodies of the Company and each of the Subsidiaries, together with copies of all
documents and information provided to the members of such Boards of Directors or
other governing bodies; (b) permit a representative of the Lender to attend, as
an observer, each meeting of such Boards of Directors or other governing bodies;
and (c) provide to the Lender, promptly after the preparation thereof, copies of
all minutes or action by written consent of such Boards of Directors or other
governing bodies.
19
<PAGE>
VI. NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that, until all Obligations
(whether now existing or hereafter arising) have been paid in full, unless the
Lender shall otherwise consent in writing, the Borrower shall not, and shall not
permit any of the Companies or any other Subsidiary to, directly or indirectly:
Section 6.01 Indebtedness and Liabilities. Incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any Indebtedness
or liability, other than:
(a) Indebtedness to the Lender pursuant to this Agreement;
(b) Batchelor Debt pursuant to the Acquisition Agreement;
(c) Liabilities with respect to trade obligations, accounts
payable, operating leases and other normal accruals incurred in the ordinary
course of business, or with respect to which the Borrower or the subject
Subsidiary is contesting in good faith the amount or validity thereof by
appropriate proceedings, and then only to the extent that the Borrower or the
subject Subsidiary has set aside on its books adequate reserves therefor;
(d) Indebtedness existing on the Agreement Date and reflected in
the Financial Statements or the footnotes thereto or owed to those Persons, in
those amounts and having those maturities as set forth in Schedule 8 annexed
hereto;
(e) Capitalized Leases reflected in the Financial Statements, and
Capitalized Leases hereafter entered into by the Borrower or its Subsidiaries in
the ordinary course of the Business Operations and within the limitations of
Section 6.09 hereof; and
(f) Purchase money indebtedness incurred in connection with the
Borrower's or its Subsidiaries' acquisition of capital assets, within the
limitations of Section 6.09 hereof.
Section 6.02 Liens. Create, incur, assume or suffer to exist any Lien or
other encumbrance of any nature whatsoever on any of its assets, now or
hereafter owned, other than:
(a) Subject to Section 5.02 above, Liens securing the payment of
taxes which are either not yet due or the validity of which is being contested
in good faith by appropriate proceedings, and as to which the Borrower or the
subject Subsidiary shall have set aside on its books adequate reserves;
(b) Deposits under workers' compensation, unemployment insurance
and social security laws, or to secure the performance of bids, tenders,
contracts (other than for the repayment of money borrowed) or leases, or to
secure statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
20
<PAGE>
(c) Liens imposed by law, such as carriers', warehousemen's or
mechanics' liens, incurred by the Borrower or any Subsidiary in good faith in
the ordinary course of business and discharged promptly after same are incurred,
and fully bonded Liens arising out of a judgment or award against the Borrower
or any Subsidiary with respect to which the Borrower or such Subsidiary shall
currently be prosecuting an appeal, a stay of execution pending such appeal
having been secured;
(d) Liens in favor of Batchelor as agent under the Batchelor
Collateral Agreements, and other Liens in existence on the Agreement Date as
disclosed in Schedule 2 annexed hereto;
(e) Other Liens incurred in connection with indebtedness expressly
permitted pursuant to Section 6.01(e) and/or Section 6.01(f) above, but only to
the extent that such Liens secure indebtedness in amounts not in excess of those
permitted by such Section 6.01(d) and/or Section 6.01(e), and only to the extent
that such Liens to not extend to any assets or property other than the specific
assets or properties acquired pursuant to such permitted indebtedness;
(f) Encumbrances consisting of easements, rights-of-way, survey
exceptions and other similar restrictions on the use of Real Property, or minor
irregularities in title thereto which do not materially impair the use of such
property in the operation of the business of the Borrower and its Subsidiaries;
and
(g) Liens arising out of judgments or awards with respect to which
the Borrower or the subject Subsidiary shall be prosecuting an appeal in good
faith and in respect of which a stay of execution shall have been issued.
Section 6.03 Guarantees. Guarantee, endorse or otherwise in any manner
become or be responsible for obligations of any other Person, except (a)
endorsements of negotiable instruments for collection in the ordinary course of
business, (b) guarantees of the Subsidiaries' obligations under the Batchelor
Collateral Agreements, and (c) other guarantees by the Borrower of obligations
of the Subsidiaries up to a maximum principal amount of $200,000 at any one time
outstanding.
Section 6.04 Sales of Assets and Management. (a) Sell, lease, transfer,
encumber or otherwise dispose of any of the Borrower's or any Subsidiary's
properties, assets, rights, licenses or franchises other than (i) sales of
inventory in the ordinary course of business, (ii) licenses, joint ventures and
related transactions entered into, modified or terminated in the ordinary course
of business, (iii) the disposition of obsolete personal properties in the
ordinary course of business, or (iv) the sale of the equipment and assets under
Capitalized Leases (excluded, however, any of the Assets or Additional Assets
covered by the Asset Purchase Agreement), (b) turn over the management of, or
enter into any management contract with respect to, the Business Operations or
such properties, assets, rights, licenses or franchises, or (c) permit any
Affiliate of the Borrower to own or obtain any patent, patent application,
license, trademark or other intangible asset relating to the Business
Operations.
21
<PAGE>
Section 6.05 Sale-Leaseback. Enter into any arrangement, directly or
indirectly, with any Person whereby the Borrower or any Subsidiary shall sell or
transfer any property (real, personal or mixed) used or useful in the Business
Operations, whether now owned or hereafter acquired, and thereafter rent or
lease such property.
Section 6.06 Investments; Acquisitions. Make any Investment in, or
otherwise acquire or hold securities (including, without limitation, capital
stock and evidences of indebtedness) of, or make loans or advances to, or enter
into any arrangement for the purpose of providing funds or credit to, any other
Person (including any Affiliate), except:
(a) existing Investments in the Subsidiaries, and loans by the
Borrower to the Subsidiaries out of the proceeds of the Loan hereunder;
(b) advances to employees of the Borrower or the Subsidiaries: (i)
for business expenses not to exceed at any time $50,000 in the aggregate, and
(ii) for personal needs not to exceed at any time $50,000 in the aggregate as to
all employees of the Borrower and the Subsidiaries; and
(c) investments in obligations of the United States or certificates
of deposit of commercial banks reasonably satisfactory to the Lender.
Section 6.07 Corporate Form; Acquisitions. Dissolve or liquidate, or
consolidate or merge with or into, sell all or substantially all of the assets
of the Borrower or any Subsidiary to, or acquire all or substantially all of the
securities, assets or properties of, any other Person.
Section 6.08 Dividends and Redemptions. Directly or indirectly declare or
pay any dividends, or make any distribution of cash or property, or both (other
than dividends solely in the form of common stock of the Borrower), to any
Person in respect of any of the shares of the capital stock of the Borrower, or
directly or indirectly redeem, purchase or otherwise acquire for consideration
any securities or shares of the capital stock of the Borrower or any other
Person.
Section 6.09 Capital Expenditures. Make aggregate expenditures for capital
assets (whether through cash purchase, principal payments under Capitalized
Leases, or otherwise) in excess of (a) $25,000 in the aggregate for the Borrower
and all Subsidiaries, or $50,000 in the aggregate for Arrow or with respect to
capital assets or Capitalized Leases to replace any of the Assets or Additional
Assets subject to the provisions of the Asset Purchase Agreement and exhibits
thereto..
Section 6.10 Change of Business. Directly or indirectly: (a) engage in a
business materially different from the general nature of the Business Operations
as now being conducted or as same may hereafter be reasonably expanded from time
to time in like areas of business, (b) change in any manner or wind up any
portion of the Business Operations of Arrow, or cease any of Arrow's normal
Business Operations, or (c) suffer any material disruption, interruption or
discontinuance of a material portion of its normal Business Operations for a
period in excess of thirty (30) consecutive days.
22
<PAGE>
Section 6.11 Certain Amendments. Agree, consent, permit or otherwise
undertake to amend, revoke or modify any of the terms or provisions of (a) the
Borrower's or any Subsidiary's Certificate of Incorporation or By-Laws or other
organizational documents in a manner which may impair in any respect any of the
Lender's rights hereunder, (b) any of the Batchelor Collateral Agreements or the
Acquisition Agreement in any manner, (c) any Contract relating to Arrow or
Arrow's Business Operations, or (d) any other Contract which is material to the
consolidated Business Operations of the Borrower.
Section 6.12 Issuance of Capital Stock. Neither the Borrower nor any
corporate Guarantor or Pledgor under the Pledge Agreement shall issue any shares
of its capital stock or any options, warrants, rights, or other securities
exercisable for or convertible into shares of capital stock of any such Person.
VII. DEFAULTS
Section 7.01 Events of Default. Each of the following events is herein,
and in the Note, sometimes referred to as an Event of Default:
(a) if any representation or warranty made in this Agreement, in
the Stock Purchase Agreement, the Asset Purchase Agreement, or in any report,
certificate, financial statement, instrument or other statement furnished in
connection herewith or therewith or the borrowing hereunder, shall be false,
inaccurate or misleading in any material respect when made or when deemed made
hereunder;
(b) any default in the payment of any principal or interest
under the Note or any other Obligations of the Borrower to the Lender when
the same shall be due and payable, whether at the due date thereof or at a
date required for prepayment or by acceleration or otherwise;
(c) any default in the due and timely observance, payment or
performance of (i) any covenant, condition or agreement contained in any Section
of Article VI hereof, or (ii) any covenant, condition or agreement to be
performed on behalf of the Lender which is contained in the Stock Purchase
Agreement or the Asset Purchase Agreement, in each case, which, if capable of
being cured, is not fully cured within ten (10) days after the occurrence
thereof;
(d) any default in the due observance or performance of any
covenant, condition or agreement to be observed or performed under Article V
hereof, or otherwise pursuant to the terms hereof, and the continuance of such
default unremedied for a period of ten (10) days after written notice thereof to
the Borrower;
(e) any default with respect to any indebtedness for money
borrowed of the Borrower or any of the Subsidiaries (other than to the Lender)
in an amount in excess of $250,000, if the effect of such default is to permit
the holder to accelerate the maturity of any such indebtedness for money
borrowed or to cause such indebtedness for money borrowed to become due prior to
the stated maturity thereof (provided that any such default shall not be an
23
<PAGE>
Event of Default hereunder unless and until the earlier of (i) ten (10) days
after the occurrence of such default, or (ii) the acceleration of the maturity
of such indebtedness for money borrowed).
(f) any Default or Event of Default by the Borrower or Tirri in
connection with the Batchelor Debt or under the Batchelor Collateral Agreements;
(g) if the Borrower or any Subsidiary shall: (i) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of it
or any of its properties, (ii) admit in writing its inability to pay its debts
as they mature, (iii) make a general assignment for the benefit of creditors,
(iv) be adjudicated a bankrupt or insolvent or be the subject of an order for
relief under Title 11 of the United States Code, or (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage or any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
against him or it in any proceeding under any such law, or (vi) take or permit
to be taken any action in furtherance of or for the purpose of effecting any of
the foregoing;
(h) if any order, judgment or decree shall be entered, without the
application, approval or consent of the Borrower or any Subsidiary, by any court
of competent jurisdiction, approving a petition seeking reorganization of the
Borrower or any Subsidiary, or appointing a receiver, trustee, custodian or
liquidator of the Borrower or any Subsidiary, or of all or any substantial part
of its assets, and such order, judgment or decree shall continue unstayed and in
effect for any period of forty-five (45) days;
(i) if final judgment(s) for the payment of money in an uninsured
amount in excess of $250,000 individually or in the aggregate shall be rendered
against the Borrower and/or any of the Subsidiaries, and the same shall remain
undischarged or unbonded for a period of thirty (30) consecutive days, during
which execution shall not be effectively stayed; or
(j) the occurrence of any levy upon or seizure or attachment of
any property of the Borrower having an aggregate fair value in excess of
$250,000 individually or in the aggregate, which levy, seizure or attachment
shall not be set aside, bonded or discharged within thirty (30) days after the
date thereof.
Section 7.02 Remedies. Upon the occurrence of any Event of Default, and at
all times thereafter during the continuance thereof: (a) the Note, and any and
all other Obligations of the Borrower to the Lender, shall, at the Lender's
option (except in the case of Sections 7.01(g) and 7.01(h) hereof, the
occurrence of which shall automatically effect acceleration, regardless of any
action or forbearance in respect of any prior or ongoing Default or Event of
Default which may be inconsistent with such automatic acceleration), become
immediately due and payable, both as to principal, interest and other charges,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Note or other
evidence of such Obligations to the contrary notwithstanding, (b) all
outstanding Obligations under the Note, and all other outstanding Obligations,
shall bear interest at the default rate of interest provided in the Note, and
(c) the Lender may file suit against the Borrower on the Note
24
<PAGE>
and/or seek specific performance or injunctive relief thereunder (whether or not
a remedy exists at law or is adequate.
VIII. ASSIGNMENT.
Section 8.01 Transfer. Anything in this Agreement to the contrary
notwithstanding, the Lender may, at any time and from time to time, without the
requirement of any consent of the Borrower if to an Affiliate of the Lender or
an Affiliate of the Borrower, or otherwise with the prior written consent of the
Borrower (which consent shall not be unreasonably withheld or delayed), and in
any such case without in any manner affecting or impairing the validity of any
Obligations, transfer and assign all or any portion of its interest in this
Agreement and the Note to any Person (an "Assignee Lender") as the Lender may
determine (subject to any required consent as hereinabove provided). Upon any
such transfer or assignment, the Assignee Lender shall be deemed to succeed (to
the extent of the interest assigned) to the rights and obligations of "Lender"
for all purposes of this Agreement. The Lender shall endeavor to give written
notice to the Borrower prior to making any such transfer or assignment, but the
failure to give any such notice shall not affect or impair the assignment so
effected.
IX. MISCELLANEOUS
Section 9.01 Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by the Lender of the Loan, and the
execution and delivery to the Lender of the Note, and shall continue in full
force and effect for so long as the Note or any other Obligations are
outstanding and unpaid. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
permitted assigns of such party; and all covenants, promises and agreements in
this Agreement contained, by or on behalf of the Borrower, shall inure to the
benefit of the successors and assigns of the Lender.
Section 9.02 Indemnification. The Borrower shall indemnify the Lender and
its directors, officers, employees, attorneys and agents against, and shall hold
the Lender and such Persons harmless from, any and all losses, claims, damages
and liabilities and related expenses, including reasonable counsel fees and
expenses, incurred by the Lender or any such Person arising out of, in any way
connected with, or as a result of: (a) the use of any of the proceeds of the
Loan made by the Lender to the Borrower; (b) this Agreement, the ownership and
operation of the Borrower's and the Subsidiaries' assets, including all Real
Properties and improvements or any Contract, the performance by the Borrower or
any other Person of their respective obligations thereunder, and the
consummation of the transactions contemplated by this Agreement; and/or (c) any
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether or not the Lender or its directors, officers, employees, attorneys or
agents are a party thereto; provided that such indemnity shall not apply to any
such losses, claims, damages, liabilities or related expenses arising from (i)
any unexcused breach by the Lender of any of its obligations under this
Agreement, (ii) the willful misconduct or gross negligence of the Lender,
provided that any such loss, claim, damage, liability or expense is determined
by a court of competent jurisdiction by final judgment to have resulted from the
willful misconduct or gross
25
<PAGE>
negligence of the Lender and the further finding that such willful misconduct or
gross negligence was the primary cause thereof (i.e., more than 50% of the
causation), or (iii) the breach of any commitment or legal obligation of the
Lender to any Person other than the Borrower or its Affiliates, provided that
such breach is determined pursuant to a final and nonappealable decision of a
court of competent jurisdiction. The foregoing indemnity shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated by this Agreement,
the repayment of the Loan, the invalidity or unenforceability of any term or
provision of this Agreement or the Note, any investigation made by or on behalf
of the Lender, and the content or accuracy of any representation or warranty
made by the Borrower under this Agreement. All amounts due under this Section
9.02 shall be payable on written demand therefor, provided, that notwithstanding
anything to the contrary contained in this Section 5.02, Borrower's indemnity
obligations to Lender hereunder shall not extend beyond the limits set forth in
the indemnity provisions of the Asset Purchase Agreement.
Section 9.03 Governing Law. This Agreement and the Note shall
(irrespective of where same are executed and delivered) be governed by and
construed in accordance with the laws of the State of Florida (without giving
effect to principles of conflicts of laws).
Section 9.04 Waiver and Amendment. Neither any modification or waiver of
any provision of this Agreement or the Note, nor any consent to any departure by
the Borrower therefrom, shall in any event be effective unless the same shall be
set forth in writing duly signed or acknowledged by the Lender and the Borrower,
and then such waiver or consent shall be effective only in the specific
instance, and for the specific purpose, for which given. No notice to or demand
on the Borrower in any instance shall entitle the Borrower to any other or
future notice or demand in the same, similar or other circumstances.
Section 9.05 Reservation of Remedies. Neither any failure nor any delay on
the part of the Lender in exercising any right, power or privilege hereunder or
under the Note shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or future exercise, or the exercise of any
other right, power or privilege.
Section 9.06 Notices. All notices, requests, demands and other
communications under or in respect of this Agreement or any transactions
hereunder shall be in writing (which may include telegraphic or telecopied
communication) and shall be personally delivered or mailed (by prepaid
registered or certified mail, return receipt requested), sent by prepaid
recognized overnight courier service, or telegraphed or telecopied by facsimile
transmission to the applicable party at its address or telecopier number
indicated in the Asset Purchase Agreement, or, as to each party, at such other
address or telecopier number as shall be designated by such party in a written
notice to the other party delivered as aforesaid. All such notices, requests,
demands and other communications shall be deemed given when personally delivered
or when deposited in the mails with postage prepaid (by registered or certified
mail, return receipt requested) or delivered to the telegraph company or
overnight courier service, addressed as aforesaid, or when submitted by
facsimile transmission to a telecopier number designated by such addressee. No
other method of written notice is precluded.
26
<PAGE>
Section 9.07 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not assign any of its
rights or obligations hereunder without the prior written consent of the Lender.
Section 9.08 Consent to Jurisdiction; Waiver of Jury Trial. The Borrower
hereby consents to the jurisdiction of all courts of the State of Florida and
the United States District Court for the Southern District of Florida, as well
as to the jurisdiction of all courts from which an appeal may be taken from such
courts, for the purpose of any suit, action or other proceeding arising out of
or with respect to this Agreement, the Note, any other agreements, instruments,
certificates or other documents executed in connection herewith or therewith, or
any of the transactions contemplated hereby or thereby, or any of the Borrower's
obligations hereunder or thereunder. The Borrower hereby expressly waives any
and all objections which it may have as to venue in any of such courts, and also
waives trial by jury in any such suit, action or proceeding. The Lender may file
a copy of this Agreement as evidence of the foregoing waiver of right to jury
trial.
Section 9.09 Severability. If any provision of this Agreement is held
invalid or unenforceable, either in its entirety or by virtue of its scope or
application to given circumstances, such provision shall thereupon be deemed
modified only to the extent necessary to render same valid, or not applicable to
given circumstances, or excised from this Agreement, as the situation may
require, and this Agreement shall be construed and enforced as if such provision
had been included herein as so modified in scope or application, or had not been
included herein, as the case may be.
Section 9.10 Captions. The Article and Section headings in this Agreement
are included herein for convenience of reference only, and shall not affect the
construction or interpretation of any provision of this Agreement.
Section 9.11 Sole and Entire Agreement. This Agreement, the Note, and the
other agreements, instruments, certificates and documents referred to or
described herein and therein constitute the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersede all prior discussions, agreements and understandings of every kind and
nature between the parties as to such subject matter.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers on the date set forth below, but
all as of the day and year first above written.
Dated: As of February 5, 1999
INTERNATIONAL AIR LEASES OF PR, INC., INC.
By: /s/ Anthony C. Tirri
-------------------------------------
Anthony C. Tirri, President
/s/ Anthony C. Tirri
----------------------------------------
ANTHONY C. TIRRI
FINE AIR SERVICES CORP.
By: /s/ J. Frank Fine
-------------------------------------
J. Frank Fine, Chairman
28
