<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A No. 1
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____to____.
Commission file number 0-22526
TOWER AIR, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2621046
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Hangar No. 17
J.F.K. International Airport
Jamaica, N.Y. 11430
(Address of principal executive offices) (Zip Code)
(718) 553-4300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Common Stock, par value $.01 per share NASDAQ National Market
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [_]
The aggregate market value of Common Stock, par value $.01 per share,
held by non-affiliates (based upon the closing sale price on the NASDAQ National
Market) on February 28, 1997 was approximately $11,337,938. As of February
28, 1997, there were 15,290,006 shares of Common Stock, par value $.01 per
share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement in connection with the registrant's
1997 Annual Meeting of Stockholders to be filed within 120 days of the close of
registrant's fiscal year are incorporated by reference into Part III.
<PAGE>
EXPLANATORY NOTE
This document is a copy of certain exhibits submitted under cover of Form SE on
March 31, 1997 pursuant to a Rule 201 temporary hardship exemption (related to
the Form 10-K filed via electronic format on March 28, 1997).
1
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports
on Form 8-K.
Item 14(a)1 and 2. Financial Statements and Schedules. See "Index to Financial
Statements and Financial Statement Schedules" on p.F-1.
Item 14(a)3. Exhibits
3(1)* Restated Certificate of Incorporation of the
Company
3(2)* By-Laws of the Company
10(1)* Employment Agreement between the Company and Morris
K. Nachtomi
10(2)** Employment Agreement between the Company and Ramesh
Punwani
10(3)* Tower Air 1993 Long-Term Incentive Plan
10(4)* Tower Air, Inc. Executive Annual Incentive Plan
10(5)** Heller Financial Inc.- Loan and Security Agreement,
Dated December 1, 1996
10(6)** Heller Financial Inc.- First Amendment to Loan and
Security Agreement, Dated January 31, 1997
10(7)** Heller Financial Inc.- Second Amendment to Loan and
Security Agreement, Dated March 13, 1997
10(8)** Sanwa Business Credit Corp.- Trust Agreement and
Supplement, Dated October 1, 1996
10(9)** First Security Bank, National Association - Aircraft
and Airframe Purchase and Sale Agreement,
Dated October 1, 1996
10(10)** Finova Capital Corporation - Consolidated Aircraft
and Engine Loan and Security Agreement,
Dated March 25, 1996
10(11)** Finova Capital Corporation - $20,000,000 Loan
Secured by Two B747 Aircraft and Eight Engines,
Dated January 30, 1996
10(12)** Finova Capital Corporation- First Amendment to
Consolidated Aircraft and Engine Loan and Security
Agreement, Dated May 8, 1996
2
<PAGE>
11*** Computation of Net Income Per Share
27*** Financial Data Schedule for the year ended December
31, 1996
- ------------------
* Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (File No. 33-69148) or amendments thereto and incorporated by
reference herein.
** Filed herewith.
*** Previously filed in electronic format with the Registrant's Form 10-K on
March 28, 1997.
Item 14(b). Registrant filed no reports on Form 8-K during the last quarter of
the period covered by this report.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: April 7, 1997 TOWER AIR, INC.
By:/s/ MORRIS K. NACHTOMI
----------------------------
Morris K. Nachtomi
President, Chief Executive
Officer and Chairman of the
Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on April 7, 1997 on behalf of the
Registrant and in the capacities indicated.
<TABLE>
<S> <C>
/s/ MORRIS K. NACHTOMI President, Chief Executive
- ---------------------------------- Officer and Chairman of the
Morris K. Nachtomi Board of Directors (Principal
Executive Officer)
/s/ RAMESH PUNWANI Chief Financial Officer and
- ----------------------------------- Vice President-Finance (Principal
Ramesh Punwani Financial and Accounting Officer)
/s/ STEPHEN L. GELBAND Director
- ---------------------------------
Stephen L. Gelband
/s/ STEPHEN A. OSBORN Director
- ---------------------------------
Stephen A. Osborn
/s/ HENRY P. BAER Director
- ----------------------------------
Henry P. Baer
/s/ STANLEY S. SHUMAN Director
- ---------------------------------
Stanley S. Shuman
</TABLE>
4
<PAGE>
INDEX TO EXHIBITS
-----------------
3(1)* Restated Certificate of Incorporation of the Company
3(2)* By-Laws of the Company
10(1)* Employment Agreement between the Company and Morris K. Nachtomi
10(2)** Employment Agreement between the Company and Ramesh Punwani
10(3)* Tower Air 1993 Long-Term Incentive Plan
10(4)* Tower Air, Inc. Executive Annual Incentive Plan
10(5)** Heller Financial Inc. - Loan and Security Agreement, Dated
December 1, 1996
10(6)** Heller Financial Inc. - First Amendment to Loan and Security
Agreement, Dated January 31, 1997
10(7)** Heller Financial Inc. - Second Amendment to Loan and Security
Agreement, Dated March 13, 1997
10(8)** Sanwa Business Credit Corp. - Trust Agreement and Supplement, Dated
October 1, 1996
10(9)** First Security Bank, National Association - Aircraft and Airframe
Purchase and Sale Agreement, Dated October 1, 1996
10(10)**Finova Capital Corporation - Consolidated Aircraft and Engine Loan
and Security Agreement, Dated March 25, 1996
10(11)**Finova Capital Corporation - $20,000,000 Loan Secured by Two B747
Aircraft and Eight Engines, Dated January 30, 1996
10(12)**Finova Capital Corporation - First Amendment to Consolidated
Aircraft and Engine Loan and Security Agreement, Dated May 8, 1996
11*** Computation of Net Income Per Share
27*** Financial Data Schedule for the year ended December 31, 1996
- -----------
* Previously filed as an Exhibit to the Registrant's Registration Statement on
Form S-1 (File No. 33-69148) or amendments thereto and incorporated by
reference herein.
** Filed herewith.
*** Previously filed in electronic format with the Registrant's Form 10-K on
March 28,1997.
5
<PAGE>
Exhibit 10(2)
September 9, 1996
Mr. Ramesh Punwani
Vice President - Finance and
Chief Financial Officer
Tower Air, Inc.
Hangar 17
John F. Kennedy International Airport
Jamaica, New York 11430
Dear Ramesh:
Pursuant to our discussions, this will confirm the terms of your employment as
Vice President-Finance and Chief Financial Officer of Tower Air.
Your base pay will be $200,00 per year.
You will be eligible for all company benefits available to company
officers.
You will be eligible to participate in the Tower Air 1993 Long-Term
Incentive Plan which, in your case, will provide for issuance of stock
options for 75,000 shares. A separate agreement will specify the terms
under which such options will be issued. These will include vesting over
three years, with 25,000 options vesting on each of your anniversaries of
employment with the company. They will also specify that you will have the
choice of accepting these benefits as Incentive Stock Options or as Stock
Appreciation Rights.
You will be eligible to participate in the Company's Executive Annual
Incentive Plan.
If you voluntarily terminate your employment with the company or if your
employment is terminated by the company for cause, you will receive no
severance pay or benefits. If your employment is terminated by the company
for lack of performance, you will receive severance pay for six months
equal to your monthly base pay at the time of termination, and will
continue to be eligible to receive company benefits for that same period.
If your employment is terminated by the company for any reason following a
change in control of the company, you will receive severance pay for 12
months equal to your monthly base pay at the time of termination, and you
will continue to be eligible to receive company benefits for that same
period.
I look forward to a long and fruitful working relationship with you.
Sincerely yours,
/s/ Morris K. Nachtomi
- ---------------------------
Morris K. Nachtomi
Chairman/CEO
<PAGE>
Exhibit 10(5)
*
- --------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
DATED AS OF DECEMBER 1, 1996
between
TOWER AIR, INC.,
as Borrower,
and
HELLER FINANCIAL, INC.,
as Agent and as Lender
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
SECTION 1. DEFINITIONS ................................................................ 1
1.1 Certain Defined Terms ...................................................... 1
1.2 Accounting Terms ........................................................... 11
1.3 Other Definitional Provisions .............................................. 11
SECTION 2. LOANS AND COLLATERAL ....................................................... 12
2.1 Loans ...................................................................... 12
(A) Revolving Loan ....................................................... 12
(1) Maximum Revolving Loan Amount .................................. 12
(2) Borrowing Base ................................................. 12
(B) Eligible Collateral .................................................. 13
(C) Borrowing Mechanics .................................................. 14
(D) Revolving Note[s] .................................................... 15
(E) Evidence of Revolving Loan Obligations ............................... 15
(F) Letters of Credit .................................................... 15
(1) Maximum Amount ................................................. 15
(2) Reimbursement .................................................. 16
(3) Conditions of Issuance ......................................... 16
(4) Request for Letters of Credit .................................. 16
(G) Other Letter of Credit Provisions .................................... 16
(1) Obligations Absolute ........................................... 16
(2) Nature of Lender's Duties ...................................... 17
(3) Liability ...................................................... 18
2.2 Interest ................................................................... 18
(A) Rate of Interest ..................................................... 18
(B) Computation and Payment of Interest .................................. 18
(C) Interest Laws ........................................................ 18
2.3 Fees ....................................................................... 19
(A) Closing Fee .......................................................... 19
(B) Unused Line Fee ...................................................... 19
(C) Letter of Credit Fees ................................................ 19
(D) Audit Fees ........................................................... 19
(E) Other Fees and Expenses .............................................. 20
2.4 Payments and Prepayments ................................................... 20
(A) Manner and Time of Payment ........................................... 20
(B) Mandatory Prepayments ................................................ 20
(1) Overadvance .................................................... 20
(2) Proceeds of Asset Dispositions ................................. 20
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C>
(3) Events of Loss with Respect to Eligible Aircraft Collateral .... 20
(C) Voluntary Prepayments and Repayments ................................. 21
(D) Payments on Business Days ............................................ 21
2.5 Term of this Agreement ..................................................... 21
2.6 Statements ................................................................. 22
2.7 Grant of Security Interest ................................................. 22
2.8 Capital Adequacy and Other Adjustments ..................................... 22
2.9 Taxes ...................................................................... 23
(A) No Deductions ........................................................ 23
(B) Changes in Tax Laws .................................................. 23
(C) Foreign Lenders ...................................................... 24
2.10 Optional Prepayment/Replacement of Agent or Lenders in Respect of
Increased Costs ............................................................ 24
SECTION 3. CONDITIONS TO LOANS ........................................................ 25
3.1 Conditions to Loans ........................................................ 25
(A) Closing Deliveries ................................................... 25
(B) Security Interests ................................................... 25
(C) Representations and Warranties ....................................... 25
(D) Closing Fee .......................................................... 25
(E) No Default ........................................................... 25
(F) Performance of Agreements ............................................ 26
(G) No Prohibition ....................................................... 26
(H) No Litigation ........................................................ 26
(I) Insurance ............................................................ 26
(J) Business Plan ........................................................ 26
(K) Appraisals ........................................................... 26
(L) Audit ................................................................ 26
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES .................................. 26
4.1 Organization, Powers, Capitalization ....................................... 27
(A) Organization and Powers .............................................. 27
(B) Capitalization ....................................................... 27
4.2 Authorization of Borrowing, No Conflict .................................... 27
4.3 Financial Condition ........................................................ 27
4.4 Indebtedness and Liabilities ............................................... 28
4.5 Account Warranties ......................................................... 28
4.6 Names ...................................................................... 28
4.7 Locations; FEIN ............................................................ 28
4.8 Title to Properties; Liens ................................................. 28
4.9 Litigation; Adverse Facts .................................................. 28
4.10 Payment of Taxes ........................................................... 29
4.11 Performance of Agreements .................................................. 29
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
4.12 Employee Benefit Plans ..................................................... 29
4.13 Intellectual Property ...................................................... 29
4.14 Broker's Fees .............................................................. 29
4.15 Environmental Compliance ................................................... 29
4.16 Solvency ................................................................... 30
4.17 Disclosure ................................................................. 30
4.18 Insurance .................................................................. 30
4.19 Compliance with Laws ....................................................... 30
4.20 Bank Accounts .............................................................. 31
4.21 Subsidiaries ............................................................... 31
4.22 Employee Matters ........................................................... 31
4.23 Governmental Regulation .................................................... 31
SECTION 5. AFFIRMATIVE COVENANTS ...................................................... 31
5.1 Financial Statements and Other Reports ..................................... 31
(A) Monthly Financials ................................................... 32
(B) Quarterly Financials ................................................. 32
(C) Year-End Financials ................................................. 32
(D) Accountants' Certification and Reports ............................... 32
(E) Compliance Certificate ............................................... 33
(F) Borrowing Base Certificates, Registers and Journals .................. 33
(G) Reconciliation Reports, Inventory Reports and Listings and Agings .... 33
(H) Management Report .................................................... 33
(I) Appraisals ........................................................... 34
(J) Government Notices ................................................... 34
(K) Events of Default, etc. .............................................. 34
(L) Trade Names .......................................................... 34
(M) Locations ............................................................ 34
(N) Bank Accounts ........................................................ 34
(O) Litigation ........................................................... 35
(P) Projections .......................................................... 35
(Q) Subordinated Debt and Other Indebtedness Notices ..................... 35
(R) Other Information .................................................... 35
5.2 Access to Accountants and Management ....................................... 35
5.3 Inspection ................................................................. 35
5.4 Collateral Records ......................................................... 36
5.5 Account Covenants; Verification ............................................ 36
5.6 Collection of Accounts and Payments ........................................ 36
5.7 Endorsement ................................................................ 37
5.8 Corporate Existence ........................................................ 37
5.9 Payment of Taxes ........................................................... 37
5.10 Maintenance of Properties; Insurance ....................................... 37
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
5.11 Compliance with Laws ....................................................... 37
5.12 Further Assurances ......................................................... 38
5.13 Collateral Locations ....................................................... 38
5.14 Bailees .................................................................... 38
5.15 [Intentionally Omitted]. ................................................... 38
5.16 Use of Proceeds and Margin Security ........................................ 38
SECTION 6. FINANCIAL COVENANTS ........................................................ 38
6.1 Tangible Net Worth ......................................................... 38
6.2 Future Covenants ........................................................... 39
SECTION 7. NEGATIVE COVENANTS ......................................................... 39
7.1 Indebtedness and Liabilities ............................................... 39
7.2 Guaranties ................................................................. 39
7.3 Transfers, Liens and Related Matters ....................................... 40
(A) Transfers ............................................................ 40
(B) Liens ................................................................ 40
(C) No Negative Pledges .................................................. 40
7.4 Investments and Loans ...................................................... 40
7.5 Restricted Payments ........................................................ 40
7.6 Restriction on Fundamental Changes ......................................... 40
7.7 Transactions with Affiliates ............................................... 40
7.8 Environmental Liabilities .................................................. 41
7.9 Conduct of Business ........................................................ 41
7.10 Compliance with ERISA ...................................................... 41
7.11 Tax Consolidations ......................................................... 41
7.12 Subsidiaries ............................................................... 41
7.13 Fiscal Year ................................................................ 41
7.14 Press Release; Public Offering Materials ................................... 41
7.15 Bank Accounts .............................................................. 41
SECTION 8. DEFAULT, RIGHTS AND REMEDIES ............................................... 41
8.1 Event of Default ........................................................... 41
(A) Payment .............................................................. 42
(B) Default in Other Agreements .......................................... 42
(C) Breach of Certain Provisions ......................................... 42
(D) Breach of Warranty ................................................... 42
(E) Other Defaults Under Loan Documents .................................. 42
(F) Change in Control .................................................... 42
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. ................ 42
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. .................. 43
(I) Liens ................................................................ 43
(J) Judgment and Attachments ............................................. 43
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
(K) Dissolution .......................................................... 43
(L) Solvency ............................................................. 43
(M) Injunction ........................................................... 43
(N) Invalidity of Loan Documents ......................................... 44
(O) Failure of Security .................................................. 44
(P) Damage, Strike, Casualty ............................................. 44
(Q) Licenses and Permits ................................................. 44
(R) Forfeiture ........................................................... 44
8.2 Suspension of Commitments .................................................. 44
8.3 Acceleration ............................................................... 44
8.4 Remedies ................................................................... 45
8.5 Appointment of Attorney-in-Fact ............................................ 45
8.6 Limitation on Duty of Agent with Respect to Collateral ..................... 46
8.7 Application of Proceeds .................................................... 46
8.8 License of Intellectual Property ........................................... 46
8.9 Waivers, Non-Exclusive Remedies ............................................ 47
SECTION 9. ASSIGNMENT AND PARTICIPATION ............................................... 47
9.1 Assignments and Participations in Loans .................................... 47
9.2 Agent ...................................................................... 48
(A) Appointment .......................................................... 48
(B) Nature of Duties ..................................................... 48
(C) Rights, Exculpation, Etc. ............................................ 49
(D) Reliance ............................................................. 50
(E) Indemnification ...................................................... 50
(F) Heller Individually .................................................. 50
(G) Successor Agent ...................................................... 50
(1) Resignation .................................................... 50
(2) Appointment of Successor ....................................... 50
(3) Successor Agent ................................................ 51
(H) Collateral Matters ................................................... 51
(1) Release of Collateral .......................................... 51
(2) Confirmation of Authority; Execution of Releases ............... 51
(3) Absence of Duty ................................................ 52
(I) Agency for Perfection ................................................ 52
(J) Exercise of Remedies ................................................. 52
9.3 Consents ................................................................... 52
9.4 Set Off and Sharing of Payments ............................................ 53
9.5 Disbursement of Funds ...................................................... 53
9.6 Settlements, Payments and Information ...................................... 53
(A) Revolving Advances and Payments; Fee Payments ........................ 54
(B) Availability of Lender's Pro Rata Share .............................. 54
(C) Return of Payments ................................................... 55
</TABLE>
v
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<TABLE>
<CAPTION>
<S> <C>
9.7 Dissemination of Information ............................................... 55
SECTION 10. MISCELLANEOUS .............................................................. 55
10.1 Expenses and Attorneys' Fees ............................................... 55
10.2 Indemnity .................................................................. 56
10.3 Amendments and Waivers. .................................................... 56
10.4 Notices .................................................................... 57
10.5 Survival of Warranties and Certain Agreements .............................. 58
10.6 Indulgence Not Waiver ...................................................... 58
10.7 Marshaling; Payments Set Aside ............................................. 58
10.8 Entire Agreement ........................................................... 59
10.9 Independence of Covenants .................................................. 59
10.10 Severability ............................................................... 59
10.11 Lenders' Obligations Several; Independent Nature of Lenders' Rights ........ 59
10.12 Headings ................................................................... 59
10.13 Applicable Law ............................................................. 60
10.14 Successors and Assigns ..................................................... 60
10.15 No Fiduciary Relationship; Limitation of Liabilities ....................... 60
10.16 Consent to Jurisdiction .................................................... 60
10.17 Waiver of Jury Trial ....................................................... 60
10.18 Construction ............................................................... 61
10.19 Counterparts; Effectiveness ................................................ 61
10.20 No Duty .................................................................... 61
10.21 Confidentiality ............................................................ 61
10.22 Agent's Consent ............................................................ 62
</TABLE>
vi
<PAGE>
EXHIBITS
--------
EXHIBIT A Borrowing Base Certificate
EXHIBIT B Compliance Certificate
EXHIBIT C Lender Addition Agreement
EXHIBIT D Reconciliation Report
SCHEDULES
---------
1.1(A) Location(s) of Inventory
3.1(A) List of Closing Documents
4.1(B) Capitalization of Loan Parties
4.6 Trade Names (Present and Past Five Years)
4.7 Location of Principal Place of Business, Books and Records and
Collateral
4.9 Litigation
4.13 Intellectual Property
4.20 Bank Accounts
4.21 Subsidiaries
4.22 Employee Matters
vii
<PAGE>
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of December 1, 1996 and
entered into among TOWER AIR, INC., a Delaware corporation ("Borrower"), with
its principal place of business at Hanger 17, JFK International Airport,
Jamaica, New York 11430, the financial institution(s) listed on the signature
pages hereof and their respective successors and assigns (each individually a
"Lender" and collectively "Lenders") and HELLER FINANCIAL, INC., a Delaware
corporation (in its individual capacity, "Heller"), with offices at 500 West
Monroe Street, Chicago, Illinois 60661, for itself as a Lender and as Agent.
All capitalized terms used herein are defined in Section 1 of this Agreement.
---------
WHEREAS, Borrower desires that Lenders extend a credit facility to provide
working capital financing and to provide funds for other general corporate
purposes; and
WHEREAS, Borrower desires to secure its obligations under the Loan
Documents by granting to Agent, for the benefit of Lenders, a security interest
in and lien upon certain of Borrower's property;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower, Agent and Lenders agree as
follows:
SECTION 1. DEFINITIONS
-----------
1.1 Certain Defined Terms. The following terms used in this Agreement
---------------------
shall have the following meanings:
"Accounts" means all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by Borrower arising or
resulting from the sale of goods or the rendering of services.
"Affiliate" means, with respect to any Loan Party, any Person (other than
Agent or any Lender): (a) directly or indirectly controlling, controlled by, or
under common control with, such Loan Party; (b) directly or indirectly owning or
holding five percent (5%) or more of any equity interest in Borrower; (c) five
percent (5%) or more of whose stock or other equity interest having ordinary
voting power for the election of directors or the power to direct or cause the
direction of management, is directly or indirectly owned or held by Borrower;
or (d) which has a senior executive officer who is also a senior executive
officer of Borrower. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with") means the possession directly or indirectly of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or other equity interest, or
by contract or otherwise.
"Agent" means Heller in its capacity as agent for the Lenders under the
Loan Documents and any successor in such capacity appointed pursuant to
subsection 9.1.
- --------------
<PAGE>
"Agent's Account" means ABA No. 0710 0001 3, Account No. 52 98695 at First
National Bank of Chicago, One First National Plaza, Chicago, IL 60670,
Reference: Heller Business Credit for the benefit of Tower Air, Inc.
"Agreement" means this Loan and Security Agreement as it may be amended,
restated, supplemented or otherwise modified from time to time.
"Airframe" means the Boeing model 747 airframe (excluding the engines from
time to time attached thereto) as more particularly described in the Security
Agreement (Aircraft).
"Appraisal" means the appraisal delivered by the Appraiser with respect to
the Eligible Inventory pursuant to Section 3.1(K) hereof.
--------------
"Appraiser" means Sage-Popovich, Inc.
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the Collateral of Borrower or any of its Subsidiaries other than sales of
Eligible Inventory in the ordinary course of business.
"Bank Letter of Credit" means each letter of credit issued by a bank
acceptable to and approved by Agent for the account of Borrower and supported by
a Risk Participation Agreement.
"Base Rate" means a variable rate of interest per annum equal to the higher
of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent, or (b) the Federal Funds Effective Rate. The
statistical release generally sets forth a Bank Prime Loan rate for each
Business Day. In the event the Board of Governors of the Federal Reserve System
ceases to publish a Bank Prime Loan rate or its equivalent, the term "Base Rate"
shall mean a variable rate of interest per annum equal to the highest of the
"prime rate", "reference rate", "base rate", or other similar rate announced
from time to time by any of Bankers Trust Company, The Chase Manhattan Bank,
N.A., or their successors (with the understanding that any such rate may merely
be a reference rate and may not necessarily represent the lowest or best rate
actually charged to any customer by any such bank).
"Blocked Accounts" has the meaning assigned to that term in subsection 5.6.
--------------
"Borrower" has the meaning assigned to that term in the preamble to this
Agreement.
"Borrowing Base" has the meaning assigned to that term in subsection
----------
2.1(A).
- ------
"Borrowing Base Certificate" means a certificate and assignment schedule
duly executed by an officer of Borrower appropriately completed and in
substantially the form of Exhibit A.
---------
2
<PAGE>
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of Illinois or the city of
Chicago, Illinois or is a day on which banking institutions located in any such
state or city are closed.
"Capital Expenditures" means all expenditures (including deposits) for, or
contracts for expenditures (excluding contracts for expenditures under or with
respect to Capital Leases, but including cash down payments for assets acquired
under Capital Leases) with respect to any fixed assets or improvements, or for
replacements, substitutions or additions thereto, which have a useful life of
more than one year, including the direct or indirect acquisition of such assets
by way of increased product or service charges, offset items or otherwise.
"Capital Lease" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P-1 from Moody's Investors Service, Inc.; and (c)
certificates of deposit or bankers' acceptances maturing within six (6) months
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank.
"Closing Date" means December 18, 1996.
"Collateral" has the meaning assigned to that term in subsection 2.7.
--------------
"Collecting Banks" has the meaning assigned to that term in subsection 5.6.
--------------
"Commitment" or "Commitments" means the commitment or commitments of
Lenders to make Loans as set forth in subsection 2.1(A).
-----------------
"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in substantially the form of Exhibit B.
---------
"Default" means a condition, act or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable grace or cure period.
3
<PAGE>
"Default Rate" has the meaning assigned to that term in subsection 2.2.
--------------
"EBITDA" means, for any period, without duplication, the total of the
following for Borrower and its Subsidiaries on a consolidated basis, each
calculated for such period: (1) net income determined in accordance with GAAP;
plus, to the extent included in the calculation of net income, (2) the sum of
- ----
(a) income and franchise taxes paid or accrued; (b) Interest Expenses, net of
interest income, paid or accrued; (c) interest paid in kind; (d) amortization
and depreciation and (e) other non-cash charges (excluding accruals for cash
expenses made in the ordinary course of business); less, to the extent included
----
in the calculation of net income, (3) the sum of (a) the income of any Person
(other than wholly-owned Subsidiaries of Borrower) in which Borrower or a wholly
owned Subsidiary of Borrower has an ownership interest except to the extent such
income is received by Borrower or such wholly-owned Subsidiary in a cash
distribution during such period; (b) gains or losses from sales or other
dispositions of assets (other than Inventory in the normal course of business);
and (c) extraordinary or non-recurring gains, but not net of extraordinary or
non-recurring "cash" losses.
"Eligible Accounts" has the meaning assigned to that term in subsection
----------
2.1(B).
- ------
"Eligible Aircraft Collateral" means, collectively, the Airframe and the
Spare Engines.
"Eligible Consumable Inventory" shall mean all aircraft parts now or
hereafter owned by the Borrower for which Borrower can report orderly
liquidation values by part numbers, which cannot be refurbished upon expiration
of such parts' useful lives, and which are (a) not subject to any liens or
encumbrances other than in favor of Lenders, (b) not obsolete or unserviceable,
and (c) located at the locations listed in attached Schedule 1.1(A).
---------------
"Eligible Inventory" means, collectively, the Eligible Consumable Inventory
and the Eligible Rotable Inventory.
"Eligible Rotable Inventory" shall mean all aircraft parts now or hereafter
owned by Borrower for which Borrower can report orderly liquidation values by
part numbers, and, pursuant to FAA regulations, are refurbished from time to
time, and which are (a) not subject to any liens or encumbrances, other than in
favor of Lenders, (b) not obsolete or unserviceable, and (c) located at the
locations listed in attached Schedule 1.1(A).
---------------
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party
------------
or any ERISA Affiliate or (b) has at any time within the preceding six (6) years
been maintained for the employees of any Loan Party or any current or former
ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
4
<PAGE>
"Environmental Laws" means any present or future federal, state or local
law, rule, regulation or order relating to pollution, waste, disposal or the
protection of human health or safety, plant life or animal life, natural
resources or the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to any Loan Party, means any Person who is a
member of a group which is under common control with any Loan Party, who
together with any Loan Party is treated as a single employer within the meaning
of Section 414(b) and (c) of the IRC.
----------------------
"Event of Default" means each of the events set forth in subsection 8.1.
--------------
"Federal Funds Effective Rate" means, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Federal Reserve Bank of New York or,
if such rate is not published for any Business Day, the average of the
quotations for the day of the requested Loan received by Agent from three
Federal funds brokers of recognized standing selected by Agent.
"Fiscal Year" means each twelve month period ending on the last day of
December in each year.
"Fixed Charge Coverage" means, for any period, Operating Cash Flow divided
by Fixed Charges.
"Fixed Charges" means, for any period, and each calculated for such period
(without duplication), (a) Interest Expenses paid or accrued by Borrower and its
Subsidiaries; plus (b) scheduled payments of principal with respect to all
----
Indebtedness of Borrower and its Subsidiaries; plus (c) any provision for (to
----
the extent it is greater than zero) income or franchise taxes included in the
determination of net income, excluding any provision for deferred taxes; plus
----
(d) payment of deferred taxes accrued in any prior period.
"Funding Date" means the date of each funding of a Loan.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"Hazardous Material" means all or any of the following: (a) substances that
are defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any
5
<PAGE>
other formulation intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, or toxicity; (b) oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (c)
any flammable substances or explosives or any radioactive materials; and (d)
asbestos in any form or electrical equipment which contains any oil or
dielectric fluid containing polychlorinated biphenyls.
"Indebtedness", as applied to any Person, means without duplication: (a)
all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; (e) all indebtedness secured by any Lien
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is non
recourse to the credit of that Person; and (f) obligations in respect of letters
of credit.
"Intangible Assets" means all intangible assets (determined in conformity
with GAAP) including, without limitation, goodwill, Intellectual Property,
licenses, organizational costs, deferred amounts, covenants not to compete,
unearned income and restricted funds.
"Intellectual Property" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing, and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.
"Interest Expenses" means, without duplication, for any period, the
following, for Borrower and its Subsidiaries each calculated for such period:
interest expenses deducted in the determination of net income (excluding (i) the
amortization of fees and costs with respect to the transactions contemplated by
this Agreement which have been capitalized as transaction costs in accordance
- ----
with the provisions of subsection 1.2; and (ii) interest paid in kind).
--------------
"Interest Rate" has the meaning assigned to that term in subsection 2.2(A).
-----------------
"Inventory" means all "inventory" (as defined in the UCC), including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.
6
<PAGE>
"Inventory Report" means a report duly executed by an officer of Borrower
in form and substance satisfactory to Heller.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Lender" or "Lenders" has the meaning assigned to that term in the preamble
to this Agreement.
"Lender Addition Agreement" means an agreement among Agent, a Lender and
such Lender's assignee regarding their respective rights and obligations with
respect to assignments of the Loans, the Commitments and other interests under
this Agreement and the other Loan Documents substantially in the form of
Exhibit C.
- ------- -
"Lender Letter of Credit" has the meaning assigned to that term in
subsection 2.1(F).
- -----------------
"Letter of Credit Liability" means, all reimbursement and other liabilities
of Borrower or any of its Subsidiaries with respect to each Lender Letter of
Credit, whether contingent or otherwise, including: (a) the amount available to
be drawn or which may become available to be drawn; (b) all amounts which have
been paid or made available by any Lender issuing a Lender Letter of Credit or
any bank issuing a Bank Letter of Credit to the extent not reimbursed; and (c)
all unpaid interest, fees and expenses related thereto.
"Letter of Credit Reserve" means, at any time, an amount equal to (a) the
aggregate amount of Letter of Credit Liability with respect to all Lender
Letters of Credit outstanding at such time plus, without duplication, (b) the
aggregate amount theretofore paid by Agent or any Lender under Lender Letters of
Credit and not debited to the Loan Account pursuant to subsection 2.1 or
--------------
otherwise reimbursed by Borrower.
"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" or "Loans" means an advance or advances under the Revolving Loan
Commitment.
"Loan Documents" means this Agreement, the Revolving Notes, the Security
Agreement (Aircraft), the Security Agreement (Spare Parts), and all other
instruments, documents and agreements executed by or on behalf of Borrower and
delivered concurrently herewith or at any time hereafter to or for Agent or any
Lender in connection with the Loans, any Lender Letter of
7
<PAGE>
Credit and other transactions contemplated by this Agreement, all as amended,
restated, supplemented or modified from time to time.
"Loan Party" means each of Borrower, Borrower's Subsidiaries and any other
Person (other than Agent or any Lender) which is or becomes a party to any Loan
Document.
"Loan Year" means each period of twelve (12) consecutive months commencing
on the Closing Date and on each anniversary thereof.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of any Loan Party on an individual basis or taken as a whole or (b)
the ability of any Loan Party to perform its obligations under any Loan Document
to which it is a party or of Agent or any Lender to enforce or collect any of
the Obligations.
"Maximum Revolving Loan Amount" has the meaning assigned to that term in
subsection 2.1(A).
- -----------------
"Net Worth" means, as of any date, the sum of the capital stock and
additional paid-in capital plus retained earnings (or minus accumulated deficit)
calculated in conformity with GAAP.
"Notice of Borrowing" has the meaning assigned to that term in subsection
----------
2.1(C).
- ------
"Obligations" means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Agent or to any Lender under
the Loan Documents including the principal amount of all debts, claims and
indebtedness (whether incurred before or after the Termination Date), accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable including, without limitation, all
interest, fees, cost and expenses accrued or incurred after the filing of any
petition under any bankruptcy or insolvency law.
"Operating Cash Flow" means, for any period, (a) EBITDA; less (b) Capital
----
Expenditures.
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Claims or ERISA) for taxes,
assessments or other governmental charges not yet due and payable; (b) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent; (c) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and return-of-
money bonds and other similar obligations (exclusive of obligations
8
<PAGE>
for the payment of borrowed money); (d) easements, rights-of-way, restrictions,
and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of any Loan Party or any of
its Subsidiaries; (e) Liens for purchase money obligations, provided that (i)
--------
the Indebtedness secured by any such Lien is permitted under subsection 7.1, and
--------------
(ii) such Lien encumbers only the asset so purchased; and (f) Liens in favor of
Agent, on behalf of Lenders.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Pro Rata Share" means (a) with respect to matters relating to a particular
Commitment of a Lender, the percentage obtained by dividing (i) such Commitment
of that Lender by (ii) all such Commitments of all Lenders and (b) with respect
to all other matters, the percentage obtained by dividing (i) the Total Loan
Commitment of a Lender by (ii) the Total Loan Commitments of all Lenders, in
either case as such percentage may be adjusted by assignments permitted pursuant
to subsection 9.1; provided, however, if any Commitment is terminated pursuant
--------------
to the terms hereof, then "Pro Rata Share" means the percentage obtained by
dividing (x) the aggregate amount of such Lender's outstanding Loans related to
such Commitment by (y) the aggregate amount of all outstanding Loans related to
such Commitment.
"Projections" means Borrower's forecasted consolidated and consolidating:
(a) balance sheets; (b) profit and loss statements; (c) cash flow statements;
and (d) capitalization statements, all prepared on a division by division and
Subsidiary by Subsidiary basis and otherwise consistent with Borrower's
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.
"Reconciliation Report" means a report duly executed by the chief executive
officer or chief financial officer of Borrower appropriately completed and in
substantially the form of Exhibit D.
---------
"Requisite Lenders" means Lenders holding or being responsible for sixty-
six and two-thirds percent (66.66%) or more of the sum of (a) outstanding Loans,
(b) outstanding Letter of Credit Liability, and (c) unutilized Commitments.
"Restricted Payment" means: (a) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of Borrower or any
of its Subsidiaries now or hereafter outstanding, except a dividend payable
solely with shares of the class of stock on which such dividend is declared; or
(b) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock of
Borrower or any of its Subsidiaries now or hereafter outstanding.
9
<PAGE>
"Revolving Advance" means each advance made by Lender(s) pursuant to
subsection 2.1(A).
- -----------------
"Revolving Loan" means the outstanding balance of all Revolving Advances
and any amounts added to the principal balance of the Revolving Loan pursuant to
this Agreement.
"Revolving Loan Commitment" means (a) as to any Lender, the commitment of
such Lender to make Revolving Advances pursuant to subsection 2.1(A), in the
-----------------
aggregate amount set forth on the signature page of this Agreement opposite such
Lender's signature or in the most recent Lender Addition Agreement, if any,
executed by such Lender and (b) as to all Lenders, the aggregate commitment of
all Lenders to make Revolving Advances.
"Revolving Note" means each promissory note of Borrower in a form
reasonably acceptable to Agent, issued pursuant to subsection 2.1(A).
-----------------
"Risk Participation Agreement" has the meaning assigned to that term in
subsection 2.1(F).
- ----------------
"Security Agreement (Aircraft)" means that certain Aircraft Mortgage and
Security Agreement of even date herewith between Borrower and Agent.
"Security Agreement (Spare Parts)" means that certain Security Agreement
(Spare Parts) of even date herewith between Borrower and Agent.
"Security Agreements" means, collectively, the Security Agreement
(Aircraft) and the Security Agreement (Spare Parts).
"Settlement Date" has the meanings assigned to that term in subsection
----------
9.6(A)(2).
- ---------
"Spare Engines" means, collectively, the three (3) Pratt & Whitney model
JT9D-3A engines designated as the "Spare Engines" (and more particularly
described) in the Security Agreement (Aircraft).
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.
"Tangible Net Worth" of any Person means an amount equal to: (a) Net Worth
of such Person; less (b) Intangible Assets of such Person; less (c) prepaid
---- ----
expenses of any Person; less (d) all obligations owed to such Person by any
----
Affiliate of such Person or any of its Subsidiaries; and less (e) all loans by
----
such Person to its officers, stockholders, Subsidiaries or employees.
10
<PAGE>
"Termination Date" means the date this Agreement is terminated as set forth
in subsection 2.5.
--------------
"Total Loan Commitment" means as to any Lender the aggregate commitments of
such Lender with respect to its Revolving Loan Commitment.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of Illinois, as amended from time to time, and any successor statute.
"Working Capital" means as to any Person: (a) current assets; less (b)
current liabilities; and less (c) the amount of any obligations owed to such
Person or any of its Subsidiaries by any Affiliate of such Person or any of its
Subsidiaries.
1.2 Accounting Terms. For purposes of this Agreement, all accounting
----------------
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP. Financial statements and other information
furnished to Agent or any Lender pursuant to subsection 5.1 shall be prepared in
--------------
accordance with GAAP (as in effect at the time of such preparation) on a
consistent basis. In the event any "Accounting Changes" (as defined below)
shall occur and such changes affect financial covenants, standards or terms in
this Agreement, then Borrower and Lenders agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the
financial condition of Borrower shall be the same after such Accounting Changes
as if such Accounting Changes had not been made, and until such time as such an
amendment shall have been executed and delivered by Borrower and Requisite
Lenders, (A) all financial covenants, standards and terms in this Agreement
shall be calculated and/or construed as if such Accounting Changes had not been
made, and (B) Borrower shall prepare footnotes to each Compliance Certificate
and the financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "Accounting Changes" means: (a)
changes in accounting principles required by GAAP and implemented by Borrower;
and (b) changes in accounting principles recommended by Borrower's certified
public accountants.
1.3 Other Definitional Provisions. References to "Sections",
-----------------------------
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
--------------
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, words importing any gender include the
other genders; the words "including," "includes" and "include" shall be deemed
to be followed by the words "without limitation"; references to agreements and
other contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted
11
<PAGE>
successors and assigns or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such Persons; and all references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations.
SECTION 2. LOANS AND COLLATERAL
--------------------
2.1 Loans.
-----
(A) Revolving Loan. Subject to the terms and conditions of this
--------------
Agreement and in reliance upon the representations and warranties of Borrower
and the other Loan Parties set forth herein and in the other Loan Documents,
each Lender, severally, agrees to lend to Borrower from time to time its Pro
Rata Share of each Revolving Advance. The aggregate amount of all Revolving
Loan Commitments shall not exceed at any time Twelve Million Five Hundred
Thousand Dollars ($12,500,000) as reduced by subsection 2.4(B). Amounts
-----------------
borrowed under this subsection 2.1(A) may be repaid and reborrowed at any time
-----------------
prior to the earlier of (i) the termination of the Revolving Loan Commitment
pursuant to subsection 8.3 or (ii) the Termination Date. Except as otherwise
--------------
provided herein, no Lender shall have any obligation to make an advance under
this subsection 2.1(A) to the extent such advance would cause the Revolving Loan
-----------------
(after giving effect to any immediate application of the proceeds thereof) to
exceed the Maximum Revolving Loan Amount.
(1) "Maximum Revolving Loan Amount" means, as of any date of
determination, the lesser of (a) the Revolving Loan Commitment(s) of all Lenders
or (b) the Borrowing Base.
(2) "Borrowing Base" means, as of any date of determination, an
amount equal to the sum of (a) eighty-five percent (85%) of the value of the
Eligible Accounts plus (b) sixty percent (60%) of the orderly liquidation value
----
of the Eligible Rotable Inventory (as determined by the Appraiser and set forth
in the Appraisal or any subsequent appraisal) (c) fifty percent (50%) of the
orderly liquidation value of Eligible Consumable Inventory (as determined by the
Appraiser and set forth in the Appraisal or any subsequent appraisal) plus (d)
twenty percent (20%) of the orderly liquidation value of the Eligible Aircraft
Collateral (as determined by the Appraiser and set forth in the Appraisal and
any subsequent appraisals) in each case subject to such reserves as the Agent in
its reasonable discretion may elect to establish.
(B) Eligible Collateral.
-------------------
(1) "Eligible Accounts" means, as at any date of determination,
the aggregate of all Accounts that Agent, in its reasonable judgment, deems to
be eligible for borrowing purposes. Without limiting the generality of the
foregoing, unless otherwise agreed by Agent, the following Accounts are not
Eligible Accounts:
12
<PAGE>
(a) Accounts which, at the date of issuance of the respective
invoice therefor, were payable more than sixty (60) days after the date of
issuance of such invoice;
(b) Accounts which remain unpaid for more than one hundred twenty
(120) days after the due date specified in the original invoice or for more than
one hundred twenty (120) days after invoice date if no due date was specified;
(c) Accounts which are otherwise eligible with respect to which
the account debtor is owed a credit by Borrower, but only to the extent of such
credit;
(d) Accounts due from a customer whose principal place of
business is located outside the United States of America except to the extent
Borrower has taken all steps deemed necessary or advisable to perfect Agent's
first priority security interest in such Accounts; Accounts due from a customer
which Agent has notified Borrower does not have a satisfactory credit standing;
(e) Accounts with respect to which the customer is the United
States of America, any state or any municipality, or any department, agency or
instrumentality thereof unless Borrower has, with respect to such Accounts,
complied with the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or
any applicable statute or municipal ordinance of similar purpose and effect;
(f) Accounts with respect to which the customer is an Affiliate
of Borrower or a director, officer, agent, stockholder or employee of Borrower
or any of its Affiliates;
(g) Accounts due from a customer if more than twenty-five percent
(25%) of the aggregate amount of Accounts of such customer have at the time
remained unpaid for more than sixty (60) days after due date or ninety (90) days
after the invoice date if no due date was specified;
(h) Accounts with respect to which there is any unresolved
dispute with the respective customer (but only to the extent of such dispute);
(i) Accounts evidenced by an "instrument" or "chattel paper" (as
defined in the UCC) not in the possession of Agent, on behalf of Lenders;
(j) Accounts with respect to which Agent, on behalf of Lenders,
does not have a valid, first priority and fully perfected security interest;
(k) Accounts subject to any Lien except those in favor of Agent,
on behalf of Lenders;
13
<PAGE>
(l) Accounts with respect to which the customer is the subject of
any bankruptcy or other insolvency proceeding;
(m) Accounts due from a customer to the extent that such Accounts
exceed in the aggregate an amount equal to twenty percent (20%) of the aggregate
of all Accounts at said date;
(n) Accounts with respect to which the customer's obligation to
pay is conditional or subject to a repurchase obligation or right to return or
with respect to which the goods or services giving rise to such Account have not
been delivered (or performed, as applicable) and accepted by such account
debtor, including progress billings, bill and hold sales, guarantied sales, sale
or return transactions, sales on approval or consignment sales;
(o) Accounts with respect to which the customer is located in
Indiana, New Jersey, Minnesota, or any other state denying creditors access to
its courts in the absence of a Notice of Business Activities Report or other
similar filing, unless Borrower has either qualified as a foreign corporation
authorized to transact business in such state or has filed a Notice of Business
Activities Report or similar filing with the applicable state agency for the
then current year;
(p) Accounts with respect to which the customer is a creditor of
Borrower, provided, however, that any such Account shall only be ineligible as
-------- -------
to that portion of such Account which is less than or equal to the amount owed
by Borrower to such Person.
(2) Notwithstanding anything herein to the contrary, the Spare
Engine bearing manufacturer's serial number 662270 shall not be considered a
part of the Eligible Aircraft Inventory unless and until the Borrower provides
evidence satisfactory to the Agent that such Spare Engine is free and clear of
all Liens (other than Permitted Encumbrances and the Lien of the Security
Agreement (Aircraft)).
(C) Borrowing Mechanics. (1) On any day when Borrower desires an
-------------------
advance under this subsection 2.1, Borrower shall give Agent telephonic notice
--------------
of the proposed borrowing by 11:00 a.m. Central time on the Funding Date of a
Loan, which notice (a "Notice of Borrowing") shall also specify the proposed
Funding Date (which shall be a Business Day). Any such telephonic notice shall
be confirmed in writing on the same day. Neither Agent nor Lender shall incur
any liability to Borrower for acting upon any telephonic notice Agent believes
in good faith to have been given by a duly authorized officer or other person
authorized to borrow on behalf of Borrower or for otherwise acting in good faith
under this subsection 2.1(C). Neither Agent nor Lender will make any advance
-----------------
pursuant to any telephonic notice unless Agent has also received the most recent
Borrowing Base Certificate and all other documents required under
Section 5.1 by 11:00 a.m. Central time. Each Revolving Advance shall be
- -----------
deposited by wire transfer in immediately available funds in such account as
Borrower may from time to time designate to Agent in writing. The becoming due
of any amount required to be paid under this
14
<PAGE>
Agreement or any of the other Loan Documents as principal, accrued interest and
fees shall be deemed irrevocably to be a request by Borrower for a Base Rate
Revolving Loan on the due date of, and in the amount required to pay, such
principal, accrued interest and fees, and the proceeds of each such Revolving
Advance if made by Agent or any Lender shall be disbursed by Agent or such
Lender by way of direct payment of the relevant obligation.
(D) Revolving Note[s]. Borrower shall execute and deliver to each
-----------------
Lender with appropriate insertions a Revolving Note to evidence such Lender's
Revolving Loan Commitment. In the event of an assignment under subsection 9.1,
--------------
Borrower shall, upon surrender of the assigning Lender's Revolving Note[s],
issue [a] new Revolving Note[s] to reflect the interest held by the assigning
Lender and its assignee.
(E) Evidence of Revolving Loan Obligations. Each Revolving Advance
--------------------------------------
shall be evidenced by this Agreement, the Revolving Note with respect thereto,
and notations made from time to time by Agent in its books and records,
including computer records. Agent shall record in its books and records,
including computer records, the principal amount of the Revolving Loan owing to
each Lender from time to time. Agent's books and records shall constitute
presumptive evidence, absent manifest error, of the accuracy of the information
contained therein. Failure by Agent to make any such notation or record shall
not affect the obligations of Borrower[s] to Lenders with respect to the
Revolving Loans.
(F) Letters of Credit. Subject to the terms and conditions of this
-----------------
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, the Revolving Loan Commitments may, in addition to Revolving
Advances be utilized, upon the request of Borrower, for (i) the issuance of
letters of credit by Agent; or with Agent's consent any Lender, or (ii) the
issuance by Agent of risk participations (a Risk Participation Agreement) to
banks to induce such banks to issue letters of credit for the account of
Borrower (each of (i) and (ii) above a "Lender Letter of Credit"). Each Lender
shall be deemed to have purchased a participation in each Lender Letter of
Credit issued on behalf of Borrower in an amount equal to its Pro Rata Share
thereof. In no event shall any Lender Letter of Credit be issued to the extent
that the issuance of such Lender Letter of Credit would cause the sum of the
Letter of Credit Reserve (after giving effect to such issuance) plus the
Revolving Loan to exceed the lesser of (x) the Borrowing Base and (y) the
Revolving Loan Commitment.
(1) Maximum Amount. The aggregate amount of Letter of Credit
--------------
Liability with respect to all Lender Letters of Credit outstanding at any time
shall not exceed $5,000,000.
(2) Reimbursement. Borrower shall be irrevocably and
-------------
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse Agent or the issuer for any amounts
paid with respect to a Lender Letter of Credit including all fees, costs and
expenses paid to any bank that issues a Bank Letter of Credit. Borrower hereby
authorizes and directs Agent, at Agent's option, to debit Borrower's account (by
15
<PAGE>
increasing the Revolving Loan) in the amount of any payment made with respect to
any Lender Letter of Credit. All amounts paid with respect to any Lender Letter
of Credit that are not immediately repaid by Borrower with the proceeds of a
Revolving Advance or otherwise shall bear interest at the Default Rate
applicable to Base Rate Revolving Loans. In the event that Borrower shall fail
to reimburse Agent on the date of any payment under a Lender Letter of Credit in
an amount equal to the amount of such payment, Agent shall promptly notify each
Lender of the unreimbursed amount of such payment together with accrued interest
thereon and each Lender, on the next Business Day, shall deliver to Agent an
amount equal to its respective participation in same day funds. The obligation
of each Lender to deliver to Agent an amount equal to its respective
participation pursuant to the foregoing sentence shall be absolute and
unconditional and such remittance shall be made notwithstanding the occurrence
or continuation of an Event of Default or Default or the failure to satisfy any
condition set forth in Section 3. In the event any Lender fails to make
---------
available to Agent the amount of such Lender's participation in such Lender
Letter of Credit, Agent shall be entitled to recover such amount on demand from
such Lender together with interest at the Base Rate.
(3) Conditions of Issuance. In addition to all other terms and
----------------------
conditions set forth in this Agreement, the issuance of any Lender Letter of
Credit shall be subject to the satisfaction of all conditions applicable to
Revolving Advances, and the conditions that the letter of credit which Borrower
requests be in such form, be for such amount, contain such terms and support
such transactions as are reasonably satisfactory to Agent. The expiration date
of each Lender Letter of Credit shall be on a date which is at least thirty (30)
days prior to the Termination Date.
(4) Request for Letters of Credit. Borrower shall give Agent at
-----------------------------
least ten (10) Business Days prior notice specifying the date a Lender Letter of
Credit is to be issued, identifying the beneficiary and describing the nature of
the transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the letter of credit being requested.
(G) Other Letter of Credit Provisions.
---------------------------------
(1) Obligations Absolute. The obligation of Borrower to reimburse
--------------------
Agent or any Lender for payments made under, and other amounts payable in
connection with, any Lender Letter of Credit shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including the following circumstances:
(a) any lack of validity or enforceability of any Lender Letter of
Credit, Bank Letter of Credit or any other agreement;
(b) the existence of any claim, set-off, defense or other right
which Borrower, any of its Affiliates, Agent or any Lender, on the one hand, may
at any time have against any beneficiary or transferee of any Lender Letter of
Credit or Bank Letter
16
<PAGE>
of Credit (or any Persons for whom any such transferee may be acting), Agent,
any Lender or any other Person, on the other hand, whether in connection with
this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Borrower or any of its
Affiliates and the beneficiary of the letter of credit);
(c) any draft, demand, certificate or any other document presented
under any Lender Letter of Credit or Bank Letter of Credit is alleged to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(d) payment under any Lender Letter of Credit or Bank Letter of
Credit against presentation of a demand, draft or certificate or other document
which does not comply with the terms of such letter of credit; provided that, in
the case of any payment by Agent or a Lender under any Lender Letter of Credit,
Agent or such Lender has not acted with gross negligence or willful misconduct
(as determined by a court of competent jurisdiction) in determining that the
demand for payment under such Lender Letter of Credit complies on its face with
any applicable requirements for a demand for payment under such Lender Letter of
Credit;
(e) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(f) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(2) Nature of Lender's Duties. As between Agent and Lenders, on
-------------------------
the one hand, and Borrower, on the other hand, Borrower assumes all risks of the
acts and omissions of, or misuse of any Lender Letter of Credit by the
beneficiary thereof. In furtherance and not in limitation of the foregoing,
neither Agent nor any Lender shall be responsible: (a) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document by any party
in connection with the application for and issuance of any Lender Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (b) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Lender Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (c) for failure of the beneficiary of any
Lender Letter of Credit to comply fully with conditions required in order to
demand payment thereunder; provided that, in the case of any payment by Agent or
any Lender under any Lender Letter of Credit, Agent or Lender has not acted with
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under such Lender
Letter of Credit complies on its face with any applicable requirements for a
demand for payment thereunder; (d) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise,
17
<PAGE>
whether or not they be in cipher; (e) for errors in interpretation of technical
terms; (f) for any loss or delay in the transmission or otherwise of any
document required in order to make a payment under any Lender Letter of Credit;
(g) for the credit of the proceeds of any drawing under any Lender Letter of
Credit; and (h) for any consequences arising from causes beyond the control of
Agent or any Lender as the case may be. None of the above shall affect, impair,
or prevent the vesting of any of Agent's or any Lender's rights or powers
hereunder.
(3) Liability. In furtherance and extension of and not in
---------
limitation of, the specific provisions herein above set forth, any action taken
or omitted by Agent or any Lender under or in connection with any Lender Letter
of Credit, if taken or omitted in good faith, shall not put Agent or any Lender
under any resulting liability to Borrower.
2.2 Interest.
--------
(A) Rate of Interest. The Loans and all other Obligations shall bear
----------------
interest from the date such Loans are made or such other Obligations become due
to the date paid at a rate per annum equal to the Base Rate plus one percent
(1%) (the "Interest Rate").
After the occurrence and during the continuance of an Event of Default (i)
the Loans and all other Obligations shall, at the option of Requisite Lenders,
bear interest at a rate per annum equal to two percent (2%) plus the applicable
Interest Rate (the "Default Rate").
(B) Computation and Payment of Interest. Interest on the Loans and
-----------------------------------
all other Obligations shall be computed on the daily principal balance on the
basis of a 360 day year for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of funding
of the Loan shall be included; and the date of payment of such Loan shall be
excluded; provided that if a Loan is repaid on the same day on which it is made,
one day's interest shall be paid on that Loan. Interest on the Loans and all
other Obligations shall be payable to Agent for benefit of Lenders monthly in
arrears on the first day of each month, on the date of any prepayment of Loans,
and at maturity, whether by acceleration or otherwise.
(C) Interest Laws. Notwithstanding any provision to the contrary
-------------
contained in this Agreement or any other Loan Document, Borrower shall not be
required to pay, and neither Agent nor any Lender shall be permitted to collect,
any amount of interest in excess of the maximum amount of interest permitted by
applicable law ("Excess Interest"). If any Excess Interest is provided for or
determined by a court of competent jurisdiction to have been provided for in
this Agreement or in any other Loan Document, then in such event: (1) the
provisions of this subsection shall govern and control; (2) neither Borrower nor
any other Loan Party shall be obligated to pay any Excess Interest; (3) any
Excess Interest that Agent or any Lender may have received hereunder shall be,
at such Lender's option, (a) applied as a credit against the outstanding
principal balance of the Obligations or accrued and unpaid interest (not to
exceed the maximum amount permitted by law), (b) refunded to the payor thereof,
or (c) any combination of the foregoing; (4) the interest rate(s) provided for
herein shall be automatically reduced to the
18
<PAGE>
maximum lawful rate allowed from time to time under applicable law (the "Maximum
Rate"), and this Agreement and the other Loan Documents shall be deemed to have
been and shall be, reformed and modified to reflect such reduction; and (5)
neither Borrower nor any Loan Party shall have any action against Agent or any
Lender for any damages arising out of the payment or collection of any Excess
Interest. Notwithstanding the foregoing, if for any period of time interest on
any Obligations is calculated at the Maximum Rate rather than the applicable
rate under this Agreement, and thereafter such applicable rate becomes less than
the Maximum Rate, the rate of interest payable on such Obligations shall remain
at the Maximum Rate until each Lender shall have received the amount of interest
which such Lender would have received during such period on such Obligations had
the rate of interest not been limited to the Maximum Rate during such period.
2.3 Fees.
----
(A) Closing Fee. On the Closing Date, Borrower shall pay to Agent,
-----------
for the benefit of Lenders, a fee in an amount equal to $250,000 (the "Closing
Fee").
(B) Unused Line Fee. Borrower shall pay to Agent, for the benefit of
---------------
Lenders, a fee in an amount equal to the Revolving Loan Commitment less the sum
of the average daily balance of the Revolving Loan plus the average daily face
amount of the Lender Letter of Credit Reserve during the preceding month
multiplied by one-half of one percent (.50%) per annum, such fee to be
calculated on the basis of a 360 day year for the actual number of days elapsed
and to be payable monthly in arrears on the first day of the first month
following the Closing Date and the first day of each month thereafter.
(C) Letter of Credit Fees. Borrower shall pay to Agent for the
---------------------
account of Lenders, a fee for the account of Lenders with respect to the Lender
Letters of Credit in the amount of the average daily amount of Letter of Credit
Liability outstanding during such month multiplied by one and three-quarters
percent (1.75%) per annum. Such fees will be calculated on the basis of a 360
day year for the actual number of days elapsed and will be payable monthly in
arrears on the first day of each month. Borrower shall also reimburse Agent for
any and all fees and expenses, if any, paid by Agent or any Lender to the issuer
of any Bank Letter of Credit.
(D) Audit Fees. Borrower agrees to pay to Agent for its own account
----------
an audit fee for each inspection equal to $650 per auditor per day or any
portion thereof, excluding all full days spent by Agent traveling to or from
Borrower's locations together with out of pocket expenses.
(E) Other Fees and Expenses. Borrower shall pay to Agent, for its own
-----------------------
account, all charges for returned items and all other bank charges incurred by
Agent, as well as Agent's standard wire transfer charges for each wire transfer
made under this Agreement.
2.4 Payments and Prepayments.
------------------------
19
<PAGE>
(A) Manner and Time of Payment. In its sole discretion, Agent may
--------------------------
charge interest and other amounts payable hereunder to the Revolving Loan, all
as set forth on Agent's books and records. If Agent elects to bill Borrower for
any amount due hereunder, such amount shall be immediately due and payable with
interest thereon as provided herein. All payments made by Borrower with respect
to the Obligations shall be made without deduction, defense, setoff, withholding
or counterclaim. All payments to Agent hereunder shall, unless otherwise
directed by Agent, be made to Agent's Account or in accordance with subsection
----------
5.6. Proceeds remitted to the Agent's Accounts shall be credited to the
- ---
Obligations on the first Business Day following the day such proceeds were
received; provided, however, for the purpose of calculating interest on the
Obligations, such funds shall be deemed received on the first Business Day
thereafter. Proceeds remitted to Agent's Account by wire transfer shall be
credited to the Obligations on the Business Day received; provided, however, for
the purpose of calculating interest on the Obligations such funds shall be
deemed received the first Business Day thereafter.
(B) Mandatory Prepayments.
---------------------
(1) Overadvance. At any time that the Revolving Loan exceeds the
-----------
Maximum Revolving Loan Amount, Borrower shall, immediately repay the
Revolving Loan to the extent necessary to reduce the principal balance to
an amount equal to or less than the Maximum Revolving Loan Amount.
(2) Proceeds of Asset Dispositions. Immediately upon receipt by
------------------------------
Borrower or any of its Subsidiaries of proceeds of any Asset Disposition
(in one or a series of related transactions), which proceeds exceed $10,000
(it being understood that if the proceeds exceed $10,000, the entire amount
and not just the portion above $10,000 shall be subject to this subsection
----------
2.4(B)(2)), Borrower shall prepay the Obligations in an amount equal to
----------
such proceeds.
(3) Events of Loss with Respect to Eligible Aircraft Collateral.
-----------------------------------------------------------
If an Event of Loss (as defined in the Security Agreement (Aircraft))
occurs with respect to the Airframe or a Spare Engine, then:
(a) the Borrowing Base shall automatically and without
action by the Agent be reduced by 20% of the orderly liquidation value of
such Airframe or Spare Engine, as the case may be, as set forth in the
Appraisal; and
(b) as more particularly set forth in the Security Agreement
(Aircraft), the Agent shall be paid directly by the applicable insurance
carrier the proceeds of the hull insurance with respect to such Aircraft
or Spare Engine carried by the Borrower, as required by the terms of the
Security Agreement (Aircraft). The proceeds of such insurance shall be
applied by the Agent as follows:
20
<PAGE>
first, to the extent that (x) the reduced Borrowing Base is
greater than (y) the principal amount of the Revolving Loan then
outstanding hereunder, then so much of such proceeds as shall be required
to reduce the outstanding principal amount of the Revolving Loan then
outstanding hereunder sufficiently such that the sum of the amounts set
forth in clause (y) above shall be equal to or less than the reduced
Borrowing Base shall be applied by the Agent in payment of such principal
amount by paying such amount to the holders of the then outstanding
Revolving Notes on a pro rata basis; and
second, any proceeds then remaining shall be distributed to
the Borrower;
provided, however, that no amounts shall be disbursed by the
Agent pursuant to clause second above if at the time of such disbursement a
Default or Event of Default shall have occurred and be continuing, and such
amounts shall be held by the Agent as security for the Indebtedness owed
hereunder, to be applied against such Indebtedness as and when due. At such
time as there shall not be continuing any Default or Event of Default, such
amounts shall be paid over to the Borrower, to the extent not previously
applied hereunder. Furthermore, to the extent there are insufficient
insurance proceeds to satisfy all amounts payable under clause first above,
the Borrower shall pay to the Agent the amount by which such insurance
proceeds are insufficient, to be distributed by the Agent pursuant to this
subsection 2.4(B)(3).
--------------------
(C) Voluntary Prepayments and Repayments. Except as provided in
------------------------------------
subsection 2.4(B), Borrower's Obligations may be prepaid or repaid in full or in
- -----------------
part. Borrower may, at any time upon not less than three Business Days' prior
notice to Agent, terminate the Revolving Loan Commitment. Upon termination of
the Revolving Loan Commitment, Borrower shall cause Agent and each Lender to be
released from all liability under any Lender Letters of Credit or, at Agent's
option, Borrower will deposit cash collateral with Agent in an amount equal to
105% of the Letter of Credit Liability that will remain outstanding after
prepayment or repayment.
(D) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.
2.5 Term of this Agreement. This Agreement shall be effective until June
----------------------
17, 1997 (the "Termination Date") unless earlier terminated pursuant to Section
-------
8.3 hereof. The Commitments shall (unless earlier terminated) terminate upon
- ---
the earlier of (i) the occurrence of an event specified in subsection 8.3 or
--------------
(ii) the Termination Date. Upon termination in accordance with subsection 8.3
--------------
or on the Termination Date, all Obligations shall become immediately due and
payable without notice or demand. Notwithstanding any termination, until all
Obligations have been fully paid and satisfied, Agent, on behalf of Lenders,
shall be entitled to retain security
21
<PAGE>
interests in and liens upon all Collateral, and even after payment of all
Obligations hereunder, Borrower's obligation to indemnify Agent and each
Lender in accordance with the terms hereof shall continue.
2.6 Statements. Agent shall render a monthly statement of account to
----------
Borrower within twenty (20) days after the end of each month. Such statement of
account shall constitute an account stated unless Borrower makes written
objection thereto within thirty (30) days from the date such statement is mailed
to Borrower. Borrower promises to pay all of its Obligations as such amounts
become due or are declared due pursuant to the terms of this Agreement.
2.7 Grant of Security Interest. To secure the payment and performance of
--------------------------
the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, Borrower hereby grants to Agent,
on behalf of Lenders, a continuing security interest, lien and mortgage in and
to all right, title and interest of Borrower in the following property of
Borrower, whether now owned or existing or hereafter acquired or arising and
regardless of where located (all being collectively referred to as the
"Collateral"): (A) Accounts, and all guaranties and security therefor, and all
goods and rights represented thereby or arising therefrom including the rights
of stoppage in transit, replevin and reclamation; (B) Inventory; (C) general
intangibles (as defined in the UCC); (D) Intellectual Property; (E) all cash and
other monies and property of Borrower in the possession or under the control of
Agent, any Lender or any participant; (F) all books, records, ledger cards,
files, correspondence, computer programs, tapes, disks and related data
processing software that at any time evidence or contain information relating to
any of the property described above or are otherwise necessary or helpful in the
collection thereof or realization thereon; (G) the Eligible Inventory and the
Eligible Aircraft Collateral; (H) all landing and gate rights and any
agreements, contracts and licenses with respect thereto; and (I) proceeds of all
or any of the property described above, including, without limitation, the
proceeds of any insurance policies covering any of the above described property.
2.8 Capital Adequacy and Other Adjustments. In the event Agent or any
--------------------------------------
Lender shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by Agent or such Lender or any corporation controlling Agent or
such Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) from any central
bank or governmental agency or body having jurisdiction does or shall have the
effect of increasing the amount of capital, reserves or other funds required to
be maintained by Agent or such Lender or any corporation controlling Agent or
such Lender and thereby reducing the rate of return on Agent's or such Lender's
or such corporation's capital as a consequence of its obligations hereunder,
then Borrower shall from time to time within fifteen (15) days after notice and
demand from such Lender (with a copy to Agent) or Agent (together with the
certificate referred to in the next sentence) pay to Agent or such Lender
additional amounts sufficient to compensate Agent or such Lender for such
reduction. A certificate as to the amount of such cost and showing the basis of
22
<PAGE>
the computation of such cost submitted by Agent or any Lender to Borrower shall,
absent manifest error, be final, conclusive and binding for all purposes.
2.9 Taxes.
-----
(A) No Deductions. Any and all payments or reimbursements made
-------------
hereunder or under the Revolving Notes shall be made free and clear of and
without deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto; excluding, however, the
following: federal or state taxes imposed on the net income of any Lender or
Agent by the jurisdiction under the laws of which Agent or such Lender is
organized or doing business or any political subdivision thereof and taxes
imposed on its net income by the jurisdiction of Agent's or such Lender's
applicable lending office or any political subdivision thereof (all such taxes,
levies, imposts, deductions, charges or withholdings and all liabilities with
respect thereto excluding such taxes imposed on net income, herein "Tax
Liabilities"). If Borrower shall be required by law to deduct any such Tax
Liabilities from or in respect of any sum payable hereunder to Agent or any
Lender, then the sum payable hereunder shall be increased as may be necessary so
that, after making all required deductions, Agent or such Lender receives an
amount equal to the sum it would have received had no such deductions been made.
(B) Changes in Tax Laws. In the event that, subsequent to the Closing
-------------------
Date, (i) any changes in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (ii) any new law, regulation, treaty
or directive enacted or any interpretation or application thereof, or (iii)
compliance by Lender with any request or directive (whether or not having the
force of law) from any governmental authority, agency or instrumentality:
(1) does or shall subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any Loans
made or Lender Letters of Credit issued hereunder, or change the basis of
taxation of payments to Agent or such Lender of principal, fees, interest or any
other amount payable hereunder (except for net income taxes, or franchise taxes
imposed in lieu of net income taxes, imposed generally by federal, state or
local taxing authorities with respect to interest or commitment or other fees
payable hereunder or changes in the rate of tax on the overall net income of
Agent or such Lender); or
(2) does or shall impose on Agent or any Lender any other condition or
increased cost in connection with the transactions contemplated hereby or
participations herein; and the result of any of the foregoing is to increase the
cost to Agent or such Lender of issuing any Lender Letter of Credit or making or
continuing any Loan hereunder, as the case may be, or to reduce any amount
receivable hereunder, then, in any such case, Borrower shall promptly pay to
Agent or such Lender, upon its demand, any additional amounts necessary to
compensate Agent or such Lender, on an after-tax basis, for such additional cost
or reduced amount receivable, as determined by Agent or such Lender with respect
to this Agreement or the other Loan Documents.
23
<PAGE>
If Agent or any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify Borrower of the event by
reason of which Agent or such Lender has become so entitled. A certificate as
to any additional amounts payable pursuant to the foregoing sentence submitted
by Agent or any Lender to Borrower shall, absent manifest error, be final,
conclusive and binding for all purposes.
(C) Foreign Lenders. Each Lender organized under the laws of a
---------------
jurisdiction outside the United States (a "Foreign Lender") as to which payments
to be made under this Agreement or under the Revolving Note[s] are exempt from
United States withholding tax or are subject to United States withholding tax at
a reduced rate under an applicable statute or tax treaty shall provide to
Borrower and Agent (i) a properly completed and executed Internal Revenue
Service Form 4224 or Form 1001 or other applicable form, certificate or document
prescribed by the Internal Revenue Service of the United States certifying as to
such Foreign Lender's entitlement to such exemption or reduced rate of
withholding with respect to payments to be made to such Foreign Lender under
this Agreement or under the Revolving Notes, (a "Certificate of Exemption"), or
(ii) a letter from any such Foreign Lender stating that it is not entitled to
any such exemption or reduced rate of withholding (a "Letter of Non-Exemption").
Prior to becoming a Lender under this Agreement and within fifteen (15) days
after a reasonable written request of Borrower or Agent from time to time
thereafter, each Foreign Lender that becomes a Lender under this Agreement shall
provide a Certificate of Exemption or a Letter of Non-Exemption to Borrower and
Agent.
If a Foreign Lender is entitled to an exemption with respect to
payments to be made to such Foreign Lender under this Agreement (or to a reduced
rate of withholding) and does not provide a Certificate of Exemption to Borrower
and Agent within the time periods set forth in the preceding paragraph, Borrower
shall withhold taxes from payments to such Foreign Lender at the applicable
statutory rates and Borrower shall not be required to pay any additional amounts
as a result of such withholding; provided, however, that all such withholding
--------
shall cease upon delivery by such Foreign Lender of a Certificate of Exemption
to Borrower and Agent.
2.10 Optional Prepayment/Replacement of Agent or Lenders in Respect of
-----------------------------------------------------------------
Increased Costs. Within fifteen (15) days after receipt by Borrower of written
- ---------------
notice and demand from Agent or any Lender (an "Affected Lender") for payment of
additional costs as provided in subsection 2.8, Borrower may, at its option,
--------------
notify Agent and such Affected Lender of its intention to do one of the
following:
(A) Borrower may obtain, at Borrower's expense, a replacement Lender
("Replacement Lender") for such Affected Lender, which Replacement Lender shall
be reasonably satisfactory to Agent. In the event Borrower obtains a
Replacement Lender within ninety (90) days following notice of its intention to
do so, the Affected Lender shall sell and assign its Loans and Commitments to
such Replacement Lender provided, that Borrower has
--------
reimbursed such Affected Lender for its increased costs for which it is entitled
to reimbursement under this Agreement through the date of such sale and
assignment.
24
<PAGE>
(B) Borrower may prepay in full all outstanding Obligations owed to
such Affected Lender and terminate such Affected Lender's Commitments. Borrower
shall, within ninety (90) days following notice of its intention to do so,
prepay in full all outstanding Obligations owed to such Affected Lender
(including such Affected Lender's increased costs for which it is entitled to
reimbursement under this Agreement through the date of such prepayment and
terminate such Affected Lender's Commitments.
SECTION 3. CONDITIONS TO LOANS
-------------------
3.1 Conditions to Loans. The obligations of Agent and each Lender to make
-------------------
Loans and the obligation of Agent or any Lender to issue Lender Letters of
Credit on the Closing Date and on each Funding Date are subject to satisfaction
of all of the conditions set forth below.
(A) Closing Deliveries. Agent shall have received, in form and
------------------
substance satisfactory to Agent and Lenders, all documents, instruments and
information identified on Schedule 3.1(A) and all other agreements, notes,
---------------
certificates, orders, authorizations, financing statements, mortgages and other
documents which Agent may at any time reasonably request.
(B) Security Interests. Agent and Lenders shall have received
------------------
satisfactory evidence that all security interests and liens granted to Agent for
the benefit of Lenders pursuant to this Agreement, the Security Agreements or
the other Loan Documents have been duly perfected and constitute first priority
liens on the Collateral, subject only to Permitted Encumbrances.
(C) Representations and Warranties. The representations and
------------------------------
warranties contained herein and in the Loan Documents shall be true, correct and
complete in all material respects on and as of that Funding Date to the same
extent as though made on and as of that date, except for any representation or
warranty limited by its terms to a specific date and taking into account any
amendments to the Schedules or Exhibits as a result of any disclosures made by
Borrower to Agent after the Closing Date and approved by Agent.
(D) Closing Fee. With respect to Loans or Lender Letters of Credit to
-----------
be made or issued on the Closing Date, Borrower shall have paid the fees payable
on the Closing Fee.
(E) No Default. No event shall have occurred and be continuing or
----------
would result from the consummation of the requested borrowing or notice
requesting issuance of a Lender Letter of Credit that would constitute an Event
of Default or a Default.
(F) Performance of Agreements. Each Loan Party shall have performed
-------------------------
in all material respects all agreements and satisfied all conditions which any
Loan Document provides shall be performed by it on or before that Funding Date.
25
<PAGE>
(G) No Prohibition. No order, judgment or decree of any court,
--------------
arbitrator or governmental authority shall purport to enjoin or restrain Agent
or any Lender from making any Loans or issuing any Lender Letters of Credit.
(H) No Litigation. There shall not be pending or, to the knowledge of
-------------
Borrower, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration by, against or affecting any
Loan Party or any of its Subsidiaries or any property of any Loan Party or any
of its Subsidiaries that has not been disclosed to Agent by Borrower in writing,
and there shall have occurred no development in any such action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
that, in the opinion of Agent, would reasonably be expected to have a Material
Adverse Effect.
(I) Insurance. Agent shall have received, in form and substance
---------
satisfactory to Agent and Lenders, (i) insurance policies or binders of Borrower
with appropriate endorsements naming Agent as Loss Payee and, (ii) with respect
to the Eligible Inventory and the Eligible Aircraft Collateral, such evidence of
insurance and insurance certificates as are required under the Security
Agreements.
(J) Business Plan. Agent shall have received, in form and substance
-------------
satisfactory to Agent and Lenders, a business plan of Borrower, including
financial projections acceptable in form and content to Lenders. Lenders shall
have the ability to discuss the business plan with Borrower's operating
management, and be satisfied as to the likelihood of its successful
implementation.
(K) Appraisals. Agent shall have received the Appraisal with respect
----------
to the orderly liquidation value and condition of the Eligible Inventory, the
Airframe and the Spare Engines prepared by the Appraiser.
(L) Audit. Completion of an audit by Agent or its representatives of
-----
Borrower's business operations, financial condition and assets, including the
opportunity to meet with Borrower's management.
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES
-----------------------------------------
To induce Agent and each Lender to enter into this Agreement, to make Loans
and to issue Lender Letters of Credit, Borrower represents and warrants to Agent
and each Lender that the following statements are and will be true, correct and
complete:
26
<PAGE>
4.1 Organization, Powers, Capitalization.
------------------------------------
(A) Organization and Powers. Each of the Loan Parties is a
-----------------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and qualified to do business in all states
where such qualification is required except where failure to be so qualified
could not be reasonably expected to have a Material Adverse Effect. Each of the
Loan Parties has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and proposed to be
conducted and to enter into each Loan Document.
(B) Capitalization. The authorized capital stock of each of the Loan
--------------
Parties is as set forth on Schedule 4.1(B). All issued and outstanding shares
---------------
of capital stock of each of the Loan Parties are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens and such shares
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities. The capital stock of each of the Loan Parties is
owned by the stockholders and in the amounts set forth on Schedule 4.1(B). No
---------------
shares of the capital stock of any Loan Party, other than those described above,
are issued and outstanding. There are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from any Loan Party, of any
shares of capital stock or other securities of any such entity except as set
forth on Schedule 4.1(B).
---------------
4.2 Authorization of Borrowing, No Conflict. Borrower has the corporate
---------------------------------------
power and authority to incur the Obligations and to grant security interests in
the Collateral. On the Closing Date, the execution, delivery and performance of
the Loan Documents by each Loan Party signatory thereto will have been duly
authorized by all necessary corporate and shareholder action. The execution,
delivery and performance by each Loan Party of each Loan Document to which it is
a party and the consummation of the transactions contemplated by this Agreement
and the other Loan Documents by each Loan Party do not contravene and will not
be in contravention of any applicable law, the corporate charter or bylaws of
any Loan Party or any agreement or order by which any Loan Party or any Loan
Party's property is bound. This Agreement is, and the other Loan Documents,
including the Revolving Note[s] when executed and delivered will be, the legally
valid and binding obligations of the applicable Loan Parties respectively, each
enforceable against the Loan Parties, as applicable, in accordance with their
respective terms.
4.3 Financial Condition. All financial statements concerning Borrower and
-------------------
its Subsidiaries which have been or will hereafter be furnished by Borrower and
its Subsidiaries to Agent or any Lender pursuant to this Agreement have been or
will be prepared in accordance with GAAP consistently applied throughout the
periods involved (except as disclosed therein) and do or will present fairly the
financial condition of the Borrower covered thereby as at the dates thereof and
the results of their operations for the periods then ended. The Projections
delivered and to be delivered have been and will be prepared by Borrower in
light of the past operations of the business of Borrower and its Subsidiaries,
and such Projections represent and will represent
27
<PAGE>
the good faith estimate of Borrower and its senior management concerning the
most probable course of its business as of the date such Projections are
prepared and delivered.
4.4 Indebtedness and Liabilities. As of the Closing Date, neither
----------------------------
Borrower nor any of its Subsidiaries has (a) any Indebtedness except as
reflected on the most recent financial statements delivered to Agent and
Lenders; or (b) any Liabilities other than as reflected on the most recent
financial statements delivered to Agent and Lenders or as incurred in the
ordinary course of business following the date of the most recent financial
statements delivered to Agent and Lenders.
4.5 Account Warranties. Borrower represents, warrants and covenants as to
------------------
each Account that, at the time of its creation, the Account is a valid, bona
fide account, representing an undisputed indebtedness incurred by the named
account debtor for goods actually sold and delivered or for services completely
rendered; there are no setoffs, offsets or counterclaims, genuine or otherwise,
against the Account; the Account does not represent a sale to an Affiliate or a
consignment, sale or return or a bill and hold transaction; no agreement exists
permitting any deduction or discount (other than the discount stated on the
invoice); Borrower is the lawful owner of the Account and has the right to
assign the same to Agent, for the benefit of Lenders; the Account is free of all
security interests, liens and encumbrances other than those in favor of Agent,
on behalf of Lenders, and the Account is due and payable in accordance with its
terms.
4.6 Names. Schedule 4.6 sets forth all names, trade names, fictitious
----- ------------
names and business names under which Borrower currently conducts business or has
at any time during the past five years conducted business.
4.7 Locations; FEIN. Schedule 4.7 sets forth the location of Borrower's
--------------- ------------
principal place of business, the location of Borrower's books and records, the
location of all other offices of Borrower and all Collateral locations, and such
locations are Borrower's sole locations for its business and the Collateral.
Borrower's federal employer identification number is set forth on the signature
page hereof.
4.8 Title to Properties; Liens. Borrower and each of its Subsidiaries has
--------------------------
good, sufficient and legal title, subject to Permitted Encumbrances, to all its
respective material properties and assets. Except for Permitted Encumbrances,
all such properties and assets are free and clear of Liens. To the best
knowledge of Borrower after due inquiry, there are no actual, threatened or
alleged defaults with respect to any leases of real property under which
Borrower or any of its Subsidiaries is lessee or lessor which would have a
Material Adverse Effect.
4.9 Litigation; Adverse Facts. There are no judgments outstanding against
-------------------------
any Loan Party or affecting any property of any Loan Party nor is there any
action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration now pending or, to the best knowledge of Borrower
after due inquiry, threatened against or affecting any Loan Party or any
property of any Loan Party which could reasonably be expected to result in any
Material Adverse Effect other than as set forth on Schedule 4.9 hereof. No Loan
------------
Party has received any opinion
28
<PAGE>
or memorandum or legal advice from legal counsel to the effect that it is
exposed to any liability which could reasonably be expected to result in any
Material Adverse Effect.
4.10 Payment of Taxes. All material tax returns and reports of
----------------
Borrower and each of its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon such Persons and upon their respective properties, assets, income
and franchises which are shown on such returns as due and payable have been paid
when due and payable. As of the Closing Date, none of the United States income
tax returns of Borrower or any of its Subsidiaries are under audit. No tax
liens have been filed and no claims (except as otherwise permitted by subsection
----------
5.9) are being asserted with respect to any such taxes. The charges, accruals
- ---
and reserves on the books of Borrower and each of its Subsidiaries in respect of
any taxes or other governmental charges are in accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties and none of
-------------------------
their respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
contractual obligation of any such Person, and no condition exists that, with
the giving of notice or the lapse of time or both, would constitute such a
default.
4.12 Employee Benefit Plans. Borrower, each of its Subsidiaries and
----------------------
each ERISA Affiliate is in compliance in all material respects with all
applicable provisions of ERISA, the IRC and all other applicable laws and the
regulations and interpretations thereof with respect to all Employee Benefit
Plans. No material liability has been incurred by Borrower, any Subsidiaries or
any ERISA Affiliate which remains unsatisfied for any funding obligation, taxes
or penalties with respect to any Employee Benefit Plan.
4.13 Intellectual Property. Borrower and each of its Subsidiaries
---------------------
owns, is licensed to use or otherwise has the right to use, all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted, and all such Intellectual Property is identified on Schedule 4.13.
-------------
4.14 Broker's Fees. No broker's or finder's fee or commission will be
-------------
payable with respect to any of the transactions contemplated hereby.
4.15 Environmental Compliance. Each Loan Party has been and is
------------------------
currently in compliance with all applicable Environmental Laws, including
obtaining and maintaining in effect all permits, licenses or other
authorizations required by applicable Environmental Laws. There are no claims,
liabilities, investigations, litigation, administrative proceedings, whether
pending or threatened, or judgments or orders relating to any Hazardous
Materials asserted or threatened against any Loan Party or relating to any real
property currently or formerly owned, leased or operated by any Loan Party.
29
<PAGE>
4.16 Solvency. After giving effect to the transactions contemplated
--------
by the Loan Documents, and from and after the date of this Agreement, Borrower:
(a) owns and will own assets the fair salable value of which are (i) greater
than the total amount of its liabilities (including contingent liabilities) and
(ii) greater than the amount that will be required to pay the probable
liabilities of Borrower as they mature; (b) has capital that is not unreasonably
small in relation to its business as presently conducted or any contemplated or
undertaken transaction; and (c) does not intend to incur and does not believe
that it will incur debts beyond its ability to pay such debts as they become
due. There is no material fact known to Borrower that has or could have a
Material Adverse Effect and that has not been fully disclosed herein or in such
other documents, certificates and statements furnished to Agent or Lenders for
use in connection with the transactions contemplated hereby.
4.17 Disclosure. No representation or warranty of Borrower, any of
----------
its Subsidiaries or any other Loan Party contained in this Agreement, the
financial statements, the other Loan Documents, or any other document,
certificate or written statement furnished to Agent or any Lender by or on
behalf of any such Person for use in connection with the Loan Documents contains
any untrue statement of a material fact or omitted, omits or will omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. The Projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by such
Persons to be reasonable at the time made, it being recognized by Agent and
Lenders that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by any such
projections may differ from the projected results. There is no material fact
known to Borrower that has had or will have a Material Adverse Effect and that
has not been disclosed herein or in such other documents, certificates and
statements furnished to Agent or any Lender for use in connection with the
transactions contemplated hereby.
4.18 Insurance. Borrower and each of its Subsidiaries maintains
---------
adequate insurance policies for public liability, property damage for its
business and properties, product liability, and business interruption, no notice
of cancellation has been received with respect to such policies and Borrower and
each of its Subsidiaries is in compliance with all conditions contained in such
policies.
4.19 Compliance with Laws. Neither Borrower nor any of its
--------------------
Subsidiaries is in violation of any law, ordinance, rule, regulation, order,
policy, guideline or other requirement of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
its business or the ownership of its properties, including, without limitation,
any violation relating to any use, release, storage, transport or disposal of
any Hazardous Material, which violation would subject Borrower or any of its
Subsidiaries, or any of their respective officers to criminal liability or have
a Material Adverse Effect and no such violation has been alleged.
30
<PAGE>
4.20 Bank Accounts. Schedule 4.20 sets forth the account numbers and
------------- -------------
locations of all bank accounts of Borrower and its Subsidiaries.
4.21 Subsidiaries. Borrower has no Subsidiaries other than as set
------------
forth on Schedule 4.21.
-------------
4.22 Employee Matters. Except as set forth on Schedule 4.22, (a) no
---------------- -------------
Loan Party nor any of such Loan Party's employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Loan Party and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
Borrower after due inquiry, threatened between any Loan Party and its respective
employees, other than employee grievances arising in the ordinary course of
business which could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. Except as set forth on Schedule 4.22,
-------------
neither Borrower nor any of its Subsidiaries is subject to an employment
contract.
4.23 Governmental Regulation. None of the Loan Parties is, or after
-----------------------
giving effect to any loan will be, subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or the Investment
Company Act of 1940 or to any federal or state statute or regulation limiting
its ability to incur indebtedness for borrowed money.
Borrower may, at any time and from time to time and subject to subsection
----------
5.13, amend any one or more of the Schedules referred in this Section 4 and any
- ---- ---------
representation or warranty contained herein which refers to any such Schedule
shall from and after the date of any such amendment refer to such Schedule as so
amended, provided, however, that in no event may the Borrower amend any such
Schedule if such amendment would reflect or evidence a Default or Event of
Default.
SECTION 5. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall be in effect and until payment in full of all Obligations,
unless Requisite Lenders shall otherwise give their prior written consent,
Borrower shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 5 applicable to such Person.
---------
5.1 Financial Statements and Other Reports. Borrower will maintain,
--------------------------------------
and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP. Borrower
will deliver to Agent and each Lender (unless specified to be delivered solely
to Agent) the financial statements and other reports described below.
31
<PAGE>
(A) Monthly Financials. As soon as available and in any event within
------------------
twenty (20) days after the end of each month, Borrower will deliver (1) the
consolidated and consolidating balance sheet of Borrower and its Subsidiaries as
at the end of such month and the related consolidated and consolidating
statements of income, stockholders' equity and cash flow for such month and for
the period from the beginning of the then current Fiscal Year to the end of such
month, and (2) a schedule of the outstanding Indebtedness for borrowed money of
Borrower and its Subsidiaries describing in reasonable detail each such debt
issue or loan outstanding and the principal amount and amount of accrued and
unpaid interest with respect to each such debt issue or loan.
(B) Quarterly Financials. As soon as available and in any event
--------------------
within forty-five (45) days after the end of each quarter of a Fiscal Year,
Borrower will deliver the consolidated and consolidating balance sheet of
Borrower and its Subsidiaries as at the end of such period and the related
consolidated and consolidating statements of income, stockholders' equity and
cash flow for such quarter of a Fiscal Year and for the period from the
beginning of the then current Fiscal Year to the end of such quarter of a Fiscal
Year and such financial statements shall have been reviewed by a firm of
independent certified public accountants selected by Borrower.
(C) Year-End Financials. As soon as available and in any event within
-------------------
ninety (90) days after the end of each Fiscal Year, Borrower will deliver: (1)
the consolidated balance sheet of Borrower and its Subsidiaries as at the end of
such year and the related consolidated statements of income, stockholders'
equity and cash flow for such Fiscal Year; (2) a schedule of the outstanding
Indebtedness of Borrower and its Subsidiaries describing in reasonable detail
each such debt issue or loan outstanding and the principal amount and amount of
accrued and unpaid interest with respect to each such debt issue or loan; and
(3) a report with respect to the financial statements from a firm of independent
certified public accountants selected by Borrower and acceptable to Agent, which
report shall be unqualified as to going concern and scope of audit of Borrower
and its Subsidiaries and shall state that (a) such consolidated financial
statements present fairly the consolidated financial position of Borrower and
its Subsidiaries as at the dates indicated and the results of their operations
and cash flow for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years and (b) that the examination by such
accountants in connection with such consolidated financial statements has been
made in accordance with generally accepted auditing standards; and (4) copies of
the consolidating financial statements of Borrower and its Subsidiaries,
including (a) consolidating balance sheets of Borrower and its Subsidiaries as
at the end of such Fiscal Year showing intercompany eliminations and (b) related
consolidating statements of earnings of Borrower and its Subsidiaries showing
intercompany eliminations.
(D) Accountants' Certification and Reports. Together with each
--------------------------------------
delivery of consolidated financial statements of Borrower and its Subsidiaries
pursuant to subsection 5.1(C), Borrower will deliver (1) a written statement by
-----------------
its independent certified public accountants (a) stating that the examination
has included a review of the terms of this Agreement as same relate to
accounting matters and (b) stating whether, in connection with the examination,
any condition
32
<PAGE>
or event that constitutes a Default or an Event of Default has come to their
attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof and (2) a letter addressed
to Agent and Lenders from such accountants stating that such accountants have
been informed that a primary intent of Borrower was to have the professional
services such accountants provided to Borrower in preparing their audit report
and the letter referred to in this subsection 5.1(D) benefit or influence Agent
-----------------
and Lenders, and identifying Agent and Lenders as parties that Borrower has
indicated intend to rely on such professional services provided to Borrower by
such accountants. Promptly upon receipt thereof, Borrower will deliver copies
of all significant reports submitted to Borrower by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of Borrower made by such accountants, including the comment
letter submitted by such accountants to management in connection with their
annual audit.
(E) Compliance Certificate. Together with the delivery of each set of
----------------------
financial statements referenced in subparts (A), (B) and (C) of this subsection
----------
5.1, Borrower will deliver a Compliance Certificate, together with copies of the
- ---
calculations and work-up employed to determine Borrower's compliance or
noncompliance with the financial covenants set forth in Section 6.
---------
(F) Borrowing Base Certificates, Registers and Journals. On the first
---------------------------------------------------
Business Day of each week, Borrower shall deliver to Agent: (1) a Borrowing Base
Certificate updated to reflect the most recent sales and collections of Borrower
and an assignment schedule of all Accounts created by Borrower during the
preceding week; (2) an invoice register or sales journal describing all sales of
Borrower for the preceding week, in form and substance satisfactory to Agent,
and, if Agent so requests, copies of invoices evidencing such sales and proofs
of delivery relating thereto; and (3) a cash receipts journal; provided,
however, that Borrower shall include in its Borrowing Base Certificate a report
with respect to ARC, IATA, the Tel Aviv Account and its credit card receivables
only in the first Borrowing Base Certificate delivered each calendar month,
which Borrowing Base Certificate shall contain the relevant information for the
immediately preceding calendar month.
(G) Reconciliation Reports, Inventory Reports and Listings and Agings.
-----------------------------------------------------------------
On the Closing Date and within five (5) Business Days after the last day of each
month and from time to time upon the request of Agent, Borrower will deliver to
Agent: (1) an aged trial balance of all then existing Accounts; and (2) an
Inventory Report as of the last day of such period. As soon as available and in
any event within five (5) Business Days after the last day of each month, and
from time to time upon the request of Agent, Borrower will deliver to Agent: (1)
a Reconciliation Report as at the last day of such period; (2) an aged trial
balance of all then existing accounts payable; and (3) a detailed inventory
listing and cover summary report. All such reports shall be in form and
substance satisfactory to Agent.
(H) Management Report. Together with each delivery of financial
-----------------
statements of Borrower and its Subsidiaries pursuant to subdivisions (A), (B)
and (C) of this subsection 5.1,
--------------
33
<PAGE>
Borrower will deliver a management report: (1) describing the operations and
financial condition of Borrower and its Subsidiaries for the month then ended
and the portion of the current Fiscal Year then elapsed (or for the Fiscal Year
then ended in the case of year-end financials); (2) setting forth in comparative
form the corresponding figures for the corresponding periods of the previous
Fiscal Year and the corresponding figures from the most recent Projections for
the current Fiscal Year delivered to Lenders pursuant to 5.1(P); and (3)
discussing the reasons for any significant variations. The information above
shall be presented in reasonable detail and shall be certified by the chief
financial officer of Borrower to the effect that such information fairly
presents the results of operations and financial condition of Borrower and its
Subsidiaries as at the dates and for the periods indicated.
(I) Appraisals. From time to time, upon the request of Agent,
----------
Borrower will obtain and deliver to Agent, at Borrower's expense, appraisal
reports in form and substance and from appraisers satisfactory to Agent, stating
the then current fair market and orderly liquidation values of all or any
portion of the Collateral; provided, however, so long as no Event of Default is
continuing, Agent shall not request an appraisal as to any particular category
of Collateral to be performed more than once every Loan Year at Borrower's
expense.
(J) Government Notices. Borrower will deliver to Agent promptly after
------------------
receipt copies of all notices, requests, subpoenas, inquiries or other writings
received from any governmental agency concerning any Employee Benefit Plan, the
violation or alleged violation of any Environmental Laws, the storage, use or
disposal of any Hazardous Material, the violation or alleged violation of the
Fair Labor Standards Act or Borrower's payment or non-payment of any taxes
including any tax audit.
(K) Events of Default, etc. Promptly upon any officer of Borrower
-----------------------
obtaining knowledge of any of the following events or conditions, Borrower shall
deliver a certificate of Borrower's chief executive officer specifying the
nature and period of existence of such condition or event and what action
Borrower has taken, is taking and proposes to take with respect thereto: (1) any
condition or event that constitutes an Event of Default or Default; (2) any
notice of default that any Person has given to Borrower or any of its
Subsidiaries or any other action taken with respect to a claimed default; or (3)
any Material Adverse Effect.
(L) Trade Names. Borrower and each of its Subsidiaries will give
-----------
Agent at least thirty (30) days advance written notice of any change of name or
of any new trade name or fictitious business name. Borrower's use of any trade
name or fictitious business name will be in compliance with all laws regarding
the use of such names.
(M) Locations. Borrower will give Agent at least thirty (30) days
---------
advance written notice of any change in Borrower's principal place of business
or any change in the location of its books and records or the Collateral or of
any new location for its books and records or the Collateral.
34
<PAGE>
(N) Bank Accounts. Borrower will give Agent prompt notice of any new
-------------
bank accounts Borrower or any of its Subsidiaries intends to establish prior to
its opening same.
(O) Litigation. Promptly upon any officer of Borrower or its
----------
subsidiaries obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrower to Agent or (2) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan Party which
could reasonably be expected to have a Material Adverse Effect, Borrower will
promptly give notice thereof to Agent and provide such other information as may
be reasonably available to them to enable Agent and its counsel to evaluate such
matter.
(P) Projections. As soon as available and in any event no later than
-----------
thirty (30) days prior to the end of each Fiscal Year of Borrower, Borrower will
deliver consolidated and consolidating Projections of Borrower and its
Subsidiaries for the forthcoming three Fiscal Years, year by year, and for the
forthcoming Fiscal Year, month by month.
(Q) Subordinated Debt and Other Indebtedness Notices. Borrower shall
------------------------------------------------
promptly deliver copies of all notices given or received by Borrower and any of
its Subsidiaries with respect to noncompliance with any term or condition
related to any Subordinated Debt and other Indebtedness, and shall promptly
notify Lenders and Agent of any potential or actual event of default with
respect to any Subordinated Debt or other Indebtedness.
(R) Other Information. With reasonable promptness, Borrower will
-----------------
deliver such other information and data with respect to any Loan Party, any
Subsidiary of any Loan Party or the Collateral as Agent or any Lender may
reasonably request from time to time.
5.2 Access to Accountants and Management. Borrower authorizes Agent and
------------------------------------
Lenders to discuss the financial condition and financial statements of Borrower
and its Subsidiaries with Borrower's independent public accountants upon
reasonable notice to Borrower of its intention to do so, and authorizes such
accountants to respond to all of Agent's and Lenders' inquiries. Each Lender may
with the consent of Agent, which will not be unreasonably denied, confer with
Borrower's management directly regarding Borrower's business, operations and
financial condition.
5.3 Inspection. Borrower shall permit Agent and any authorized
----------
representatives designated by Agent to visit and inspect any of the properties
of Borrower or any of its Subsidiaries, including its and their financial and
accounting records, and in conjunction with such inspection, to make copies and
take extracts therefrom, and to discuss its and their affairs, finances and
business with its and their officers and independent public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested. Borrower acknowledges that Agent intends to make such inspections on
at least a quarterly basis.
35
<PAGE>
Each Lender may with the consent of Agent, which will not be unreasonably
denied, accompany Agent on any such visit or inspection.
5.4 Collateral Records. Borrower shall keep full and accurate books
------------------
and records relating to the Collateral and shall mark such books and records to
indicate Agent's security interests in the Collateral, for the benefit of
Lenders.
5.5 Account Covenants; Verification. Borrower shall, at its own expense:
-------------------------------
(a) cause all invoices evidencing Accounts and all copies thereof to bear a
notice that such invoices are payable to the lockboxes established in accordance
with subsection 5.6 and (b) use its best efforts to assure prompt payment of all
--------------
amounts due or to become due under the Accounts. No discounts, credits or
allowances will be issued, granted or allowed by Borrower to customers and no
returns will be accepted without Agent's prior written consent; provided, that
--------
until Agent notifies Borrower to the contrary, Borrower may presume consent.
Borrower will immediately notify Agent in the event that a customer alleges any
dispute or claim with respect to an Account or of any other circumstances known
to Borrower that may impair the validity or collectibility of an Account. Agent
shall have the right, at any time or times hereafter, to verify the validity,
amount or any other matter relating to an Account, by mail, telephone or in
person. After the occurrence of a Default or an Event of Default, Borrower
shall not, without the prior consent of Agent, adjust, settle or compromise the
amount or payment of any Account, or release wholly or partly any customer or
obligor thereof, or allow any credit or discount thereon.
5.6 Collection of Accounts and Payments. Borrower shall establish
-----------------------------------
lockboxes and blocked accounts (collectively, "Blocked Accounts") in Borrower's
name with such banks ("Collecting Banks") as are acceptable to Agent (subject to
irrevocable instructions acceptable to Agent as hereinafter set forth) to which
all account debtors shall directly remit all payments on Accounts and in which
Borrower will immediately deposit all payments made for Inventory or other
payments constituting proceeds of Collateral in the identical form in which such
payment was made, whether by cash or check. The Collecting Banks shall
acknowledge and agree, in a manner satisfactory to Agent, that all payments made
to the Blocked Accounts are the sole and exclusive property of Agent, for the
benefit of Lenders, and that the Collecting Banks have no right of setoff
against the Blocked Accounts and that all such payments received will be
promptly transferred to Agent's Account. Borrower hereby agrees that all
payments received by Agent, whether by cash, check, wire transfer or any other
instrument, made to such Blocked Accounts or otherwise received by Agent and
whether on the Accounts or as proceeds of other Collateral or otherwise will be
the sole and exclusive property of Agent, for the benefit of Lenders. Borrower
shall irrevocably instruct each Collecting Bank to promptly transfer all
payments or deposits to the Blocked Accounts into Agent's Account. Borrower,
and any of its Affiliates, employees, agents or other Persons acting for or in
concert with Borrower, shall, acting as trustee for Agent, receive, as the sole
and exclusive property of Agent, any monies, checks, notes, drafts or any other
payments relating to and/or proceeds of Accounts or other Collateral which come
into the possession or under the control of Borrower or any of Borrower's
Affiliates, employees, agents or other Persons acting for or in concert with
Borrower, and immediately upon receipt
36
<PAGE>
thereof, Borrower or such Persons shall remit the same or cause the same to be
remitted, in kind, to the Blocked Accounts or to Agent at its address set forth
in subsection 10.4 below.
---------------
5.7 Endorsement. Borrower hereby constitutes and appoints Agent and
-----------
all Persons designated by Agent for that purpose as Borrower's true and lawful
attorney-in-fact, with power to endorse Borrower's name to any of the items of
payment or proceeds described in subsection 5.6 above and all proceeds of
--------------
Collateral that come into Agent's possession or under Agent's control. Both the
appointment of Agent as Borrower's attorney and Agent's rights and powers are
coupled with an interest and are irrevocable until payment in full and complete
performance of all of the Obligations.
5.8 Corporate Existence. Borrower will, and will cause each of its
-------------------
Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business.
Borrower will promptly notify Agent of any change in its or its Subsidiaries'
ownership or corporate structure.
5.9 Payment of Taxes. Borrower will, and will cause each of its
----------------
Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty accrues thereon
provided that no such tax need be paid if Borrower or one of its Subsidiaries is
- --------
contesting same in good faith by appropriate proceedings promptly instituted and
diligently conducted and if Borrower or such Subsidiary has established
appropriate reserves as shall be required in conformity with GAAP.
5.10 Maintenance of Properties; Insurance. Borrower will maintain or
------------------------------------
cause to be maintained in good repair, working order and condition all material
properties used in the business of Borrower and its Subsidiaries and will make
or cause to be made all appropriate repairs, renewals and replacements thereof.
Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers, public liability and property damage insurance with respect
to its business and properties and the business and properties of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts acceptable to Agent. Borrower shall cause Agent, for
the benefit of Lenders, to be named as loss payee on all insurance policies
relating to any Collateral and as additional insured under all liability
policies, in each case pursuant to appropriate endorsements in form and
substance satisfactory to Agent and shall collaterally assign to Agent, for the
benefit of Lenders, as security for the payment of the Obligations all business
interruption insurance of Borrower. Borrower shall apply any proceeds received
from any policies of insurance relating to any Collateral to the Obligations as
set forth in subsection 2.4(B).
-----------------
5.11 Compliance with Laws. Borrower will, and will cause each of its
--------------------
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower or any of
its Subsidiaries is now doing business or may hereafter be doing
37
<PAGE>
business, other than those laws the noncompliance with which would not have a
Material Adverse Effect.
5.12 Further Assurances. Borrower shall, and shall cause each of its
------------------
Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Agent such instruments, certificates of title or other
documents as Agent at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents. At Agent's request, Borrower shall cause
any Subsidiaries of Borrower promptly to guaranty the Obligations and to grant
to Agent, on behalf of Lenders, security interests in the real, personal and
mixed property of such Subsidiary to secure the Obligations.
5.13 Collateral Locations. Borrower will keep the Collateral at the
--------------------
locations specified on Schedule 4.7. With respect to any new location (which in
-------------
any event shall be within the continental United States), Borrower will execute
such documents and take such actions as Agent deems necessary to perfect and
protect the security interests of the Agent, on behalf of Lenders, in the
Collateral prior to the transfer or removal of any Collateral to such new
location.
5.14 Bailees. If any Collateral is at any time in the possession or
-------
control of any warehouseman, bailee or any of Borrower's agents or processors,
Borrower shall, upon the request of Lenders, notify such warehouseman, bailee,
agent or processor of the security interests in favor of Agent, for the benefit
of Lenders, created hereby and shall instruct such Person to hold all such
Collateral for Agent's account subject to Agent's instructions.
5.15 [Intentionally Omitted].
---------------------
5.16 Use of Proceeds and Margin Security. Borrower shall use the
-----------------------------------
proceeds of all Loans for proper business purposes (as described in the recitals
to this Agreement) consistent with all applicable laws, statutes, rules and
regulations. No portion of the proceeds of any Loan shall be used by Borrower
or any of its Subsidiaries for the purpose of purchasing or carrying margin
stock within the meaning of Regulation G or Regulation U, or in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation T or Regulation X or any other regulation of the Board of Governors
of the Federal Reserve System or to violate the Exchange Act.
SECTION 6. FINANCIAL COVENANTS
-------------------
Borrower covenants and agrees that so long as any of the Commitments remain
in effect and until payment in full of all Obligations and termination of all
Lender Letters of Credit, unless Borrower has received the prior written consent
of Requisite Lenders, Borrower shall comply with and shall cause each of its
Subsidiaries to comply with all covenants in this Section 6 applicable to such
----------
Person.
38
<PAGE>
6.1 Tangible Net Worth. Borrower shall at all times maintain Tangible Net
------------------
Worth of at least $45,600,000.
6.2 Future Covenants. The Borrower agrees that in the event of any
----------------
extension of the Termination Date or the Maximum Revolving Loan Amount, Borrower
shall agree to amend this Section 6 to incorporate such additional financial
---------
covenants as the Agent and Borrower deem reasonable in light of the Borrower's
financial status and projections.
SECTION 7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that so long as any of the Commitments remain
in effect and until payment in full of all Obligations and termination of all
Lender Letters of Credit, unless Borrower has received the prior written consent
of Requisite Lenders, Borrower shall not and will not permit any of its
subsidiaries to:
7.1 Indebtedness and Liabilities. Directly or indirectly create, incur,
----------------------------
assume, guaranty, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any Indebtedness except: (a)
the Obligations; (b) Indebtedness (excluding Capital Leases) not to exceed
$5,000,000 in the aggregate at any time outstanding secured by purchase money
Liens; (c) Indebtedness under Capital Leases not to exceed $10,000,000
outstanding at any time in the aggregate; and (d) Indebtedness existing on the
Closing Date and identified on Schedule 1.1(C). Except for Indebtedness
---------------
described permitted in the preceding sentence, Borrower will not, and will not
permit any of its Subsidiaries to, incur any Liabilities except for trade
payables and normal accruals in the ordinary course of business not yet due and
payable or with respect to which Borrower or any of its Subsidiaries is
contesting in good faith the amount or validity thereof by appropriate
proceedings and then only to the extent that Borrower or any of its Subsidiaries
has established adequate reserves therefor, if appropriate under GAAP.
7.2 Guaranties. Except for endorsements of instruments or items of
----------
payment for collection in the ordinary course of business, guaranty, endorse, or
otherwise in any way become or be responsible for any obligations of any other
Person, whether directly or indirectly by agreement to purchase the indebtedness
of any other Person or through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants or conditions,
or by way of stock purchase, capital contribution, advance or loan for the
purpose of paying or discharging any indebtedness or obligation of such other
Person or otherwise.
39
<PAGE>
7.3 Transfers, Liens and Related Matters.
------------------------------------
(A) Transfers. Sell, assign (by operation of law or otherwise) or
---------
otherwise dispose of, or grant any option with respect to any of the Collateral,
except that Borrower and its Subsidiaries may (i) sell Inventory in the ordinary
course of business; and (ii) make Asset Dispositions if all of the following
conditions are met: (1) the market value of assets sold or otherwise disposed
of in any single transaction or series of related transactions does not exceed
$2,000,000 and the aggregate market value of assets sold or otherwise disposed
of in any Fiscal Year does not exceed $5,000,000; (2) the consideration received
is at least equal to the fair market value of such assets; (3) the sole
consideration received is cash; (4) the net proceeds of such Asset Disposition
are applied as required by subsection 2.4(B); (5) after giving effect to the
-----------------
sale or other disposition of the assets included within the Asset Disposition
and the repayment of the Obligations with the proceeds thereof, Borrower is in
compliance on a pro forma basis with the covenants set forth in Section 6
---------
recomputed for the most recently ended month for which information is available
and is in compliance with all other terms and conditions contained in this
Agreement; and (6) no Default or Event of Default shall then exist or result
from such sale or other disposition.
(B) Liens. Except for Permitted Encumbrances, directly or indirectly
-----
create, incur, assume or permit to exist any Lien on or with respect to any of
the Collateral or any proceeds, income or profits therefrom.
(C) No Negative Pledges. Enter into or assume any agreement (other
-------------------
than the Loan Documents) prohibiting the creation or assumption of any Lien upon
its properties or assets, whether now owned or hereafter acquired.
7.4 Investments and Loans. Make or permit to exist investments in or
---------------------
loans to any other Person, except: (a) Cash Equivalents; and (b) loans and
advances to employees for moving, entertainment, travel and other similar
expenses in the ordinary course of business in an aggregate outstanding amount
not in excess of $1,000,000 at any time.
7.5 Restricted Payments. Directly or indirectly declare, order, pay, make
-------------------
or set apart any sum for any Restricted Payment.
7.6 Restriction on Fundamental Changes. (a) Enter into any transaction of
----------------------------------
merger or consolidation; (b) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, or the capital stock of any of its
Subsidiaries, whether now owned or hereafter acquired; or (d) acquire by
purchase or otherwise all or any substantial part of the business or assets of,
or stock or other evidence of beneficial ownership of, any Person.
7.7 Transactions with Affiliates. Directly or indirectly, enter into or
----------------------------
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any
40
<PAGE>
service) with any Affiliate or with any officer, director or employee of any
Loan Party, except for transactions in the ordinary course of and pursuant to
the reasonable requirements of Borrower's business and upon fair and reasonable
terms which are fully disclosed to Agent and Lenders and which are no less
favorable to Borrower than it would obtain in a comparable arm's length
transaction with an unaffiliated Person.
7.8 Environmental Liabilities. (a) Violate any applicable Environmental
-------------------------
Law; (b) dispose of any Hazardous Materials (except in accordance with
applicable law) into or onto or from, any real property owned, leased or
operated by any Loan Party; or (c) permit any Lien imposed pursuant to any
Environmental Law to be imposed or to remain on any real property owned, leased
or operated by any Loan Party.
7.9 Conduct of Business. From and after the Closing Date, engage in any
-------------------
business other than businesses of the type engaged in by Borrower or any
Subsidiary on the Closing Date.
7.10 Compliance with ERISA. Establish any new Employee Benefit Plan
---------------------
or amend any existing Employee Benefit Plan if the liability or increased
liability resulting from such establishment or amendment is material. Neither
Borrower nor any Subsidiary shall fail to establish, maintain and operate each
Employee Benefit Plan in compliance in all material respects with the provisions
of ERISA, the IRC and all other applicable laws and the regulations and
interpretations thereof.
7.11 Tax Consolidations. File or consent to the filing of any
------------------
consolidated income tax return with any Person other than Borrower or any of its
Subsidiaries.
7.12 Subsidiaries. Establish, create or acquire any new Subsidiaries.
------------
7.13 Fiscal Year. Change its Fiscal Year.
-----------
7.14 Press Release; Public Offering Materials. Disclose the name of
----------------------------------------
Agent or any Lender in any press release or in any prospectus, proxy statement
or other materials filed with any governmental entity relating to a public
offering of the capital stock of any Loan Party except as may be required by
law.
7.15 Bank Accounts. Establish any new bank accounts, or amend or
-------------
terminate any Blocked Account or lockbox agreement without Agent's prior written
consent.
SECTION 8. DEFAULT, RIGHTS AND REMEDIES
----------------------------
8.1 Event of Default. "Event of Default" shall mean the occurrence or
----------------
existence of any one or more of the following:
41
<PAGE>
(A) Payment. Failure to make payment of any of the Obligations when
-------
due and, in the case of interest, such failure shall not be cured within five
(5) days of the applicable due date; or
(B) Default in Other Agreements. (1) Failure of Borrower or any of
---------------------------
its Subsidiaries to pay when due any principal or interest on any Indebtedness
(other than the Obligations) or (2) breach or default of Borrower or any of its
Subsidiaries with respect to any Indebtedness (other than the Obligations); if
such failure to pay, breach or default entitles the holder to cause such
Indebtedness having an individual principal amount in excess of $100,000 or
having an aggregate principal amount in excess of $250,000 to become or be
declared due prior to its stated maturity; or
(C) Breach of Certain Provisions. Failure of Borrower to perform or
----------------------------
comply with any term or condition contained in subsections 5.1 (A), (B), (C) and
---------------------------------
(S), 5.3, 5.5 or 5.6 or contained in Section 6 or Section 7; or
- -------------------- --------- ---------
(D) Breach of Warranty. Any representation, warranty, certification
------------------
or other statement made by any Loan Party in any Loan Document or in any
statement or certificate at any time given by such Person in writing pursuant or
in connection with any Loan Document is false in any material respect on the
date made; or
(E) Other Defaults Under Loan Documents. Borrower or any other Loan
-----------------------------------
Party defaults in the performance of or compliance with any term contained in
this Agreement or the other Loan Documents and such default is not remedied or
waived within ten (10) days after receipt by Borrower of notice from Agent, or
Requisite Lenders of such default (other than occurrences described in other
provisions of this subsection 8.1 for which a different grace or cure period is
--------------
specified or which constitute immediate Events of Default); or
(F) Change in Control. Morris Nachtomi Family Limited Partnership
-----------------
ceases to beneficially own and control, directly or indirectly, at least fifty-
one percent (51%) of the issued and outstanding shares of each class of capital
stock of Borrower entitled (without regard to the occurrence of any contingency)
to vote for the election of a majority of the members of the board of directors
of Borrower; or
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court
-----------------------------------------------------
enters a decree or order for relief with respect to Borrower or any of its
Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, which decree or order is not
stayed or other similar relief is not granted under any applicable federal or
state law; or (2) the continuance of any of the following events for sixty (60)
days unless dismissed, bonded or discharged: (a) an involuntary case is
commenced against Borrower or any of its Subsidiaries, under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect; or (b) a
decree or order of a court for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
Borrower
42
<PAGE>
or any of its Subsidiaries, or over all or a substantial part of their
respective property, is entered; or (c) an interim receiver, trustee or other
custodian is appointed without the consent of Borrower or any of its
Subsidiaries, for all or a substantial part of the property of Borrower or any
such Subsidiary; or
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) An order
---------------------------------------------------
for relief is entered with respect to Borrower or any of its Subsidiaries or
Borrower or any of its Subsidiaries commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
or to the conversion of an involuntary case to a voluntary case under any such
law or consents to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or (2)
Borrower or any of its Subsidiaries makes any assignment for the benefit of
creditors; or (3) the board of directors of Borrower or any of its Subsidiaries
adopts any resolution or otherwise authorizes action to approve any of the
actions referred to in this subsection 8.1(H); or
-----------------
(I) Liens. Any lien, levy or assessment is filed or recorded with
-----
respect to or otherwise imposed upon all or any part of the Collateral or the
assets of Borrower or any of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state, county, municipality or
other governmental agency (other than Permitted Encumbrances) and such lien,
levy or assessment is not stayed, vacated, paid or discharged within ten (10)
days after written notice thereof is given to Borrower or Borrower otherwise
becomes aware of such lien, levy or assessment; or
(J) Judgment and Attachments. Any money judgment, writ or warrant of
------------------------
attachment, or similar process involving (1) an amount in any individual case in
excess of $100,000 or (2) an amount in the aggregate at any time in excess of
$250,000 (in either case not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against
Borrower or any of its Subsidiaries or any of their respective assets and
remains undischarged, unvacated, unbonded or unstayed for a period of thirty
(30) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
(K) Dissolution. Any order, judgment or decree is entered against
-----------
Borrower or any of its Subsidiaries decreeing the dissolution or split up of
Borrower or that Subsidiary and such order remains undischarged or unstayed for
a period in excess of twenty (20) days; or
(L) Solvency. Borrower ceases to be solvent (as represented by
--------
Borrower in subsection 4.16) or admits in writing its present or prospective
---------------
inability to pay its debts as they become due; or
(M) Injunction. Borrower or any of its Subsidiaries is enjoined,
----------
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from
43
<PAGE>
conducting all or any material part of its business and such order continues for
more than thirty (30) days; or
(N) Invalidity of Loan Documents. Any of the Loan Documents for any
----------------------------
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or any Loan Party denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or
(O) Failure of Security. Agent, on behalf of Lenders, does not have
-------------------
or ceases to have a valid and perfected first priority security interest in the
Collateral (subject to Permitted Encumbrances), in each case, for any reason
other than the failure of Agent or any Lender to take any action within its
control; or
(P) Damage, Strike, Casualty. Any material damage to, or loss, theft
------------------------
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than forty-five (45) consecutive days, the
cessation or substantial curtailment of revenue producing activities at any
facility of Borrower or any of its Subsidiaries if any such event or
circumstance could reasonably be expected to have a Material Adverse Effect.
(Q) Licenses and Permits. The loss, suspension or revocation of, or
--------------------
failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could reasonably be expected to have a Material Adverse Effect.
(R) Forfeiture. There is filed against Borrower or any Guarantor any
----------
civil or criminal action, suit or proceeding under any federal or state
racketeering statute (including, without limitation, the Racketeer Influenced
and Corrupt Organization Act of 1970), which action, suit or proceeding (1) is
not dismissed within one hundred twenty (120) days; and (2) could result in the
confiscation or forfeiture of any material portion of the Collateral.
8.2 Suspension of Commitments. Upon the occurrence of any Default or
-------------------------
Event of Default, notwithstanding any grace period or right to cure, Agent may
or upon demand by Requisite Lenders shall, without notice or demand, immediately
cease making additional Loans and the Commitments shall be suspended; provided
--------
that, in the case of a Default, if the subject condition or event is waived or
cured within any applicable grace or cure period, the Commitments shall be
reinstated.
8.3 Acceleration. Upon the occurrence of any Event of Default described
------------
in the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall
----------------------------
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrower, and the Commitments shall thereupon terminate. Upon the
occurrence and during the continuance of any other Event of Default, Agent may,
and
44
<PAGE>
upon demand by Requisite Lenders shall, by written notice to Borrower, (a)
declare all or any portion of the Obligations to be, and the same shall
forthwith become, immediately due and payable and the Commitments shall
thereupon terminate and (b) demand that Borrower immediately deposit with Agent
an amount equal to one hundred five percent (105%) of the Letter of Credit
Reserve to enable Lender to make payments under the Lender Letters of Credit
when required and such amount shall become immediately due and payable.
8.4 Remedies. If any Event of Default shall have occurred and be
--------
continuing, in addition to and not in limitation of any other rights or remedies
available to Agent and Lenders at law or in equity, Agent may and shall upon the
request of Requisite Lenders exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral) and may also (a)
notify any or all obligors on the Accounts to make all payments directly to
Agent; (b) require Borrower to, and Borrower hereby agrees that it will, at its
expense and upon request of Agent forthwith, assemble all or part of the
Collateral as directed by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to both parties; (c) withdraw
all cash in the Blocked Accounts and apply such monies in payment of the
Obligations in the manner provided in subsection 8.7; (d) without notice or
--------------
demand or legal process, enter upon any premises of Borrower and take possession
of the Collateral; and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Agent's offices or elsewhere, at such time or times, for cash, on
credit or for future delivery, and at such price or prices and upon such other
terms as Agent may deem commercially reasonable. Borrower agrees that, to the
extent notice of sale shall be required by law, at least ten (10) days notice to
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. At any
sale of the Collateral, if permitted by law, Agent or any Lender may bid (which
bid may be, in whole or in part, in the form of cancellation of indebtedness)
for the purchase of the Collateral or any portion thereof for the account of
Agent or such Lender. Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Borrower shall
remain liable for any deficiency. Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned. To the extent permitted by law, Borrower hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter enacted. Agent shall not be required to
proceed against any Collateral but may proceed against Borrower directly.
8.5 Appointment of Attorney-in-Fact. Borrower hereby constitutes and
-------------------------------
appoints Agent as Borrower's attorney-in-fact with full authority in the place
and stead of Borrower and in the name of Borrower, Agent or otherwise, from time
to time in Agent's discretion while an Event of Default is continuing to take
any action and to execute any instrument that Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, including: (a) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for
45
<PAGE>
moneys due and to become due under or in respect of any of the Collateral; (b)
to adjust, settle or compromise the amount or payment of any Account, or release
wholly or partly any customer or obligor thereunder or allow any credit or
discount thereon; (c) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above; (d) to file any claims or take any action or institute any proceedings
that Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Agent and Lenders with respect
to any of the Collateral; and (e) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral. The appointment of Agent as Borrower's attorney and
Agent's rights and powers are coupled with an interest and are irrevocable until
payment in full and complete performance of all of the Obligations.
8.6 Limitation on Duty of Agent with Respect to Collateral. Beyond the
------------------------------------------------------
safe custody thereof, Agent and each Lender shall have no duty with respect to
any Collateral in its possession or control (or in the possession or control of
any agent or bailee) or with respect to any income thereon or the preservation
of rights against prior parties or any other rights pertaining thereto. Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Agent accords its own property.
Neither Agent nor any Lender shall be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by Agent in good faith.
8.7 Application of Proceeds. Upon the occurrence and during the
-----------------------
continuance of an Event of Default, (a) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Agent from or on behalf of Borrower, and Borrower hereby irrevocably
agrees that Agent shall have the continuing exclusive right to apply and to
reapply any and all payments received at any time or times after the occurrence
and during the continuance of an Event of Default against the Obligations in
such manner as Agent may deem advisable notwithstanding any previous entry by
Agent upon any books and records and (b) the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied: first, to
-----
all fees, costs and expenses incurred by Agent or any Lender with respect to
this Agreement, the other Loan Documents or the Collateral; second, to all fees
------
due and owing to Agent and Lenders; third, to accrued and unpaid interest on the
-----
Obligations; fourth, to the principal amounts of the Obligations outstanding;
------
and fifth, to any other indebtedness or obligations of Borrower owing to Agent
-----
or any Lender.
8.8 License of Intellectual Property. Borrower hereby assigns, transfers
--------------------------------
and conveys to Agent, for the benefit Lenders, effective upon the occurrence of
any Event of Default hereunder, the non-exclusive right and license to use all
Intellectual Property owned or used by Borrower together with any goodwill
associated therewith, all to the extent necessary to enable Agent to realize on
the Collateral and any successor or assign to enjoy the benefits of the Col-
46
<PAGE>
lateral. This right and license shall inure to the benefit of all successors,
assigns and transferees of Agent and its successors, assigns and transferees,
whether by voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is
granted free of charge, without requirement that any monetary payment whatsoever
be made to Borrower by Agent; provided, however, that the Borrower shall be
entitled to continue to use the name "Tower Air" following the occurrence and
during the continuance of any Event of Default so long as (i) the FAA has not
revoked the Borrower's air carrier operating certificate, (ii) the Borrower has
not ceased to operate its regularly scheduled passenger services, (iii)
proceedings for dissolution of the Borrower have not commenced, or (iv) the
Agent has not accelerated the obligations pursuant to subsection 8.3 hereof.
--------------
8.9 Waivers, Non-Exclusive Remedies. No failure on the part of Agent or
-------------------------------
any Lender to exercise, and no delay in exercising and no course of dealing with
respect to, any right under this Agreement or the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise by Agent
or any Lender of any right under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement and the other Loan Documents are cumulative
and are not exclusive of any other remedies provided by law.
SECTION 9. ASSIGNMENT AND PARTICIPATION
----------------------------
9.1 Assignments and Participations in Loans.
---------------------------------------
(A) Each Lender may assign its rights and delegate its obligations
under this Agreement to another Person; provided, that (a) such Lender shall
--------
first obtain the written consent of Agent, which shall not be unreasonably
withheld, (b) the amount of Commitments and Loans of the assigning Lender being
assigned shall in no event be less than the lesser of (i) $5,000,000 or (ii) the
entire amount of the Commitments and Loans of such assigning Lender and (c)(i)
each such assignment shall be of a pro rata portion of all such assigning
Lender's Loans and Commitments hereunder, and (ii) the parties to such
assignment shall execute and deliver to Agent for acceptance and recording a
Lender Addition Agreement together with (x) a processing and recording fee of
$2,500 payable to Agent and (y) the Revolving Note[s] originally delivered to
the assigning Lender. Upon receipt of all of the foregoing, Agent shall notify
Borrower of such assignment and Borrower shall comply with its obligations under
the last sentence of subsection 2.1(D). In the case of an assignment authorized
-----------------
under this subsection 9.1, the assignee shall have, to the extent of such
--------------
assignment, the same rights, benefits and obligations as it would if it were a
Lender hereunder. The assigning Lender shall be relieved of its obligations
hereunder with respect to its Commitment or assigned portion thereof. Borrower
hereby acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a "Lender".
47
<PAGE>
(B) Each Lender may sell participations in all or any part of any
Loans made by it to another Person; provided, that all amounts payable by
--------
Borrower hereunder shall be determined as if that Lender had not sold such
participation and the holder of any such participation shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly effecting (a) any reduction in the principal amount, interest rate or
fees payable with respect to any Loan in which such holder participates; (b) any
extension of the Termination Date or the date fixed for any payment of
principal, interest or fees payable with respect to any Loan in which such
holder participates; and (c) any release of substantially all of the Collateral
(other than in accordance with the terms of this Agreement or the Loan
Documents). Borrower hereby acknowledges and agrees that the participant under
each participation shall for purposes of subsections 2.8, 2.9, 2.10, 9.4 and
-------------------------------
10.2 of this Agreement be considered to be a "Lender".
- ----
(C) Except as otherwise provided in this subsection 9.1 no Lender
--------------
shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans or
other Obligations owed to such Lender. Each Lender may furnish any information
concerning Borrower and its Subsidiaries in the possession of that Lender from
time to time to assignees and participants (including prospective assignees and
participants) provided that the Persons obtaining such information agrees to
maintain the confidentiality of such information to the extent required by
subsection 10.21.
- ----------------
(D) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Loans owing
to it and the Revolving Note[s] held by it in favor of any Federal Reserve Bank
in accordance with Regulation A of the Board of Governors of the Federal Reserve
System).
9.2 Agent.
-----
(A) Appointment. Each Lender hereby designates and appoints Heller as
-----------
its agent under this Agreement and the Loan Documents, and each Lender hereby
irrevocably authorizes Agent to take such action or to refrain from taking such
action on its behalf under the provisions of this Agreement and the Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto. Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Loan Documents on behalf of Lenders subject to the
requirement that certain of Lenders' consent be obtained in certain instances as
provided in subsection 9.3. Agent agrees to act as such on the express
--------------
conditions contained in this subsection 9.2. The provisions of this subsection
-------------- ----------
9.2 are solely for the benefit of Agent and Lenders and neither Borrower nor any
- ---
Loan Party shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
Agent shall act solely as an administrative representative of Lenders and does
not assume and shall not be deemed to have assumed any
48
<PAGE>
obligation toward or relationship of agency or trust with or for Lenders,
Borrower or any Loan Party. Agent may perform any of its duties hereunder, or
under the Loan Documents, by or through its agents or employees.
(B) Nature of Duties. Agent shall have no duties, obligations or
----------------
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of Agent shall be mechanical and administrative in
nature. Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. Each Lender shall make its own
independent investigation of the financial condition and affairs of Borrower in
connection with the extension of credit hereunder and shall make its own
appraisal of the credit worthiness of Borrower, and Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the Closing Date or at any time or times thereafter. If
Agent seeks the consent or approval of any Lenders to the taking or refraining
from taking any action hereunder, then Agent shall send notice thereof to each
Lender. Agent shall promptly notify each Lender any time that the applicable
percentage of Lenders have instructed Agent to act or refrain from acting
pursuant hereto.
(C) Rights, Exculpation, Etc. Neither Agent nor any of its officers,
-------------------------
directors, employees or agents shall be liable to any Lender for any action
taken or omitted by them hereunder or under any of the Loan Documents, or in
connection herewith or therewith, except that Agent shall be obligated on the
terms set forth herein for performance of its express obligations hereunder, and
except that Agent shall be liable with respect to its own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account, but Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectability, or sufficiency of this Agreement or any of the
Loan Documents or the transactions contemplated thereby, or for the financial
condition of any Loan Party. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of any Loan Party, or the existence or possible existence of any
Default or Event of Default. Agent may at any time request instructions from
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Loan Documents Agent is permitted or required to take
or to grant, and Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Loan Documents until it shall have received such
instructions from the applicable percentage of the
49
<PAGE>
Lenders. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or refraining from
acting under this Agreement or any of the other Loan Documents in accordance
with the instructions of the applicable percentage of the Lenders and
notwithstanding the instructions of Lenders, Agent shall have no obligation to
take any action if it, in good faith believes that such action exposes Agent to
any liability.
(D) Reliance. Agent shall be entitled to rely upon any written
--------
notices, statements, certificates, orders or other documents or any telephone
message or other communication (including any writing, telex, telecopy or
telegram) believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it. Agent shall be
entitled to rely upon the advice of legal counsel, independent accountants, and
other experts selected by Agent in its sole discretion.
(E) Indemnification. Each Lender, severally, agrees to reimburse and
---------------
indemnify Agent for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Agent in any way relating to or arising out of this
Agreement or any of the Loan Documents or any action taken or omitted by Agent
under this Agreement for any of the Loan Documents, in proportion to each
Lender's Pro Rata Share; provided, however, that no Lender shall be liable for
-------- -------
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements resulting
from Agent's gross negligence or willful misconduct. The obligations of Lenders
under this subsection 9.2(E) shall survive the payment in full of the
-----------------
Obligations and the termination of this Agreement.
(F) Heller Individually. With respect to its Commitments and the
-------------------
Loans made by it, and the Revolving Note[s] issued to it, Heller shall have and
may exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender. The terms "Lenders" or "Requisite Lenders" or any similar terms shall,
unless the context clearly otherwise indicates, include Heller in its individual
capacity as a Lender or one of the Requisite Lenders. Heller may lend money to,
and generally engage in any kind of banking, trust or other business with any
Loan Party as if it were not acting as Agent pursuant hereto.
(G) Successor Agent.
---------------
(1) Resignation. Agent may resign from the performance of all its
-----------
functions and duties hereunder at any time by giving at least thirty (30)
Business Days' prior written notice to Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (2) below or as otherwise provided below.
50
<PAGE>
(2) Appointment of Successor. Upon any such notice of resignation
------------------------
pursuant to clause (G)(1) above, Requisite Lenders shall, upon receipt of
Borrower's prior consent which shall not unreasonably be withheld, appoint a
successor Agent. If a successor Agent shall not have been so appointed within
said thirty (30) Business Day period, the retiring Agent, upon notice to
Borrower, shall then appoint a successor Agent who shall serve as Agent until
such time, as Requisite Lenders, upon receipt of Borrower's prior written
consent which shall not be unreasonably withheld, appoint a successor Agent as
provided above.
(3) Successor Agent. Upon the acceptance of any appointment as Agent
---------------
under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents. After any retiring
Agent's resignation as Agent under the Loan Documents, the provisions of this
subsection 9.2 shall inure to its benefit as to any actions taken or omitted to
- --------------
be taken by it while it was Agent under the Loan Documents.
(H) Collateral Matters.
------------------
(1) Release of Collateral. Lenders hereby irrevocably authorize
---------------------
Agent, at its option and in its discretion, to release any Lien granted to or
held by Agent upon any property covered by this Agreement or the Loan Documents
(i) upon termination of the Commitments and payment and satisfaction of all
Obligations; (ii) constituting property being sold or disposed of if Borrower
certifies to Agent that the sale or disposition is made in compliance with the
provisions of this Agreement (and Agent may rely in good faith conclusively on
any such certificate, without further inquiry); or (iii) constituting property
leased to Borrower under a lease which has expired or been terminated in a
transaction permitted under this Agreement or is about to expire and which has
not been, and is not intended by Borrower to be, renewed or extended. In
addition during any Fiscal Year (x) Agent may release Collateral having a book
value of not more than 10% of the book value of all Collateral, (y) Agent, with
the consent of Requisite Lenders, may release Collateral having a book value of
not more than 25% of the book value of all Collateral and (z) Agent, with the
consent of Lenders having 90% of (i) the Total Loan Commitments and (ii) Loans,
may release all the Collateral.
(2) Confirmation of Authority; Execution of Releases. Without in
------------------------------------------------
any manner limiting Agent's authority to act without any specific or further
authorization or consent by Lenders (as set forth in subsection 9.2(H)(1)), each
--------------------
Lender agrees to confirm in writing, upon request by Borrower, the authority to
release any property covered by this Agreement or the Loan Documents conferred
upon Agent under subsection 9.2(H)(1). So long as no Event of Default is then
--------------------
continuing, upon receipt by Agent of confirmation from the requisite percentage
of Lenders, of its authority to release any particular item or types of property
covered by this Agreement or the Loan Documents, and upon at least five (5)
Business Days prior written request by Borrower, Agent shall (and is hereby
irrevocably authorized by Lenders to) execute such documents as may be necessary
to evidence the release of the Liens granted to Agent for the benefit of Lenders
51
<PAGE>
herein or pursuant hereto upon such Collateral; provided, however, that (i)
Agent shall not be required to execute any such document on terms which, in
Agent's opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of any Loan Party, in
respect of), all interests retained by any Loan Party, including, without
limitation, the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.
(3) Absence of Duty. Agent shall have no obligation whatsoever to any
---------------
Lender or any other Person to assure that the property covered by this Agreement
or the Loan Documents exists or is owned by Borrower or is cared for, protected
or insured or has been encumbered or that the Liens granted to Agent on behalf
of Lenders herein or pursuant hereto have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent in this subsection
----------
9.2(H) or in any of the Loan Documents, it being understood and agreed that in
- ------
respect of the property covered by this Agreement or the Loan Documents or any
act, omission or event related thereto, Agent may act in any manner it may deem
appropriate, in its discretion, given Agent's own interest in property covered
by this Agreement or the Loan Documents as one of the Lenders and that Agent
shall have no duty or liability whatsoever to any of the other Lenders;
provided, that Agent shall exercise the same care which it would in dealing with
- --------
loans for its own account.
(I) Agency for Perfection. Each Lender hereby appoints each other
---------------------
Lender as agent for the purpose of perfecting Lenders' security interest in
Collateral which, in accordance with Article 9 of the Uniform Commercial Code in
---------
any applicable jurisdiction, can be perfected only by possession. Should any
Lender (other than Agent) obtain possession of any such Collateral, such Lender
shall notify Agent thereof, and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent or in accordance with Agent's instructions.
(J) Exercise of Remedies. Each Lender agrees that it will not have
--------------------
any right individually to enforce or seek to enforce this Agreement or any Loan
Document or to realize upon any collateral security for the Loans, it being
understood and agreed that such rights and remedies may be exercised only by
Agent.
9.3 Consents.
--------
(A) In the event Agent requests the consent of a Lender and does not
receive a written denial thereof within five (5) Business Days after such
Lender's receipt of such request, then such Lender will be deemed to have given
such consent.
52
<PAGE>
(B) In the event Agent requests the consent of a Lender and such
consent is denied, then Heller may, at its option, require such Lender to assign
its interest in the Loans to Heller for a price equal to the then outstanding
principal amount thereof plus accrued and unpaid interest and fees due such
----
Lender, which interest and fees will be paid when collected from Borrower. In
the event that Heller elects to require any Lender to assign its interest to
Heller, Heller will so notify such Lender in writing within forty-five (45) days
following such Lender's denial, and such Lender will assign its interest to
Heller no later than five (5) days following receipt of such notice.
9.4 Set Off and Sharing of Payments. In addition to any rights now or
-------------------------------
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender is hereby authorized by Borrower at any time or from time to time,
with reasonably prompt subsequent notice to Borrower or to any other Person (any
prior or contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (A) balances held by such Lender or such
holder at any of its offices for the account of Borrower or any of its
Subsidiaries (regardless of whether such balances are then due to Borrower or
its Subsidiaries), and (B) other property at any time held or owing by such
Lender or such holder to or for the credit or for the account of Borrower or
any of its Subsidiaries, against and on account of any of the Obligations which
are not paid when due; except that no Lender or any such holder shall exercise
any such right without the prior written consent of Agent. Any Lender which has
exercised its right to set off shall, to the extent the amount of any such set
off exceeds its Pro Rata Share of the Obligations, purchase for cash (and the
other Lenders or holders shall sell) participations in each such other Lender's
or holder's Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share such excess with each other Lender or holder in accordance
with their respective Pro Rata Shares. Borrower agrees, to the fullest extent
permitted by law, that (a) any Lender or holder may exercise its right to set
off with respect to amounts in excess of its Pro Rata Share of the Obligations
and may sell participations in such excess to other Lenders and holders, and (b)
any Lender or holder so purchasing a participation in the Loans made or other
Obligations held by other Lenders or holders may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender or holder were a direct holder of Loans and other
Obligations in the amount of such participation.
9.5 Disbursement of Funds. Agent may, on behalf of Lenders, disburse
---------------------
funds to Borrower for Loans requested. Each Lender shall reimburse Agent on
demand for all funds disbursed on its behalf by Agent, or if Agent so requests,
each Lender will remit to Agent its Pro Rata Share of any Loan before Agent
disburses same to Borrower. If Agent elects to require that funds be made
available prior to disbursement to Borrower, Agent shall advise each Lender by
telephone, telex or telecopy of the amount of such Lender's Pro Rata Share of
such requested Loan no later than by 1:00 p.m. Central time on the Funding Date
for Base Rate Loans, and each such Lender shall pay Agent such Lender's Pro Rata
Share of such requested Loan, in same day funds, by wire transfer to Agent's
account not later than 3:00 p.m. Central time for Base Rate Loans. If any
Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's
53
<PAGE>
demand, Agent shall promptly notify Borrower, and Borrower shall immediately
repay such amount to Agent. Any repayment required pursuant to this subsection
----------
9.5 shall be without premium or penalty. Nothing in this subsection 9.5 or
- --- --------------
elsewhere in this Agreement or the other Loan Documents, including without
limitation the provisions of subsection 9.6, shall be deemed to require Agent to
--------------
advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Agent or Borrower may have against any Lender as a result of any default by such
Lender hereunder.
9.6 Settlements, Payments and Information.
-------------------------------------
(A) Revolving Advances and Payments; Fee Payments.
---------------------------------------------
(1) The Revolving Loan may fluctuate from day to day through Agent's
disbursement of funds to, and receipt of funds from, Borrower. In order to
minimize the frequency of transfers of funds between Agent and each Lender
notwithstanding terms to the contrary set forth in Section 2 and subsection 9.5,
--------- --------------
Revolving Advances and repayments may be settled according to the procedures
described in subsection 9.6(A)(2) and 9.6(A)(3) of this Agreement.
----------------------------------
Notwithstanding these procedures, each Lender's obligation to fund its Pro Rata
Share of any advances made by Agent to Borrower will commence on the date such
advances are made by Agent. Such payments will be made by such Lender without
set-off, counterclaim or reduction of any kind.
(2) Once each week, or more frequently (including daily), if Agent so
elects (each such day being a "Settlement Date"), Agent will advise each Lender
by 1 p.m. Central time by telephone, telex, or telecopy of the amount of each
such Lender's Pro Rata Share of the Revolving Loan. In the event payments are
necessary to adjust the amount of such Lender's share of the Revolving Loan to
such Lender's Pro Rata Share of the Revolving Loan, the party from which such
payment is due will pay the other, in same day funds, by wire transfer to the
other's account not later than 3:00 p.m. Central time on the Settlement Date.
(3) On the first Business Day of each month ("Interest Settlement
Date"), Agent will advise each Lender by telephone, telefax or telecopy of the
amount of interest and fees charged to and collected from Borrower for the
proceeding month. Provided that such Lender has made all payments required to
be made by it under this Agreement, Agent will pay to such Lender, by wire
transfer to such Lender's account (as specified by such Lender on the signature
page of this Agreement as amended by such Lender from time to time after the
date hereof pursuant to the notice provisions contained herein or in the
applicable Lender Addition Agreement) not later than 3 p.m. Central time on the
Interest Settlement Date such Lender's share of such interest and fees.
(B) Availability of Lender's Pro Rata Share.
---------------------------------------
54
<PAGE>
(1) Unless Agent has been notified by a Lender prior to a Funding Date
of such Lender's intention not to fund its Pro Rata Share of the Loan amount
requested by Borrower, Agent may assume that such Lender will make such amount
available to Agent on the Funding Date or the next Settlement Date, as
applicable. If such amount is not, in fact, made available to Agent by such
Lender when due, Agent will be entitled to recover such amount on demand from
such Lender without set-off, counterclaim or deduction of any kind.
(2) Nothing contained in this subsection 9.6(B) will be deemed to
-----------------
relieve a Lender of its obligation to fulfill its Commitments or to prejudice
any rights Agent or Borrower may have against such Lender as a result of any
default by such Lender under this Agreement.
(3) Without limiting the generality of the foregoing, each Lender
shall be obligated to fund its Pro Rata Share of any Revolving Advance made with
respect to any draw on a Lender Letter of Credit.
(C) Return of Payments.
------------------
(1) If Agent pays an amount to a Lender under this Agreement in the
belief or expectation that a related payment has been or will be received by
Agent from Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender without set-off,
counterclaim or deduction of any kind.
(2) If Agent determines at any time that any amount received by Agent
under this Agreement must be returned to Borrower or paid to any other person
pursuant to any solvency law or otherwise, then, notwithstanding any other term
or condition of this Agreement, Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to Agent on
demand any portion of such amount that Agent has distributed to such Lender,
together with interest at such rate, if any, as Agent is required to pay to
Borrower or such other Person, without set-off, counterclaim or deduction of any
kind.
9.7 Dissemination of Information. Agent will provide Lenders with any
----------------------------
information received by Agent from Borrower which is required to be provided to
a Lender hereunder; provided, however, that Agent shall not be liable to Lenders
-------- -------
for any failure to do so, except to the extent that such failure is attributable
to Agent's gross negligence or willful misconduct.
SECTION 10. MISCELLANEOUS
-------------
10.1 Expenses and Attorneys' Fees. Whether or not the transactions
----------------------------
contemplated hereby shall be consummated, Borrower agrees to promptly pay all
reasonable fees, costs and expenses incurred by Agent and each of the Lenders in
connection with any matters contemplated by or arising out of this Agreement or
the other Loan Documents including the following, and all such fees, costs and
expenses shall be part of the Obligations, payable on demand and secured by
55
<PAGE>
the Collateral: (a) fees, costs and expenses (including attorneys' fees,
allocated costs of internal counsel and fees of environmental consultants,
accountants and other professionals retained by Agent) incurred in connection
with the examination, review, due diligence investigation, documentation and
closing of the financing arrangements evidenced by the Loan Documents; (b) fees,
costs and expenses (including attorneys' fees, allocated costs of internal
counsel and fees of environmental consultants, accountants and other
professionals retained by Agent) incurred in connection with the review,
negotiation, preparation, documenta tion, execution, syndication, and
administration of the Loan Documents, the Loans, and any amendments, waivers,
consents, forbearances and other modifications relating thereto or any
subordination or intercreditor agreements; (c) fees, costs and expenses incurred
by Agent in creating, perfecting and maintaining perfection of Liens in favor of
Agent, on behalf of Lenders; (d) fees, costs and expenses incurred by Agent in
connection with forwarding to Borrower the proceeds of Loans including Agent's
or any Lenders' standard wire transfer fee; (e) fees, costs, expenses and bank
charges, including bank charges for returned checks, incurred by Agent or any
Lender in establishing, maintaining and handling lock box accounts, blocked
accounts or other accounts for collection of the Collateral; (f) fees, costs,
expenses (including attorneys' fees and allocated costs of internal counsel) of
Agent or any Lender and costs of settlement incurred in collecting upon or
enforcing rights against the Collateral or incurred in any action to enforce
this Agreement or the other Loan Documents or to collect any payments due from
Borrower or any other Loan Party under this Agreement or any other Loan Document
or incurred in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement, whether in the nature of a "workout"
or in connection with any insolvency or bankruptcy proceedings or otherwise.
10.2 Indemnity. In addition to the payment of expenses pursuant to
---------
subsection 10.1, whether or not the transactions contemplated hereby shall be
- ---------------
consummated, Borrower agrees to indemnify, pay and hold Agent and each Lender
and any holder of the Notes and the officers, directors, employees, agents,
consultants, auditors, persons engaged by Agent or any Lender and any holder of
the Revolving Note[s] to evaluate or monitor the Collateral, affiliates and
attorneys of Agent, Lender and such holders (collectively called the
"Indemnitees") harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including the fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) that may be
imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Agreement or the other Loan Documents, the
consummation of the transactions contemplated by this Agreement, the statements
contained in the commitment letters, if any, delivered by Agent or any Lender,
Agent's and each Lender's agreement to make the Loans hereunder, the use or
intended use of the proceeds of any of the Loans or the exercise of any right or
remedy hereunder or under the other Loan Documents (the "Indemnified
Liabilities"); provided that Borrower shall have no obligation to an Indemnitee
--------
hereunder with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of that Indemnitee as determined by a court of
competent jurisdiction.
56
<PAGE>
10.3 Amendments and Waivers.
----------------------
(A) Except as otherwise provided herein, no amendment, modification,
termination or waiver of any provision of this Agreement or any Loan Document,
or consent to any departure by any Loan Party therefrom, shall in any event be
effective unless the same shall be in writing and signed by Requisite Lenders or
Agent, as applicable; provided, that no amendment, modification, termination or
--------
waiver shall, unless in writing and signed by all Lenders, do any of the
following: (i) increase the Commitment of any Lender; (ii) reduce the principal
of, rate of interest on or fees payable with respect to any Loan; (iii) extend
the scheduled due date of any installment of principal of the Loans; (iv) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Loans, or the percentage of Lenders which shall be required for Lenders or
any of them to take any action hereunder; (v) amend or waive this subsection
----------
10.3 or the definitions of the terms used in this subsection 10.3 insofar as the
- ---- ---------------
definitions affect the substance of this subsection 10.3; (vi) consent to the
---------------
assignment or other transfer by any Loan Party of any of its rights and
obligations under any Loan Document; and (vii) increase the percentages
contained in the definition of Borrowing Base and provided, further, that no
-------- -------
amendment, modification, termination or waiver affecting the rights or duties of
Agent under any Loan Document shall in any event be effective, unless in writing
and signed by Agent, in addition to the Lenders required herein above to take
such action.
(B) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document.
(C) No amendment, modification or waiver of any provision of any
Lender Letter of Credit shall be applicable without the written concurrence of
the issuer of such Lender Letter of Credit. No notice to or demand on Borrower
or any other Loan Party in any case shall entitle Borrower or any other Loan
Party to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 10.3 shall be binding upon each
---------------
Lender, and, if signed by a Loan Party, on such Loan Party.
(D) In the event Agent waives (1) any Default arising under
subsection 8.1(E) as a result of the breach of any of the provisions of Section
- ----------------- -------
5 of this Agreement (other than any such breach which constitutes an Event of
- -
Default) or (2) any Default constituting a condition to the funding of any
Revolving Advance or issuance of any Lender Letter of Credit, such waiver shall
expire on the date upon which the Default which was the subject of such waiver
matures into an Event of Default pursuant to the terms of this Agreement.
10.4 Notices. Unless otherwise specifically provided herein, all notices
-------
shall be in writing addressed to the respective party as set forth below
and may be personally served, telecopied or sent by overnight courier service or
United States mail and shall be deemed to have
57
<PAGE>
been given: (a) if delivered in person, when delivered; (b) if delivered by
telecopy, on the date of transmission if transmitted on a Business Day before
4:00 p.m. Central time or, if not, on the next succeeding Business Day; (c) if
delivered by overnight courier, two (2) days after delivery to such courier
properly addressed; or (d) if by U.S. Mail, four (4) Business Days after
depositing in the United States mail, with postage prepaid and properly
addressed.
If to Borrower: Tower Air, Incorporated
Hanger 17
JFK International Airport
Jamaica, New York 11430
Telecopy No.: (718) 553-4312
Attn: Chief Financial Officer/Treasurer
If to Agent or to Heller: HELLER FINANCIAL, INC.
500 West Monroe
Chicago, Illinois, 60661
Attn: HBC Portfolio Manager
Telecopy No.: (312) 441-6133
With a copy to: HELLER FINANCIAL, INC.
500 West Monroe
Chicago, Illinois 60661
Attn: Legal Department/HBC
Telecopy No.: (312) 441-7208
and
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, Illinois 60601
Attn: Michael A. Nemeroff, Esq.
Telecopy No.: (312) 609-5005
If to any Lender: Its address indicated on the signature page hereto, in a
Lender Addition Agreement or in a notice to Agent and Borrower or to such other
address as the party addressed shall have previously designated by written
notice to the serving party, given in accordance with this subsection 10.4.
---------------
10.5 Survival of Warranties and Certain Agreements. All agreements,
---------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in subsections 10.1 and 10.2 shall survive
-------------------------
the payment of the Loans and the termination of this Agreement.
58
<PAGE>
10.6 Indulgence Not Waiver. No failure or delay on the part of Agent,
---------------------
any Lender or any holder of the Revolving Note[s] in the exercise of any power,
right or privilege hereunder or under the Revolving Note[s] shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other right, power or privilege.
10.7 Marshaling; Payments Set Aside. Neither Agent nor any Lender
------------------------------
shall be under any obligation to marshal any assets in favor of any Loan Party
or any other party or against or in payment of any or all of the Obligations.
To the extent that any Loan Party makes a payment or payments to Agent and/or
any Lender or Agent and/or any Lender enforces its security interests or
exercise its rights of setoff, and such payment or payments or the proceeds of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
10.8 Entire Agreement. This Agreement, the Revolving Note[s] and the
----------------
other Loan Documents referred to herein embody the final, entire agreement among
the parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties hereto.
10.9 Independence of Covenants. All covenants hereunder shall be
-------------------------
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
10.10 Severability. The invalidity, illegality or unenforceability in
------------
any jurisdiction of any provision in or obligation under this Agreement or the
other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
10.11 Lenders' Obligations Several; Independent Nature of Lenders'
------------------------------------------------------------
Rights. The obligation of each Lender hereunder is several and not joint and
- ------
neither Agent nor any Lender shall be responsible for the obligation or
commitment of any other Lender hereunder. In the event that any Lender at any
time should fail to make a Loan as herein provided, the Lenders, or any of them,
at their sole option, may make the Loan that was to have been made by the Lender
so
59
<PAGE>
failing to make such Loan. Nothing contained in any Loan Document and no action
taken by Agent or any Lender pursuant hereto or thereto shall be deemed to
constitute Lenders to be a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and, provided Agent fails or refuses
to exercise any remedies against Borrower after receiving the direction of the
Requisite Lenders, each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.12 Headings. Section and subsection headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
10.13 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL
--------------
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.14 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns except that Borrower may not assign its rights or obligations hereunder
without the written consent of Lenders.
10.15 No Fiduciary Relationship; Limitation of Liabilities.
----------------------------------------------------
(A) No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Agent or any Lender to Borrower.
(B) Neither Agent nor any Lender, nor any affiliate, officer,
director, shareholder, employee, attorney, or agent of Agent or any Lender shall
have any liability with respect to, and Borrower hereby waives, releases, and
agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by Borrower in
connection with, arising out of, or in any way related to, this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents. Borrower hereby waives, releases,
and agrees not to sue Agent or any Lender or any of Agent's or any Lender's
affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
10.16 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
-----------------------
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK
STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO
60
<PAGE>
AGENT'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT, REVOLVING NOTE[S] OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
SUCH COURTS. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE
REVOLVING NOTE[S], THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.
10.17 WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER HEREBY
--------------------
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE NOTE[S] OR THE OTHER LOAN
DOCUMENTS. BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE REVOLVING NOTE[S] AND
THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN
THEIR RELATED FUTURE DEALINGS. BORROWER, AGENT AND EACH LENDER FURTHER WARRANT
AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
10.18 Construction. Borrower, Agent and each Lender each acknowledge
------------
that it has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement and the other Loan Documents
with its legal counsel and that this Agreement and the other Loan Documents
shall be construed as if jointly drafted by Borrower, Agent and each Lender.
10.19 Counterparts; Effectiveness. This Agreement and any amendments,
---------------------------
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto. Delivery of an executed counterpart of a signature
page to this Agreement, any amendments, waivers, consents or supplements, or to
any other Loan Document by telecopier shall be as effective as delivery of a
manually executed counterpart thereof.
10.20 No Duty. All attorneys, accountants, appraisers, and other
-------
professional Persons and consultants retained by Agent or any Lender shall have
the right to act exclusively in the interest of Agent or such Lender and shall
have no duty of disclosure, duty of loyalty, duty of
61
<PAGE>
care, or other duty or obligation of any type or nature whatsoever to Borrower
or any of Borrower's shareholders or any other Person.
10.21 Confidentiality. Agent and Lenders shall hold all nonpublic
---------------
information obtained pursuant to the requirements hereof and identified as such
by Borrower in accordance with such Person's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
business practices and in any event may make disclosure to such of its
respective Affiliates, officers, directors, employees, agents and
representatives as need to know such information in connection with the Loans.
If any Lender is otherwise a creditor of a Borrower, such Lender may use the
information in connection with its other credits. Agent and Lenders may also
make disclosure reasonably required by a bona fide offeree or assignee (or
participation), or as required or requested by any Governmental Authority or
representative thereof, or pursuant to legal process, or to its accountants,
lawyers and other advisors, and shall require any such offeree or assignee (or
participant) to agree (and require any of its offerees, assignees or
participants to agree) to comply with this Section 10.21. In no event shall
-------------
Agent or any Lender be obligated or required to return any materials furnished
by Borrower; provided, however, each Offeree shall be required to agree that if
it does not become a assignee (or participant) it shall return all materials
furnished to it by Borrower in connection herewith.
10.22 Agent's Consent. To the extent the Agent's consent is required
---------------
under any provision hereof, unless such provision explicitly contains a
different standard, the Agent shall not unreasonably withhold its consent under
such provision.
* * *
62
<PAGE>
Witness the due execution of this Loan and Security Agreement by the
respective duly authorized officers of the undersigned as of the date first
written above.
TOWER AIR, INC.
By: /s/ Ramesh Punwani
----------------------------------
Title: VP-Finance
-------------------------------
FEIN: 11-2621046
--------------------------------
Revolving Loan Commitments: HELLER FINANCIAL, INC.
$12,500,000 By: /s/ Joel Richards
----------------------------------
Title: Vice President
-------------------------------
63
<PAGE>
Exhibit 10(6)
*
- --------------------------------------------------------------------------------
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
Dated as of January 31, 1997
between
TOWER AIR, INC.,
as Borrower,
and
HELLER FINANCIAL, INC.,
as Agent and as Lender
- --------------------------------------------------------------------------------
<PAGE>
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT dated as of
January 31, 1997 (this "Amendment") is between TOWER AIR, INC., a Delaware
corporation, as borrower under the below-defined Loan Agreement ("Borrower"),
and HELLER FINANCIAL, INC., a Delaware corporation ("Heller"), and amends that
certain Loan and Security Agreement dated as of December 1, 1996 (the "Loan
Agreement") between Borrower and Heller.
WITNESSETH:
----------
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings ascribed thereto in the
Loan Agreement;
WHEREAS, pursuant to the Loan Agreement, Lender loaned certain sums to
Borrower upon the terms and conditions set forth therein; and
WHEREAS, Borrower and Heller desire to amend the Loan Agreement in
certain respects;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
SECTION 1. Conditions Precedent to Effectiveness. The parties hereto
-------------------------------------
agree that this Amendment shall not become effective unless and until the
following conditions have been met:
(a) Closing Fee. Agent shall have received a closing fee in an amount
-----------
equal to $27,500.
(b) Secretary's Certificate. Agent shall have received a certificate
-----------------------
of the secretary of Borrower, which certificate shall be in form and substance
satisfactory to Agent.
(c) Opinion of Counsel. Agent shall have received an opinion of
------------------
Hewes, Gelband, Lamberg & Dann, counsel to Borrower, which opinion shall be in
form and substance satisfactory to Agent.
(d) No Change to Organizational Documents. There shall not have been
-------------------------------------
any amendment or other change to Borrower's certificate of incorporation, bylaws
or other organizational document since December 1, 1996.
<PAGE>
[First Amendment to Loan
and Security Agreement]
(e) Representations and Warranties. The representations and
------------------------------
warranties contained herein and in the Loan Documents shall be true, correct and
complete in all material respects on and as of the effective date hereof (the
"Effective Date") to the same extent as though made on and as of that date,
except for any representation or warranty limited by its terms to a specific
date, in which case such representation or warranty shall have been true,
correct and complete as of such earlier date.
(f) No Default. No event shall have occurred and be continuing that
----------
constitutes or would constitute, with the giving of notice or the passage of
time or both, an Event of Default or a Default.
(g) Performance of Agreements. Each Loan Party shall have performed
-------------------------
in all material respects all agreements and satisfied all conditions under any
Loan Document required to be performed by it on or before the Effective Date.
(h) No Prohibition. No order, judgment or decree of any court,
--------------
arbitrator or governmental authority shall purport to enjoin or restrain Agent
or any Lender from making any Loans or issuing any Lender Letters of Credit.
(i) No Litigation. There shall not be pending or, to the knowledge of
-------------
Borrower, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration by, against or affecting any
Loan Party or any of its Subsidiaries or any property of any Loan Party or any
of its Subsidiaries which would reasonably be expected to have a Material
Adverse Effect that has not been disclosed to Agent by Borrower in writing, and
there shall have occurred no development in any such action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
that, in the opinion of Agent, would reasonably be expected to have a Material
Adverse Effect.
SECTION 2. Amendments to Section 2.
-----------------------
(a) Section 2 of the Loan Agreement is hereby amended in the
following manner:
(i) Section 2.1(A) of the Loan Agreement is hereby amended by
deleting the phrase "Twelve Million Five Hundred Thousand Dollars
($12,500,000)" which appears in the fifth and sixth lines of such Section
2.1(A) and inserting in lieu thereof the phrase "Eighteen Million Dollars
($18,000,000)".
(ii) Section 2.1(A)(1) of the Loan Agreement is hereby amended
by adding at the end of each of clauses (a) and (b) the words "minus the
Letter of Credit Reserve".
2
<PAGE>
[First Amendment to Loan
and Security Agreement]
(iii) Section 2.1(A)(1) of the Loan Agreement is hereby
amended by inserting before the final period of such Section 2.1(A)(1) the
words "; provided, however, that, notwithstanding anything to the contrary
-------- -------
contained herein, if at any time the sum of the Borrowing Base (for these
purposes only, calculated without regard to the proviso to Section
2.1(A)(2)) minus the outstanding principal amount of the Loans minus the
Letter of Credit Reserve shall be less than Eight Million Five Hundred
Thousand Dollars ($8,500,000), then the Maximum Revolving Loan Amount shall
be reduced by the amount of such shortfall.
(iv) Section 2.1(A)(2) of the Loan Agreement is hereby amended
by inserting before the final period of such Section 2.1(A)(2) the words ";
provided, however, that, notwithstanding anything to the contrary contained
-------- -------
herein, in no event shall the amount of the Borrowing Base attributable to
Eligible Inventory exceed Fifteen Million Dollars ($15,000,000)".
SECTION 3. Amendments to Section 5.
------------------------
(a) Section 5.1(F) of the Loan Agreement is hereby amended by adding
at the end of clause (1) before the semi-colon the words "together with an
inventory report in form and substance satisfactory to Agent".
(b) Section 5.1 of the Loan Agreement is hereby amended by adding a
new paragraph (S), which shall be and read in its entirety as follows:
"(S) Weekly Cash Flow Forecasts. Borrower shall provide to Agent,
--------------------------
on or before February 7, 1997, weekly cash flow forecasts for the months of May
and June 1997."
SECTION 4. Amendment to Section 7. Section 7 of the Loan Agreement
-----------------------
is hereby amended by adding a new Section 7.16, which shall be and read in its
entirety as follows:
"7.16 Engine Servicing Agreement. Submit any or all of the Spare
--------------------------
Engines for servicing or maintenance under any engine servicing agreement
applicable to such Spare Engine or Engines."
SECTION 5. Expenses. Whether or not the transaction contemplated by
--------
this Amendment shall be consummated, Borrower agrees to promptly pay all
reasonable fees, costs and expenses incurred by Agent and each of the Lenders in
connection with any matters contemplated by or arising out of this Amendment or
the other Loan Documents including the following, and all such fees, costs and
expenses shall be part of the Obligations, payable on demand and secured by the
Collateral: (a) fees, costs and expenses (including attorneys' fees, allocated
costs of internal counsel and fees of environmental consultants, accountants and
other
3
<PAGE>
[First Amendment to Loan
and Security Agreement]
professionals retained by Agent) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangement evidenced by this Amendment and the other the Loan Documents; and
(b) fees, costs and expenses (including attorneys' fees, allocated costs of
internal counsel and fees of environmental consultants, accountants and other
professionals retained by Agent) incurred in connection with the review,
negotiation, preparation, documentation, execution, syndication, and
administration of this Amendment and the other Loan Documents, the Loans, and
any amendments, waivers, consents, forbearances and other modifications relating
thereto or any subordination or intercreditor agreements.
SECTION 6. Borrower's Representations and Warranties.
-----------------------------------------
To induce Agent and each Lender to enter into this Amendment, Borrower
hereby represents and warrants to Agent and each Lender that the following
statements are and will be true, correct and complete:
6.1 Organization, Powers, Capitalization.
------------------------------------
(A) Organization and Powers. Each of the Loan Parties is a
-----------------------
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and qualified to do business in
all states where such qualification is required except where failure to be
so qualified could not be reasonably expected to have a Material Adverse
Effect. Each of the Loan Parties has all requisite corporate power and
authority to own and operate its properties, to carry on its business as
now conducted and proposed to be conducted and to enter into this
Amendment.
(B) Capitalization. The authorized capital stock of each of the
--------------
Loan Parties is as set forth on Schedule 4.1(B) to the Loan Agreement. All
---------------
issued and outstanding shares of capital stock of each of the Loan Parties
are duly authorized and validly issued, fully paid, nonassessable, free and
clear of all Liens and such shares were issued in compliance with all
applicable state and federal laws concerning the issuance of securities.
The capital stock of each of the Loan Parties is owned by the stockholders
and in the amounts set forth on Schedule 4.1(B) to the Loan Agreement. No
---------------
shares of the capital stock of any Loan Party, other than those described
above, are issued and outstanding. There are no preemptive or other
outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from any Loan
Party, of any shares of capital stock or other securities of any such
entity except as set forth on Schedule 4.1(B) to the Loan Agreement.
---------------
6.2 Authorization of Borrowing, No Conflict. Borrower has the
---------------------------------------
corporate power and authority to enter into this Amendment. On the Effective
Date, the execution, delivery
4
<PAGE>
[First Amendment to Loan
and Security Agreement]
and performance of this Amendment by each Loan Party signatory hereto will have
been duly authorized by all necessary corporate and shareholder action. The
execution, delivery and performance of this Amendment by each Loan Party
signatory hereto and the consummation of the transactions contemplated by this
Amendment by each such Loan Party do not contravene and will not be in
contravention of any applicable law, the corporate charter or bylaws of any Loan
Party or any agreement or order by which any Loan Party or any Loan Party's
property is bound. This Amendment is the legally valid and binding obligation of
the applicable Loan Parties, enforceable against such Loan Parties in accordance
with its terms.
6.3 Financial Condition. All financial statements concerning
-------------------
Borrower and its Subsidiaries which have been or will hereafter be furnished by
Borrower and its Subsidiaries to Agent or any Lender pursuant to the Loan
Agreement have been or will be prepared in accordance with GAAP consistently
applied throughout the periods involved (except as disclosed therein) and do or
will present fairly the financial condition of the Borrower covered thereby as
at the dates thereof and the results of their operations for the periods then
ended. The Projections delivered (and attached hereto as Schedule 6.3) and to
be delivered have been and will be prepared by Borrower in light of the past
operations of the business of Borrower and its Subsidiaries, and such
Projections represent and will represent the good faith estimate of Borrower and
its senior management concerning the most probable course of its business as of
the date such Projections are prepared and delivered.
6.4 Indebtedness and Liabilities. As of the Effective Date, neither
----------------------------
Borrower nor any of its Subsidiaries has (a) any Indebtedness except as
reflected on the most recent financial statements delivered to Agent and
Lenders; or (b) any Liabilities other than as reflected on the most recent
financial statements delivered to Agent and Lenders or as incurred in the
ordinary course of business following the date of the most recent financial
statements delivered to Agent and Lenders.
6.5 Title to Properties; Liens. Borrower and each of its
--------------------------
Subsidiaries has good, sufficient and legal title, subject to Permitted
Encumbrances, to all its respective material properties and assets. Except for
Permitted Encumbrances, all such properties and assets are free and clear of
Liens. To the best knowledge of Borrower after due inquiry, there are no
actual, threatened or alleged defaults with respect to any leases of real
property under which Borrower or any of its Subsidiaries is lessee or lessor
which would have a Material Adverse Effect.
6.6 Litigation; Adverse Facts. There are no judgments outstanding
-------------------------
against any Loan Party or affecting any property of any Loan Party nor is there
any action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration now pending or, to the best knowledge of Borrower
after due inquiry, threatened against or affecting any Loan Party or any
property of any Loan Party which could reasonably be expected to result in any
Material
5
<PAGE>
[First Amendment to Loan
and Security Agreement]
Adverse Effect other than as set forth on Schedule 4.9 to the Loan Agreement.
------------
No Loan Party has received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed to any liability which could reasonably
be expected to result in any Material Adverse Effect.
6.7 Payment of Taxes. All material tax returns and reports of
----------------
Borrower and each of its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon such Persons and upon their respective properties, assets, income
and franchises which are shown on such returns as due and payable have been paid
when due and payable. As of the Effective Date, none of the United States
income tax returns of Borrower or any of its Subsidiaries are under audit. No
tax liens have been filed and no claims (except as otherwise permitted by
subsection 5.9 of the Loan Agreement) are being asserted with respect to any
- --------------
such taxes. The charges, accruals and reserves on the books of Borrower and
each of its Subsidiaries in respect of any taxes or other governmental charges
are in accordance with GAAP.
6.8 Performance of Agreements. None of the Loan Parties and none of
-------------------------
their respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
contractual obligation of any such Person, and no condition exists that, with
the giving of notice or the passage of time or both, would constitute such a
default.
6.9 Broker's Fees. No broker's or finder's fee or commission will be
-------------
payable with respect to any of the transactions contemplated hereby.
6.10 Solvency. From and after the date of this Amendment,
--------
Borrower: (a) owns and will own assets the fair salable value of which are (i)
greater than the total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be required to pay the
probable liabilities of Borrower as they mature; (b) has capital that is not
unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due. There is no material fact known to Borrower that has or
could have a Material Adverse Effect and that has not been fully disclosed in
the Loan Agreement or in such other documents, certificates and statements
furnished to Agent or Lenders for use in connection with the transactions
contemplated thereby.
6.11 Disclosure. No representation or warranty of Borrower, any
----------
of its Subsidiaries or any other Loan Party contained in this Amendment, the
financial statements, the other Loan Documents, or any other document,
certificate or written statement furnished to Agent or any Lender by or on
behalf of any such Person for use in connection with this Amendment or the other
Loan Documents contains any untrue statement of a material fact or
6
<PAGE>
[First Amendment to Loan
and Security Agreement]
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The Projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by Agent and Lenders that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results. There is no material fact known to Borrower that has had or will have
a Material Adverse Effect and that has not been disclosed in the Loan Agreement
or in such other documents, certificates and statements furnished to Agent or
any Lender for use in connection with the transactions contemplated thereby.
6.12 Compliance with Laws. Neither Borrower nor any of its
--------------------
Subsidiaries is in violation of any law, ordinance, rule, regulation, order,
policy, guideline or other requirement of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
its business or the ownership of its properties, including, without limitation,
any violation relating to any use, release, storage, transport or disposal of
any Hazardous Material, which violation would subject Borrower or any of its
Subsidiaries, or any of their respective officers to criminal liability or have
a Material Adverse Effect and no such violation has been alleged.
SECTION 7. Ratification; References to Loan Agreement. Except as
------------------------------------------
amended hereby, the Loan Agreement continues and shall remain in full force and
effect in all respects. From and after the date of this Amendment, each and
every reference in the Loan Agreement to "this Loan Agreement," "this
Agreement," "herein," "hereof" or similar words and phrases or any word or
phrase referring to a section or provision of the Loan Agreement is deemed for
all purposes to be a reference to the Loan Agreement or such section or
provision as amended pursuant to this Amendment.
SECTION 8. Severability; Headings; Amendment. Any provision of this
---------------------------------
Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. No term or
provision of this Amendment may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Borrower, Agent and
Requisite Lenders. The section headings in this Amendment are for convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof.
SECTION 9. CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
-----------------------
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK
STATE OF ILLINOIS AND IRREVOCABLY AGREES
7
<PAGE>
[First Amendment to Loan
and Security Agreement]
THAT, SUBJECT TO AGENT'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
SUCH COURTS. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AMENDMENT, THE
OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.
SECTION 10. WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER
--------------------
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS.
BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THE WAIVER IN ENTERING INTO THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS AND
THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.
BORROWER, AGENT AND EACH LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
SECTION 11. Confidentiality. Agent and Lenders shall hold all
---------------
nonpublic information obtained pursuant to the requirements hereof and
identified as such by Borrower in accordance with such Person's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound business practices and in any event may make
disclosure to such of its respective Affiliates, officers, directors, employees,
agents and representatives as need to know such information in connection with
the Loans. If any Lender is otherwise a creditor of a Borrower, such Lender may
use the information in connection with its other credits. Agent and Lenders may
also make disclosure reasonably required by a bona fide offeree or assignee (or
participation), or as required or requested by any Governmental Authority or
representative thereof, or pursuant to legal process, or to its accountants,
lawyers and other advisors, and shall require any such offeree or assignee (or
participant) to agree (and require any of its offerees, assignees or
participants to agree) to comply with this Section 11. In no event shall Agent
----------
or any Lender be obligated or required to return any materials furnished by
Borrower; provided, however, each Offeree shall be required to agree that if it
does not become a assignee (or participant) it shall return all materials
furnished to it by Borrower in connection herewith.
SECTION 12. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
--------------
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
8
<PAGE>
[First Amendment to Loan
and Security Agreement]
WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF
LAW PRINCIPLES.
SECTION 13. Successors and Assigns. This Amendment shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns except that Borrower may not assign its rights or
obligations hereunder without the written consent of Lenders.
SECTION 14. Counterparts; Effectiveness. This Amendment may be
---------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument. This Amendment shall become effective upon the
execution of a counterpart hereof by each of the parties hereto. Delivery of an
executed counterpart of a signature page to this Amendment by telecopier shall
be as effective as delivery of a manually executed counterpart thereof.
* * *
9
<PAGE>
[First Amendment to Loan
and Security Agreement]
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to Loan and Security Agreement to be duly executed as of the date
first above written.
TOWER AIR, INC.,
Borrower
By: /s/ Ramesh Punwani
---------------------------------------
Name: Ramesh Punwani
-------------------------------------
Title: VP-Finance
------------------------------------
HELLER FINANCIAL, INC.,
Agent and Lender
By: /s/ Joel Richards
---------------------------------------
Name: Joel Richards
-------------------------------------
Title: Vice President
------------------------------------
10
<PAGE>
Exhibit 10(7)
- --------------------------------------------------------------------------------
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
Dated March 13, 1997
between
TOWER AIR, INC.,
as Borrower,
and
HELLER FINANCIAL, INC.,
as Agent and as Lender
- --------------------------------------------------------------------------------
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
<PAGE>
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT dated March 13, 1997
(this "Amendment") is between TOWER AIR, INC., a Delaware corporation, as
borrower under the below-defined Loan Agreement ("Borrower"), and HELLER
FINANCIAL, INC., a Delaware corporation ("Heller"), and amends that certain Loan
and Security Agreement dated as of December 1, 1996, as amended by that certain
First Amendment to Loan and Security Agreement dated as of January 31, 1997 (the
"First Amendment") (as so amended, the "Loan Agreement") between Borrower and
Heller. Terms not otherwise defined herein shall have the respective meanings
assigned to them in the Loan Agreement.
WITNESSETH:
----------
WHEREAS, pursuant to the Loan Agreement, Lender loaned certain sums to
Borrower upon the terms and conditions set forth therein; and
WHEREAS, Borrower and Heller desire to amend the Loan Agreement in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
SECTION 1. Conditions Precedent to Effectiveness. The parties hereto
-------------------------------------
agree that this Amendment shall not become effective unless and until the
following conditions have been met:
(a) Closing Fee. Agent shall have received a closing fee in an amount
-----------
equal to $20,000.
(b) Second Amended and Restated Revolving Note. Agent shall have received
------------------------------------------
the Second Amended and Restated Revolving Note in form and substance
satisfactory to it.
(c) Secretary's Certificate. Agent shall have received a certificate of
-----------------------
the secretary of Borrower, which certificate shall be in form and substance
satisfactory to Agent.
(d) Opinion of Counsel. Agent shall have received an opinion of Hewes,
------------------
Gelband, Lamberg & Dann, counsel to Borrower, which opinion shall be in form and
substance satisfactory to Agent.
1
<PAGE>
(e) No Change to Organizational Documents. There shall not have been any
-------------------------------------
amendment or other change to Borrower's certificate of incorporation, bylaws or
other organizational document since December 1, 1996.
(f) Representations and Warranties; Covenants. The representations,
-----------------------------------------
warranties and covenants contained herein and in the Loan Documents shall be
true, correct and affirmed in all material respects on and as of the effective
date hereof (the "Effective Date") to the same extent as though made on and as
of the Effective Date, except for any representation or warranty limited by its
terms to a specific date, in which case such representation or warranty shall
have been true, correct and complete as of such earlier date.
(g) No Default. No event shall have occurred and be continuing that
----------
constitutes or would constitute, with the giving of notice or the passage of
time or both, an Event of Default.
(h) No Prohibition. No order, judgment or decree of any court, arbitrator
--------------
or governmental authority shall purport to enjoin or restrain Agent or any
Lender from making any Loans or issuing any Lender Letters of Credit.
(i) No Litigation. There shall not be pending or, to the knowledge of
-------------
Borrower, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration by, against or affecting any
Loan Party or any of its Subsidiaries or any property of any Loan Party or any
of its Subsidiaries which would reasonably be expected to have a Material
Adverse Effect that has not been disclosed to Agent by Borrower in writing, and
there shall have occurred no development in any such action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
that, in the opinion of Agent, would reasonably be expected to have a Material
Adverse Effect.
SECTION 2. Amendment of the Loan Agreement. The Loan Agreement is hereby
-------------------------------
amended as follows:
(a) The first paragraph of Section 2.1(A) of the Loan Agreement is hereby
--------------
amended by deleting the phrase "Eighteen Million Dollars ($18,000,000)" as added
pursuant to the First Amendment and inserting in lieu thereof the phrase "(i)
from and after March 13, 1997 to and including June 5, 1997, Twenty Million
Dollars ($20,000,000) and (ii) on and after June 6, 1997, Fifteen Million
Dollars ($15,000,000)".
(b) Section 2.1(A)(2)(d) of the Loan Agreement is hereby amended by
--------------------
deleting the phrase "twenty percent (20%)" and inserting in lieu thereof the
phrase "eighty percent (80%)".
2
<PAGE>
(c) Section 2.4(B)(3)(a) of the Loan Agreement is hereby amended by
--------------------
deleting the phrase "twenty percent (20%)" and inserting in lieu thereof the
phrase "eighty percent (80%)".
(d) Section 5.1 of the Loan Agreement is hereby amended by adding new
-----------
paragraph (T) which shall be and read in its entirety as follows:
"(T) Revised Financial Projections. Borrower shall provide to Agent
-----------------------------
revised Projections on or before March 24, 1997, in form and substance
acceptable to Agent, which reflect actual results for January and February,
1997 and Borrower's current forecasts and results for the remainder of
fiscal year 1997 which reflect Borrower's termination of service to
Brazil."
SECTION 3. Expenses. Whether or not the transaction contemplated by
--------
this Amendment shall be consummated, Borrower agrees to promptly pay all
reasonable fees, costs and expenses incurred by Agent and each of the Lenders in
connection with any matters contemplated by or arising out of this Amendment or
the other Loan Documents including the following, and all such fees, costs and
expenses shall be part of the Obligations, payable on demand and secured by the
Collateral: (a) fees, costs and expenses (including attorneys' fees, allocated
costs of internal counsel and fees of environmental consultants, accountants and
other professionals retained by Agent) incurred in connection with the
examination, review, due diligence investigation, documentation and closing of
the financing arrangement evidenced by this Amendment and the other Loan
Documents; and (b) fees, costs and expenses (including attorneys' fees,
allocated costs of internal counsel and fees of environmental consultants,
accountants and other professionals retained by Agent) incurred in connection
with the review, negotiation, preparation, documentation, execution,
syndication, and administration of this Amendment and the other Loan Documents,
the Loans, and any amendments, waivers, consents, forbearances and other
modifications relating thereto or any subordination or intercreditor agreements.
SECTION 4. Borrower's Representations and Warranties.
-----------------------------------------
To induce Agent and each Lender to enter into this Amendment, Borrower
hereby represents and warrants to Agent and each Lender that the following
statements are and will be true, correct and complete:
3
<PAGE>
4.1 Organization, Powers, Capitalization.
------------------------------------
(A) Organization and Powers. Each of the Loan Parties is a
-----------------------
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and qualified to do business in all
states where such qualification is required except where failure to be so
qualified could not be reasonably expected to have a Material Adverse Effect.
Each of the Loan Parties has all requisite corporate power and authority to
own and operate its properties, to carry on its business as now conducted and
proposed to be conducted and to enter into this Amendment.
(B) Capitalization. The authorized capital stock of each of the Loan
--------------
Parties is as set forth on Schedule 4.1(B) to the Loan Agreement. All issued
---------------
and outstanding shares of capital stock of each of the Loan Parties are duly
authorized and validly issued, fully paid, nonassessable, free and clear of
all Liens and such shares were issued in compliance with all applicable state
and federal laws concerning the issuance of securities. The capital stock of
each of the Loan Parties is owned by the stockholders and in the amounts set
forth on Schedule 4.1(B) to the Loan Agreement. No shares of the capital
--------------
stock of any Loan Party, other than those described above, are issued and
outstanding. There are no preemptive or other outstanding rights, options,
warrants, conversion rights or similar agreements or understandings for the
purchase or acquisition from any Loan Party, of any shares of capital stock
or other securities of any such entity except as set forth on Schedule 4.1(B)
--------------
to the Loan Agreement.
4.2 Authorization of Borrowing, No Conflict. Borrower has the
---------------------------------------
corporate power and authority to enter into this Amendment. On the Effective
Date, the execution, delivery and performance of this Amendment by each Loan
Party signatory hereto will have been duly authorized by all necessary corporate
and shareholder action. The execution, delivery and performance of this
Amendment by each Loan Party signatory hereto and the consummation of the
transactions contemplated by this Amendment by each such Loan Party do not
contravene and will not be in contravention of any applicable law, the corporate
charter or bylaws of any Loan Party or any agreement or order by which any Loan
Party or any Loan Party's property is bound. This Amendment is the legally valid
and binding obligation of the applicable Loan Parties, enforceable against such
Loan Parties in accordance with its terms.
4.3 Financial Condition. All financial statements concerning
-------------------
Borrower and its Subsidiaries which have been or will hereafter be furnished by
Borrower and its Subsidiaries to Agent or any Lender pursuant to the Loan
Agreement have been or will be prepared in accordance with GAAP consistently
applied throughout the periods involved (except as disclosed therein) and do or
will present fairly the financial condition of the Borrower covered thereby as
at the dates thereof and the results of their operations for the periods then
ended. The most recent Projections delivered to Agent and all future
Projections have been and will be prepared by Borrower in light of the past
operations of the business of Borrower and its Subsidiaries, and such
4
<PAGE>
Projections represent and will represent the good faith estimate of Borrower and
its senior management concerning the most probable course of its business as of
the date such Projections are prepared and delivered.
4.4 Indebtedness and Liabilities. As of the Effective Date, neither
----------------------------
Borrower nor any of its Subsidiaries has (a) any Indebtedness except as
reflected on the most recent financial statements delivered to Agent and
Lenders; or (b) any Liabilities other than as reflected on the most recent
financial statements delivered to Agent and Lenders or as incurred in the
ordinary course of business following the date of the most recent financial
statements delivered to Agent and Lenders.
4.5 Title to Properties; Liens. Borrower and each of its
--------------------------
Subsidiaries has good, sufficient and legal title, subject to Permitted
Encumbrances, to all its respective material properties and assets. Except for
Permitted Encumbrances, all such properties and assets are free and clear of
Liens. To the best knowledge of Borrower after due inquiry, there are no
actual, threatened or alleged defaults with respect to any leases of real
property under which Borrower or any of its Subsidiaries is lessee or lessor
which would have a Material Adverse Effect.
4.6 Litigation; Adverse Facts. There are no judgments outstanding
-------------------------
against any Loan Party or affecting any property of any Loan Party nor is there
any action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration now pending or, to the best knowledge of Borrower
after due inquiry, threatened against or affecting any Loan Party or any
property of any Loan Party which could reasonably be expected to result in any
Material Adverse Effect other than as set forth on Schedule 4.9 to the Loan
------------
Agreement. No Loan Party has received any opinion or memorandum or legal advice
from legal counsel to the effect that it is exposed to any liability which could
reasonably be expected to result in any Material Adverse Effect.
4.7 Payment of Taxes. All material tax returns and reports of
----------------
Borrower and each of its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon such Persons and upon their respective properties, assets, income
and franchises which are shown on such returns as due and payable have been paid
when due and payable. As of the Effective Date, none of the United States
income tax returns of Borrower or any of its Subsidiaries are under audit. No
tax liens have been filed and no claims (except as otherwise permitted by
subsection 5.9 of the Loan Agreement) are being asserted with respect to any
- --------------
such taxes. The charges, accruals and reserves on the books of Borrower and
each of its Subsidiaries in respect of any taxes or other governmental charges
are in accordance with GAAP.
4.8 Performance of Agreements. None of the Loan Parties and none of
-------------------------
their respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the
5
<PAGE>
obligations, covenants or conditions contained in any contractual obligation of
any such Person, and no condition exists that, with the giving of notice or the
passage of time or both, would constitute such a default.
4.9 Broker's Fees. No broker's or finder's fee or commission will be
-------------
payable with respect to any of the transactions contemplated hereby.
4.10 Solvency. From and after the date of this Amendment,
--------
Borrower: (a) owns and will own assets the fair salable value of which are (i)
greater than the total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be required to pay the
probable liabilities of Borrower as they mature; (b) has capital that is not
unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due. There is no material fact known to Borrower that has or
could have a Material Adverse Effect and that has not been fully disclosed in
the Loan Agreement or in such other documents, certificates and statements
furnished to Agent or Lenders for use in connection with the transactions
contemplated thereby.
4.11 Disclosure. No representation or warranty of Borrower, any
----------
of its Subsidiaries or any other Loan Party contained in this Amendment, the
financial statements, the other Loan Documents, or any other document,
certificate or written statement furnished to Agent or any Lender by or on
behalf of any such Person for use in connection with this Amendment or the other
Loan Documents contains any untrue statement of a material fact or omitted,
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The Projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by Agent and Lenders that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results. There is no material fact known to Borrower that has had or will have
a Material Adverse Effect and that has not been disclosed in the Loan Agreement
or in such other documents, certificates and statements furnished to Agent or
any Lender for use in connection with the transactions contemplated thereby.
4.12 Compliance with Laws. Neither Borrower nor any of its
--------------------
Subsidiaries is in violation of any law, ordinance, rule, regulation, order,
policy, guideline or other requirement of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
its business or the ownership of its properties, including, without limitation,
any violation relating to any use, release, storage, transport or disposal of
any Hazardous Material, which violation would subject Borrower or any of its
Subsidiaries, or any of their respective officers to criminal liability or have
a Material Adverse Effect and no such violation has been alleged.
6
<PAGE>
SECTION 5. Ratification; References to Loan Agreement. Except as
------------------------------------------
amended hereby, the Loan Agreement continues and shall remain in full force and
effect in all respects. From and after the date of this Amendment, each and
every reference in the Loan Agreement to "this Loan Agreement," "this
Agreement," "herein," "hereof" or similar words and phrases or any word or
phrase referring to a section or provision of the Loan Agreement is deemed for
all purposes to be a reference to the Loan Agreement or such section or
provision as amended pursuant to this Amendment.
SECTION 6. Severability; Headings; Amendment. Any provision of this
---------------------------------
Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. No term or
provision of this Amendment may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by Borrower, Agent and
Requisite Lenders. The section headings in this Amendment are for convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions hereof.
SECTION 7. CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
-----------------------
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK
STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-
EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM
NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AMENDMENT, THE OTHER LOAN DOCUMENTS OR THE
OBLIGATIONS.
SECTION 8. WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER
--------------------
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS.
BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THE WAIVER IN ENTERING INTO THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS AND
THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.
BORROWER, AGENT AND EACH LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY
7
<PAGE>
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
SECTION 9. Confidentiality. Agent and Lenders shall hold all
---------------
nonpublic information obtained pursuant to the requirements hereof and
identified as such by Borrower in accordance with such Person's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound business practices and in any event may make
disclosure to such of its respective Affiliates, officers, directors, employees,
agents and representatives as need to know such information in connection with
the Loans. If any Lender is otherwise a creditor of a Borrower, such Lender may
use the information in connection with its other credits. Agent and Lenders may
also make disclosure reasonably required by a bona fide offeree or assignee (or
participation), or as required or requested by any governmental authority or
representative thereof, or pursuant to legal process, or to its accountants,
lawyers and other advisors, and shall require any such offeree or assignee (or
participant) to agree (and require any of its offerees, assignees or
participants to agree) to comply with this Section 9. In no event shall Agent
---------
or any Lender be obligated or required to return any materials furnished by
Borrower; provided, however, each offeree shall be required to agree that if it
does not become a assignee (or participant) it shall return all materials
furnished to it by Borrower in connection herewith.
SECTION 10. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
--------------
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 11. Successors and Assigns. This Amendment shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns except that Borrower may not assign its rights or
obligations hereunder without the written consent of Lenders.
SECTION 12. Counterparts; Effectiveness. This Amendment may be
---------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument. This Amendment shall become effective upon the
execution of a counterpart hereof by each of the parties hereto. Delivery of an
executed counterpart of a signature page to this Amendment by telecopier shall
be as effective as delivery of a manually executed counterpart thereof.
* * *
8
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Second
Amendment to Loan and Security Agreement to be duly executed on the date first
above written.
TOWER AIR, INC.,
Borrower
By: /s/ Ramesh Punwani
--------------------------
Name: Ramesh Punwani
-------------------------
Title: VP-Finance
------------------------
HELLER FINANCIAL, INC.,
Agent and Lender
By: /s/ Joel Richards
---------------------------
Name: Joel Richards
-------------------------
Title: Vice President
------------------------
9
<PAGE>
Exhibit 10(8)
*
Aircraft N610FF
Aircraft N611FF
Airframe N608FF
- --------------------------------------------------------------------------------
TRUST AGREEMENT
Dated as of October 1, 1996
between
SANWA BUSINESS CREDIT CORPORATION,
Owner Participant
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Owner Trustee
-------------------------
Two Boeing Model 747-282B Aircraft
One Boeing Model 747-131 Airframe
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND TERMS.............................. 1
SECTION 1.01. Certain Definitions............................................ 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST............................ 2
SECTION 2.01. Authority to Execute Documents................................. 2
SECTION 2.02. Declaration of Trust........................................... 2
ARTICLE III
PURCHASE OF THE AIRCRAFT AND AIRFRAME N608FF................. 2
SECTION 3.01. Purchase of the Aircraft and Airframe N608FF................... 2
SECTION 3.02. Conditions Precedent........................................... 3
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE........................ 4
SECTION 4.01. Distribution of Payments....................................... 4
(a) Payments to Owner Trustee............................. 4
(b) Multiple Owner Participants......................... 4
SECTION 4.02. Method of Payments............................................. 4
ARTICLE V
DUTIES OF THE OWNER TRUSTEE........................... 5
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 5.01. Notice of Event of Default..................................... 5
SECTION 5.02. Action Upon Instructions....................................... 5
SECTION 5.03. Indemnification................................................ 5
SECTION 5.04. No Duties Except as Specified in Trust Agreement
or Instructions............................................. 6
SECTION 5.05. Satisfaction of Conditions Precedent........................... 6
SECTION 5.06. No Action Except Under Specified Documents or
Instruction................................................. 6
ARTICLE VI
THE OWNER TRUSTEE............................... 7
SECTION 6.01. Acceptance of Trusts and Duties................................ 7
SECTION 6.02. Absence of Certain Duties...................................... 7
SECTION 6.03. No Representations or Warranties as to Certain
Matters..................................................... 8
SECTION 6.04. No Segregation of Monies; Interest............................. 8
SECTION 6.05. Reliance Upon Certificates, Counsel and Agents................. 9
SECTION 6.06. Not Acting in Individual Capacity.............................. 9
SECTION 6.07. Fees; Compensation............................................. 9
SECTION 6.08. Tax Returns................................................... 10
ARTICLE VII
INDEMNIFICATION OF FIRST SECURITY BANK
BY OWNER PARTICIPANT............................. 10
SECTION 7.01. Owner Participant to Indemnify First Security Bank............ 10
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST................. 11
SECTION 8.01. Transfer of Interests......................................... 11
SECTION 8.02. Actions of the Owner Participants............................. 12
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES................... 12
SECTION 9.01. Resignation of Owner Trustee; Appointment of
Successor.................................................... 12
(a) Resignation or Removal............................. 12
(b) Execution and Delivery of Documents,
etc.................................................... 12
(c) Qualifications......................................... 13
(d) Merger, etc............................................ 13
SECTION 9.02. Co-Trustees and Separate Trustees............................. 13
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS.................. 15
SECTION 10.01. Supplements and Amendments and Delivery Thereof.............. 15
(a) Supplements and Amendments........................ 15
(b) Delivery of Amendments and
Supplements to Certain Parties......................... 15
SECTION 10.02. Discretion as to Execution of Documents...................... 15
SECTION 10.03. Absence of Requirements as to Form........................... 15
SECTION 10.04. Distribution of Documents.................................... 16
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 10.05. No Request Needed as to Lease Supplement and
Trust Supplement........................................... 16
ARTICLE XI
MISCELLANEOUS................................ 16
SECTION 11.01. Termination of Trust Agreement............................... 16
SECTION 11.02. Owner Participant Has No Legal Title in Trust
Estate..................................................... 17
SECTION 11.03. Assignment, Sale, etc. of Aircraft and Airframe
N608FF..................................................... 17
SECTION 11.04. Trust Agreement for Benefit of Certain Parties
Only....................................................... 17
SECTION 11.05. Citizenship of the Owner Participant......................... 17
SECTION 11.06. Notices...................................................... 17
SECTION 11.07. Severability................................................. 18
SECTION 11.08. Waivers, etc................................................. 18
SECTION 11.09. Counterparts................................................. 18
SECTION 11.10. Binding Effect, etc.......................................... 18
SECTION 11.11. Headings; References......................................... 18
SECTION 11.12. Governing Law................................................ 18
ARTICLE XII
CERTAIN LIMITATIONS............................ 19
SECTION 12.01. Limitations on Control....................................... 19
SECTION 12.02. Discretion and Actions of Owner Trustee...................... 19
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
SECTION 12.03. Payments..................................................... 20
SECTION 12.04. Owner Trustee Acts as Trustee................................ 20
SECTION 12.05. Termination.................................................. 20
SECTION 12.06. Amendments to Article XII.................................... 20
SECTION 12.07. Purpose...................................................... 21
Exhibit A
TRUST AGREEMENT SUPPLEMENT............................. 1
</TABLE>
v
<PAGE>
TRUST AGREEMENT
This TRUST AGREEMENT dated as of October 1, 1996, between SANWA
BUSINESS CREDIT CORPORATION, a Delaware corporation (the "Original Owner
Participant"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association (in its individual capacity, "FSB" and otherwise not in its
individual capacity but solely as trustee hereunder with its permitted
successors and assigns the "Owner Trustee");
W I T N E S S E T H:
-------------------
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. Certain Definitions. Unless the context shall
-------------------
otherwise require and except as contained in this Section 1.01, the capitalized
terms used herein shall have the respective meanings assigned thereto in the
Lease (as hereinafter defined) for all purposes hereof. All definitions
contained in this Section 1.01 shall be equally applicable to both the singular
and plural forms of the terms defined. For all purposes of this Trust Agreement
the following terms shall have the following meanings:
"Corporate Trust Department" shall mean the office of the Owner
Trustee located in Salt Lake City, Utah.
"Lease" means that certain Operating Lease Agreement, dated as of
October 1, 1996 and to be entered into by the Owner Trustee and Tower
concurrently with the execution and delivery of this Trust Agreement as said
Operating Lease Agreement may from time to time be supplemented or amended, or
the terms thereof waived or modified, to the extent permitted by, and in
accordance with, the terms of this Trust Agreement. The term "Lease" shall also
include each Lease Supplement from time to time entered into pursuant to the
terms of the Lease.
"Owner Participant" shall mean the Original Owner Participant and each
Subsequent Owner Participant.
"Subsequent Owner Participant" means any Person to which the Original
Owner Participant or any transferee from the Original Owner Participant or any
Subsequent
<PAGE>
[Trust Agreement]
Owner Participant shall have transferred at any time after the Delivery Date all
or any part of its right, title and interest in the Trust Estate.
"Tower" means Tower Air, Inc. organized and existing pursuant to the
laws of its jurisdiction.
"Trust Estate" means all estate, right, title and interest of the
Owner Trustee in and to the Aircraft, Airframe N608FF, the Lease, any Lease
Supplement and the Purchase Agreement, including, without limitation, all
amounts of Basic Rent and Supplemental Rent and all insurance proceeds (other
than insurance proceeds payable to or for the benefit of FSB for its own account
or in its individual capacity).
"Trust Supplement" means a supplement to the Trust Agreement in
substantially the form of Exhibit A to this Trust Agreement.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE DOCUMENTS;
DECLARATION OF TRUST
SECTION 2.01. Authority to Execute Documents. The Original Owner
------------------------------
Participant hereby authorizes and directs the Owner Trustee to execute and
deliver the Operative Documents to which it is a party and any other agreements,
instruments or documents to which the Owner Trustee is a party in the respective
forms thereof delivered from time to time by the Owner Participant to the Owner
Trustee for execution and delivery.
SECTION 2.02. Declaration of Trust. The Owner Trustee hereby
--------------------
declares that it will hold the Trust Estate upon the trusts hereinafter set
forth for the use and benefit of the Owner Participant.
2
<PAGE>
[Trust Agreement]
ARTICLE III
PURCHASE OF THE AIRCRAFT AND AIRFRAME N608FF
SECTION 3.01. Purchase of the Aircraft and Airframe N608FF. The
--------------------------------------------
Original Owner Participant hereby authorizes and directs the Owner Trustee to,
and the Owner Trustee agrees for the benefit of the Owner Participant that it
will, on the Delivery Date, subject to due compliance with the terms of Section
3.02 hereof:
(a) purchase the Aircraft and Airframe N608FF from Tower pursuant to
the Purchase Agreement;
(b) accept delivery from Tower of the Warranty Bills of Sale and the
FAA Bills of Sale;
(c) execute and deliver the Lease;
(d) execute and deliver a Lease Supplement covering the Aircraft and
Airframe N608FF;
(e) execute and deliver a Trust Supplement covering the Aircraft and
Airframe N608FF;
(f) effect the registration of the Aircraft and Airframe N608FF in the
name of the Owner Trustee by filing or causing to be filed with the FAA: (i)
the FAA Bills of Sale; (ii) applications for registration of the Aircraft and
Airframe N608FF in the name of the Owner Trustee (including without limitation
an affidavit from the Owner Trustee in compliance with the provisions of 14
C.F.R. (S) 47.7(c)(2)(iii) (1979)); and (iii) this Trust Agreement; and
(g) execute and deliver all such other instruments, documents or
certificates and take all such other actions in accordance with the directions
of the Original Owner Participant, as the Original Owner Participant may deem
necessary or advisable in connection with the transactions contemplated hereby.
SECTION 3.02. Conditions Precedent. The rights and obligations of
--------------------
the Owner Trustee to take the actions required by Section 3.01 hereof with
respect to the Aircraft and Airframe N608FF shall be subject to the Original
Owner Participant having notified the Owner Trustee that the terms and
conditions of the Purchase Agreement, insofar as they relate to conditions
precedent to performance by the Owner Trustee of its
3
<PAGE>
obligations thereunder, shall have been either fulfilled to the satisfaction of
or waived by the Original Owner Participant.
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
SECTION 4.01. Distribution of Payments. (a) Payments to Owner
------------------------ -----------------
Trustee. The Owner Trustee will receive all amounts constituting part of the
- -------
Trust Estate which are payable to the account of the Owner Trustee under the
Operative Documents including, without limitation, (i) all amounts payable by
the Lessee as Basic Rent or Supplemental Rent, or as the result of an Event of
Loss or an Event of Default under the Lease, (ii) all proceeds of the sale, re-
lease or other disposition of either Aircraft or Airframe N608FF upon the
termination, non-renewal or other expiration of the Lease, and (iii) all other
amounts payable to the Owner Trustee under this Trust Agreement and the other
Operative Documents, and shall forthwith distribute said amounts:
First, to payment to the Owner Trustee for any fees, expenses, costs
-----
or liabilities incurred for which the Owner Trustee is entitled to payment,
reimbursement or indemnity from the Owner Participant and for which the Owner
Trustee has not been paid or reimbursed from any other source; and
Second, to payment of the entire balance to the Owner Participant.
------
(b) Multiple Owner Participants. If, as a result of a transfer by an
---------------------------
Owner Participant under Section 8.01 of this Trust Agreement, there is more than
one Owner Participant hereunder, each such Owner Participant shall hold in
proportion to its respective beneficial interest in the Trust Estate, an
undivided beneficial interest in the entire Trust Estate and is entitled to
receive ratably with any other Owner Participant, payments distributable by the
Owner Trustee hereunder. No Owner Participant shall have legal title to the
Aircraft, Airframe N608FF or any other portion of the Trust Estate.
SECTION 4.02. Method of Payments. The Owner Trustee shall make
------------------
distributions or cause distributions to be made to the Owner Participant
pursuant to this Article IV by transferring by wire transfer in immediately
available funds on the day received (or on the next succeeding Business Day if
the funds to be so distributed shall not have been received by the Owner Trustee
by 1:00 p.m., Salt Lake City time), the amount to be distributed to such account
or accounts of the Owner Participant as the Owner
4
<PAGE>
[Trust Agreement]
Participant may designate from time to time in writing to the Owner Trustee;
provided, however, that the Owner Trustee shall use reasonable efforts to invest
overnight in federal funds all monies received by it at or later than 1:00 p.m.,
Salt Lake City time.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.01. Notice of Event of Default. If the Owner Trustee shall
--------------------------
have knowledge of a Default or an Event of Default, the Owner Trustee shall give
to the Owner Participant prompt telephonic or telex notice thereof followed by
prompt confirmation thereof by certified mail, postage prepaid. Subject to the
terms of Section 5.03 hereof, the Owner Trustee shall take such action or shall
refrain from taking such action, with respect to such Default, Event of Default,
or any other event as the Owner Trustee shall be directed in writing by the
Owner Participant. For all purposes of this Trust Agreement, the Lease and the
other Operative Documents, in the absence of actual knowledge by a responsible
officer of the Corporate Trust Department of the Owner Trustee in his or her
capacity as such, the Owner Trustee shall not be deemed to have knowledge of a
Default or an Event of Default unless notified in writing by the Owner
Participant or the Lessee.
SECTION 5.02. Action Upon Instructions. Subject to the terms of
------------------------
Sections 5.01 and 5.03 hereof, upon the written instructions at any time and
from time to time of the Owner Participant, the Owner Trustee will take such of
the following actions as may be specified in such instructions: (i) give such
notice or direction or exercise such right, remedy or power hereunder or under
any of the Operative Documents to which the Owner Trustee is a party or in
respect of all or any part of the Trust Estate, or take such other action, as
shall be specified in such instructions; (ii) take such action to preserve or
protect the Trust Estate (including the discharge of Liens) as may be specified
in such instructions; (iii) approve as satisfactory to it all matters required
by the terms of the Lease or the other Operative Documents to be satisfactory to
the Owner Trustee, it being understood that without written instructions of the
Owner Participant, the Owner Trustee shall not approve any such matter as
satisfactory to it; (iv) subject to the rights of the Lessee under the Operative
Documents, after the expiration or earlier termination of the Lease, retain,
lease or otherwise dispose of, or from time to time take such other action with
respect to, the Aircraft and Airframe N608FF on such terms as shall be
designated in such instructions; and (v) take or refrain from taking such other
action or actions as may be specified in such instructions.
5
<PAGE>
[Trust Agreement]
SECTION 5.03. Indemnification. The Owner Trustee shall not be
---------------
required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof if the Owner Trustee shall
reasonably believe such action is not adequately indemnified by the Owner
Participant under Section 7.01 hereof, unless the Owner Participant agrees to
furnish such additional indemnity as shall reasonably be required, in manner and
form satisfactory to the Owner Trustee and, in addition to the extent not
otherwise paid pursuant to the provisions of the Lease, to pay the reasonable
compensation of the Owner Trustee for the services performed or to be performed
by it pursuant to such direction and any reasonable fees and disbursements of
counsel or agents employed by the Owner Trustee in connection therewith. The
Owner Trustee shall not be required to take any action under Section 5.01 or
5.02 hereof if the Owner Trustee shall reasonably determine, or shall have been
advised by counsel, that such action is contrary to the terms of any of the
Operative Documents to which the Owner Trustee is a party, or is otherwise
contrary to law.
SECTION 5.04. No Duties Except as Specified in Trust Agreement or
---------------------------------------------------
Instructions. The Owner Trustee shall not have any duty or obligation to
- ------------
manage, control, use, sell, dispose of or otherwise deal with the Aircraft or
Airframe N608FF or any other part of the Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with any of the Operative
Documents to which the Owner Trustee is a party, except as expressly required by
the terms of any of the Operative Documents to which the Owner Trustee is a
party, or as expressly provided by the terms hereof or in a written instruction
from the Owner Participant received pursuant to the terms of Section 5.01 or
5.02, and no implied duties or obligations shall be read into this Trust
Agreement against the Owner Trustee. FSB agrees that it will, in its individual
capacity and at its own cost or expense (but without any right of indemnity in
respect of any such cost or expense under Section 7.01 hereof), promptly take
such action as may be necessary to duly discharge and satisfy in full all Lessor
Liens attributable to it in its individual capacity which it is required to
discharge pursuant to the Lease and otherwise comply with the terms of said
Section binding upon it.
SECTION 5.05. Satisfaction of Conditions Precedent. Anything herein to
------------------------------------
the contrary notwithstanding, the Owner Trustee shall comply with the provisions
of Section 3.01 hereof (subject to the satisfaction of special counsel for the
Owner Trustee of the occurrence of all the applicable conditions precedent
specified in Section 3.02 hereof).
SECTION 5.06. No Action Except Under Specified Documents or
---------------------------------------------
Instruction. The Owner Trustee agrees that it will not manage, control, use,
- -----------
sell, dispose of or otherwise deal with the Aircraft or Airframe N608FF or any
other part of the Trust
6
<PAGE>
[Trust Agreement]
Estate except (i) as expressly required by the terms of any of the Operative
Documents to which the Owner Trustee is a party, (ii) as expressly provided by
the terms hereof, or (iii) as expressly provided in written instructions from
the Owner Participant pursuant to Section 5.01 or 5.02 hereof.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01. Acceptance of Trusts and Duties. FSB accepts the
-------------------------------
trusts hereby created and agrees to perform the same but only upon the terms
hereof applicable to it. The Owner Trustee also agrees to receive and disburse
all monies received by it constituting part of the Trust Estate upon the terms
hereof. FSB shall not be answerable or accountable under any circumstances,
except (a) for its own willful misconduct or gross negligence, (b) its failure
(in its individual capacity) to perform its obligations under the last sentence
of Section 5.04 hereof and the first sentence of Section 5.01 hereof, (c) for
its or the Owner Trustee's failure to use ordinary care to disburse funds or to
comply with the first sentence of Section 6.08 hereof and (d) for liabilities
that may result from the inaccuracy of any representation or warranty of it in
its individual capacity (or from the failure by it in its individual capacity to
perform any covenant) in Section 6.03 hereof or in Section 4 of the Lease or
elsewhere in any of the Operative Agreements.
SECTION 6.02. Absence of Certain Duties. Except in accordance with
-------------------------
written instructions furnished pursuant to Section 5.02 hereof and except as
provided in, and without limiting the generality of, Sections 3.01 and 5.04
hereof and the last sentence of Section 9.01(b) hereof, neither the Owner
Trustee nor FSB shall have any duty (i) to see to any recording or filing of any
Operative Document or of any supplement to any thereof or to see to the
maintenance of any such recording or filing or any other filing of reports with
the Federal Aviation Administration or other governmental agencies, except that
FSB in its individual capacity agrees to comply with the Federal Aviation
Administration reporting requirements set forth in 14 CFR (S) 47.45 and 14 CFR
(S) 47.51, and the Owner Trustee shall, to the extent that information for that
purpose is timely supplied by Lessee pursuant to any of the Operative Documents,
complete and timely submit (and furnish the Owner Participant with a copy of)
any and all reports relating to the Aircraft and Airframe N608FF which may from
time to time be required by the Federal Aviation Administration or any
government or governmental authority having jurisdiction, (ii) to see to any
insurance on the Aircraft and Airframe N608FF or to effect or maintain any such
insurance, whether or not Lessee shall be in default with respect thereto, other
than to forward to the Owner Participant copies of all reports and other written
information which the Owner
7
<PAGE>
[Trust Agreement]
Trustee receives from Lessee pursuant to Section 11 of the Lease, (iii) to see
to the payment or discharge of any tax, assessment or other governmental charge
or any lien or encumbrance of any kind owing with respect to, assessed or levied
against any part of the Trust Estate, or (iv) to inspect Lessee's books and
records with respect to the Aircraft and Airframe N608FF at any time permitted
pursuant to the Lease. Notwithstanding the foregoing, the Owner Trustee will
furnish to the Owner Participant, promptly upon receipt thereof, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished to the Owner Trustee under the Lease
or any other Operative Document except to the extent to which a responsible
officer of the Owner Trustee reasonably believes (and confirms by telephone call
with the Owner Participant) that duplicates or copies thereof have already been
furnished to the Owner Participant by some other person.
SECTION 6.03. No Representations or Warranties as to Certain Matters.
------------------------------------------------------
NEITHER THE OWNER TRUSTEE NOR FSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE OF EITHER AIRCRAFT OR AIRFRAME N608FF OR ANY PART THEREOF, AS
TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR ANY
OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO EITHER
AIRCRAFT OR AIRFRAME N608FF OR ANY PART THEREOF WHATSOEVER, except that FSB in
its individual capacity warrants that on the Delivery Date the Owner Trustee
shall have received whatever title was conveyed to it by Tower and that the
Aircraft and Airframe N608FF shall during the Term be free of Lessor Liens
attributable to FSB in its individual capacity, or (b) any representation or
warranty as to the validity, legality or enforceability of this Trust Agreement
or any Operative Document to which the Owner Trustee is a party, or any other
document or instrument, or as to the correctness of any statement contained in
any thereof except to the extent that any such statement is expressly made
herein or therein by such party as a representation by the Owner Trustee or by
FSB in its individual capacity, as the case may be, and except that FSB in its
individual capacity hereby represents and warrants that this Trust Agreement has
been, and (assuming due authorization, execution and delivery by the Original
Owner Participant of this Trust Agreement) the Operative Documents to which it
or the Owner Trustee is a party have been (or at the time of execution and
delivery of any such instrument by it or the Owner Trustee hereunder that such
an instrument will be) duly executed and delivered by one of its officers who is
or will be, as the case may be, duly authorized to execute and deliver such
instruments on behalf of itself or the Owner Trustee, as the case may be, and
that the Trust Agreement constitutes the legal, valid and binding obligation of
FSB or the Owner Trustee, as the case may be,
8
<PAGE>
[Trust Agreement]
enforceable against FSB or the Owner Trustee, as the case may be, in accordance
with its terms.
SECTION 6.04. No Segregation of Monies; Interest. Monies received by
----------------------------------
the Owner Trustee hereunder need not be segregated in any manner except to the
extent provided by law, and shall be invested as provided in Section 4.02
hereof.
SECTION 6.05. Reliance Upon Certificates, Counsel and Agents. The
----------------------------------------------
Owner Trustee shall incur no liability to anyone in acting in good faith in
reliance upon and in accordance with any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper reasonably believed by it to be genuine and reasonably
believed by it to be signed by the proper party or parties. Unless other
evidence in respect thereof is specifically prescribed herein, any request,
direction, order or demand of the Owner Participant or Lessee mentioned herein
or in any of the Operative Documents to which the Owner Trustee is a party shall
be sufficiently evidenced by written instruments signed by a person purporting
to be the Chairman of the Board, the President, any Vice President or any other
officer and in the name of the Owner Participant or Lessee, as the case may be.
The Owner Trustee may accept a copy of a resolution of the Board of Directors or
Executive Committee of Lessee, certified by the Secretary or an Assistant
Secretary of Lessee as duly adopted and in full force and effect, as conclusive
evidence that such resolution has been duly adopted by said Board or Committee
and that the same is in full force and effect. As to any fact or matter the
manner of ascertainment of which is not specifically described herein, the Owner
Trustee may for all purposes hereof rely on a certificate signed by a person
purporting to be the Chairman of the Board, the President, any Vice President or
any other officer of Lessee, as to such fact or matter, and such certificate
shall constitute full protection to the Owner Trustee for any action taken or
omitted to be taken by it in good faith in reliance thereon and in accordance
therewith. In the administration of trusts hereunder, the Owner Trustee may
execute any of the trusts or powers hereof and perform its powers and duties
hereunder directly or through agents or attorneys and may, at the expense of the
Trust Estate, consult with counsel, accountants and other skilled persons to be
selected and employed by it. The Owner Trustee shall not be liable for anything
done, suffered or omitted in good faith by it in accordance with the advice or
opinion of any such counsel, accountants or other skilled persons and the Owner
Trustee shall not be liable for the negligence of any such counsel, accountant
or other skilled person appointed by it with due care hereunder.
SECTION 6.06. Not Acting in Individual Capacity. In acting
---------------------------------
hereunder, the Owner Trustee acts solely as trustee and not in its individual
capacity except as otherwise expressly provided herein; and, except as may be
otherwise expressly provided in this Trust Agreement or in the Lease, all
persons having any claim against the Owner Trustee by
9
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[Trust Agreement]
reason of the transactions contemplated hereby shall look only to the Trust
Estate for payment or satisfaction thereof except to the extent the Owner
Trustee shall expressly agree otherwise in writing.
SECTION 6.07. Fees; Compensation. The Owner Trustee shall be
------------------
entitled to receive compensation, reasonable as regards its responsibilities
hereunder, together with reimbursement within thirty (30) days of its request
for all reasonable expenses incurred or made by it in accordance with any of the
provisions of this Trust Agreement or any other Operative Document (including
the reasonable compensation and the expenses of its counsel, accountants or
other skilled persons and of all other persons not regularly in its employ). If
an Event of Default shall occur and be continuing or if the Lease is declared to
be in default, the Owner Trustee shall be entitled to receive compensation,
reasonable as regards its additional responsibilities hereunder, and payment or
reimbursement for its expenses as provided above. The Owner Participant shall
be required to pay the fees of the Owner Trustee comprising the compensation and
reimbursement of expenses to which the Owner Trustee is entitled under this
Section 6.07, provided that the Owner Trustee shall have a Lien upon the Trust
Estate for any such fee not paid by the Owner Participant as contemplated by
this Section 6.07 and such Lien shall entitle the Owner Trustee to priority as
to payment thereof over payment to any other Person under this Trust Agreement.
SECTION 6.08. Tax Returns. The Owner Trustee shall be responsible
-----------
for the keeping of all appropriate books and records relating to the receipt and
disbursement of all monies under this Trust Agreement or any agreement
contemplated hereby. The Owner Participant shall be responsible for causing to
be prepared and filed all income tax returns required to be filed by the Owner
Participant. The Owner Trustee shall be responsible for causing to be prepared,
at the request and expense of the Owner Participant, all income tax returns
required to be filed with respect to the trust created hereby and shall execute
and file such returns. Owner Participant, upon request, will furnish the Owner
Trustee with all such information as may be reasonably required from the Owner
Participant in connection with the preparation of such income tax returns.
ARTICLE VII
INDEMNIFICATION OF FIRST SECURITY BANK
BY OWNER PARTICIPANT
SECTION 7.01. Owner Participant to Indemnify First Security Bank.
--------------------------------------------------
The Owner Participant hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and hereby
indemnifies, protects,
10
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[Trust Agreement]
saves and keeps harmless FSB in its individual capacity and its successors,
assigns, legal representatives, agents and servants, from and against any and
all liabilities, obligations, losses, damages, penalties, taxes (excluding any
taxes payable by FSB in its individual capacity on or measured by any
compensation received by FSB in its individual capacity for its services
hereunder), claims, actions, suits, costs, expenses or disbursements (including,
without limitation, reasonable legal fees and expenses, and including without
limitation any liability of an owner, any strict liability and any liability
without fault) of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against FSB in its individual capacity in any way
relating to or arising out of this Trust Agreement or any of the Operative
Documents or the enforcement of any of the terms of any thereof, or in any way
relating to or arising out of the manufacture, purchase, acceptance,
nonacceptance, rejection, ownership, delivery, lease, possession, use,
operation, condition, sale, return or other disposition of either Aircraft or
Airframe N608FF or any part thereof (including, without limitation, latent and
other defects, whether or not discoverable, and any claim for patent, trademark
or copyright infringement), or in any way relating to or arising out of the
administration of the Trust Estate or the action or inaction of the Owner
Trustee or FSB in its individual capacity hereunder, except (a) in the case of
willful misconduct or gross negligence on the part of the Owner Trustee or FSB
in its individual capacity in the performance or nonperformance of its duties
hereunder or under any of the other Operative Documents to which the Owner
Trustee is a party or (b) those resulting from the inaccuracy of any
representation or warranty of FSB in its individual capacity (or from the
failure of FSB in its individual capacity to perform any of its covenants) in
Section 6.03 hereof and in the Lease, or elsewhere in any of the Operative
Documents or (c) as may result from a breach by FSB in its individual capacity
of its covenant in the last sentence of Section 5.04 hereof or (d) in the case
of the failure to use ordinary care on the part of the Owner Trustee or FSB in
its individual capacity in the disbursement of funds or in compliance with the
provisions of the first sentence of Section 6.08 hereof or (e) Expenses (as
defined in Section 16(c)(i) of the Lease) arising under any circumstances or
upon any terms where Lessee would not have been required to indemnify the Owner
Trustee in its individual capacity pursuant to the Lease (disregarding for
purposes of this Section 7.01, the penultimate sentence of Section 16(c)(i) of
the Lease). The indemnities contained in this Section 7.01 extend to FSB only
in its individual capacity and shall not be construed as indemnities of the
Trust Estate (except to the extent, if any, that FSB in its individual capacity
has been reimbursed by the Trust Estate for amounts covered by the indemnities
contained in this Section 7.01). The indemnities contained in this Section 7.01
shall survive the termination of this Trust Agreement.
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[Trust Agreement]
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01. Transfer of Interests. If there is more than one Owner
---------------------
Participant, no assignment, conveyance or other transfer by an Owner Participant
of any of its right, title or interest in and to this Trust Agreement or the
Trust Estate shall be valid unless each other Owner Participant's prior written
consent (which consent may be withheld in the sole discretion of such other
Owner Participants) is given to such assignment, conveyance or other transfer.
SECTION 8.02. Actions of the Owner Participants. If at any time
---------------------------------
prior to the termination of this Trust Agreement there is more than one Owner
Participant, then, subject to Section 11.05 hereof, during such time, if any
action is required to be taken by all Owner Participants and whenever any
direction, authorization, approval, consent, instruction, or other action is
permitted to be given or taken by the Owner Participant it shall be given or
taken only upon unanimous agreement of all Owner Participants; provided,
however, that the termination of this Trust Agreement pursuant to Section 11.01
hereof may be effected upon the election of any Owner Participant.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01. Resignation of Owner Trustee; Appointment of Successor.
------------------------------------------------------
(a) Resignation or Removal. The Owner Trustee or any successor Owner
----------------------
Trustee may resign at any time without cause by giving at least 60 days' prior
written notice to the Owner Participant, such resignation to be effective upon
the acceptance of appointment by the successor Owner Trustee under Section
9.01(b) hereof. In addition, the Owner Participant may at any time remove the
Owner Trustee with cause by a notice in writing delivered to the Owner Trustee
and Lessee, such removal to be effective upon the acceptance of appointment by
the successor Owner Trustee under Section 9.01(b) hereof. In the case of the
resignation or removal of the Owner Trustee, the Owner Participant may appoint a
successor Owner Trustee by an instrument signed by the Owner Participant. If a
successor Owner Trustee shall not have been appointed within 30 days after such
notice of resignation or removal, the Owner Trustee may apply to any court of
competent jurisdiction to appoint a successor Owner Trustee to act until such
time, if any, as a successor shall have been appointed as above provided. Any
successor Owner Trustee so appointed by
12
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[Trust Agreement]
such court shall immediately and without further act be superseded by any
successor Owner Trustee appointed as above provided.
(b) Execution and Delivery of Documents, etc. Any successor Owner
----------------------------------------
Trustee, however appointed, shall execute and deliver to the predecessor Owner
Trustee an instrument accepting such appointment, and thereupon such successor
Owner Trustee, without further act, shall become vested with all the estates,
properties, rights, powers, duties and trusts of the predecessor Owner Trustee
in the trusts hereunder with like effect as if originally named the Owner
Trustee herein; but nevertheless, upon the written request of such successor
Owner Trustee, such predecessor Owner Trustee shall execute and deliver an
instrument transferring to such successor Owner Trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers and trusts of such
predecessor Owner Trustee, and such predecessor Owner Trustee shall duly assign,
transfer, deliver and pay over to such successor Owner Trustee all monies or
other property then held by such predecessor Owner Trustee upon the trusts
herein expressed. Upon the appointment of any successor Owner Trustee
hereunder, the predecessor Owner Trustee will execute such documents as are
provided to it by such successor Owner Trustee and will take such further
actions as are requested of it by such successor Owner Trustee as are reasonably
required to cause registration of the Aircraft included in the Trust Estate to
be transferred upon the records of the Federal Aviation Administration, or other
governmental authority having jurisdiction, into the name of the successor Owner
Trustee.
(c) Qualifications. Any successor Owner Trustee, however appointed,
--------------
shall be a "citizen of the United States" within the meaning of 49 U.S.C. (S)
40102(a)(15) and shall also be a bank or trust company organized under the laws
of the United States or any state thereof having a combined capital and surplus
of at least $50,000,000, if there be such an institution willing, able and
legally qualified to perform the duties of the Owner Trustee hereunder upon
reasonable or customary terms. No such successor trustee shall charge fees for
its services as an Owner Trustee in excess of the then prevailing market rates
for such services.
(d) Merger, etc. Any corporation into which FSB may be merged or
-----------
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which FSB shall be a party, or
any corporation to which substantially all the corporate trust business of FSB
may be transferred, shall, subject to the terms of Section 9.01(c) hereof, be
the Owner Trustee hereunder without further act.
SECTION 9.02. Co-Trustees and Separate Trustees. If at any time it
---------------------------------
shall be necessary or prudent in order to conform to any law of any jurisdiction
in which all or any part of the Trust Estate is located, or the Owner Trustee
being advised by counsel shall
13
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[Trust Agreement]
determine that it is so necessary or prudent in the interest of the Owner
Participant or the Owner Trustee, or the Owner Trustee shall have been directed
to do so by the Owner Participant, the Owner Trustee and the Owner Participant
shall execute and deliver an agreement supplemental hereto and all other
instruments and agreements necessary or proper to constitute another bank or
trust company or one or more persons (any and all of which shall be a "citizen
of the United States" as defined in 49 U.S.C. (S) 40102(a)(15)) approved by the
Owner Trustee and the Owner Participant, either to act as co-trustee, jointly
with the Owner Trustee, or to act as separate trustee hereunder (any such co-
trustee or separate trustee being herein sometimes referred to as an "additional
trustee"). In the event the Owner Participant shall not have joined in the
execution of such agreements supplemental hereto within ten days after the
receipt of a written request from the Owner Trustee so to do, or in case an
Event of Default shall occur and be continuing, the Owner Trustee may act under
the foregoing provisions of this Section 9.02 without the concurrence of the
Owner Participant; and the Owner Participant hereby appoints the Owner Trustee
its agent and attorney-in-fact to act for it under the foregoing provisions of
this Section 9.02 in either of such contingencies.
Every additional trustee hereunder shall, to the extent permitted by
law, be appointed and act, and the Owner Trustee and its successors shall act,
subject to the following provisions and conditions:
(A) All powers, duties, obligations and rights conferred upon the
Owner Trustee in respect of the custody, control and management of monies,
the Aircraft, Airframe N608FF or documents authorized to be delivered
hereunder shall be exercised solely by the Owner Trustee;
(B) All other rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred or imposed upon and
exercised or performed by the Owner Trustee and such additional trustee
jointly, except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed (including the holding
of title to the Trust Estate) the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations shall be exercised and performed by such
additional trustee;
(C) No power given to, or which it is provided hereby may be
exercised by, any such additional trustee shall be exercised hereunder by
such additional trustee, except jointly with, or with the consent in
writing of, the Owner Trustee;
14
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[Trust Agreement]
(D) No trustee hereunder shall be personally liable by reason of any
action or omission of any other trustee hereunder; and
(E) The Owner Participant, at any time, by an instrument in writing
may remove any such additional trustee. In the event that the Owner
Participant shall not have joined in the execution of any such instrument
within ten days after the receipt of a written request from the Owner
Trustee so to do, the Owner Trustee shall have the power to remove any such
additional trustee without the concurrence of the Owner Participant; and
the Owner Participant hereby appoints the Owner Trustee its agent and
attorney-in-fact for it in such connection in such contingency.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER DOCUMENTS
SECTION 10.01. Supplements and Amendments and Delivery Thereof.
-----------------------------------------------
(a) Supplements and Amendments. This Trust Agreement may not be
--------------------------
amended, supplemented or otherwise modified except by an instrument in writing
signed by the Owner Trustee and the Owner Participant. Subject to Section 10.02
hereof, the Owner Trustee will execute any amendment, supplement or other
modification of this Trust Agreement or of any other Operative Documents to
which the Owner Trustee is a party which it is requested to execute by the Owner
Participant, except that the Owner Trustee shall not execute any such amendment,
supplement or other modification which, by the express provisions of any of the
above documents, requires the consent of any other party unless such consent
shall have been obtained.
(b) Delivery of Amendments and Supplements to Certain Parties. A
---------------------------------------------------------
signed copy of each amendment or supplement referred to in Section 10.01(a)
hereof to which Lessee is not a party shall be delivered promptly by the Owner
Trustee to the Lessee.
SECTION 10.02. Discretion as to Execution of Documents. Prior to
---------------------------------------
executing any document required to be executed by it pursuant to the terms of
Section 10.01 hereof, the Owner Trustee shall be entitled to receive an opinion
of its counsel to the effect that the execution of such document is authorized
hereunder. If in the opinion of the Owner Trustee any such document adversely
affects any right, duty, immunity or indemnity in favor of the Owner Trustee
hereunder or under any other Operative Document to which
15
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[Trust Agreement]
the Owner Trustee is a party, the Owner Trustee may in its discretion decline to
execute such document.
SECTION 10.03. Absence of Requirements as to Form. It shall not be
----------------------------------
necessary for any written request furnished pursuant to Section 10.01 hereof to
specify the particular form of the proposed documents to be executed pursuant to
such Section, but it shall be sufficient if such request shall indicate the
substance thereof.
SECTION 10.04. Distribution of Documents. Promptly after the
-------------------------
execution by the Owner Trustee of any document entered into pursuant to Section
10.01 hereof, the Owner Trustee shall mail, by certified mail, postage prepaid,
a conformed copy thereof to the Owner Participant, but the failure of the Owner
Trustee to mail such conformed copy shall not impair or affect the validity of
such document.
SECTION 10.05. No Request Needed as to Lease Supplement and Trust
--------------------------------------------------
Supplement. No written request pursuant to Section 10.01 hereof shall be
- ----------
required to enable the Owner Trustee to enter into the Lease Supplement covering
either Aircraft or Airframe N608FF with Lessee pursuant to the terms of the
Lease and Section 3.01 hereof and the Trust Supplement pursuant to the terms of
Section 3.01 hereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Termination of Trust Agreement. This Trust Agreement
------------------------------
and the trusts created hereby shall be of no further force or effect upon the
earlier of (a) the sale or other final disposition by the Owner Trustee of all
property constituting part of the Trust Estate and the final distribution by the
Owner Trustee of all monies or other property or proceeds constituting part of
the Trust Estate in accordance with Article IV hereof, provided that at such
time Lessee shall have fully complied with all of the terms of the Lease, or (b)
twenty-one years less one day after the death of the last survivor of all of the
descendants of the grandparents of David C. Rockefeller living on the date of
the earliest execution of this Trust Agreement by any party hereto, but if this
Trust Agreement and the trusts created hereby shall be or become authorized
under applicable law to be valid for a period commencing on the 21st anniversary
of the death of such last survivor (or, without limiting the generality of the
foregoing, if legislation shall become effective providing for the validity of
this Trust Agreement and the trusts created hereby for a period in gross
exceeding the period for which this Trust Agreement and the trusts created
hereby are hereinabove stated to extend and be valid), then this Trust Agreement
and the trusts created
16
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[Trust Agreement]
hereby shall not terminate under this subsection (b) but shall extend to and
continue in effect, but only if such non-termination and extension shall then be
valid under applicable law, until the day preceding such date as the same shall,
under applicable law, cease to be valid; otherwise this Trust Agreement and the
trusts created hereby shall continue in full force and effect in accordance with
the term hereof. Except as expressly set forth in this Section 11.01, this
Trust Agreement and the trusts created hereby may not be revoked by the Owner
Participant.
SECTION 11.02. Owner Participant Has No Legal Title in Trust Estate.
----------------------------------------------------
No Owner Participant shall have legal title to any part of the Trust Estate. No
transfer, by operation of law or otherwise, of any right, title and interest of
the Owner Participant in and to the Trust Estate hereunder shall operate to
terminate this Trust Agreement or the trusts hereunder or entitle any successors
or transferees of the Owner Participant to an accounting or to the transfer of
legal title to any part of the Trust Estate.
SECTION 11.03. Assignment, Sale, etc. of Aircraft and Airframe
-----------------------------------------------
N608FF. Any assignment, sale, transfer or other conveyance of either Aircraft or
Airframe N608FF or any part thereof by the Owner Trustee made pursuant to the
terms hereof or of the Lease shall bind the Owner Participant and shall be
effective to transfer or convey all right, title and interest of the Owner
Trustee and the Owner Participant in and to either Aircraft, Airframe N608FF or
such part so assigned, sold, transferred or conveyed. No purchaser or other
grantee shall be required to inquire as to the authorization, necessity,
expediency or regularity of such assignment, sale, transfer or conveyance or as
to the application of any sale or other proceeds with respect thereto by the
Owner Trustee.
SECTION 11.04. Trust Agreement for Benefit of Certain Parties Only.
---------------------------------------------------
Except for the terms of Article VIII hereof and except as otherwise provided in
Article IX and Sections 5.01, 6.07, 10.01 and 11.01 hereof, nothing herein,
whether expressed or implied, shall be construed to give any person other than
the Owner Trustee and the Owner Participant any legal or equitable right, remedy
or claim under or in respect of this Trust Agreement; but this Trust Agreement
shall be held to be for the sole and exclusive benefit of the Owner Trustee and
the Owner Participant.
SECTION 11.05. Citizenship of the Owner Participant. If at any time
------------------------------------
there shall be more than one Owner Participant, then any Owner Participant who
shall cease to be a "citizen of the United States" as defined in 49 U.S.C. (S)
40102(a)(15) shall have no voting or similar rights hereunder and shall have no
right to direct, influence or limit the exercise of, or to prevent the direction
or influence of, or place any limitation on the exercise of, the Owner Trustee's
authority or to remove the Owner Trustee.
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[Trust Agreement]
SECTION 11.06. Notices. All notices, demands, instructions and other
-------
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by facsimile, or by prepaid
courier service, and shall be deemed to be given for purposes of this Agreement
on the day that such writing is delivered or, if sent by registered or certified
mail, three Business Days after being deposited in the mails addressed to the
intended recipient thereof in accordance with the provisions of this Section
11.06. Unless otherwise specified in a notice sent or delivered in accordance
with the foregoing provisions of this Section 11.06, notices, demands,
instructions and other communications in writing shall be given to or made upon
the respective parties hereto at their respective addresses (or to their
respective facsimile numbers) as follows: (A) if to Lessee, the Owner Trustee or
the Original Owner Participant, to the respective addresses set forth in the
Lease, or (B) if to a Subsequent Owner Participant, addressed to such Subsequent
Owner Participant at such address as such Subsequent Owner Participant shall
have furnished by notice to the parties hereto.
SECTION 11.07. Severability. Subject to Sections 11.06 and 11.12
------------
hereof, any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.08. Waivers, etc. No term or provision hereof may be
-------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing entered into in compliance with the terms of Article X hereof; and any
waiver of the terms hereof shall be effective only in the specific instance and
for the specific purpose given.
SECTION 11.09. Counterparts. This Trust Agreement may be executed by
------------
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.10. Binding Effect, etc. All covenants and agreements
--------------------
contained herein shall be binding upon, and inure to the benefit of, the Owner
Trustee and its successors and assigns, and the Original Owner Participant, its
successors and, to the extent permitted by Article VIII hereof, its assigns.
Any request, notice, direction, consent, waiver or other instrument or action by
an Owner Participant shall bind its successors and assigns.
18
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[Trust Agreement]
SECTION 11.11. Headings; References. The headings of the various
--------------------
Articles and Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof.
SECTION 11.12. Governing Law. THIS TRUST AGREEMENT SHALL IN ALL
-------------
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF UTAH, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
ARTICLE XII
CERTAIN LIMITATIONS
SECTION 12.01. Limitations on Control. Notwithstanding any other
----------------------
provision of this Trust Agreement, but subject to the other provisions of this
Article XII, from and after the Delivery Date and until termination of this
Trust Agreement, (i) the Owner Participant shall not, except as otherwise
provided in the second sentence of Section 5.01, have any voting rights or other
rights to direct the Owner Trustee in connection with matters involving the
ownership and operation of either Aircraft, Airframe N608FF or any part thereof
by the Owner Trustee (collectively, "Control Rights"), and (ii) the Owner
--------------
Trustee shall have absolute and complete discretion in all matters as to which
the Owner Participant otherwise would have had any Control Rights, but for the
provisions of this Article XII. Such discretion (x) is in addition to the
discretion given to the Owner Trustee under the other Sections of this Trust
Agreement, and (y) is expressly limited to the Control Rights that, but for the
provisions of this Article XII, would be held or exercisable by the Owner
Participant, and does not extend to any other rights, powers or privileges in
respect of the beneficial interest of the Owner Participant in the Trust Estate.
SECTION 12.02. Discretion and Actions of Owner Trustee.
---------------------------------------
(a) In exercising its discretion under this Article XII, the Owner
Trustee shall exercise its best judgment and shall not be liable for any action
taken or omitted hereunder, except for its gross negligence or willful
misconduct, and shall exercise the Control Rights in connection with all matters
involving the ownership and operation of the Aircraft and Airframe N608FF by the
Owner Trustee. The Owner Trustee shall not be required, and shall have no
power, duty or obligation, to exercise Control Rights in respect of any other
matters.
(b) Notwithstanding any other provisions hereof, in exercising any
Control Rights pursuant to this Article XII in connection with all matters
involving the
19
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[Trust Agreement]
ownership or operation of the Aircraft and Airframe N608FF by the Owner Trustee,
the Owner Trustee shall be free of any kind of control by the Owner Participant
and shall exercise the Control Rights as it in its discretion shall deem
necessary to protect the interests of the United States, notwithstanding any
countervailing interests of any foreign power which may, or whose citizens may,
have a direct or indirect interest in the Owner Participant and any such action
by the Owner Trustee shall not be considered malfeasance or in breach of any
obligation which the Owner Trustee might otherwise have to the Owner
Participant, provided, however, that subject to the foregoing limitations, the
-------- -------
Owner Trustee shall exercise its discretion in all matters involving the
ownership and operation of the Aircraft and Airframe N608FF by the Owner Trustee
with due regard for the interests of the Owner Participant. The Owner Trustee,
promptly after each exercise of any Control Rights hereunder, shall notify the
Owner Participant of the exercise thereof.
(c) The Owner Trustee agrees that it shall not without the prior
written consent of the Owner Participant (i) dissolve or amend the Trust
Agreement, (ii) sell, mortgage, pledge or otherwise dispose of all or any part
of the Trust Estate, including the Aircraft, Airframe N608FF and the Lease,
(iii) transfer any portion of the Owner Participant's beneficial interest in the
Trust Estate to any other person, or (iv) amend or modify the Lease or any other
Operative Agreement, or grant any waivers of any terms thereof or give any
consents thereunder.
SECTION 12.03. Payments. Notwithstanding any other provision of this
--------
Article XII, the Owner Participant shall be entitled to receive from the Owner
Trustee or otherwise all rent, payments or insurance proceeds and other payments
of whatsoever kind and nature payable to the Owner Participant pursuant to this
Trust Agreement or any other Operative Agreement in the same manner as if the
Control Rights had not been transferred to the Owner Trustee and held in trust
hereunder.
SECTION 12.04. Owner Trustee Acts as Trustee. Notwithstanding any
-----------------------------
other provision of this Trust Agreement, in exercising any Control Rights
pursuant to this Article XII, the Owner Trustee acts solely as trustee and not
in its individual capacity, and except as may be otherwise expressly provided in
Section 12.02 hereof, all persons having any claim against the Owner Trustee in
its individual capacity or as the Owner Trustee by reason of the transactions
contemplated by this Article XII shall not have any recourse to the Owner
Trustee in its individual capacity.
SECTION 12.05. Termination. The provisions of this Article XII shall
-----------
terminate upon the earliest of (i) the Aircraft ceasing to be registered under
the laws of the United States, or (ii) the Owner Participant becoming a citizen
of the United States, as defined in 49 U.S.C. (S) 40102(a)(15) as in effect on
the date hereof or on any subsequent
20
<PAGE>
[Trust Agreement]
date (a "U.S. Citizen"), or (iii) the termination of this Trust Agreement
pursuant to the provisions of Section 11.01 hereof.
SECTION 12.06. Amendments to Article XII. Notwithstanding any other
-------------------------
provision of this Trust Agreement, so long as the Aircraft and Airframe N608FF
shall be registered under the laws of the United States and so long as this
Article XII shall not have been terminated pursuant to Section 12.05 hereof,
this Article XII shall not be amended, supplemented or modified unless either
(i) the Owner Participant shall have become a U.S. Citizen, or (ii) the FAA
shall have concluded that such amendment, supplement or modification would not
cause the Aircraft or Airframe N608FF to be ineligible for registration in the
United States.
SECTION 12.07. Purpose. The purpose of this Article XII is to give
-------
the Owner Trustee the power to manage and control the Aircraft and Airframe
N608FF with respect to matters involving the ownership and operation of the
Aircraft and Airframe N608FF by the Owner Trustee so as to assure that the
Aircraft and Airframe N608FF shall be controlled with respect to such matters by
a U.S. Citizen, and that the Owner Trustee shall be able to give the affidavit
required by Section 47.7(c)(2)(iii) of the FAR, 14 C.F.R. (S) 47.7(c)(2)(iii).
This Article XII shall be construed in furtherance of, and the powers given to
the Owner Trustee thereby shall be construed no more broadly than is required
by, such purpose.
* * *
21
<PAGE>
[Trust Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Douglas Emerson
-----------------------------------
Title: Senior Credit Officer
--------------------------------
FIRST SECURITY BANK, NATIONAL ASSOCIATION
By: /s/ Greg Hawley
-----------------------------------
Title: Vice President
--------------------------------
22
<PAGE>
TRUST AGREEMENT SUPPLEMENT
This TRUST AGREEMENT SUPPLEMENT, dated October 11, 1996 (herein called the
"Trust Supplement") of FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee (herein called the "Owner
Trustee"), under the Trust Agreement, dated as of October 1, 1996 (the "Trust
Agreement"), between the Owner Trustee and the Owner Participant named therein.
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and delivery of one
or more supplements thereto substantially in the form hereof, which shall
particularly describe the Aircraft and Airframe N608FF (such term and other
terms defined in the Trust Agreement used herein as therein defined) included in
the property covered by the Trust Agreement;
WHEREAS, the Trust Agreement relates to Airframes and Engines described
below, and a counterpart of the Trust Agreement is attached hereto and made a
part hereof and this Trust Supplement is being filed on the date hereof with the
Federal Aviation Administration as one document:
AIRFRAME
Three Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------ -------------
<S> <C> <C> <C>
The Boeing Company 747-282B N610FF 20501
The Boeing Company 747-282B N611FF 20502
The Boeing Company 747-131 N608FF 19672
</TABLE>
together with all Parts of whatever nature, which are from time to time
incorporated or installed in or attached to said aircraft.
<PAGE>
AIRCRAFT ENGINES
Eight aircraft engines, each such engine having 750 or more rated
take-off horsepower or the equivalent thereof, identified as follows:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
------------ ----- --------------
<S> <C> <C>
Pratt & Whitney JT9D-7A 685648
Pratt & Whitney JT9D-7A 686063
Pratt & Whitney JT9D-7A 663074
Pratt & Whitney JT9D-7A 662750
Pratt & Whitney JT9D-7A 685769
Pratt & Whitney JT9D-7A 685773
Pratt & Whitney JT9D-7A 685694
Pratt & Whitney JT9D-7A 662359
</TABLE>
together with all Parts of whatever nature, which are from time to time
incorporated or installed in or attached to such engines.
Together with (a) all substitutions, renewals and replacements of and
additions, improvements, accessions and accumulations to Airframe and Engines
(other than additions, improvements, accessions and accumulations which
constitute appliances, parts, instruments, appurtenances, accessories,
furnishings or other equipment excluded from the definition of Parts) and (b)
all logs, manuals and data and inspection, modification and overhaul records
maintained in respect of the Aircraft and Airframe N608FF, including the
Engines, including, without limitation, all such logs, manuals, data and records
required to be maintained by the FAA or by the applicable regulatory agency or
body of any other jurisdiction in which the Aircraft and Airframe N608FF may
then be registered in each case whether the Owner Trustee now has or shall
hereafter acquire an interest.
This Trust Supplement shall be construed as supplemental to the Trust
Agreement and shall form a part of each, and the Trust Agreement is hereby
incorporated by reference herein and each is hereby ratified, approved and
confirmed.
<PAGE>
AND, FURTHER, the Owner Trustee hereby acknowledges that the delivered
Aircraft referred to in this Trust Supplement and the aforesaid Lease Supplement
has been delivered to the Owner Trustee and is included in the property of the
Owner Trustee covered by all the terms and conditions of the Trust Agreement.
* * *
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this Trust Supplement
to be duly executed by one of its officers, thereunto duly authorized, on the
day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee
Owner Trustee
By: /s/ Greg Hawley
---------------------------
Title: Vice President
<PAGE>
Exhibit 10(9)
*
AIRCRAFT AND AIRFRAME PURCHASE AND SALE AGREEMENT
TOWER AIR, INC.
(Seller)
- and -
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely
as Owner Trustee
(Buyer)
In Respect of
Two Boeing Model 747-282B Aircraft
One Boeing Model 747-131 Airframe
and
Eight Pratt & Whitney Model JT9D-7A Engines
Dated as of October 1, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
1. DEFINITIONS AND INTERPRETATION........................................... 1
2. AGREEMENT TO SELL................................................. 4
3. DELIVERY AND ACCEPTANCE........................................... 4
4. PAYMENT OF DOWNPAYMENT............................................ 5
5. SELLER'S REPRESENTATIONS AND WARRANTIES........................... 6
6. CONDITIONS PRECEDENT.............................................. 9
7. WARRANTIES........................................................ 12
8. RISK.............................................................. 13
9. MISCELLANEOUS..................................................... 13
</TABLE>
Schedule 1 Filings
Schedule A Description of Aircraft and Airframe N608FF
Schedule B-1 Acceptance Certificate - Aircraft N610FF
Schedule B-2 Acceptance Certificate - Aircraft N611FF
Schedule B-3 Acceptance Certificate - Airframe N608FF
Schedule C-1 Warranty Bill of Sale - Aircraft N610FF
Schedule C-2 Warranty Bill of Sale - Aircraft N611FF
Schedule C-3 Warranty Bill of Sale - Airframe N608FF
Schedule D Delivery Conditions
i
<PAGE>
AIRCRAFT AND AIRFRAME PURCHASE AND SALE AGREEMENT
-------------------------------------------------
THIS AGREEMENT is dated as of the 1st day of October, 1996
BETWEEN:
TOWER AIR, INC., a corporation incorporated
under the laws of the State of Delaware
(hereinafter called the "Seller")
- and -
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association,
not individually, but solely as Owner Trustee
(hereinafter called the "Buyer")
WHEREAS the Seller desires to sell to the Buyer, and the Buyer desires to
purchase from the Seller, both Aircraft and Airframe N608FF as hereinafter
provided;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants herein contained and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
covenant and agree as follows:
1. DEFINITIONS AND INTERPRETATION
------------------------------
1.1 In this Agreement, unless the context otherwise requires:
"Acceptance Certificate" means, with respect to each Aircraft and Airframe
----------------------
N608FF, means an acceptance certificate issued by the Buyer to the Seller with
respect to such Aircraft or Airframe N608FF as provided in Clause 3
substantially in the form set forth as Schedules B-1, B-2 and B-3, respectively
(collectively referred to herein as the "Acceptance Certificates");
-----------------------
"Agreement" means this Aircraft and Airframe Purchase and Sale Agreement
---------
together with the recitals and schedules hereto (which form an integral part
hereof) as originally executed by the parties hereto;
"Aircraft" means, collectively, Aircraft N610FF and Aircraft N611FF (and
--------
where the context permits references to the "Aircraft" shall include the
Aircraft Documents) and, as the context requires, shall mean each Aircraft as a
whole and any part thereof;
<PAGE>
"Aircraft N610FF" means Airframe N610FF and its Engines (and where the
---------------
context permits references to "Aircraft N610FF" shall include the Aircraft
Documents) and, as the context requires, shall mean Aircraft N610FF as a whole
and any part thereof;
"Aircraft N611FF" means Airframe N611FF and its Engines (and where the
---------------
context permits references to "Aircraft N611FF" shall include the Aircraft
Documents) and, as the context requires, shall mean Aircraft N611FF as a whole
and any part thereof;
"Airframe" means, collectively, Airframe N608FF, Airframe N610FF and
--------
Airframe N611FF;
"Airframe N608FF" means the Boeing model 747-131 airframe described in
---------------
Schedule A-3 (excluding any engines from time to time installed thereon)
together with the APU, landing gear and any and all Parts incorporated thereon,
installed thereon or attached thereto on the Delivery Date;
"Airframe N610FF" means the Boeing model 747-282B airframe described in
---------------
Schedule A-1 excluding its Engines, but including the APU, landing gear and any
and all Parts incorporated thereon, installed thereon or attached thereto on the
Delivery Date;
"Airframe N611FF" means the Boeing model 747-282B airframe described in
---------------
Schedule A-2 excluding its Engines, but including the APU, landing gear and any
and all Parts incorporated thereon, installed thereon or attached thereto on the
Delivery Date;
"Delivery" or "Delivered" means, with respect to each Aircraft and Airframe
-------- ---------
N608FF, the time (Chicago time) at which the Buyer receives the Warranty Bills
of Sale with respect to such Aircraft or Airframe N608FF on the Delivery Date in
accordance with this Agreement;
"Delivery Date" means October 11, 1996 (Chicago time) or such other date as
-------------
may be mutually agreed in writing between the parties hereto;
"Dollars" and the sign "$" each means, unless otherwise specifically
------- -
indicated, the lawful currency of the United States of America;
"Downpayment" means the aggregate of Two Million Three Hundred Thousand
-----------
Dollars ($2,300,000) (in respect of Aircraft N610FF, Two Million Three Hundred
Thousand Dollars ($2,300,000), in respect of Aircraft N611FF and One Million
Four Hundred Thousand Dollars ($1,400,000), in respect of Airframe N608FF;
"Engine" or "Engines" means any one or more or all, as the context may
------ -------
require, of the four (4) Pratt & Whitney model JT9D-7A aircraft engines,
including all quick engine change kit components normally installed thereon,
which are designated as being parts of Aircraft N610FF or any one or more or
all, as the context may require, of the four (4) Pratt &
2
<PAGE>
Whitney model JT9D-7A aircraft engines which are designated as being parts of
Aircraft N611FF on the Delivery Date including all quick engine change kit
components normally installed thereon, in each case as identified in Schedules
A-1 and A-2, respectively, together with all Parts incorporated in, installed on
or attached to any such Engines on the Delivery Date;
"FAA" shall have the meaning set forth in the Lease;
---
"Lease" means the Operating Lease Agreement of even date herewith between
-----
the Buyer, as lessor, and the Seller, as lessee, in respect of the Aircraft and
Airframe N608FF;
"Technical Inspection" shall have the meaning set forth in Clause 3.4;
--------------------
"Warranties" means any and all conditions, warranties, guarantees,
----------
representations, service contracts, contracts to stock spare parts or other
agreements of any nature whatsoever, verbal or written, express or implied,
legal, statutory, conventional, collateral or otherwise, in respect of, or that
shall in any manner apply to, Aircraft N610FF, Aircraft N611FF, Airframe N608FF,
the Engines and the Parts; and
"Warranty Bills of Sale" means with respect to each Aircraft and Airframe
----------------------
N608FF, the bills of sale issued by the Seller to the Buyer as provided in
Clause 3 with respect to such Aircraft or Airframe N608FF substantially in the
form attached hereto as Schedules C-1, C-2 and C-3, respectively;
1.2 Capitalized terms used herein without definition shall have the
respective meanings set forth in the Lease.
1.3 The words "hereof", "herein" and "hereunder" and other words of
------ ------ ---------
similar import used in this Agreement refer to this Agreement as a whole and not
to any particular part of this Agreement.
1.4 The headings of Clauses of this Agreement and the Table of Contents
are inserted for ease of reference only and shall not in any way affect the
interpretation of this Agreement.
1.5 Where the context so requires, in this Agreement words importing the
singular only shall also include the plural and vice versa.
1.6 Reference herein to any applicable law or any document, instrument or
agreement means such applicable law or such document, instrument or agreement as
originally implemented or executed, or as modified, amended or supplemented from
time to time.
<PAGE>
1.7 Reference herein to "written" and "in writing" includes telexed and
------- ----------
telecopied communications.
1.8 Unless otherwise specifically stated, reference herein to any Recital,
Clause, subclause or Schedule is a reference to such Recital, Clause, subclause
or Schedule to or of this Agreement.
1.9 Reference herein to any party shall include its permitted successors
and assigns.
2. AGREEMENT TO SELL
-----------------
2.1 The Seller agrees to sell and the Buyer agrees to buy both Aircraft
and Airframe N608FF (including, without limitation, the Aircraft Documents) on
the Delivery Date upon and subject to the terms and conditions of this Agreement
for the Downpayment plus, subject to sellers satisfaction of the conditions set
forth in Clause 4.3 hereof, the Supplemental Airframe Payment and the
Supplemental Aircraft Payment.
3. DELIVERY AND ACCEPTANCE
-----------------------
3.1 Both Aircraft and Airframe N608FF shall be delivered and accepted and
made available to the Buyer pursuant hereto on the Delivery Date.
3.2 On the Delivery Date, subject to the terms and conditions of this
Agreement, the Buyer shall execute Acceptance Certificates with respect to
Aircraft N610FF, Aircraft N611FF and Airframe N608FF and deliver the same to the
Seller and contemporaneously therewith the Buyer shall pay to the Seller, or as
the Seller may direct, the Downpayment for the purchase of Aircraft N610FF,
Aircraft N611FF and Airframe N608FF against delivery to the Buyer of the
Warranty Bills of Sale. The delivery of the Acceptance Certificates, payment of
the Downpayment and delivery of the Warranty Bills of Sale with respect to
Aircraft N610FF, Aircraft N611FF and Airframe N608FF shall occur at the time set
forth in the respective Warranty Bills of Sale, whereupon title to and ownership
of Aircraft N610FF, Aircraft N611FF and Airframe N608FF, respectively, shall
pass from the Seller to the Buyer. Subject to Clause 4.2 hereof, Seller shall
deliver the Aircraft and Airframe N608FF to Buyer at such location or locations
as Seller may select, so long as each such location is acceptable to Buyer. All
costs incurred in connection with ferrying an Aircraft or Airframe N608FF to its
delivery location shall be for the Seller's account.
3.3 Execution and delivery of the Acceptance Certificates by the Buyer
shall evidence and constitute irrevocable, final and conclusive acceptance of
Aircraft N610FF, Aircraft N611FF and Airframe N608FF by the Buyer for all
purposes hereof and shall irrevocably confirm that Aircraft N610FF, Aircraft
N611FF and Airframe N608FF are satisfactory in all respects and comply with the
requirements of this Agreement.
4
<PAGE>
3.4 Prior to the Delivery of both Aircraft and Airframe N608FF, the Buyer
shall have conducted a technical inspection (the "Technical Inspection") of both
Aircraft and Airframe N608FF, including without limitation, an inspection of the
Aircraft Documents, at the Seller's maintenance center or at such other site as
mutually agreed, the purpose of such Technical Inspection to be to allow the
Buyer to determine whether each Aircraft and Airframe N608FF satisfy the
relevant Delivery Conditions set forth in Schedule D hereto.
4. PAYMENT OF DOWNPAYMENT
----------------------
4.1 Subject to the terms and conditions of this Agreement, the Downpayment
shall be paid by the Buyer to the Seller in such manner as the Seller shall
reasonably direct in writing and upon confirmation of receipt thereof, the
Seller shall deliver the Warranty Bills of Sale to the Buyer.
4.2 Subject to the second sentence of this Clause 4.2, all payments to be
made by the Buyer to the Seller under this Agreement shall be made in full,
without any set-off or counterclaim whatsoever or any deduction or withholding
for or in respect of Taxes. The Seller agrees to indemnify the Buyer, on an
after-tax basis, from and against any and all liability for Taxes which may
arise out of the sale of the Aircraft and Airframe N608FF by the Seller to the
Buyer hereunder.
4.3 The Seller shall (i) during the period commencing on the Delivery Date
and ending on or before December 24, 1996 (the ""D" Check Period - N608FF"),
accomplish, or cause to be accomplished a "D" Check maintenance visit (including
all necessary corrosion prevention and control program tasks, the AD mandated
Section 41 terminating actions and the AD mandated pylon modification
terminating actions) for Airframe N608FF and (ii) during the period commencing
on the Delivery Date and ending on or before April 30, 1997 (the ""D" Check
Period - N611FF"), accomplish, or cause to be accomplished a "D" Check
maintenance visit (including all necessary corrosion prevention and control
program tasks and the AD mandated pylon modification terminating actions) for
Aircraft N611FF (the maintenance activities in clauses (i) and (ii) being
referred to hereinafter as the ""D" Check Maintenance Visit N611FF" and the "D"
Check Maintenance Visit N608FF", respectively, and, collectively the ""D" Check
Maintenance Visits"). The "D" Check Maintenance Visits shall be accomplished
pursuant to the "D" Check Maintenance Agreements (as defined in Clause 6.1(v)
hereof). The Seller shall not change the workscope in any "D" Check Maintenance
Agreement without the Buyer's prior written consent.
Not later than ten days after the completion of each "D" Check Maintenance
Visit, the Seller shall provide written notice (each, an ""D" Check
Accomplishment Notice") setting forth in reasonable detail the "D" Check
Maintenance Visit which has been completed. The Seller shall attach to each "D"
Check Accomplishment Notice a copy of all invoices received from the maintenance
facility with respect to such completed "D" Check Maintenance Visit and such
other evidence of the completion of such "D" Check Maintenance Visit as the
Buyer
5
<PAGE>
may request. On the first Business Day of calendar month following receipt of
each "D" Check Accomplishment Notice, so long as (i) the Buyer shall have
inspected and found satisfactory the relevant "D" Check Maintenance Visit, (ii)
no Event of Default shall have occurred and be continuing, and (iii) the Seller
shall have suffered no significant degradation in its financial position or then
current financial outlook, both as determined by the Buyer in its sole
discretion, the Buyer shall pay the Seller (or, if the Seller has not yet paid
the maintenance facility's invoice for such "D" Check Maintenance Visit, the
Buyer shall pay the maintenance facility directly) as additional consideration
for the purchase of Aircraft N611FF or Airframe N608FF, as the case may be, (x)
in respect of the "D" Check Maintenance Visit N608FF, an amount not to exceed
50% of the Seller's actual cost to accomplish the "D" Check Maintenance Visit
N608FF, up to a maximum amount of $2,000,000, (the "Supplemental Airframe
Payment") and (y) in respect of the "D" Check Maintenance Visit N611FF, an
amount not to exceed 71% of the Seller's actual cost to accomplish the "D" Check
Maintenance Visit N611FF, up to a maximum amount of $2,125,000 (the
"Supplemental Aircraft Payment"); provided, however, if a "D" Check
Accomplishment Notice is received less than five Business Days prior to the end
of a calendar month, the Supplemental Airframe Payment or the Supplemental
Aircraft Payment, as the case may be, shall be paid on the first Business Day of
the succeeding second calendar month; provided, further, that if Buyer has
failed to inspect the relevant "D" Check Maintenance Visit in time to make the
relevant payment, then Buyer shall make such payment on the first Business Day
of the month following the month in which the Buyer makes such inspection.
5. SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
5.1 SUBJECT TO CLAUSE 5.3, THE SELLER SHALL NOT MAKE, GIVE OR BE DEEMED TO
HAVE MADE OR GIVEN, AND THE SELLER HEREBY EXPRESSLY DISCLAIMS, ANY
REPRESENTATION, WARRANTY OR GUARANTEE OF ANY KIND WHATSOEVER, EXPRESS OR
IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, MERCHANTABILITY,
DESIGN, OPERATION, SERVICEABILITY, OR FITNESS FOR USE FOR ANY PURPOSE OF THE
AIRCRAFT AND AIRFRAME N608FF OR ANY PART THEREOF, OR ANY OTHER REPRESENTATION,
WARRANTY OR GUARANTEE OF ANY KIND WHATSOEVER (ARISING BY LAW OR OTHERWISE),
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT AND AIRFRAME N608FF OR ANY PART
THEREOF, ANY IMPLIED WARRANTY ARISING FROM THE COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE OF TRADE, ANY IMPLIED WARRANTY OF FITNESS OR ANY OBLIGATION OR
LIABILITY OF THE SELLER ARISING IN CONTRACT OR TORT, WHETHER OR NOT ARISING FROM
THE NEGLIGENCE OF THE SELLER, ACTUAL OR IMPUTED, OR FOR LOSS OF USE, REVENUE OR
PROFIT WITH RESPECT TO THE AIRCRAFT AND AIRFRAME N608FF OR ANY PART THEREOF OR
ANY OTHER DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGE.
6
<PAGE>
5.2 Subject to Clause 5.3(c), the Aircraft and Airframe N608FF are being
sold by the Seller to the Buyer "AS IS, WHERE IS".
5.3 The Seller represents and warrants to the Buyer that:
(a) the Seller has good and marketable title to the Aircraft and
Airframe N608FF, free and clear of all Liens;
(b) upon Delivery, the Seller shall have validly conveyed to the
Buyer all the right, title and interest of the Seller in and to the Aircraft and
Airframe N608FF;
(c) upon Delivery:
(i) the Aircraft and Airframe N608FF shall each have a valid
certificate of airworthiness issued by the Aviation
Authority; and
(ii) the Aircraft and Airframe N608FF shall be in compliance
with Maintenance Program and shall otherwise be in the
condition required by the Lease;
(d) no event has occurred which constitutes, or with the giving of
notice and/or the lapse of time and/or a relevant determination would
constitute, a contravention of, or default under, any agreement or instrument by
which the Seller or any of its assets is bound or affected. No Default or Event
of Default has occurred or will occur solely as a result of the consummation of
the transactions contemplated hereby;
(e) no litigation, arbitration or administrative proceeding or claim
is presently in progress or pending or threatened against (or involving) the
Aircraft, Airframe N608FF or the transactions contemplated hereby or by the
other Operative Documents;
(f) the chief executive office and chief place of business (as such
terms are defined in Article 9 of the Uniform Commercial Code as in effect in
the State of New York) of the Seller are located at Hangar No. 17, JFK
International Airport, Jamaica, NY 11430, and the Seller agrees to give the
Buyer at least 30 days' prior written notice of any relocation of said chief
executive office or chief place of business from its present location;
(g) the Seller (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
power and authority, and the legal right, to conduct the business in which it is
currently engaged, (c) is in
7
<PAGE>
compliance with its organizational documents and (d) to the best of Seller's
knowledge, is in compliance with all Requirements of Law;
(h) the Seller has the power and authority to make, deliver and perform the
transactions contemplated in the Operative Documents to which it is a party. To
the best of Seller's knowledge, no consent or authorization of, filing with or
other act by or in respect of any governmental authority is required in
connection with the borrowing hereunder or with the execution, delivery,
performance, validity or enforceability of the Operative Documents except for
any filings necessary to register and operate the Aircraft and Airframe N608FF.
This Agreement has been, and each other Operative Documents to which it is to be
a party will be, duly executed and delivered on behalf of the Seller. This
Agreement constitutes, and each other Operative Document to which it is a party
when executed and delivered will constitute, a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law);
(i) the execution, delivery and performance of this Agreement and the other
Operative Documents will not violate any Requirement of Law or Contractual
Obligation of the Seller or the organizational documents of the Seller and to
the best of Seller's knowledge will not result in, or require, the creation or
imposition of any security interest (other than Permitted Liens) on any of its
or its properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation;
(j) each of the "D" Check Maintenance Agreements and the Leasehold
Improvements Agreements contains provisions allowing the Buyer to inspect the
work being performed under such agreements; and
(k) the representations and warranties given by the Seller herein shall
survive the completion of the transactions contemplated herein.
5.4 The Buyer represents and warrants to the Seller that:
(a) the Buyer (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the power and
authority, and the legal right, to conduct the business in which it is currently
engaged, (c) is in compliance with its organizational documents and (d) to the
best of Buyer's knowledge, is in compliance with all Requirements of Law;
(b) the Buyer has the power and authority to make, deliver and perform the
transactions contemplated in the Operative Documents to which it is a party. To
the
8
<PAGE>
best of Buyer's knowledge, no consent or authorization of, filing with or other
act by or in respect of any governmental authority is required in connection
with the borrowing hereunder or with the execution, delivery, performance,
validity or enforceability of the Operative Documents except for any filings
necessary to register and operate the Aircraft and Airframe N608FF. This
Agreement has been, and each other Operative Documents to which it is to be a
party will be, duly executed and delivered on behalf of the Buyer. This
Agreement constitutes, and each other Operative Document to which it is a party
when executed and delivered will constitute, a legal, valid and binding
obligation of the Buyer enforceable against the Buyer in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law);
(c) the execution, delivery and performance of this Agreement and will not
violate any Requirement of Law or Contractual Obligation of the Buyer or the
organizational documents of the Buyer and to the best of Buyer's knowledge will
not result in, or require, the creation or imposition of any security interest
(other than Permitted Liens) on any of its or its properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation; and
(d) the representations and warranties given by the Seller herein shall
survive the completion of the transactions contemplated herein.
6. CONDITIONS PRECEDENT
--------------------
6.1 The purchase by the Buyer of both Aircraft and Airframe N608FF are
subject to and conditional upon the fulfillment or waiver of the following terms
and conditions at or prior to the Delivery of both Aircraft and Airframe N608FF:
(a) the Buyer shall have received each of the Operative Documents,
duly authorized, executed and delivered by all parties thereto in form and
substance satisfactory to the Buyer;
(b) the Buyer shall have a duly executed officer's incumbency
certificate of the Seller in form and substance satisfactory to the Buyer;
(c) the Buyer shall have received independent insurance broker's
certificates, in form and substance satisfactory to the Buyer relating to
the Aircraft and Airframe N608FF demonstrating, among other things,
Seller's compliance with Section 11 of the Lease;
9
<PAGE>
(d) the Buyer shall have received a letter of undertaking from an
independent insurance broker, in form and substance satisfactory to the Buyer;
(e) the Buyer shall have received a copy of the resolutions of the Board
of Directors or other competent authority of the Seller with respect to the due
authorization of the transactions contemplated by this Agreement and the other
Operative Documents, certified by the Seller;
(f) the Buyer shall have received true and complete copies of (i) the
Certificate of Incorporation of the Seller, (ii) the By-laws of the Seller and
(iii) a good standing certificate for Seller in the States of Delaware and New
York;
(g) the consummation of the transactions contemplated hereby shall not
contravene, violate or conflict with, nor involve the Buyer in any violation of,
any Requirement of Law or Contractual Obligation of the Seller;
(h) the Buyer shall have received a copy, certified as true and correct by
an officer of the Seller, of each approval and consent, if any, of any
governmental or other regulatory authorities in the United States or any other
country or place, which are necessary for the execution, performance and
delivery of each of the Operative Documents by each of the parties thereto;
(i) the Buyer shall have received evidence satisfactory to the Buyer that
the Aircraft and Airframe N608FF are the property of the Seller free and clear
of all security interests and adverse claims or rights;
(j) no Default, Event of Default, Event of Loss or event which, with the
pass of time, is capable of becoming an Event of Loss, to any Aircraft or
Airframe N608FF shall have occurred;
(k) no action or proceeding shall have been instituted nor shall any
governmental action be threatened before any court or governmental agency, nor
shall any order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency pertaining in any way to the Aircraft, Airframe
N608FF or to the transactions contemplated by this Agreement;
(l) there shall not have been, in the opinion of the Buyer, any material
adverse change in the business, operations, property or condition (financial or
other) of the Seller;
(m) the representations and warranties made by the Seller in this
Agreement and each other Operative Document shall be true and correct on and as
of the Delivery Date;
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(n) the Seller shall have paid or made arrangements for the payment of all
agreed upon and reasonable expenses incurred by the Buyer in connection with the
transactions contemplated hereby;
(o) the filings referred to on Schedule 1 shall have been filed or
recorded in the places indicated;
(p) the Buyer shall have received such further documents, instruments and
agreements as the Buyer shall reasonably require in connection with the
transactions contemplated by the Operative Documents;
(q) the Buyer shall have received an Appraisal, in form and substance
satisfactory to it, including as to the current and future fair market values of
each of the Aircraft and Airframe N608FF;
(r) the Buyer shall have completed its Technical Inspection of each of the
Aircraft and Airframe N608FF to its satisfaction;
(s) Buyer shall have received the opinion of Daughtery, Fowler & Peregrin,
FAA counsel, in form and substance reasonably satisfactory to it and addressed
to the Buyer;
(t) Buyer shall have received the opinion of Hewes, Gelband, Lamberton &
Dann, P.C., counsel to Seller, in form and substance reasonably satisfactory to
it and addressed to the Buyer;
(u) the Buyer shall have entered into, and provided copies to the Seller
of, contracts to accomplish the "D" Check Maintenance Visit - Aircraft N610FF
(the ""D" Check Maintenance Agreement N610FF") and the Engine Improvements (the
"Engine Improvements Agreement" and, collectively with the "D" Check Maintenance
Agreement, the "Leasehold Improvements Agreements"). Each Leasehold
Improvements Agreement shall contain a detailed description of the workscope of
such Leasehold Improvements and the maintenance facility that shall accomplish
such Leasehold Improvements. Each of the workscope, the maintenance facility
and the Leasehold Improvements Agreements shall be satisfactory to the Buyer.
Each such Leasehold Improvements Agreement shall specify that Buyer, or its
designee, shall have the right to inspect the Leasehold Improvements both during
and after their accomplishment.
(v) Seller shall have entered into a contract to accomplish the "D" Check
Maintenance Visit N608FF (the "D" Check Maintenance Agreement-Airframe N608FF")
and the "D" Check Visit N611FF (the "D" Check Maintenance Agreement-Aircraft
N611FF" and, collectively with the "D" Check Maintenance Agreement-
11
<PAGE>
Airframe N608FF the ""D" Check Maintenance Agreements"). Each "D" Check
Maintenance Agreement shall contain a detailed description of the workscope of
the relevant "D" Check Maintenance Visit N611FF or "D" Check Maintenance Visit
N608FF, as the case may be, and the maintenance facility that shall accomplish
such "D" Check Maintenance Visit N611FF or "D" Check Maintenance Visit N608FF,
as the case may be, and each of the workscope and the maintenance facility shall
be satisfactory to the Buyer. Each "D" Check Maintenance Agreement shall specify
that the Buyer, or its designee, shall have the right to inspect the relevant
"D" Check Maintenance Visit both during and after its accomplishment; and
(w) Seller shall have made the $916,000 payment to the "D" Check
maintenance provider for the "D" Check Maintenance Visit N608FF and provided
such evidence thereof as the Buyer may reasonably request.
6.2 The foregoing conditions shall be for the benefit of the Buyer and
may, without prejudice to any of the warranties or covenants which are preserved
(dealing with or similar to the condition waived), be waived by the Buyer in
writing, in whole or in part, at any time. In case any of the conditions shall
not be fulfilled, or waived by the Buyer, at or before the Delivery of the
Aircraft, the Buyer may rescind or terminate this Agreement by written notice by
the Buyer to the Seller and, in such event, the Buyer shall be released from all
obligations hereunder and, unless the Buyer can show that the condition or
conditions for the non-performance of which the Buyer so rescinded this
Agreement are or were reasonably capable of being performed or caused to be
performed by the Seller, then the Seller shall also be released from all
obligations hereunder.
6.3 The sale by the Seller of the Aircraft and Airframe N608FF is subject
to and conditional on the fulfillment or waiver of the following terms and
conditions at or prior to the Delivery of the Aircraft and Airframe N608FF:
(a) the Seller shall have received the duly executed Acceptance
Certificates from the Buyer with respect to the Aircraft and Airframe
N608FF;
(b) the Seller shall have received the Downpayment from the Buyer in
the manner provided for by Clause 4; and
(c) the representations and warranties made by the Seller in this
Agreement and each other Operative Document shall be true and correct on
and as of the Delivery Date.
6.4 The foregoing conditions shall be for the benefit of the Seller and
may, without prejudice to any of the warranties or covenants which are preserved
(dealing with or similar to the condition waived), be waived by it in writing,
in whole or in part, at any time. In case any of the said conditions shall not
be fulfilled, or waived by the Seller, at or before the
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Delivery, the Seller may rescind or terminate this Agreement by written notice
to the Buyer and, in such event, the Seller shall be released from all
obligations hereunder and, unless the Seller can show that the condition or
conditions for the non-performance of which the Seller so rescinded this
Agreement are or were reasonably capable of being performed or caused to be
performed by the Buyer, then the Buyer shall also be released from all
obligations hereunder.
7. WARRANTIES
----------
7.1 In connection with the sale of the Aircraft and Airframe N608FF to the
Buyer, the Seller hereby assigns to the Buyer such assignable rights as the
Seller may have under any of the Warranties with respect to the Aircraft and
Airframe N608FF. The Seller hereby appoints the Buyer its agent and attorney,
for and in the Seller's own name and behalf, to make and enforce, at the Buyer's
sole cost and expense, any claim which the Seller may have under any of the
Warranties. To the extent that any Warranty may not be assigned to the Buyer,
the Seller hereby agrees to hold such Warranty in trust for and on behalf of the
Buyer. The Seller agrees, at the Buyer's sole cost, expense and reasonable
request, to join with the Buyer in any claim, action, suit or proceeding arising
out of or in connection with any such Warranties, other than any claim, action,
suit or proceeding in which the Seller and the Buyer are adverse in interest, or
to assign to the Buyer the Seller's right to do so, the whole at the option of
the Buyer.
8. RISK
----
8.1 Risk of loss of or damage to the Aircraft and Airframe N608FF shall
pass to the Buyer upon the transfer of title to the Buyer on Delivery. Should
an Event of Loss, or an event which, with the passage of time, is capable of
becoming an Event of Loss, occur with respect to either Aircraft or the Airframe
N608FF prior to Delivery, the parties shall have no further liability to one
another under this Agreement with respect to the purchase and sale of such
Aircraft or Airframe N608FF and this Agreement shall terminate. At Delivery,
risk of loss of or damage to the Aircraft and Airframe N608FF shall be governed
by the Lease.
9. MISCELLANEOUS
-------------
9.1 Amendments. This Agreement may not be amended except by an agreement
----------
in writing between the parties hereto.
9.2 Severability. Any provision of this Agreement that is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
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9.3 Time of the Essence. Time is of the essence with respect to the
-------------------
performance by the parties of their respective obligations hereunder.
9.4 Notices. Every notice, request, demand or other communication under
-------
this Agreement:
(a) shall be in writing in the English language and shall be sent by
courier or telefax, as to each party hereto, to it at its address set forth
herein or at such other address as shall have been or be designated by it in a
written notice to the other party hereto. All such notices, requests, demands,
and other communications shall be deemed to have been given when delivered or
sent, as the case may be; and
(b) shall be sent:
if to the Buyer at:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
Telephone No.: 801-246-5819
Telefax No.: 801-246-5053
with a copy to:
Sanwa Business Credit Corporation
One South Wacker Drive
Chicago, Illinois 60606
Attention: Senior Vice President, Aircraft Finance
Telephone No.: 312-853-8026
Telefax No.: 312-853-2632
and
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Attention: Dean N. Gerber
14
<PAGE>
Telephone No.: 312-609-7638
Telefax No.: 312-609-5005
if to the Seller, at:
Tower Air, Inc.
Hangar No. 17
JFK International Airport
Jamaica, NY 11430
Attention: Gerald Martin
Telephone No.: 718-553-3575
Telefax No.: 718-553-4312
9.5 Miscellaneous; Governing Law; Expenses.
--------------------------------------
(a) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which renders any provisions hereof prohibited or
unenforceable in any respect. No term or provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which the enforcement of the change, waiver,
discharge or termination is sought. The section and paragraph headings in this
Agreement and the table of contents are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions hereof
and all references herein to numbered sections, unless otherwise indicated, are
to sections of this Agreement. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument. The representations, warranties, covenants,
agreements and indemnities of the Buyer and Seller set forth in this Agreement
and Buyer's and Seller's obligations hereunder, shall survive the expiration or
other termination of this Agreement to the extent required for full performance
and satisfaction thereof.
(b) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. This Agreement is being delivered in
Chicago, Illinois.
(c) Regardless of whether or not the transactions contemplated hereby
are consummated, the Seller agrees (a) to pay or reimburse the Buyer for all its
out-of-pocket costs and reasonable expenses incurred in connection with the
development, preparation and
15
<PAGE>
execution of this Agreement and any other documents prepared in connection
herewith, and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable fees and disbursements of
counsel to the Buyer, (b) to pay or reimburse Buyer for all its out-of-pocket
costs and expenses incurred in connection with any amendment, supplement or
modification to this Agreement, including without limitation, the reasonable
fees and disbursements of counsel to the Buyer, (c) to pay or to reimburse the
Buyer for all its costs and expenses incurred in connection with the enforcement
or preservation of any rights under this Agreement, and any such other
documents, including, without limitation, reasonable fees and disbursements of
counsel to the Buyer and appraisals obtained prior to and after the Delivery
Date, and (d) to pay, indemnify, and hold the Buyer harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Agreement and any such other documents. The terms of this
Agreement supersede in their entirety any prior written or oral statements made
by the Buyer or the Seller.
(d) The Seller (a) hereby irrevocably submits itself to the non-
exclusive jurisdiction of (i) the courts of the State of Illinois and (ii) any
United States District Court in Illinois for the purposes of any suit, action or
other proceeding arising out of this Agreement or any other Operative Document,
or the subject matter hereof or thereof or any of the transactions contemplated
hereby or thereby, brought by or on behalf of the Seller or its respective
successors, subrogees or assigns, and (b) hereby irrevocably agrees that all
claims in respect of such action or proceeding shall be heard and determined in
either such Illinois State or Federal court.
THE SELLER HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO
WHICH IT IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER AND
WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER
THE PAYMENT, OBSERVANCE AND PERFORMANCE OF THE SELLER'S OBLIGATIONS UNDER THIS
AGREEMENT.
* * *
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<PAGE>
IN WITNESS WHEREOF the parties hereto have entered into this Agreement as of the
day and year first above written.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
not individually,
but solely as Owner Trustee,
Buyer
By: /s/ Greg Hawley
------------------------------
TOWER AIR, INC.,
Seller
By: /s/ Ramesh Punwani
------------------------------
17
<PAGE>
Exhibit 10(10)
CONSOLIDATED, AMENDED AND RESTATED
AIRCRAFT AND ENGINE LOAN AND SECURITY AGREEMENT
-----------------------------------------------
THIS CONSOLIDATED, AMENDED AND RESTATED AIRCRAFT AND ENGINE LOAN AND
SECURITY AGREEMENT (the "Loan Agreement") made and entered into this 25th day of
March, 1996 by and between FINOVA CAPITAL CORPORATION (formerly GREYHOUND
FINANCIAL CORPORATION) (the "Lender"), a corporation organized and existing
under the laws of the State of Delaware, with its chief executive office and
principal place of business at 1850 North Central Avenue, Phoenix, Arizona 85002
and TOWER AIR, INC. (the "Borrower"), a corporation organized and existing under
the laws of the State of Delaware, with its chief executive office and principal
place of business at Hangar No. 17, John F. Kennedy International Airport,
Jamaica, New York 11430. Capitalized terms used herein, unless otherwise
defined shall have the meanings ascribed to such terms in Section 1 hereof.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower and the Lender have entered into the Loan Agreement
[N604FF], pursuant to which: (a) on or about August 30, 1988, the Lender made a
loan in the amount of $12,000,000.00 (the "N604FF Aircraft Loan") to the
Borrower to enable the Borrower to acquire Aircraft [N604FF] and (b) on or about
October 1, 1990, the Lender made a loan in the amount of $1,750,000.00 (the
"662443 Engine Loan") to enable Borrower to acquire Spare Engine [662443];
WHEREAS, in connection with the N604FF Aircraft Loan, the Borrower issued
Note [N604FF] to the Lender and the Borrower granted to the Lender a first
priority security interest in Aircraft [N604FF] pursuant to Aircraft Mortgage
[N604FF] to secure, among other things, the obligations of the Borrower under
Loan Agreement [N604FF] and Note [Aircraft N604FF];
WHEREAS, in connection with the 662443 Engine Loan, the Borrower issued the
Note [Engine 662443] and the Borrower granted to the Lender a first priority
security interest in Spare Engine [662443] pursuant to Engine Mortgage [662443]
to secure, among other things, the obligations of the Borrower under Note
[Engine 662443];
WHEREAS, the Borrower and the Lender have entered into that certain
Aircraft Loan and Security Agreement dated as of August 28, 1990, as amended by
that certain First Amendment to Loan And Security Agreement dated as of
February 27, 1991 and as further amended by that certain Second Amendment to
Aircraft Loan And Security
<PAGE>
Agreement dated as of July 31, 1991 (collectively, "Loan Agreement [662962]")
pursuant to which, on or about August 28, 1990, the Lender made a loan in the
amount of $8,000,000.00. (the "662962 Engine Loan") to the Borrower to enable
the Borrower to acquire Engine [662962] and one Pratt & Whitney model JT9D-7A
engine bearing manufacturer's serial number P662864 (which engine subsequently
suffered an Event of Loss) ("Engine [662864]", and together with Engine
[662962], "Engines [662962/662864]") ;
WHEREAS, in connection with the 662962 Engine Loan, the Borrower issued a
Promissory Note dated August 28, 1990 in the principal amount of $8,000,000.00
("Note [Engine 662962]") to the Lender and the Borrower granted to the Lender:
(a) a first priority security interest in the Engines [662962/662862] pursuant
to Engine Mortgage [662962] to secure, among other things, the obligations of
the Borrower under Loan Agreement [N604FF], Note [N604FF] and Note [Engine
662962] and (b) a second priority security interest in Aircraft [N604FF] to
secure, among other things, the obligations of the Borrower under Note [Engine
662962];
WHEREAS, on or prior to December 31, 1995, the Borrower paid all amounts
outstanding under Note [Engine 662962];
WHEREAS, the Borrower and the Lender have entered into the Loan Agreement
[N603FF], pursuant to which: (a) on or about November 7, 1991, the Lender made a
loan in the amount of $12,000,000.00 (the "N603FF Aircraft Loan") to the
Borrower to enable the Borrower to acquire Aircraft [N603FF]; (b) on or about
March 20, 1992, the Lender made a loan in the amount of $4,000,000.00 (the
"662804 Engine Loan") to enable the Borrower to acquire Engines
[662804/662821/662787/663034]; and (c) on or about March 20, 1992, the Lender
made a loan in the amount of $2,000,000.00 (the "N603FF General Loan") to the
Borrower for general corporate purposes;
WHEREAS, in connection with the N603FF Aircraft Loan, the 662804 Engine
Loan and the N603FF General Loan, the Borrower issued Note [Aircraft N603FF],
Note [Engine 662804] and Note [General N603FF] to the Lender and the Borrower
granted to the Lender: (a) a first priority security interest in Aircraft
[N603FF] pursuant to Aircraft Mortgage [N603FF] and a first priority security
interest in Engines [662804/662821/662787/663034] pursuant to Engine Mortgage
[662804], each to secure, among other things, the obligations of the Borrower
under Loan Agreement [N603FF], Note [Aircraft N603FF], Note [Engine 662804],
Note [General N603FF], Loan Agreement [N604FF], Note [Aircraft N604FF] and Note
[Engine 662962]; (b) a second priority security interest in Engines
[662962/662864] pursuant to the Second Priority Engine Mortgage [662962] to
secure, among other things, the obligations of the Borrower under Loan Agreement
[N603FF], Note [Aircraft N603FF], Note [Engine
<PAGE>
662962] and Note [General N603FF] and (c) a third priority security interest in
Aircraft [N604FF] pursuant to the Third Priority Aircraft Mortgage [N604FF] to
secure, among other things, the obligations of the Borrower under Loan Agreement
[N603FF], Note [Aircraft N603FF], Note [Engine 662804] and Note [General
N603FF];
WHEREAS, the Borrower and the Lender have entered into the Aircraft Loan
and Security Agreement dated May 28, 1993 (the "Original N602FF Loan
Agreement"), pursuant to which the Lender made a loan in the amount of
$13,500,000.00 (the "Original N602FF Aircraft Loan") to the Borrower to enable
the Borrower to acquire Aircraft [N602FF];
WHEREAS, in connection with the Original N602FF Aircraft Loan, the Borrower
issued a Promissory Note dated May 28, 1993 (the "Original Note [Aircraft
N602FF]") to the Lender and the Borrower granted to the Lender: (a) a first
priority security interest in Aircraft [N602FF] pursuant to Aircraft Mortgage
[N602FF], to secure, among other things, the obligations of the Borrower under
Original Loan Agreement [N602FF], Original Note [Aircraft N602FF], Loan
Agreement [N603FF], Note [Aircraft N603FF], Note [Engine 662804], Note [General
N603FF], Loan Agreement [N604FF], Note [Aircraft N604FF] and Note [Engine
662962]; (b) a second priority security interest in Aircraft [N603FF] pursuant
to Second Priority Aircraft Mortgage [N603FF], to secure, among other things,
the obligations of the Borrower under Original Loan Agreement [N602FF] and
Original Note [Aircraft N602FF]; (c) a second priority security interest in
Engines [662804/662821/662787/663034] pursuant to Second Priority Engine
Mortgage [662804], to secure, among other things, the obligations of the
Borrower under Original Loan Agreement [N602FF] and Original Note [Aircraft
N602FF]; (d) a third priority security interest in Engines [662962/662864]
pursuant to the Third Priority Engine Mortgage [662962] to secure, among other
things, the obligations of the Borrower under Original Loan Agreement [N602FF]
and Original Note [Aircraft N602FF] and (e) a fourth priority security interest
in Aircraft [N604FF] pursuant to the Fourth Priority Aircraft Mortgage dated
May 28, 1993 between the Borrower and the Lender to secure, among other things,
the obligations of the Borrower under Original Loan Agreement [N602FF] and
Original Note [N602FF];
WHEREAS, on or about January 7, 1994, the Borrower prepaid the amounts due
and owing to the Lender under the Original Loan Agreement [N602FF] and the
Original Note [N602FF];
WHEREAS, the Borrower and the Lender have entered into the Loan Agreement
[N602FF], pursuant to which, on or about February 15, 1995, the Lender made a
loan in the amount of $12,000,000.00 (the "N602FF Aircraft Loan") to the
Borrower to enable the Borrower to refinance Aircraft [N602FF];
<PAGE>
WHEREAS, in connection with the N602FF Aircraft Loan, the Borrower issued a
Promissory Note dated February 15, 1995 (the "Note [Aircraft N602FF]") to the
Lender and the Borrower granted to the Lender: (a) a first priority security
interest in Aircraft [N602FF] pursuant to Aircraft Mortgage [N602FF], to secure,
among other things, the obligations of the Borrower under Loan Agreement
[N602FF], Note [Aircraft N602FF], Loan Agreement [N603FF], Note [Aircraft
N603FF], Note [Engine 662804], Note [General N603FF], Loan Agreement [N604FF],
Note [Aircraft N604FF] and Note [Engine 662962]; (b) a third priority security
interest in Aircraft [N603FF] pursuant to Third Priority Aircraft Mortgage
[N603FF], to secure, among other things, the obligations of the Borrower under
Loan Agreement [N602FF] and Note [Aircraft N602FF]; (c) a third priority
security interest in Engines [662804/662821/662787/663034] pursuant to Third
Priority Aircraft Engine [662804], to secure, among other things, the
obligations of the Borrower under Loan Agreement [N602FF] and Note [Aircraft
N602FF]; (d) a fourth priority security interest in Engines [662962/662864]
pursuant to the Fourth Priority Engine Mortgage [662962] to secure, among other
things, the obligations of the Borrower under Loan Agreement [N602FF] and Note
[Aircraft N602FF] and (e) a fourth priority security interest in Aircraft
[N604FF] pursuant to the Fourth Priority Aircraft Mortgage [N604FF] to secure,
among other things, the obligations of the Borrower under Loan Agreement
[N602FF] and Note [N602FF];
WHEREAS, the Borrower and the Lender have entered into Loan Agreement
[N613FF/N617FF], pursuant to which, among other things, the Lender made a loan
in the amount of $20,000,000.00 (the "N613FF/N617FF Aircraft Loan", and together
with the N604FF Aircraft Loan, 662443 Engine Loan, the N603FF Loan, the 662804
Engine Loan, the N603FF General Loan and the N602FF Aircraft Loan" being
hereinafter collectively referred to as the "Existing Loans") to the Borrower
for working capital purposes;
WHEREAS, in connection with the N613FF/N617FF Aircraft Loan, the Borrower
issued a Note [Aircraft N613FF/N617FF] to the Lender and the Borrower granted to
the Lender a first priority security interest in Aircraft [N613FF] and Aircraft
[N617FF] pursuant to Aircraft Mortgage [N613/N617FF], to secure, among other
things, the obligations of the Borrower under Loan Agreement [N613FF/N617FF],
Note [Aircraft N613FF/N617FF], Loan Agreement [N602FF], Note [Aircraft N602FF],
Loan Agreement [N603FF], Note [Aircraft N603FF], Note [Engine 662804], Note
[General N603FF], Loan Agreement [N604FF], Note [Aircraft N604FF] and Note
[Engine 662962];
WHEREAS, the Borrower desires to borrow from Lender an additional
$17,000,000.00; and
<PAGE>
WHEREAS, the Borrower and the Lender desire to consolidate the obligations
under the existing Loan Documents;
NOW THEREFORE, the undersigned hereto agree as follows:
1. DEFINITIONS.
-----------
1.1 Each of the following terms shall have the respective meaning
ascribed to it in this Paragraph 1.1 (where the context so permits, the
definition of each term used herein shall be equally applicable to the singular
and plural forms thereof):
Act: shall mean 49 United States Code Section 40101 et seq., as
amended or supplemented from time to time.
Agreed Value: shall mean, in the case of a Total Loss of any of the
Aircraft or any of the Engines, the lesser of: (i) 100% of the insurance
proceeds payable in connection with such Total Loss or (ii) the amount that will
reduce the principal balance of the Loan such that the loan to value ratio after
such principal reduction will equal the Lender's most recent calculation of the
loan to value ratio prior to the occurrence of such Total Loss. The calculation
of the loan to value ratio after the occurrence of a Total Loss shall be based
on an internal appraisal prepared by the Lender of all of the existing Aircraft
and Engines; provided, however, that to the extent the Borrower objects to the
Lender's appraisal of the collateral value, the Borrower and the Lender shall
mutually select an independent appraiser who shall provide an appraisal of all
of the existing Aircraft and Engines. Such independent appraisal shall be
binding on the Lender and shall be used by the Lender to calculate the Agreed
Value. The cost of obtaining the independent appraisal shall be for the account
of the Borrower.
Aircraft: collectively, Aircraft [N602FF], Aircraft [N603FF],
Aircraft [N604FF], Aircraft [N613FF], Aircraft [N617FF], Aircraft [N619FF] and
Aircraft [N620FF].
Aircraft [N602FF]: that certain Boeing passenger Aircraft Model
747-124, bearing FAA Registration No. N602FF and Manufacturer's Serial No.
19734, together with two (2) Pratt & Whitney Engines Model JT9D-7A, bearing
Manufacturer's Serial Nos. P662280CN and P662923CN and two (2) Pratt & Whitney
Engines Model JT9D-7, bearing Manufacturer's Serial Nos. P662890 and P662938,
together with any and all attachments, accessories, improvements and betterments
thereto and replacements thereof and all general intangibles and contract
rights, including, but not limited to, all rents, issues, proceeds, insurance
proceeds, properties, revenues and other income in respect of the such aircraft
and engines.
Aircraft [N603FF]: that certain Boeing passenger Aircraft Model
747-130, bearing FAA Registration No. N603FF and Manufacturer's Serial No.
19746, together with four (4) installed Pratt & Whitney Model JT9D-7A Engines,
bearing Manufacturer's Serial Nos. P662756, 662711, 662934 (which engine
replaced one Pratt & Whitney Model JT9D-7A engine bearing Manufacturer's Serial
No. P662664) and 662616, together with any and all attachments, accessories,
improvements and betterments thereto and replacements thereof and all general
intangibles and contract rights, including, but not limited to, all rents,
issues, proceeds, insurance proceeds, properties, revenues and other income in
respect of the Aircraft.
<PAGE>
Aircraft [N604FF]: that certain Boeing passenger Model Aircraft
747-121, bearing FAA Registration No. N604FF (formerly N755PA) and
Manufacturer's Serial No. 19659, together with three (3) installed Pratt &
Whitney Model JT9D-7A Engines, bearing Manufacturer's Serial Nos. P662561,
P685674 (which engine replaced one Pratt & Whitney Model JT9D-7A engine bearing
Manufacturer's Serial No. P662543B) and 662387, and Spare Engine [662443] (which
engine replaced one (1) Pratt & Whitney Model JT9D-7A Engine bearing
Manufacturer's Serial No. P662310B, together with any and all attachments,
accessories, improvements and betterments thereto and replacements thereof and
all general intangibles and contract rights, including, but not limited to, all
rents, issues, proceeds, insurance proceeds, properties, revenues and other
income in respect of such aircraft and engines.
Aircraft [N613FF]: that certain Boeing cargo Aircraft Model 747-100,
bearing FAA Registration No. N613FF and Manufacturer's Serial Number 19647,
together with four Pratt & Whitney Engines Model JT9D-7, bearing Manufacturer's
Serial Nos: 662417, 662598, 685945 and 662574, together with any and all
attachments, accessories, improvements and betterments thereto and replacements
thereof and all general intangibles and contract rights, including, but not
limited to, all rents, issues, proceeds, insurance proceeds, properties,
revenues and other income in respect of such aircraft and engines.
Aircraft [N617FF]: that certain Boeing cargo Aircraft Model 747-100,
bearing FAA Registration No. N617FF and Manufacturer's Serial Number 19650,
together with four Pratt & Whitney Engines Model JT9D-7, bearing Manufacturer's
Serial Nos: 685714, 662362, 663029 and 662867, together with any and all
attachments, accessories, improvements and betterments thereto and replacements
thereof and all general intangibles and contract rights, including, but not
limited to, all rents, issues, proceeds, insurance proceeds, properties,
revenues and other income in respect of such aircraft and engines.
Aircraft [N619FF]: that certain Boeing passenger Aircraft Model
747-200, bearing FAA Registration No. N504DC (to be changed to N619FF) and
Manufacturer's Serial Number 21316, together with four Pratt & Whitney Engines
Model JT9D-7J, bearing Manufacturer's Serial Nos. 685708, 662440, 662995, and
662748 together with any and all attachments, accessories, improvements and
betterments thereto and replacements thereof and all general intangibles and
contract rights, including, but not limited to, all rents, issues, proceeds,
insurance proceeds, properties, revenues and other income in respect of such
aircraft and engines.
Aircraft [N620FF]: that certain Boeing passenger Aircraft Model
747-200, bearing FAA Registration No. N511P (to be changed to N620FF) and
<PAGE>
Manufacturer's Serial Number 21162, together with four Pratt & Whitney Engines
Model JT9D-7J, bearing Manufacturer's Serial Nos. 685725, 689452, 689573, and
689569 together with any and all attachments, accessories, improvements and
betterments thereto and replacements thereof and all general intangibles and
contract rights, including, but not limited to, all rents, issues, proceeds,
insurance proceeds, properties, revenues and other income in respect of such
aircraft and engines.
Aircraft Engines: each of the engines referred to in the definition
of any Aircraft.
Aircraft Mortgage [N602FF]: that certain Aircraft Mortgage dated
February 15, 1995 by the Borrower for the benefit of the Lender, as amended by
that certain First Amendment to Aircraft Mortgage dated January 30, 1996 by the
Borrower for the benefit of the Lender.
Aircraft Mortgage [N603FF]: that certain Aircraft Mortgage dated as
of November 7, 1991 by Borrower for the benefit of the Lender, as supplemented
by that certain Supplemental Aircraft Mortgage dated as of June 13, 1995 by the
Borrower, and as further amended by that certain First Amendment to Aircraft
Mortgage dated January 30, 1996 by the Borrower for the benefit of the Lender.
Aircraft Mortgage [N604FF]: collectively, (a) that certain Aircraft
Mortgage, dated August 30, 1988, by the Borrower for the benefit of the Lender,
as amended by that certain First Amendment to Aircraft Mortgage, dated as of
July 31, 1991, by the Borrower for the benefit of the Lender, as supplemented by
that certain Supplemental Aircraft Mortgage, dated as of June 13, 1995, by the
Borrower for the benefit of the Mortgagor, and as further amended by that
certain Second Amendment to Aircraft Mortgage dated January 30, 1996 by the
Borrower for the benefit of the Lender and (b) that certain Aircraft Engine
Mortgage dated October 1, 1990 between the Borrower and the Lender, as amended
by that certain First Amendment to Aircraft Engine Mortgage dated as of July 31,
1991 between the Borrower and the Lender.
Aircraft Mortgage [N613FF/N617FF]: that certain Aircraft Mortgage
dated January 30, 1996 by the Borrower for the benefit of the Lender.
Arizona Courts: defined in Paragraph 10.14(a) hereof.
Borrower: above defined.
Business Day: any day other than Saturday, Sunday or other day on
which commercial lenders in Phoenix, Arizona or New York, New York are required
or
<PAGE>
permitted to close under the laws of the States of Arizona and New York,
respectively.
Certificate of Resolutions: that certain certificate of resolutions
of the board of directors of the Borrower to be delivered by the Borrower to the
Lender in form and substance satisfactory to the Lender.
Documents: collectively, this Loan Agreement, the Mortgage, the Note
the Letter Agreements and the documents, instruments and agreements referred to
herein and therein and to be executed and delivered in connection herewith and
therewith.
Due Date(s): defined in the Note.
Engines: collectively, Engines [662804/662821/662787/663034] and
Engine [662962].
Engines [662804/662821/662787/663034]: Three (3) Pratt & Whitney
Model JT9D-3A engines bearing Manufacturer's Serial Nos. P662804, P662787,
P662821 and one (1) Pratt and Whitney Model JT9D-7A engine bearing
Manufacturer's Serial No. P663034 (which engine replaced one Pratt & Whitney
Model JT9D-3A Engine bearing Manufacturer's Serial No. 662519, together with any
and all attachments, accessories, improvements and betterments thereto and
replacements thereof and all general intangibles and contract rights, including,
but not limited to, all rights, issues, proceeds, insurance proceeds,
properties, revenues and other income in respect of such engines.
Engine [662962]: one (1) Pratt & Whitney Model JT9D-7A engine bearing
Manufacturer's Serial No.P662962CN, together with any and all attachments,
accessories, improvements and betterments thereto and replacements thereof and
all general intangibles and contract rights, including, but not limited to, all
rights, issues, proceeds, insurance proceeds, properties, revenues and other
income in respect of such engines.
Engine Mortgage [662804]: that certain Purchase Money Aircraft Engine
Mortgage dated March 20, 1992 by the Borrower for the benefit of the Lender, as
supplemented by that certain Supplemental Aircraft Mortgage dated as of
December 30, 1994 by the Borrower for the benefit of the Lender, and as amended
by that certain First Amendment to Purchase Money Aircraft Engine Mortgage dated
January 30, 1996 by the Borrower for the benefit of the Lender.
Engine Mortgage [662962]: that certain Aircraft Engine Mortgage dated
August 28, 1990 between the Borrower and the Lender, as amended by the First
Amendment to Aircraft Engine Mortgage dated as of July 31, 1991 between the
Borrower and the Lender and as further amended by the Second Amendment to
Aircraft Engine Mortgage dated January 30, 1996 by the Borrower for the benefit
of the Lender.
Event of Default: defined in paragraph 8.1 hereof.
Existing Loan Agreements: collectively, Loan Agreement [N602FF], Loan
Agreement [N603FF], Loan Agreement [N604FF], Loan Agreement [N613FF/N617FF].
Existing Loan Amount: the amount set forth in pexaragraph 2.1 hereof.
Existing Loan Documents: collectively, Loan Documexit
ents [N602FF], Loan
<PAGE>
Documents [N603FF], Loan Documents [N604FF], Loan Documents [N613FF/N617FF]
First Loan Documents [N602FF] and Loan Documents [662962].
FAA: the Federal Aviation Administration, or any successor or
substituted governmental authority at the time having jurisdiction over the use,
operation, maintenance and perfection of security interests in the Engines and
the Aircraft.
First Loan Documents [N602FF]: collectively, the Second Priority
Aircraft Mortgage [N603FF], Second Priority Engine Mortgage [662804] and Third
Priority Engine Mortgage [662962].
Fourth Priority Aircraft Mortgage [N604FF]: that certain Fourth
Priority Aircraft Mortgage dated February 15, 1995 between the Borrower and the
Lender, as amended by that certain First Amendment to Fourth Priority Aircraft
Mortgage dated January 30, 1996 by the Borrower for the benefit of the Lender.
Fourth Priority Engine Mortgage [662962]: that certain Fourth
Priority Aircraft Engine Mortgage dated February 15, 1995 by the Borrower for
the benefit of the Lender, as amended by that certain First Amendment to Fourth
Priority Aircraft Engine Mortgage dated January 30, 1996 by the Borrower for the
benefit of the Lender.
Funding Date: the date to be agreed upon by the Borrower and the
Lender and which shall occur subsequent to the fulfillment of all applicable
conditions precedent set forth in Section 9 hereof, upon which date that portion
of the Loan equal to the New Loan Amount shall be advanced (provided that such
date shall not be later than March 26, 1996) and the Existing Loans shall be
consolidated and the obligations of the Borrower under the Existing Loan
Agreements shall be consolidated, amended and restated in accordance with
paragraph 2 hereof.
GAAP: means generally accepted accounting principles in the United
States of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application in which Borrower's
independent certified public accountants concur), applied both to classification
of items and amounts.
Impositions: sales, use, excise, gross receipts, value added,
personal property, stamp, documentary taxes, ad valorem taxes, license fees,
registration fees, assessments, fines, penalties and similar charges imposed on
the Engines and all other
<PAGE>
taxes of whatsoever kind (except federal or state income taxes) imposed upon the
Lender with respect to either Aircraft, the Documents, the transactions
contemplated by the Documents, the Installments and any other payments of
whatsoever kind made under the Documents.
Indemnitees: defined in Paragraph 6.12 hereof.
Installments: defined in the Note.
Lender: above defined.
Letter Agreement: the letter agreement dated the Funding Date relating to
the repair of certain Aircraft Engines.
Loan: USD 50,200,000.00, consisting of the Existing Loan Amount and the
New Loan Amount.
Loan Agreement: above defined.
Loan Agreement [N602FF] : that certain Aircraft Loan and Security
Agreement, dated as of February 15, 1995, by and between the Borrower and the
Lender, as amended by that certain First Amendment to Aircraft Loan and Security
Agreement, dated January 30, 1996, by and between the Borrower and the Lender.
Loan Agreement [N603FF]: that certain Aircraft and Engine Loan and
Security Agreement, dated as of November 5, 1991, by and between the Borrower
and the Lender, as amended by that certain First Amendment to Aircraft and
Engine Loan and Security Agreement, dated as of May 28, 1993, by and between the
Borrower and the Lender, as further amended by that certain Second Amendment to
Aircraft and Engine Loan and Security Agreement, dated February 15, 1995, by and
between the Borrower and the Lender, and as further amended by that certain
Third Amendment to Aircraft and Engine Loan and Security Agreement, dated
January 30, 1996, by and between the Borrower and the Lender.
Loan Agreement [N604FF]: that certain Aircraft Loan and Security
Agreement, dated as of August 30, 1988, by and between the Borrower and the
Lender, as amended by that certain First Amendment to Aircraft Loan and Security
Agreement, dated as of August 28, 1990, by and between the Borrower and the
Lender, as further amended by that certain Second Amendment to Aircraft Loan and
Security Agreement, dated as of October 1, 1990, by and between the Borrower and
the Lender, as further amended by that certain Third Amendment to Aircraft Loan
and Security Agreement, dated as of July 31, 1991, by and between the Borrower
and the Lender, as further amended by that certain Fourth Amendment to Aircraft
Loan and Security Agreement,
<PAGE>
dated as of November 5, 1991, by and between the Borrower and the Lender, as
further amended by that certain Fifth Amendment to Aircraft Loan and Security
Agreement, dated as of May 28, 1993, by and between the Borrower and the Lender,
as further amended by that certain Sixth Amendment to Aircraft Loan and Security
Agreement, dated February 15, 1995, by and between the Borrower and the Lender,
and as further amended by that certain Seventh Amendment to Aircraft Loan and
Security Agreement, dated January 30, 1996, between the Borrower and the Lender.
Loan Agreement [N613FF/N617FF]: that certain Aircraft Loan and Security
Agreement, dated January 26, 1996, by and between the Borrower and the Lender.
Loan Documents [N602FF]: collectively, Loan Agreement [N602FF], Note
[Aircraft N602FF], Third Priority Aircraft Mortgage [N603FF], the Third Priority
Engine Mortgage [662804], Fourth Priority Aircraft Mortgage [N604FF] and the
Fourth Priority Engine Mortgage [662962].
Loan Documents [N603FF]: collectively, Loan Agreement [N603FF], Note
[Aircraft N603FF], Note [Engine 662804], Note [General N603FF], Aircraft
Mortgage [N603FF], Engine Mortgage [N603FF], Engine Mortgage [662804], Second
Priority Engine Mortgage [662962] and Third Priority Aircraft Mortgage [N604FF].
Loan Documents [N604FF]: collectively, Loan Agreement [N604FF], Note
[Aircraft N604FF], Note [Engine 662443], Aircraft Mortgage [N604FF].
Loan Documents [N613FF/N617FF]: collectively, Loan Agreement
[N613FF/N617FF], Note [Aircraft N613FF/N617FF] and Aircraft Mortgage
[N613FF/N617FF].
Loan Documents [662962]: collectively, Engine Mortgage [662962] and Second
Priority Aircraft Mortgage [N604FF].
Mortgage: that certain Consolidated, Amended and Restated Aircraft and
Engine Mortgage to be made by the Borrower on the Aircraft and the Engines to
and for the benefit of the Lender in form and substance satisfactory to the
Lender.
New Loan Amount: USD 16,791,352.44.
Note: that certain Consolidated, Amended and Restated Promissory Note to
be made and delivered by the Borrower to the Lender on the Funding Date in the
principal amount of the Loan in form and substance satisfactory to the Lender.
<PAGE>
Note [Aircraft N602FF]: that certain Promissory Note dated February 15,
1995 issued by the Borrower in the principal amount of USD 12,000,000.00.
Note [Aircraft N603FF]: that certain Promissory Note [Aircraft] dated
November 7, 1991 issued by the Borrower in the principal amount of USD
12,000,000.00.
Note [Aircraft N603FF General]: that certain Promissory Note [General]
dated March 20, 1992 issued by the Borrower in the principal amount of USD
2,000,000.00
Note [Aircraft N604FF]: that Certain Promissory Note dated August 30, 1988
issued by the Borrower in the principal amount of USD 12,000,000.00.
Note [Aircraft N613FF/N617FF]: that certain Promissory Note Dated January
30, 1996 issued by the Borrower in the principal amount of USD 20,000,000.00.
Note [Engine 662443]: that certain Amended and Restated Supplemental
Promissory Note dated October 1, 1990 issued by the Borrower in the principal
amount of USD 1,750,000.00.
Note [Engine 662804]: that certain Promissory Note [Engines] dated March
20, 1992 issued by the Borrower in the principal amount of USD 4,000,000.00
Obligations: each and every obligation, duty, covenant, undertaking and
promise of the Borrower now existing or hereafter arising under the Documents.
Officer's Certificate: that certain certificate to be signed on the
Funding Date by (i) the President or Vice President and (ii) the Treasurer or
Secretary of the Borrower, in form and substance satisfactory to the Lender.
Opinion(s) of Counsel: those opinion(s) to be made and delivered on the
Funding Date by legal counsel (including, without limitation, legal counsel to
the Borrower and special FAA counsel), in form and substance satisfactory to the
Lender.
Overdue Rate: a rate of interest per annum equal to the Interest Rate plus
2%.
Second Priority Aircraft Mortgage [N603FF]: that certain Second Priority
Aircraft Mortgage dated May 28, 1993 by the Borrower for the benefit of the
Lender, as supplemented by Supplemental Aircraft Mortgage dated as of June 13,
1995
<PAGE>
by the Borrower for the benefit of the Lender, as amended by that certain First
Amendment to Second Priority Aircraft Mortgage dated January 30, 1996 by the
Borrower for the benefit of the Lender.
Second Priority Aircraft Mortgage [N604FF]: that certain Second Priority
Aircraft Mortgage dated August 28, 1990 by the Borrower for the benefit of the
Lender, as supplemented by that certain Supplemental Second Priority Aircraft
Mortgage dated October 1, 1990 by the Borrower for the benefit of the Lender, as
amended by that certain First Amendment to Second Priority Aircraft Mortgage
dated as of July 31, 1991 by and between the Borrower and the Lender, as further
supplemented by that certain supplemental Aircraft Mortgage dated as of June 13,
1995 by the Borrower for the benefit of the Lender, and as further amended by
that certain Second Amendment to Second Priority Aircraft Mortgage dated January
30, 1996 by the Borrower for the benefit of the Lender.
Second Priority Engine Mortgage [662804]: that certain Second Priority
Aircraft Engine Mortgage dated May 28, 1993 by the Borrower for the benefit of
the Lender, as amended by that certain First Amendment to Second Priority
Aircraft Engine Mortgage dated January 30, 1996 by the Borrower for the benefit
of the Lender.
Second Priority Engine Mortgage [662962]: that certain Second Priority
Aircraft Engine Mortgage dated November 7, 1991 by the Borrower for the benefit
of the Lender, as amended by that certain First Amendment to Second Priority
Aircraft Engine Mortgage dated January 30, 1996 by the Borrower for the benefit
of the Lender.
Security Interest: an interest, charge, lien, encumbrance, security
interest and claim in and to any Aircraft or any Engine, securing the payment
and performance of the Obligations.
Spare Engine [662443]: One (1) Pratt & Whitney JT9D-7A Engine bearing
Manufacturer's Serial No. P662443.
Term: that period of time commencing on the Funding Day to and including
the date 60 months thereafter or, if earlier, the date on which the Obligations
are fully and completely paid and performed, as the case may be.
Third Priority Aircraft Mortgage [N603FF]: that certain Third Priority
Aircraft Mortgage dated February 15, 1995 by the Borrower for the benefit of the
Lender, as amended by that certain First Amendment to Third Priority Aircraft
Mortgage dated January 30, 1996 by the Borrower for the benefit of the Lender.
<PAGE>
Third Priority Aircraft Mortgage [N604FF]: that certain Third Priority
Aircraft Mortgage dated November 7, 1991 by the Borrower for the benefit of the
Lender, as supplemented by that certain Supplemental Aircraft Mortgage dated as
of June 13, 1995 by the Borrower for the benefit of the Lender and as amended by
that certain First Amendment to Third Priority Aircraft Mortgage dated January
30, 1996 by the Borrower for the benefit of the Lender.
Third Priority Engine Mortgage [662804]: that certain Third Priority
Aircraft Engine Mortgage dated February 15, 1995 by the Borrower for the benefit
of the Lender, as amended by that certain First Amendment to Third Priority
Aircraft Engine Mortgage dated January 30, 1996 by the Borrower for the benefit
of the Lender.
Third Priority Engine Mortgage [662962]: that certain Third Priority
Aircraft Engine Mortgage dated May 28, 1993 by the Borrower for the benefit of
the Lender, as amended by that certain First Amendment to Third Priority
Aircraft Engine Mortgage dated January 30, 1996 by the Borrower for the benefit
of the Lender.
Total Loss: (i) extensive damage to or destruction of any Aircraft, any
Aircraft Engine or any Engine if repair cannot be made or if permanently
rendered unfit for normal use for any reason whatsoever; or (ii) condemnation,
requisition of title or use, confiscation, appropriation, nationalization or
deprivation, de facto or de jure, by exercise of the power of eminent domain or
-- ----- -- ----
by any governmental body, or otherwise, which continues uninterrupted for a
period in excess of 60 days; provided, however, that at all times during said 60
day period, no other Event of Default has occurred hereunder and the insurance
required to be provided by the Borrower pursuant to the terms hereof shall not
be adversely affected by the occurrence of any of the events set forth in this
clause (ii); or (iii) theft and such property is unrecovered for an
uninterrupted period in excess of 60 days; or (iv) prohibition of use in the
ordinary course of the business of passenger air transportation or grounding as
a result of a rule, regulation, order, directive or other action by the
governmental authority (including, without limitation, legislative, executive,
administrative or judicial bodies) having jurisdiction, which prohibition of use
or grounding continues uninterrupted for a period in excess of 90 days,
provided, however, that in the event the Borrower has undertaken and is pursuing
in a diligent manner those actions necessary to remove such prohibition of use
or grounding, then in such event, same will not constitute a Total Loss
(assuming no Event of Default has occurred) unless such prohibition of use or
grounding continues uninterrupted for a period in excess of 180 days.
Notwithstanding anything set forth in this clause (iv) to the contrary, if a
prohibition of use or grounding of an Aircraft occurs due to a prohibition of
use or grounding of all aircraft of the same make and model as such Aircraft
then, in such event, a Total Loss shall not be deemed to have occurred provided,
however, that no Event of Default has occurred or with notice or passage of time
would occur, that the insurance
<PAGE>
required to be provided pursuant hereto shall not be adversely affected and, in
all events, such prohibition of use or grounding does not continue uninterrupted
for a period in excess of 120 days from the commencement of the prohibition or
grounding, unless the Borrower has undertaken and is pursuing, in a diligent
manner, those actions necessary to remove such prohibition of use or grounding
provided, that in all events, such prohibition of use or grounding does not
continue uninterrupted for a period in excess of 270 days from the commencement
date of the prohibition or grounding. With respect to any period of time set
forth in this clause (iv) as to when a Total Loss shall be deemed to have
occurred, the Borrower agrees that in the event the Borrower has entered into
any loan or leasing agreement with respect to any other aircraft or engines, as
the case may be, owned or leased by the Borrower and which provides with respect
to the events mentioned in this clause (iv) for a shorter period of time to have
passed before a Total Loss will be deemed to have occurred, then, in such event,
the Borrower agrees that such shorter period of time shall apply with respect to
this Loan Agreement as to when a Total Loss shall be deemed to have occurred. A
Total Loss with respect to an Airframe shall be deemed a Total Loss with respect
to the related Aircraft.
<PAGE>
Unpaid Amount: the stipulated sum of money equal to the aggregate of: (i)
the outstanding principal balance of the Loan as of the day the "Unpaid Amount"
is declared due and payable; plus (ii) all accrued and unpaid interest as of the
day the "Unpaid Amount" is declared due and payable; plus (iii) all other sums
of whatever nature due and unpaid as of the day the "Unpaid Amount" is declared
due and payable; plus (iv) interest at the Overdue Rate on those amounts set
forth in clauses (i), (ii) and (iii), commencing on the day the "Unpaid Amount"
is declared due and payable to and including the day(s) of payment thereof in
full.
USD: lawful currency of the United States of America.
1.2 It is the intention of the parties hereto to use herein such
definitions, descriptions and terms for and specifications of the Aircraft as
are necessary and/or desirable in accordance with the practice and procedure of
any governmental entity having jurisdiction to record and/or file mortgages on
the Aircraft and in order to accomplish such goal the parties hereto agree that
should redefinition and/or redescription of the terms for and specifications of
the Aircraft from time to time be necessary and/or desirable to facilitate such
recordation and/or filing, the parties hereto shall make such redefinition
and/or redescription of the terms for and specifications of the Aircraft as
shall be necessary and/or desirable together with such re-filings, re-
recordations and/or new or additional filings as shall be necessary and/or
desirable to protect and preserve the interest of the Lender hereunder;
provided, however, that such redefinition and/or redescription of the terms for
and specifications of the Aircraft and/or such re-filings, re-recordations
and/or new or additional filings shall not in any manner whatsoever change or
alter the respective and substantive powers, privileges, remedies and rights of
the parties hereto.
2. CONSOLIDATION OF EXISTING LOANS
-------------------------------
2.1 On and as of the date hereof the principal amount outstanding and the
accrued interest related thereto for the Existing Loan Documents is as set forth
below:
<TABLE>
<CAPTION>
Accrued
Principal Interest
--------------- ----------
<S> <C> <C>
Loan Documents [N604FF] $ 586,993.93 $ 4,280.21
Loan Documents [N603FF] $ 867,725.29 $ 6,176.48
Loan Documents [N602FF] $12,000,000.00 $ 85,416.64
Loan Documents [N619FF/N620FF] $19,736,462.78 $128,698.19
-------------- -----------
$33,191,182.00 $224,571.52
</TABLE>
2.2 On and after the Funding Day, the Existing Loans and the obligations
of the Borrower with respect thereto shall be consolidated into the Loan and the
terms and conditions of the Existing Loan Agreements shall be consolidated,
amended and restated
<PAGE>
as set forth herein. This Loan Agreement hereby supersedes all of the terms and
conditions of the Existing Loan Agreements.
3. NEW LOAN AND NOTE.
-----------------
3.1 (a) The Lender hereby agrees to lend to the Borrower and the
Borrower hereby agrees to borrow from the Lender the New Loan Amount in
accordance with the terms and conditions of this Loan Agreement.
(b) That portion of the Loan equal to the New Loan Amount shall
be used to replenish working capital.
3.2 On the Funding Date the Lender shall the New Loan Amount
directly to Borrower, and the disbursement thereof shall be evidenced and
secured by the execution and delivery by the Borrower on or prior to the Funding
Date to the Lender of the Documents as set forth in this Loan Agreement. The
Loan shall be disbursed in such a manner as to ensure the fulfillment of the
conditions precedent as set forth in Section 9 hereof and elsewhere in this Loan
Agreement and the other Documents and the disbursement thereof shall be directed
in writing by Borrower and approved by Lender.
3.3 The Borrower agrees to duly and punctually pay, or cause to be
duly and punctually paid, all amounts due and owing by the Borrower under the
Documents at the times and places and in the manner specified herein and therein
according to the terms hereof and thereof. If any Installment or any other
payment of whatsoever kind due under the Documents is not paid when due, an
additional fee for late payment shall be payable thereon at a rate of interest
equal to the Overdue Rate from the Due Date(s) and due date(s), respectively,
thereof to and including the earlier to occur of (i) the date(s) of payment in
full of such overdue Installment or other payment or (ii) the day the Unpaid
Amount is declared due and payable, in which event, interest shall be due
thereon at the Overdue Rate as is more particularly set forth in the Note. This
provision, or reliance thereon by the Lender, shall not be deemed a waiver of
any Event of Default.
3.4 (a) Interest shall accrue on the unpaid principal amount of the
Loan at a fixed rate per annum ("Interest Rate") equal to the sum of the Base
Rate (defined below) plus 3.94% per annum. The "Base Rate" equals 6.18% per
annum (which rate is the yield to maturity of that issue of U.S. Treasury notes
maturing in March, 2001 with the highest, as published in The Wall Street
Journal three Banking Days preceding the Funding
<PAGE>
Date). Interest shall be calculated on a 360 day year based on the actual number
of days elapsed. Interest shall be payable monthly on each Due Date, and
whenever else principal is due and payable hereunder.
(b) The unpaid principal amount of the Loan together with any
unpaid accrued interest thereon and all other amounts owing hereunder shall be
repaid by the Borrower in full on March 25, 2001.
3.5 The Borrower's obligation to pay all interest, the principal and
all other payments of whatsoever kind under the Documents shall be absolute and
unconditional under any and all circumstances of whatever kind and shall not be
affected by any circumstance of any character, including, but not limited to,
(a) any set-off, counterclaim, recoupment, abatement, demand, deduction, defense
or any other circumstance of whatsoever kind which the Borrower may have against
the Lender, its successors and assigns, or anyone else for any reason
whatsoever, (b) any defect in the title, airworthiness, merchantability,
condition, design, operation or fitness for use of the Aircraft,, (c) any damage
to or loss or destruction of the Aircraft, (d) any interruption or cessation in
the use or possession of the Aircraft, by the Borrower or by anyone entitled to
use or possess the same for any reason whatsoever and (e) any insolvency,
bankruptcy, reorganization or similar proceedings by or against the Borrower or
any third party whomsoever.
3.6 All Installments and any and all other payments of whatsoever
kind due under the Documents shall be paid without notice (except as otherwise
expressly provided herein). Each payment shall be final and the Borrower will
not seek to recover all or any part of such payment from the Lender or from
whosoever may be entitled thereto, for any reason whatsoever. Each Installment
shall be applied first to the payment of accrued and unpaid interest on the Loan
and the remainder shall be applied to the reduction of principal.
3.7 The Lender shall open and maintain on its books a loan account in
the Borrower's name showing the repayment of the Loan and other amounts due and
paid under the Documents. Such loan account shall be conclusive and binding on
the Borrower and any third party whosoever claiming through or by way of the
Borrower as to the amount at any time due to the Lender in respect of the
Obligations, except in the case of error in computation or willful
misrepresentation by the Lender.
<PAGE>
3.8 Except where due to the negligence or willful misconduct of the
Lender, all Installments and other payments of whatever kind to be made by the
Borrower shall be free of expense to the Lender with respect to the amount of
any Impositions (all of which Impositions the Borrower assumes and agrees to pay
on demand in addition to the other payments to be made by the Borrower as
provided for in the Documents).
4. PREPAYMENT.
----------
4.1 There shall be no prepayment of the Note or the Loan either in
whole or in part except as set forth in Paragraphs 4.2, and 4.3 hereof.
4.2 Subject to the immediately succeeding sentence, provided no Event
of Default shall have occurred and be continuing, the Borrower shall be entitled
to prepay all or a portion of the Loan at any time by providing Lender with not
less than thirty (30) days' prior written notice of Borrower's intention to
prepay, which notice will specify the date of prepayment and the amount of such
prepayment. Each prepayment under this Paragraph 4.2 shall be in an amount not
less $1,000,000.00 and, during any twelve month period, the Borrower shall not
be entitled to make more than two prepayments under this Paragraph 4.2. Any
prepayment, whether voluntary or involuntary (including, without limitation, as
a result of a Total Loss of Aircraft or any Engine) shall, subject to Paragraph
4.3 hereof, be made together with: (i) accrued interest on the amount of such
prepayment through the date of such prepayment, (ii) a prepayment fee equal to
the following percentage of the principal amount of the Loan: (A) if such
prepayment is made on or prior to the first year anniversary of the Funding
Date, 4% of such principal amount; (B) if such prepayment is made after the
first year anniversary and on or prior to the second year anniversary of the
Funding Date, 3% of such principal amount; (C) if such prepayment is made after
the second year anniversary and on or prior to the third year anniversary of the
Funding Date, 2% of such principal amount; and (D) if such prepayment is made
after the third year anniversary and on or prior to the fourth year anniversary
of the Funding Date, 1% of such principal amount; and (iii) all other sums due
and owing hereunder. No prepayment fee with respect to the Loan shall be payable
if any prepayment is made after the fourth year anniversary of the Funding Day.
No prepayment fee shall be payable if any prepayment is made as a result of
Borrower's refinancing this Loan with Lender.
4.3 Notwithstanding anything to the contrary in Paragraph 4.2,
above, in the event of a Total Loss with respect to any Aircraft or any Engine,
the Borrower shall pay to Lender on the earlier of: (i) the date on which such
insurance proceeds are paid by the insurer or (ii) 120 days after the occurrence
of such Total Loss, an amount equal to the Agreed Value. Lender shall apply the
amount of the Agreed Value, or, subject to Borrower's right to replace an engine
or aircraft pursuant to the provisions of paragraph 6.4 hereof, the proceeds of
such
<PAGE>
insurance, as a prepayment of the Unpaid Amount under this Loan Agreement.
5. SECURITY.
--------
5.1 To secure payment of the Note and the full and complete
performance of the Obligations, the Borrower hereby grants and conveys to the
Lender a Security Interest in and to the Aircraft, the Engines, all original
books, records, logs and other material pertaining to the use, operation and
maintenance of the Aircraft and the Engines, and all the estate, right, title
and interest of every nature whatsoever of the Borrower at law or in equity in
and to the Aircraft and the Engines, and every part and parcel thereof. Title to
or a lien upon all property in which a Security Interest is granted hereby, or
is intended to be, and which is hereafter acquired by the Borrower or to which
the Borrower may at any time hereafter be, in any manner, entitled at law or in
equity, and required to be subjected hereto or intended so to be, shall vest in
the Lender, under the terms and conditions of this Loan Agreement, forthwith
upon acquisition thereof by the Borrower, and such property shall be as fully
embraced within the Security Interest granted by and pursuant to this Loan
Agreement and subject to the lien hereof as if such property were now owned by
the Borrower and were specifically described herein and a Security Interest
granted hereby.
5.2 The Documents and any or all agreements, documents and
instruments pertaining to the Aircraft and the Engines, or counterparts or
copies or other evidence hereof or thereof may be filed or recorded in any
public office of any jurisdiction as may be necessary or appropriate to protect
the perfection and/or existence of the Lender's Security Interest in and to the
Aircraft and the Engines. Borrower hereby agrees and covenants to execute and
file such agreements, documents and instruments, including, without limitation,
Uniform Commercial Code financing statements, with respect to agreements,
documents and instruments previously executed and/or filed relating to the
Security Interest and interests created under the Documents as shall from time
to time be specified by the Lender.
5.3 The Borrower will not nor will the Borrower attempt to, nor will
the Borrower authorize, suffer or permit a third party to either assign, pledge,
mortgage, lease, hypothecate, encumber, sell or otherwise dispose of any
Aircraft or any Engine. Notwithstanding the foregoing, nothing herein contained
shall be deemed to prohibit the Borrower from "wet leasing" any Aircraft. The
Borrower shall not "dry lease" any Aircraft or any Engine, without the Lender's
prior written consent, which consent shall not be unreasonably withheld; except,
that the Borrower shall not dry lease any Aircraft or any Engine, without the
Lender's prior written consent, which consent may be withheld in the Lender's
sole and absolute discretion, if said dry lease is for a term of more than six
months or is to a non-FAR Part 121 U.S. air carrier.
<PAGE>
5.4 (a) The Borrower will not suffer or permit to be incurred any
liens, security interests, charges, claims or encumbrances of whatsoever nature
or kind on or in and to the Aircraft or the Engines, or permit the Aircraft and
the Engines, to be subjected to any unpaid charges whatsoever. The Borrower
will defend the Aircraft, and its interests therein against the claims and
demands of all parties other than the Lender. The Borrower shall notify the
Lender in writing within 5 days of its acquisition of knowledge thereof that a
lien, security interest, charge, claim or encumbrance of whatsoever kind has
attached to or been asserted against any Aircraft or any Engine.
(b) (i) The Borrower shall have the right to contest by
appropriate proceedings duly instituted and diligently prosecuted or defended,
as applicable, without cost or expense to the Lender, the validity of any lien,
security interest, charge, claim or encumbrance of whatsoever nature referred to
in Paragraph 5.4(a) hereof or any law, ordinances or regulation the nature of
which it deems harmful to any Aircraft or any Engine. However, for claims in
excess of USD 150,000 the Borrower shall upon commencing such contest furnish to
the Lender a bond, guarantee or other document satisfactory to the Lender, in
the Lender's reasonable discretion, guaranteeing that the Lender's interest in
and to such Aircraft or such Engine, shall be held harmless from any penalty,
damage, charge, claim or adverse judgment of whatsoever kind resulting from such
contest; and provided that the Borrower shall diligently prosecute such contest,
and maintain in force any required bond, guarantee or other document, no Event
of Default as set forth in Paragraph 8.1(g) or otherwise shall be deemed to
occur with respect to any such lien, security interest, charge, claim or
encumbrance.
(ii) The Borrower hereby irrevocably assigns, transfers
and sets over to the Lender all of its rights to any award or payment on account
of any confiscation of any Aircraft or any Engine, and irrevocably authorizes
and empowers the Lender, in the name of the Borrower or otherwise, to file and
prosecute what would otherwise be the Borrower's claim for any such award or
payment and to collect, receipt for and retain the same. The Borrower will pay
all costs, fees and expenses incurred by the Lender in connection with any
expropriation or confiscation and seeking and obtaining any award or payment on
account thereof. Any monies received by the Lender under this Paragraph
5.4(b)(ii) shall be applied by the Lender in the following order: (A) to the
payment of all reasonable out-of-pocket costs and expenses incurred in the
collection of said balance; then (B) to the payment of the Unpaid Amount; then
(C) to the payment of any other of the Borrower's Obligations due; then (D) any
remainder shall be paid to the Borrower.
(c) Nothing contained in this Paragraph 5.4 or elsewhere in
the Documents is intended to prohibit any Aircraft, from being subject to liens,
security interests, charges, claims or encumbrances of whatever nature that
arise in the normal
<PAGE>
course of the Borrower's business nor provide for the posting by the Borrower of
a bond, guarantee or other document, provided, however, that such liens and
encumbrances are cleared up in a reasonable period of time and do not involve
any material danger of the sale, forfeiture or loss of such Aircraft, and do not
adversely affect the Lender's rights in and to such Aircraft, or any of the
Lender's remedies with respect thereto and further provided that the Borrower
shall have set aside on its books reserves to the extent required by generally
accepted accounting principles, and adequate with respect thereto.
5.5 The Borrower at its expense shall comply with and satisfy all
the provisions of all applicable laws as amended from time to time, and shall
establish and maintain the Mortgage as a first priority and perfected senior
lien and Security Interest on the Aircraft and the Engines, under the laws of
the United States of America and the State of Arizona, including, without
limitation, the Act. The Borrower shall perform all acts and execute all
instruments necessary or required by the Lender in order to permit the immediate
registration and recordation of the Mortgage at the FAA and the filing of
Uniform Commercial Code financing statements in Queens County, New York and with
the Secretary of State of the State of New York. The Borrower shall furnish to
the Lender from time to time such proof as the Lender may reasonably request
with respect to the Borrower's compliance with the foregoing. Without limiting
the foregoing, the Borrower shall do or cause to be done, at its own cost and
expense, any and all acts and things which may be required under the terms of
the Convention for the International Recognition of Rights in Aircraft, signed
(ad referendum) at Geneva, Switzerland, on June 19, 1948, to perfect and
preserve title to the Aircraft and the Engines, within the jurisdiction of any
signatory state which has ratified said Convention and the territory of which
the Borrower may operate the Aircraft or the Engines. The Borrower shall also do
or cause to be done, at its own cost and expense, everything which may be
required under the terms of any other agreement, treaty, convention, pact or by
a practice, custom, or understanding involving any state in which the Borrower
may operate the Aircraft, or any and all acts and things which the Lender may
reasonably request, to perfect and preserve the rights of the Lender under the
Mortgage in and to the Aircraft and the Engines, within the jurisdiction of any
such state.
6. COVENANTS.
---------
6.1 Except as otherwise provided in the Documents, the Borrower
shall until the occurrence of an Event of Default remain in possession of the
Aircraft and the Engines, and the Lender shall not interfere with the
(a) possession, enjoyment, use and control of the Aircraft and the Engines, nor
(b) rents, earnings, surplus, profits, revenues and income therefrom, except as
otherwise set forth herein.
6.2 [Intentionally Omitted]
<PAGE>
6.3 The Borrower will maintain and deliver evidence to the Lender of
such insurance on the Aircraft and the Engines, required by, written by insurers
and in amounts and forms satisfactory to, the Lender.
6.4 (a) In the event of any payment made to the Borrower by an
insurer in connection with any Aircraft or any Engine pursuant to a claim by the
Borrower, the Borrower shall submit to the Lender for approval a proposal for
the use of such insurance proceeds. Notwithstanding the foregoing, subject to
subparagraph 6.4(b) below, the Lender may in its sole discretion, apply such sum
to the satisfaction of the Obligations and to the extent not so applied shall be
paid over to the Borrower.
(b) Upon the occurrence of a Total Loss with respect to any of
the Aircraft or any Engine, Borrower shall give Lender prompt (and in any event
within 15 days after such occurrence) written notice thereof. If as a result of
the Total Loss, the Borrower or Lender shall be entitled to receive insurance
proceeds under the insurance policies required to be maintained by the Borrower
pursuant to the terms hereof, Borrower, at its option, may acquire, within 120
days after the occurrence of such Total Loss a replacement aircraft or engine
with all or part of such insurance proceeds and Lender shall apply proceeds held
by it to such acquisition, provided, however, that such replacement aircraft or
engine shall have a value and utility at least equal to, and being in as good
operating condition as, the engine or aircraft with respect to which such Total
Loss occurred (assuming such engine or aircraft was of the value and utility and
in the condition and repair required by the terms of this Loan Agreement
immediately prior to the occurrence of such Total Loss). In the event Borrower
elects to acquire a replacement aircraft or engine Borrower shall deliver to
Lender: (i) at least 60 days prior to the acquisition of a replacement engine or
aircraft, notice stating the type of replacement engine or aircraft; (ii) at
least twenty days prior to the acquisition of such replacement aircraft or
engine, a written appraisal rendered by an independent appraiser reasonably
acceptable to Lender; (iii) a duly executed supplement hereto and a supplement
to each of the Documents pursuant to which the Lender was granted a security
interest in such engine or aircraft that was the subject of the Total Loss; (iv)
an opinion of the Borrower's counsel, satisfactory to Lender, in form and
substance satisfactory to Lender, to the effect that such replacement engine or
aircraft is free and clear of all liens, encumbrances and rights of others and
that the Lender has a perfected security interest therein, (v) an officers'
certificate certifying to the continued truth of all representatives and
warranties and that no Event of Default then exists and (vi) Uniform Commercial
Code financing statements covering such replacement engine or aircraft. Borrower
shall also take such other action and furnish such other documents as Lender may
reasonably request.
6.5 Except as expressly permitted in Paragraph 6.7(g) hereof,
Borrower shall not permit any Aircraft or Engine during the term hereof to be
operated in any
<PAGE>
manner contrary to any international treaties, conventions or statutes, rules or
regulations of the FAA or of any other country with jurisdiction or any
department or agency thereof, and Borrower covenants that each Aircraft and
Engine will at all times comply with the foregoing and each Aircraft shall have
on board as and when required thereby valid certificates showing compliance
therewith.
6.6 (a) At all times during the term hereof, except as may be
required for normal maintenance, service, repair and overhaul, and except as
otherwise provided in this Loan Agreement, the Borrower will cause each Aircraft
and Engine to be in as good operating condition as at the time of funding,
ordinary wear and tear excepted, and will meet the standards of the FAA and any
other governmental authority having jurisdiction thereof, regardless of on whom
such requirements are, by their terms, nominally imposed, will meet the
manufacturers' standards and will be able to engage in scheduled operations. An
Event of Default shall not be deemed to occur by virtue of maintaining,
servicing, repairing or overhauling the Aircraft and the Engines while the
Borrower is diligently performing the same.
(b) The Borrower shall (i) comply with all applicable
mandatory service, maintenance, repair and overhaul regulations, directives and
instructions, manuals and service bulletins of the FAA and of the manufacturers
of the Aircraft and the Engines and all parts thereof including, without
limitation, regulations requiring the Aircraft to comply with, or be operated in
accordance with, Stage 3 requirements; (ii) accurately maintain in the English
language all records, logs and other materials required by the FAA to be
maintained in respect of the Aircraft and the Engines regardless of on whom such
requirements are, by their terms, nominally imposed; (iii) take all steps
necessary which are within its power to assure that the Aircraft remains
certified by the FAA with appropriate airworthiness certificates; (iv) comply
with all laws, rules, regulations and orders of applicable jurisdictions
(domestic or foreign) and with all rules of the FAA (including, but not limited
to, the regulations set forth in FAR Part 121) and any other legislative,
executive, administrative or judicial body exercising any power or jurisdiction
over the Aircraft and the Engines and in the event that such laws or rules
require the alteration of the Aircraft or the Engines, the Borrower shall
conform or obtain conformance therewith at no expense to the Lender and will
maintain the Aircraft, the Engines and each part thereof in proper condition for
operation under such laws and rules provided that no technical or nonsubstantial
noncompliance with the provisions of this Paragraph shall be deemed a breach
thereof if the Borrower shall have obtained in writing from the appropriate
authorities permissions, extensions or continuances to perform any and all
requirements or conditions set forth therein. In operating the Aircraft or
Engines for hire or otherwise, the Borrower shall at all times comply with all
laws, rules, regulations and orders of applicable jurisdictions (domestic or
foreign) and with all rules, regulations and orders of the FAA and any other
legislative, executive, administrative or
<PAGE>
judicial body, exercising any power or jurisdiction over the Aircraft and the
Engines.
(c) In addition to and not in limitation of the foregoing
requirements regarding the maintenance, use and operation of the Aircraft and
the Engines by the Borrower, the Borrower shall service, repair, maintain and
overhaul the Aircraft and the Engines in accordance with an FAA approved
maintenance program acceptable to the Lender. The Borrower shall submit to the
Lender for the Lender's approval, details of the maintenance program for the
Aircraft and the Engines.
6.7 (a) The Borrower shall promptly replace all appliances, parts,
instruments, accessories and other equipment, of whatever nature, which may from
time to time be incorporated or installed in or attached to the Aircraft
(including, without limitation, any engine constituting part of the Aircraft)
and the Engines and which may from time to time become worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair, in any way rendered unfit
for use or unserviceable. The Borrower shall also replace any item of equipment
installed on the Aircraft or the Engines where necessary in the normal course of
the Borrower's maintenance program. All such replacement parts or items of
equipment shall be of at least equal utility, value and condition as the part or
item of equipment so replaced and in the same or better serviceable condition by
standards of the FAA as the unit so retired or rendered unfit for use assuming
such replaced property was maintained in accordance with the provisions hereof,
and shall be free and clear of all liens, charges, claims, encumbrances and
rights of others, except for the Security Interest to be granted by the Borrower
to the Lender in such replacement parts or items of equipment. In the case of
the replacement of an engine constituting part of the Aircraft, the replacement
engine shall be of the same type and model as such engine or shall be an
improved or advanced version thereof then operated on other aircraft of the same
make and same model and Borrower will, with respect to replacement engines,
execute and deliver to the Lender a Supplemental Chattel Mortgage and Form UCC-3
and such other documents as may be necessary to accord the Lender a first
priority lien under the security agreement with respect thereto. The Borrower
may remove accessories, equipment or parts from the Aircraft and the Engines
provided, however, that such equipment or parts are promptly replaced by the
Borrower with equipment or parts in as good condition and value as the equipment
or parts so removed and, further provided, that (i) an Event of Default has not
occurred nor an event has occurred that with the giving of notice or passage of
time, or both, would become an Event of Default, (ii) the equipment to be
removed is not required by the FAA or any other governmental authority
exercising jurisdiction in respect of the Aircraft and (iii) the removal of the
accessories, equipment or parts will not interfere with or reduce the usefulness
of the Aircraft or the Engines in regard to its intended use as of the date
hereof. Any accessories, equipment or parts added to the Aircraft or the Engines
by the Borrower may be removed by the Borrower, provided, however, that:
(x) such
<PAGE>
accessories, equipment or parts have not replaced other accessories, equipment
or parts on the Aircraft or the Engines or (y) such accessories, equipment or
parts are not required by the FAA or any other legislative, executive,
administrative or judicial body exercising any power or jurisdiction over the
Aircraft or the Engines or (z) such accessories, equipment or parts are not
otherwise required by the Loan Agreement.
(b) Any accessories, equipment or parts so installed on,
incorporated in, or attached to the Aircraft or the Engines in replacement of
any item of equipment or existing parts and accessories, and any accessories,
equipment or parts so installed, incorporated or attached which are in addition
to existing accessories, equipment or parts and which are essential or required
by the FAA or any other governmental authority having jurisdiction thereof to
the Aircraft or the Engines will be considered accessions to the Aircraft and/or
the engines installed thereon, or the Engines, provided, however, that any such
engine or any item of equipment which shall have been replaced by other engines,
accessories, equipment or parts of at least equal value installed on,
incorporated in or attached to the Aircraft or the Engines shall be released
from the lien of the Mortgage at such time as replacement has been completed.
(c) The Borrower shall promptly report to the Lender all
replacements made having a cost in excess of USD 250,000 with respect to any
Aircraft and USD 150,000.00 with respect to any Engine and made pursuant hereto
and submit satisfactory evidence of compliance with the terms of this Loan
Agreement with respect thereto, and if it is necessary or advisable that this
Loan Agreement be amended or supplemented from time to time to protect the
interest of the Lender with respect thereto, the Lender and the Borrower shall
do so.
(d) The Borrower shall not make any alterations in and to any
Aircraft, any Engine or any part thereof which adversely affects the value or
utility of such Aircraft except as necessary for compliance with the provisions
hereof.
(e) The Lender shall bear no liability whatsoever for the cost
of modifications to any Aircraft, any Engine or any part thereof, whether in the
event of grounding, suspension of certifications or for any other cause.
(f) Borrower will not operate any Aircraft or suffer any
Aircraft to be operated except by pilots who are, at the time of operation,
certified by the FAA for the operation of such Aircraft and meeting the
requirements of any insurance policy in effect with respect to such Aircraft.
(g) Neither Aircraft nor any Engine shall not be used for any
military operation or maneuver. Notwithstanding the foregoing or any other
provision of
<PAGE>
this Agreement to the contrary (including, without limitation, the provisions of
Paragraph 6.5 hereof), Borrower shall be permitted to operate the Aircraft in
connection with its present and future Air Mobility Command ("AMC") charter
contracts with the United States Department of Defense ("Department of Defense")
and to place the Aircraft in the Civil Reserve Air Fleet program ("CRAF"). If
the Aircraft is placed by Borrower in the CRAF and the CRAF is activated by the
Department of Defense during the Term ("CRAF Activation Period"), Borrower shall
nevertheless be obligated to retain control of the Aircraft. Lender agrees to
accept indemnification by the United States Government in lieu of the insurance
required pursuant to Paragraph 6.3 hereof during the Term if Borrower is unable
to provide such insurance required pursuant to Paragraph 6.3 provided, however,
that such indemnification shall provide substantially similar coverage as the
insurance required pursuant to Paragraph 6.3 and Lender shall have received
evidence of such indemnification reasonably satisfactory to Lender. Lender
agrees that the failure of Borrower to provide the insurance required pursuant
to Paragraph 6.3 during the Term shall not be an Event of Default hereunder so
long as such indemnification is in effect. Borrower may transfer possession of
the Aircraft to the Department of Defense during the CRAF Activation Period if
required to do so by the terms of the CRAF program, provided, however, that
Borrower will not volunteer the Aircraft for any CRAF activation without the
express prior written consent of Lender. In addition, Lender agrees to notify
the Commander, Air Mobility Command, Scott Air Force Base, Illinois 62225-5001
in the event that default of this Agreement is contemplated by Lender. All other
terms and provisions of this Agreement shall continue in full force and effect
during any CRAF Activation Period and until such time as Borrower has discharged
all its obligations under this Agreement.
6.8 The Borrower will plainly, distinctly and conspicuously place
and leave in the cockpit of each Aircraft and on each Engine and upon such other
place as may reasonably be designated by the Lender from time to time, a plate,
insignia or other identification bearing the name of the Borrower and the Lender
and identifying them as "Owner" and "Mortgagee", as applicable, in letters of a
size reasonable under the circumstances and acceptable to the Lender.
6.9 (a) Until the Borrower has fully and completely performed and
paid all of the Obligations, the Borrower shall furnish or cause to be furnished
to the Lender, as soon as the same are available, and in any event within 120
days after the end of each fiscal year, a copy of the Borrower's current annual
audited financial statements. Such financial statements shall contain a balance
sheet as of the end of such fiscal year and statements of income and of changes
in cash flows for such fiscal year (together, in each case, with the comparable
figures for the same period during the immediately preceding fiscal year), all
in reasonable detail, prepared in accordance with generally accepted accounting
principles applied on a basis consistently maintained throughout the
<PAGE>
period involved and with prior periods and certified to by a recognized firm of
independent certified public accountants satisfactory to Lender. Together with
such annual financial statements, the Borrower will deliver to the Lender (i) a
certificate from the accountants who audited such statements stating that in
making the examination necessary for the audit of such financial statements they
obtained no knowledge of any default by the Borrower in the full and complete
payment and performance of the Obligations, or if they shall have obtained
knowledge of any such default, specifying the same; and (ii) an officer's
certificate stating that there exists no Event of Default and no condition,
event or act which, with notice or lapse of time or both would become an Event
of Default or, if any such Event of Default or any such condition, event or act
exists, specifying the nature and period of existence thereof and what action
the Borrower proposes to take with respect thereto. The Borrower shall also
furnish from time to time, such additional financial and other information as
the Lender may reasonably request.
(b) Until the Borrower has fully and completely performed and paid all
of the Obligations, the Borrower shall furnish or cause to be furnished to the
Lender, as soon as the same are available, and in any event within 45 days after
the end of each quarter during each fiscal year, a copy of the Borrower's
current quarterly financial statements. Such financial statements shall contain
a balance sheet as of the end of such quarter and statements of income and of
changes in cash flows for such quarter (together, in each case, with the
comparable figures for the same quarter during the immediately preceding fiscal
year), all in reasonable detail. Together with such quarterly financial
statements, the Borrower will deliver to the Lender a certificate of the chief
financial officer of the Borrower stating that there exists no Event of Default
and no condition, event or act which, with notice or lapse of time or both would
become an Event of Default or, if any such Event of Default or any such
condition, event or act exists, specifying the nature and period of existence
thereof and what action the Borrower proposes to take with respect thereto.
(c) The Borrower shall promptly give notice to the Lender of (i) any
substantial dispute with respect to taxes or any other matter in connection with
the Aircraft or which might in any way interfere with the normal use and
operation thereof, or (ii) any substantial labor dispute threatening the
continued normal operations of the Borrower.
(d) The Borrower will at any and all times, on reasonable notice and
request of the Lender, permit the Lender or its representatives to inspect the
Aircraft, the Engines and the records, reports, books of accounts, logs and
other papers of the Borrower relating to the Aircraft, the Engines and the
business operations of the Borrower and to make copies and take extracts
therefrom and will afford and procure a reasonable opportunity to make any such
inspections and will furnish the Lender with any
<PAGE>
and all other information as the Lender may reasonably request with respect to
the Aircraft and the Engines including information concerning the location,
condition, use and operation of the Aircraft and the Engines. Such inspections
shall take place on dates, times and places mutually convenient to the Borrower
and the Lender and so as not to unreasonably interfere with the normal business
operations of the Borrower. The annual inspection of the Aircraft and the
Engines and any other inspection made by the Lender in addition to the annual
inspection (other than in connection with the exercise of its rights after the
occurrence of an Event of Default) shall be at the Lender's sole cost and
expense. For purposes of this paragraph (d), the term "annual inspection" shall
mean an annual inspection with respect to each Aircraft and each Engine, which
inspections may be completed on different days. Nothing contained in the
immediately preceding sentence shall be construed in any way to limit the number
of inspections the Lender may make of the Aircraft and the Engines. Borrower
shall also provide Lender with not less than 60 days' prior written notice as to
the time and location of all "C" and "D" checks to be performed on any Aircraft.
The Lender shall have no duty to make any such inspections and shall not incur
any liability or obligation or be deemed to have waived any rights by reason of
not making any such inspection.
(e) The Borrower shall provide the Lender with the following
information within 30 days after the end of each year and at the following times
upon Lender's request: (i) at any time after the occurrence of an Event of
Default, or (ii) otherwise, no more frequently than once every quarter:
(A) the current location of each Engine and each Aircraft Engine
(in the event that an Engine is attached to another aircraft, Borrower shall
provide Lender with information identifying such aircraft and if such aircraft
is subject to a lease, Borrower shall inform Lender of the name and address of
the lessee thereunder and the term of such lease and such other information as
is reasonably requested by Lender regarding the location of such Engine or
Aircraft Engine);
(B) the total number of hours and cycles with respect to the
Aircraft, each Aircraft Engine and each Engine;
(C) the number of hours remaining on the airframe of each
Aircraft, until the next required or scheduled "C" Check;
(D) the number of engine cycles remaining with respect to each
Aircraft Engine and each Engine prior to the next scheduled removal for
maintenance of such Aircraft Engine and such Engine from any aircraft or
Aircraft; and
(E) whether the FAA has during the preceding quarter: (i)
conducted a NASIP inspection of any facility of Borrower; (ii) issued a letter
of investigation; or (iii) conducted a debriefing or issued any correspondence
in connection with any discrepancy uncovered after an inspection of any
facility of Borrower or taken any action with respect to any facility or
procedure of Borrower, and, if so, the nature and results and resolution of such
inspection or action (including, without limitation, any fines and settlements
in connection therewith).
6.10 If the Borrower shall fail to perform any of its covenants in the
<PAGE>
Documents, including, without limitation, its covenant set forth in Paragraph
6.3 hereof to maintain insurance, the Lender may, in its sole and exclusive
discretion, at any time and from time to time, make advances to effect
performance of such covenant on behalf of the Borrower, including, with respect
to such insurance, to purchase such insurance, and all moneys so advanced by the
Lender, together with interest thereon at the Overdue Rate, shall be repaid by
the Borrower on demand, but no such advance shall constitute a waiver by the
Lender of or relieve the Borrower from any Event of Default.
6.11 Nothing contained in the Documents shall constitute any consent
or request by the Lender, express or implied, for the performance of any labor
or services or the furnishing of any materials or other property in respect of
the Aircraft, the Engines or any part thereof, nor as giving the Borrower any
right, power or authority to contract for or permit the performance of any labor
or services or the furnishing of any materials or other property in such a
fashion as would permit the making of any claim against the Lender in respect
thereof or any claim that any lien based on the performance of such labor or
services or the furnishing of any such materials or other property is superior
to the Security Interest herein granted in and to the Aircraft and the Engines
in favor of the Lender.
6.12 The Borrower hereby agrees to (a) indemnify, reimburse and save
harmless the Lender, its successors, assigns, shareholders (including corporate
shareholders) directors, officers, employees, agents and servants of the
foregoing (collectively, the "Indemnitees") from and against any and all
liability, loss, damages, costs and expenses which the Lender or the Indemnitees
may hereafter incur, suffer or be required to pay by reason of all manner of
action and actions, cause and causes of action, suits, debts, sums of money,
reckonings, controversies, suits, judgments, claims and demands howsoever
arising and resulting from or growing out of the management, control, condition,
use, operation, destruction, damage, repossession, storage, surrender, sale or
other disposition of the Aircraft and the Engines (whether or not the Borrower
is in possession of the Aircraft or the Engines), or otherwise from this
transaction and (b) waive and release the Indemnitees from any and all action
and actions, cause and causes of action, reckonings, controversies, claims and
demands howsoever arising and resulting from or growing out of the management,
control, condition, use, operation, destruction, damage, repossession, storage,
surrender, sale or other disposition of the Aircraft and the Engines (whether or
not the Borrower is in possession of the Aircraft or the Engines) or otherwise
from this transaction. This indemnification shall not cover liability, loss,
damage, cost or expense which is proximately caused solely by the negligence or
willful misconduct of an Indemnitee.
6.13 The Borrower's Obligations will rank at least pari passu in
---- -----
priority of payment and in all other respects with all other indebtedness or
obligations of the
<PAGE>
Borrower.
6.14 The Borrower shall provide the Lender with written notice of the
relocation of its chief executive office and/or principal place of business not
less than 30 days prior to the effective date thereof.
7. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
----------------------------------------------
The Borrower represents and warrants to the Lender as follows:
7.1 The Borrower is a corporation duly organized and validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified to do business and in good standing in every jurisdiction in which the
nature of its business or properties requires such qualification, except where
failure to qualify will not have a material adverse effect upon the transaction
embodied herein. The Borrower maintains its chief executive office and
principal place of business at the address set forth in the preamble to this
Loan Agreement.
7.2 The Borrower has taken all action which may be required by its
articles or certificate of incorporation and its by-laws, and by the laws of the
State of Delaware and all other applicable laws to (a) grant and convey to the
Lender the Security Interest in and to the Aircraft and the Engines, and (b)
authorize the execution, delivery and performance of the Documents.
7.3 The execution and delivery of the Documents and the performance
by the Borrower of the Obligations under the Documents and the creation of the
Security Interest in and to the Aircraft and the Engines, will not conflict with
or violate any provisions of its articles or certificate of incorporation or its
by-laws, or any provisions thereof or result in a default or acceleration of any
obligation under any agreement or instrument of any kind or any undertaking,
order, decree or judgment to which the Borrower is a party or by which it is
bound.
7.4 Except as set forth on Attachment A, hereto, and as further
described in the opinion of Borrower's counsel delivered pursuant to Paragraph
8.1(l) hereof, there is no litigation currently pending or expected against the
Borrower before any court or administrative agency which may have a materially
adverse effect on the assets, business, financial condition or operations of the
Borrower or which would or do prevent or hinder the performance by the Borrower
of its obligations under the Documents.
7.5 The Documents are valid obligations of the Borrower, binding and
enforceable against it in accordance with the terms and conditions thereof.
<PAGE>
7.6 The Borrower has read and is fully familiar with all the
covenants, terms and conditions of the Documents and has not relied on any
representations or warranties of the Lender, express or implied, except those
representations and warranties of the Lender, if any, expressly set forth in the
Documents.
7.7 Simultaneously with the disbursement of the Loan, the Lender's
Security Interest in and to the Aircraft and the Engines, will be duly and
properly preserved and perfected and will constitute a first priority security
interest in and to the Aircraft, in accordance with all applicable laws and
regulations.
7.8 As of the Funding Date, the Borrower (i) owns and holds good and
marketable title to each Aircraft and each Engine, free and clear of all liens,
security interests, charges, claims and encumbrances of whatsoever nature (other
than the Security Interests granted and conveyed to the Lender by the Mortgage
and herein) and (ii) will defend title to each Aircraft and each Engine against
the claims and demands of all parties.
7.9 On the Funding Date, no further registration, recording or filing
with respect to the Aircraft or the Engines will be necessary or advisable in
order to establish and perfect the Borrower's title thereto nor to establish and
perfect the Security Interest in favor of the Lender in and to the Aircraft or
the Engines, other than the filing of Mortgage Amendments, and Uniform
Commercial Code financing statements.
7.10 All documents, instruments, certificates and agreements delivered
to the Lender in connection with the transaction contemplated herein, including,
but not limited to, the Note and the Mortgage, are complete and there are no
addenda thereto nor modifications thereof (whether written or verbal) which have
not been disclosed in writing to the Lender prior to the date hereof.
7.11 The Borrower is, and at all times will be, a "Citizen of the
United States" as defined in the Act.
7.12 The Borrower is, and at all times will be, an FAR Part 121 air
carrier.
7.13 Borrower has heretofore furnished to Lender a draft of Borrower's
audited annual financial statements and related financial information as of
December 31, 1995 ("Financial Statements"). Borrower does not anticipate any
material change to such draft Financial Statements (including the notes thereto)
in the completion of the final financial statements as of December 31, 1995. The
Financial Statements
<PAGE>
fully and fairly present the financial condition of Borrower as of the dates of
the balance sheets contained therein, and the results of its operations for the
periods then ended, all in conformity with GAAP on a basis consistent with that
of financial statements for corresponding prior periods. Except as disclosed
therein, Borrower has no material contingent liabilities (including liabilities
for taxes). Since December 31, 1995 there has been no material, adverse change
in the business, operations or financial condition of Borrower;
7.14 Neither the Documents nor any filing required or permitted
thereunder is subject to any registration tax, stamp duty or similar tax and to
the extent the same is due then the same shall be paid by the Borrower when due
or reimbursed to the Lender upon demand.
7.15 The Borrower will use that portion of Loan equal to the New Loan
Amount for the purposes set forth in Paragraph 3.1 hereof, and for no other
purpose without the prior written consent of the Lender.
7.16 The reports as to the status and condition of the Aircraft
Engines and the Engines have been true and accurate in all material reports.
7.17 No information given by the Borrower in relation to this Loan
Agreement or the other Documents and the transaction contemplated herein and
therein and furnished pursuant hereto or thereto contains any misstatement of
fact or omits to state a fact which would be adverse to the interest of the
Lender or which would be necessary to make any statement or representation or
warranty contained herein or therein not misleading.
8. DEFAULT, ACCELERATION AND REMEDIES.
----------------------------------
8.1 Each of the following events and occurrences shall, at the
Lender's option, constitute a default (each, an "Event of Default") under the
Documents:
(a) The Borrower fails to pay any payment of interest or
principal hereunder when and as the same is due and such failure continues for 5
days subsequent to the receipt by the Borrower of written notice thereof;
(b) The Borrower fails to pay any payment due under the Documents
when and as the same is due, other than the payments referred to in Paragraph
8.1(a) hereof, and such failure continues for 10 days subsequent to the receipt
by the Borrower of written notice thereof;
<PAGE>
(c) The Borrower fails to procure and/or maintain any insurance
coverage or knowingly violates or suffers or permits the violation of any of the
warranties or conditions of the policies of insurance required hereunder;
(d) The Borrower fails to perform or observe any material duty,
obligation or covenant contained in the Documents, other than that referred to
in Paragraphs 8.1(a) (b) or (c) hereof, and such failure continues for 15 days
subsequent to the receipt by the Borrower of written notice thereof;
(e) A default occurs under the Mortgage;
(f) The Borrower becomes insolvent or unable to pay its debts when due
or commits or permits any act of bankruptcy, including, but not limited to: (i)
the filing by the Borrower of a petition in any bankruptcy, reorganization,
winding-up or liquidation proceeding or other proceeding analogous in purpose or
effect relating to itself; (ii) the filing by another of a petition instituting
any bankruptcy, reorganization, winding-up or liquidation proceeding or other
proceeding analogous in purpose or effect relating to the Borrower, which
petition is not dismissed or discharged within 60 days of its filing; (iii) its
application for or consent to the appointment of a receiver, custodian, or
trustee for the bankruptcy, reorganization, winding-up or liquidation of itself;
(iv) it makes an assignment for the benefit of creditors; or (v) any court order
for judgment is entered confirming the bankruptcy or insolvency of itself or
approving any reorganization, winding-up or liquidation of itself or a
substantial portion of its assets or providing other relief;
(g) A final non-appealable judgment or decree for money damages or for
a fine or penalty in excess of USD 1,000,000.00 is entered against the Borrower
and such judgment or decree is not paid or discharged within 45 days thereof;
(h) The Borrower has made a materially untrue, incorrect or misleading
representation or warranty herein or in any other Document;
(i) Borrower shall fail to pay any indebtedness in an amount, solely
or in the aggregate, of not less than $1,000,000.00 when and as payable (or
within any applicable grace period) or shall default with respect to any
evidence of such indebtedness or any obligation for borrowed money in such
amount, or in the performance of any other obligation incurred in connection
with any such indebtedness, if the effect of such default is to accelerate the
maturity of such evidence of indebtedness or obligation or to require the
prepayment thereof or to permit the holder or obligee thereof (or a trustee on
behalf of such holder or obligee) to cause any such indebtedness to become
payable prior to its stated maturity;
<PAGE>
(j) Any Aircraft shall no longer be registered in the United States of
America;
(k) The Airworthiness Certificate for any Aircraft has been suspended
or revoked or the Borrower's Part 121 certificate is suspended or revoked and
same is not reinstated or reacquired within 30 days of the date of such
suspension or revocation (if the Borrower has undertaken and has diligently
commenced such action as is necessary to have the Airworthiness Certificate for
such Aircraft or the Borrower's Part 121 certificate reinstated or reacquired,
then, in such event, the 30 day cure period provided for in this subsection (n)
shall be extended to 60 days from the date of the suspension or revocation of
same). Notwithstanding the foregoing, in the event the Airworthiness
Certificate for such Aircraft have been suspended or revoked due to a suspension
or revocation of airworthiness certificates for all aircraft of the same type as
such Aircraft then, in such event, provided no other Event of Default has
occurred hereunder or by the giving of notice or passage of time would be
constituted, and the insurance required to be provided pursuant hereto is not
adversely affected, then, in such instance, an Event of Default shall not be
deemed to have occurred unless the Airworthiness Certificate is not reinstated
or reacquired or the required certifications are not reinstated or reacquired,
respectively, within 120 days of the date of such suspension or revocation.
However, if the Borrower has undertaken and has diligently commenced such action
necessary in such event to remove such prohibition of use or grounding of all
aircraft of the same type as such Aircraft same shall not constitute an Event of
Default unless such prohibition of use or grounding of all aircraft of the same
type as the Aircraft continues uninterrupted for a period in excess of 270 days
from the commencement date of the prohibition or grounding; or
(l) The Lender has not received, within 14 days after the Funding
Date, an Opinion of Counsel referred to in Paragraph 9.1(f) and a Certificate
of Resolutions, certified by the corporate secretary of the Borrower and setting
forth a true, complete and accurate copy of the resolutions approved by the
Borrower's Board of Directors authorizing the entering into, execution and
delivery of the Documents and performance by the Borrower thereunder and the
incurring of the Obligations by the Borrower.
8.2 (a) Upon the occurrence of an Event of Default, the Lender may,
at its option, declare the Unpaid Amount to be immediately due and payable,
whereupon the Unpaid Amount shall immediately be due and payable and the
Borrower shall immediately pay same to the Lender.
(b) In addition to exercising all rights, powers, privileges and
remedies available to the Lender under the Uniform Commercial Code or other
applicable
<PAGE>
law or as provided for elsewhere in the Documents, upon the occurrence of an
Event of Default, the Lender may, in each and every case: (i) declare the
Unpaid Amount immediately due and payable; (ii) enter into and take possession
of any or all of the Aircraft and the Engines, (iii) sell, to the extent
permitted by law, the Aircraft and/or the Engines, at such place or places and
otherwise in such manner and on such notice as may be required by law in order
to collect the indebtedness of the Borrower under the Documents and execute
proper conveyances to the purchaser or purchasers thereof; and/or (iv) proceed
by a suit or suits in equity or at law to protect and enforce the Lender's
rights under the Documents, whether for the specific performance of any
covenant, condition, agreement or undertaking therein contained, or in aid of
the execution of any power therein granted, or for the foreclosure of the
Security Interests and sale of the Aircraft, the Engines or any part thereof
under the judgment or decree of any court of competent jurisdiction, or for the
appointment of a receiver or receivers, or for the enforcement of such other
appropriate legal or equitable remedy as may in the opinion of the Lender's
counsel be most effectual to protect and enforce the rights aforesaid.
8.3 If an Event of Default shall have occurred and the Lender shall
elect to take possession of the Aircraft and/or the Engines, as set forth in
Paragraph 8.2(b) hereof, the Lender, by its attorneys or agents, may enter into
and take possession of the Aircraft, the Engines, and each and every part
thereof and exclude the Borrower and its agents, servants and employees wholly
therefrom, and have, hold, use, operate, manage and control the same and each
and every part thereof and in the name of the Borrower, or otherwise as the
Lender shall deem best, use the Aircraft and the Engines, and at the expense of
the Borrower, maintain, restore, insure and keep insured the Aircraft and the
Engines, and likewise from time to time, at the expense of the Borrower, make
all such expenditures for maintenance, insurance, repairs, replacements,
alterations and, to the extent Lender considers reasonably necessary or
desirable in its sole discretion in order to effect a sale, additions and
improvements to and of such property. Lender shall be entitled to collect and
receive all earnings, income, rents, issues, profits, proceeds and revenues of
the same and of every part thereof, and after deducting therefrom the expenses
of operation and all expenses incurred hereunder and all other proper outlays
herein authorized, and all payments which may be made as just and reasonable
compensation for its own services, and for the services of its attorneys, agents
and assistants, the Lender shall apply the rest and residue of the monies
received by it in the following order: (i) to the payment of all reasonable
costs and expenses incurred in the collection of the Unpaid Amount, including,
but not limited to, reasonable attorney's fees; then (ii) to the payment of all
reasonable costs and expenses incurred by the Lender in taking any of the
actions specified above in this Paragraph 8.3; then (iii) to the payment of the
remaining Unpaid Amount; then (iv) to the payment of any other of the Borrower's
Obligations then due; then (v) any remainder shall be paid to the Borrower.
<PAGE>
8.4 If an Event of Default shall have occurred and the Lender shall
elect to sell any Aircraft, any Engine or any part thereof, then the Lender
shall proceed to do so in a commercially reasonable manner in accordance with
applicable law and the proceeds of any such sale shall be applied in accordance
with Paragraph 8.3 hereof. In any such sale the Lender may bid for and purchase
any Aircraft or Engine, and on compliance with the terms of sale may hold,
retain, possess and dispose of such property in its own absolute right, without
further accountability.
8.5 On any sale, whether made under the power of sale hereby given or
by virtue of judicial proceedings, the receipt of the Lender or of the officer
making a sale under judicial proceedings shall be a sufficient discharge to the
purchaser(s) and his or their assigns or personal representatives, who shall,
after paying such purchase money and receiving such receipt of the Lender or of
such officer therefor, not be obliged to see to the application of such purchase
price or be in any way answerable for any loss, misapplication or non-
application thereof.
8.6 (a) No failure or delay by the Lender to insist on the strict
performance of any term or condition of the Documents or to exercise any right,
remedy, power or privilege consequent on an Event of Default and no acceptance
of any payment of the principal of or interest on the Note or other payment of
whatsoever kind payable to the Lender during the continuance of any such Event
of Default shall constitute a waiver of any such term or condition or default or
of any such right, remedy, power or privilege, nor shall any single or partial
exercise of any such right, remedy, power or privilege preclude any other or
further exercise thereof or of the exercise of any other right, remedy, power or
privilege. No waiver of any Event of Default hereunder shall affect or alter
the Documents, which shall continue in full force and effect, or the rights of
the Lender with respect to any other then existing or subsequent Event of
Default.
(b) Each right, remedy, power or privilege of the Lender provided
for in the Documents or now or hereafter existing at law or in equity, by
statute or otherwise, shall be cumulative and concurrent and shall be in
addition to every other right, remedy, power or privilege by statute or
otherwise, and the exercise or beginning of the exercise by the Lender of any
one or more of such rights, remedies, powers or privileges shall not preclude
the simultaneous or later exercise of any or all other rights, remedies, powers
or privileges.
8.7 The Borrower, for itself and for all who may claim through or
under it, hereby expressly waives and releases all right to have any Aircraft,
any Engine or any part thereof or any other of its property marshaled on any
foreclosure, sale or other enforcement hereof, and the Lender, or any court in
which the foreclosure of the Security Interests in any Aircraft or Engine is
sought, shall have the right to sell such Aircraft or
<PAGE>
such Engine, as an entirety in a single parcel or otherwise. The Borrower, if
called upon to do so, shall provide the Lender with a specific written waiver to
evidence the intent of this Paragraph 8.7.
8.8 If any legal action or any other proceeding is brought for the
enforcement of this Loan Agreement or of any of the Documents or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Loan Agreement or of any of the Documents, the successful
or prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in connection with such action or proceeding and any appeal
thereof, in addition to any other remedies available.
9. CLOSING CONDITIONS.
------------------
9.1 Notwithstanding anything contained in this Loan Agreement or the
other Documents to the contrary, the obligation of the Lender to advance that
portion of the Loan equal to the New Loan Amount or any part thereof is
expressly contingent on the fulfillment and/or satisfaction in the sole
discretion of the Lender of the following conditions precedent and the receipt
by the Lender (in form and substance satisfactory to the Lender) of such
documents and instruments, if any, therein required or deemed necessary by the
Lender to evidence the fulfillment and/or satisfaction of said conditions
precedent:
(a) The Borrower and the Lender have executed and delivered
this Loan Agreement or have caused the same to be done;
(b) The Borrower has executed and delivered to the Lender the
Note in the amount of the Loan and dated as of the Funding Date or has caused
the same to be done;
(c) The Borrower has executed and delivered the Mortgage or has
caused the same to be done;
(d) The Lender has received certificates of insurance or other
written evidence that insurance required under this Loan Agreement and under the
Mortgage in respect of each of the Aircraft has been obtained;
(e) The Lender has received a Certificate of Resolutions,
certified by the corporate secretary of the Borrower and setting forth a true,
complete and accurate copy of the resolutions approved by the Board of
Directors, of the Borrower authorizing the entering into, execution and delivery
of the Documents and performance by the
<PAGE>
Borrower thereunder and the incurring of the Obligations by the Borrower;
(f) The Lender has received an Opinion of Counsel from the
Borrower's counsel to the effect that the representations and warranties of the
Borrower set forth in Paragraphs 7.1, 7.2, 7.3, 7.4, 7.5, 7.7, 7.8(i), 7.9,
7.11, 7.12 and 7.14, hereof are true and correct as of the Funding Date;
(g) The Lender has received evidence that the Borrower has good
and marketable title to Aircraft [N619FF] and Aircraft [N620FF] free and clear
of all liens, security interests, claims, charges and other encumbrances of
whatsoever kind, except the Mortgage, in favor of and for the benefit of the
Lender;
(h) The Lender has acquired or maintained a perfected first and
senior Security Interest and mortgage in and to the Aircraft and the Engines;
(i) The Lender has received an Officer's Certificate setting
forth the following: (i) the name of each of the duly elected and acting
officers of the Borrower together with the title of each office each holds; (ii)
the name and title of each officer of the Borrower who is authorized by the
Board of Directors of the Borrower to enter into, execute and deliver the
Documents on behalf of the Borrower and a specimen signature of each of said
officers and (iii) a certified copy of a current Certificate of Good Standing of
the Borrower certified by the Secretary of State of the State of Delaware;
(j) The Lender has received a copy of the Borrower's articles
of incorporation;
(k) The Lender has received a copy of the by-laws, as amended,
of the Borrower;
(l) The Borrower has executed and delivered to the Lender such
Uniform Commercial Code financing statements as the Lender shall require;
(m) The Lender has completed a satisfactory inspection of
Aircraft [N619FF] (including the Aircraft Engines related thereto) and Aircraft
[N620FF] (including the Aircraft Engines related thereto) together with books
and records relating to both such Aircraft and Lender shall have received an
appraisal, in form and substance reasonably satisfactory to it, of both such
Aircraft;
(n) The Lender has received an Opinion of Counsel from
Daugherty, Fowler and Peregrin, special FAA counsel;
<PAGE>
(o) The Lender has received copies of all other licenses,
consents and approvals, if any, necessary to the operation of the Borrower's
business; and
(p) Such other agreements, certificates instruments or legal
opinions in writing as shall be deemed by the Lender or its counsel necessary or
desirable in order to more fully and completely service, protect, perfect or
preserve the Lender's Security Interests and other interests in and to the, the
Aircraft, and otherwise under the Documents and the Mortgage.
10. MISCELLANEOUS.
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10.1 The Documents and the documents, instruments and agreements
herein referred to constitute the entire agreement between the parties hereto
with respect to the transaction embodied herein and shall supersede all other
prior agreements, written or oral, with respect thereto.
10.2 This Loan Agreement shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns, provided,
however, that the Borrower shall not have the right to assign or transfer its
rights or obligations under the Documents except with the prior written consent
thereto of the Lender. The Lender, at any time, may sell, assign, grant or
otherwise transfer its rights, interest and obligations under the Documents or
part thereof.
10.3 This Loan Agreement may be amended, modified, renewed or extended
but only by a written instrument, executed by both of the parties hereto, in the
manner of the execution of this Loan Agreement.
10.4 The validity, construction and interpretation of this Loan
Agreement and the other Documents, and all rights, obligations and liabilities
arising hereunder or thereunder, shall be governed by the laws of the State of
Arizona, United States of America, and for the purpose of legal proceedings this
Loan Agreement and the other Documents shall be deemed to have been made and to
be wholly performed in such jurisdiction.
10.5 Each of the parties hereto shall, from time to time, perform such
other and further acts and execute and deliver any and all such other and
further instruments as may be required or reasonably requested by the other
party to establish, maintain and protect the respective rights and remedies of
such other party and to carry out and effect the intents and purposes of this
Loan Agreement.
10.6 All documents, agreements, certificates and instruments herein
<PAGE>
required shall be in form and substance satisfactory in all respects to the
Lender in its sole discretion and shall be provided at the sole cost and expense
of the Borrower.
10.7 The representations and warranties hereunder shall survive the
Funding Date and the Lender may enforce such representations and warranties at
any time. The Borrower's covenants shall survive the Funding Date and shall be
performed fully and faithfully by the Borrower at all times. The indemnities of
the Borrower in each case shall survive repayment of the Loan.
10.8 Any provision hereof prohibited by, or unlawful or unenforceable
under, any applicable law of any jurisdiction shall as to such jurisdiction be
ineffective without affecting the remaining provisions of this Loan Agreement
which shall remain in full force and effect. Where, however, the provisions of
any such applicable law may be waived they are hereby waived to the fullest
extent permitted by law so that this Loan Agreement shall be a valid and binding
agreement enforceable in accordance with its terms. In the event that any
provision of this Loan Agreement or the documents, instruments and agreements
pertaining hereto shall be deemed to be invalid or become invalid, the Borrower
agrees to substitute for such invalid provision a new provision which serves the
purpose of the invalid provision to the furthest possible extent permitted by
law.
10.9 The Borrower shall pay, on the Funding Date and thereafter, to
the extent required, on demand, all expenses incident to this transaction,
including, but not limited to, appraisal fees, the costs payable upon the filing
and recording of any of the Documents, recordation taxes, travel expenses,
transfer taxes and reasonable fees and disbursements of outside counsel.
10.10 This Loan Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
10.11 The headings of the Sections and Paragraphs of this Loan
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof.
10.12 The Documents have been reviewed and negotiated by counsel
for each party and no ambiguity in this Loan Agreement or the other Documents
shall be construed against either party based upon its having prepared any of
the Documents or part thereof.
10.13 It is the intention of the parties hereto to comply with
applicable
<PAGE>
state usury laws. Accordingly, it is agreed that notwithstanding any provisions
to the contrary in the Documents, the Documents shall not require the payment or
permit the collection of interest in excess of the maximum legal amount
permitted by law. If any such excess of interest otherwise is contracted for,
charged or received pursuant to the Documents or if the Obligations are
accelerated in whole or in part, so that under any of such circumstances the
amount contracted for, charged or received pursuant to the Documents would
exceed the maximum legal amount of interest permitted by law, then, upon such
happenstance, (i) the provisions of this Paragraph 10.13 shall govern and
control, (ii) neither the Borrower nor any other person or entity now or
hereafter liable for payments under the Documents would be obligated to pay the
same to the extent that it is in excess of the maximum legal amount of interest
permitted by law, (iii) any such excess which may have been collected shall, at
the Lender's option, be either applied as a credit against the Unpaid Amount(s)
or refunded to the Borrower or the person or entity thereunto entitled and (iv)
the effective rate of interest shall be automatically reduced to the maximum
lawful rate allowed under law as now or hereafter construed by any court having
jurisdiction hereof.
10.14 (a) The Borrower (i) hereby irrevocably submits to the
jurisdiction of the Superior Court of Maricopa County, State of Arizona, or any
successor to said court, and to the jurisdiction of the United States District
Court for the District of Arizona, or any successor to said court (hereinafter
referred to collectively as the "Arizona Courts"), for purposes of any suit,
action or other proceeding which relates to the transactions contemplated in
this Loan Agreement, (ii) to the extent permitted by applicable law, hereby
irrevocably waives and agrees not to assert by way of motion as a defense or
otherwise in any such suit, action or proceeding any claim that it is not
personally subject to the jurisdiction of the Arizona Courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Loan Agreement or any
transaction provided for or contemplated herein may not be enforced in or by the
Arizona Courts, (iii) hereby agrees not to seek, and hereby waives, any
collateral review by any other court, which may be called upon to enforce the
judgment of any of the Arizona Courts, of the merits of any such suit, action or
proceeding or the jurisdiction of said Arizona Courts, and (iv) hereby
irrevocably waives, to the fullest extent permitted under applicable law, the
right to trial by jury in any action, suit or proceeding brought to enforce the
provisions of this Loan Agreement or any of the Documents. Nothing herein shall
limit the Lender's right to bring any suit, action or other proceeding against
the Borrower or any of the Borrower's assets or to serve process on the Borrower
by any means authorized by law.
(b) The Borrower hereby irrevocably designates and appoints
C T Corporation System, with offices on the date hereof at 3225 N. Central
Avenue, Phoenix, Arizona 85012, United States of America, as its agent for
service of process in the State
<PAGE>
of Arizona, United States of America. The foregoing, however, shall not limit
the right of the Lender to serve legal proceedings in any other manner permitted
by law or to bring any legal action or proceedings or to obtain execution or
judgment in any courts of competent jurisdiction.
10.15 Interest calculations under the Documents shall be made on a
360 day year based on the actual number of days elapsed.
10.16 All demands, declaration, notices, consents, requests and
other communications hereunder shall be in writing and shall be deemed to have
been duly given five (5) days subsequent to its being deposited in the mail,
registered or certified, postage prepaid, addressed as follows to the party to
be given notice:
(i) To the Lender:
FINOVA Capital Corporation
1850 North Central Avenue
Phoenix, Arizona 85002
Attention: Vice President Operations Management -
Transportation Department
(ii) To the Borrower:
Tower Air, Inc.
Hangar No. 17
John F. Kennedy International Airport
Jamaica, New York 11430
Attention: Morris Nachtomi
Chairman-President & CEO
10.17 The Borrower hereby represents and warrants to the Lender
that no broker brought about the transaction contemplated hereby and the
Borrower hereby agrees to indemnify and hold the Lender harmless from any and
all liabilities and costs (including, without limitation, costs of counsel) to
any person or entity claiming brokerage commissions or finder's fees on account
of this Loan Agreement or the other Documents.
10.18 The Borrower has paid to the Lender the amount of USD
170,000.00 as a non-interest bearing deposit (the "Deposit"). On the Funding
Date, the Borrower shall pay to the Lender a loan fee in the amount of
USD170,000.00 and Lender shall apply the Deposit to the payment of such fee.
<PAGE>
10.19 Both parties agree that they shall keep all proprietary
information and data provided with respect to the transaction embodied herein
confidential except as required by law.
10.20 Time is of the essence with respect to the terms and
conditions of this Loan Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Consolidated,
Amended and Restated Aircraft and Engine Loan and Security Agreement as of the
day and year first above written.
TOWER AIR, INC.
By: /s/ Josephina M. Essex
-----------------------------------
Title: Chief Financial Officer
Tax ID No.: 11-262-1046
FINOVA CAPITAL CORPORATION
By: /s/ Sandra K. McDonough
-----------------------------------
Title: Vice President
<PAGE>
Exhibit 10(11)
AIRCRAFT LOAN AND SECURITY AGREEMENT
------------------------------------
THIS AIRCRAFT LOAN AND SECURITY AGREEMENT (the "Loan Agreement") made and
entered into this 26th day of January, 1996 by and between FINOVA CAPITAL
CORPORATION (formerly GREYHOUND FINANCIAL CORPORATION) (the "Lender"), a
corporation organized and existing under the laws of the State of Delaware, with
its chief executive office and principal place of business at 1850 North Central
Avenue, Phoenix, Arizona 85002 and TOWER AIR, INC. (the "Borrower"), a
corporation organized and existing under the laws of the State of Delaware, with
its chief executive office and principal place of business at Hangar No. 17,
John F. Kennedy International Airport, Jamaica, New York 11430.
W I T N E S S E T H:
- - - - - - - - - -
1. DEFINITIONS.
-----------
1.1 Each of the following terms shall have the respective meaning
ascribed to it in this Paragraph 1.1 (where the context so permits, the
definition of each term used herein shall be equally applicable to the singular
and plural forms thereof):
Act: defined in Paragraph 6.12 hereof.
Agreed Value: shall mean, in the case of a Total Loss of either of the
Aircraft, the fair market value of the aircraft subject to such Total Loss, with
such fair market value determined by an appraiser selected by Lender and
Borrower.
Aircraft: Aircraft I and Aircraft II
Aircraft I: that certain Boeing cargo Aircraft Model 747-100, bearing
FAA Registration No. N613FF and Manufacturer's Serial Number 19647, together
with four Pratt & Whitney Engines Model JT9D-7, bearing Manufacturer's Serial
Nos: 662417, 662598, 685945 and 662574, together with any and all attachments,
accessories, improvements and betterments thereto and replacements thereof and
all general intangibles and contract rights, including, but not limited to, all
rents, issues, proceeds, insurance proceeds, properties, revenues and other
income in respect of Aircraft I.
<PAGE>
Aircraft II: that certain Boeing cargo Aircraft Model 747-100, bearing FAA
Registration No. N617FF and Manufacturer's Serial Number 19650, together with
four Pratt & Whitney Engines Model JT9D-7, bearing Manufacturer's Serial Nos:
685714, 662362, 663029 and 662867, together with any and all attachments,
accessories, improvements and betterments thereto and replacements thereof and
all general intangibles and contract rights, including, but not limited to, all
rents, issues, proceeds, insurance proceeds, properties, revenues and other
income in respect of Aircraft II.
Acquisition Aircraft I: that certain Boeing passenger Aircraft Model
747-200, bearing FAA Registration No. N511P (to be changed to N620FF) and
Manufacturer's Serial Number _____, together with four Pratt & Whitney Engines
Model JT9D-___, bearing Manufacturer's Serial Nos. _____, _____, _____, and
_____ together with any and all attachments, accessories, improvements and
betterments thereto and replacements thereof and all general intangibles and
contract rights, including, but not limited to, all rents, issues, proceeds,
insurance proceeds, properties, revenues and other income in respect of
Acquisition Aircraft I.
Acquisition Aircraft II: that certain Boeing passenger Aircraft Model
747-200, bearing FAA Registration No. N504DC (to be changed to N619FF) and
Manufacturer's Serial Number _____, together with four Pratt & Whitney Engines
Model JT9D-___, bearing Manufacturer's Serial Nos. _____, _____, _____, and
_____ together with any and all attachments, accessories, improvements and
betterments thereto and replacements thereof and all general intangibles and
contract rights, including, but not limited to, all rents, issues, proceeds,
insurance proceeds, properties, revenues and other income in respect of
Acquisition Aircraft II.
Arizona Courts: defined in Paragraph 9.14(a) hereof.
Borrower: above defined.
Business Day: any day other than Saturday, Sunday or other day on which
commercial lenders in Phoenix, Arizona or New York, New York are required or
permitted to close under the laws of the States of Arizona and New York,
respectively.
Certificate of Resolutions: that certain certificate of resolutions of the
board of directors of the Borrower to be delivered by the Borrower to the Lender
in form and substance satisfactory to the Lender.
Documents: collectively, the Loan Agreement, the Mortgage, the Note, the
First Loan Documents, the Third Loan Documents, the Fourth Loan Documents, the
Third Amendment to Third Loan Agreement, the Seventh Amendment to First Loan
<PAGE>
Agreement, the First Amendment to Fourth Loan Agreement, the Mortgage Amendments
and the documents, instruments and agreements referred to herein and therein and
to be executed and delivered in connection herewith and therewith.
Due Date(s): defined in the Note.
Engine: each of the engines referred to in the definition of either
Aircraft.
Event of Default: defined in Paragraph 7.1 hereof.
FAA: the Federal Aviation Administration as provided for in the Department
of Transportation Act of 1966, as in effect on the date of this Loan Agreement
and as modified or amended hereafter, or any successor or substituted
governmental authority at the time having jurisdiction over the use, operation,
maintenance and perfection of security interests in the Engines and the
Aircraft.
Fifth Amendment to First Loan Agreement: that certain Fifth Amendment to
Aircraft Loan and Security Agreement dated as of May 28, 1993 by and between
Borrower and Lender.
First Aircraft: that certain Boeing Model Aircraft 747-121, bearing FAA
Registration No. N604FF (formerly N755PA) and Manufacturer's Serial No. 19659,
together with three (3) installed Pratt & Whitney Engines Model JT9D-7A, bearing
Manufacturer's Serial Nos. P662561, P685674 and 662387, and one (1) Pratt &
Whitney Engine Model JT9D-7F bearing Manufacturer's Serial No. P662443, together
with any and all attachments, accessories, improvements and betterments thereto
and replacements thereof and all general intangibles and contract rights,
including, but not limited to, all rents, issues, proceeds, insurance proceeds,
properties, revenues and other income in respect of such Aircraft.
First Amendment to Third Priority Aircraft Engine Mortgage (First): that
certain First Amendment to Third Priority Aircraft Engine Mortgage to be entered
into by the Borrower and the Lender.
First Amendment to Fourth Priority Aircraft Mortgage (First): that certain
First Amendment to Fourth Priority Aircraft Mortgage to be entered into by
Borrower and Lender.
First Amendment to Second Priority Aircraft Engine Mortgage (Second): that
certain First Amendment to Second Priority Aircraft Engine Mortgage to be
entered into by Borrower and Lender.
<PAGE>
First Amendment to Third Priority Aircraft Engine Mortgage (Second): that
certain First Amendment to Third Priority Aircraft Engine Mortgage to be entered
into by Borrower and Lender.
First Amendment to Second Priority Aircraft Mortgage (Second): that
certain First Amendment to Second Priority Aircraft Mortgage to be entered into
by the Borrower and the Lender.
First Amendment to Third Priority Aircraft Mortgage (Second): that certain
First Amendment to Third Priority Aircraft Mortgage to be entered into by the
Borrower and the Lender.
First Amendment to Third Priority Aircraft Mortgage (First): that certain
First Amendment to Third Priority Aircraft Mortgage to be entered into by the
Borrower and the Lender.
First Amendment to Aircraft Mortgage (Third): that certain First Amendment
to Aircraft Mortgage to be entered into between Borrower and Lender.
First Amendment to First Priority Aircraft Engine Mortgage (Second): that
certain First Amendment to Purchase Money Aircraft Engine Mortgage to be entered
into between Borrower and Lender.
First Amendment to First Priority Aircraft Mortgage (Second): that certain
First Amendment to the Aircraft Mortgage to be entered into between Borrower and
Lender.
First Amendment to Second Priority Aircraft Engine Mortgage (First): that
certain First Amendment to Second Priority Aircraft Engine Mortgage to be
entered into between Borrower and Lender.
Second Amendment to Second Priority Aircraft Mortgage (First): that certain
Second Amendment to Second Priority Aircraft Mortgage to be entered into between
Borrower and Lender.
Second Amendment to First Priority Aircraft Engine Mortgage (First): that
certain Second Amendment to Aircraft Engine Mortgage to be entered into between
Borrower and Lender.
Second Amendment to First Priority Aircraft Engine Mortgage (October 1990):
that certain Second Amendment to Aircraft Engine Mortgage to be entered into
between Lender and Borrower, which amends that certain Aircraft Engine Mortgage
dated October 1, 1990 between Lender and Borrower, as amended by the First
<PAGE>
Amendment to Aircraft Engine Mortgage dated July 31, 1991, between Lender and
Borrower.
Second Amendment to First Priority Aircraft Mortgage (First): that certain
Second Amendment to Aircraft Mortgage to be entered into between Borrower and
Lender.
First Amendment to Fourth Priority Aircraft Engine Mortgage (First): that
certain First Amendment to Fourth Priority Aircraft Engine Mortgage to be
entered into by the Borrower and the Lender, in form and substance satisfactory
to the Lender.
First Amendment to First Loan Agreement: that certain First Amendment to
Aircraft Loan and Security Agreement dated as of August 28, 1990 by and between
the Borrower and the Lender.
First Amendment to Fourth Loan Agreement: that certain First Amendment to
Aircraft Loan and Security Agreement to be entered into by and between Borrower
and Lender, in form and substance satisfactory to Lender, which amends the Loan
Agreement referred to in the definition of Fourth Loan Documents.
First Amendment to Third Loan Agreement: that certain First Amendment to
Aircraft and Engine Loan and Security Agreement dated as of May 28, 1993 by and
between Borrower and Lender.
First Engines: one (1) Pratt & Whitney Model JT9D-7A engine bearing
Manufacturer's Serial No.P662962CN.
First Loan Documents: collectively, that certain Aircraft Loan and
Security Agreement dated as of August 30, 1988 by and between the Borrower and
the Lender, as amended by the First Amendment to First Loan Agreement, by the
Second Amendment to First Loan Agreement, by the Third Amendment to First Loan
Agreement, by the Fourth Amendment to First Loan Agreement, by the Fifth
Amendment to First Loan Agreement and by the Sixth Amendment to First Loan
Agreement, that certain Aircraft Mortgage dated August 30, 1988, executed and
delivered in connection therewith, that certain USD 12,000,000 promissory note
of the Borrower dated August 30, 1988 payable to the order of the Lender
executed and delivered in connection therewith, that certain Aircraft Engine
Mortgage dated October 1, 1990, as amended by the First Amendment to Aircraft
Engine Mortgage dated as of July 31, 1991, executed and delivered in connection
therewith, and that certain USD 1,750,000 Supplemental Promissory Note of the
Borrower dated October 1, 1990 payable to the order of the Lender executed and
delivered in connection therewith, the Second Priority Aircraft Engine Mortgage
(Second), the Third Priority Aircraft Engine Mortgage (First) and the
<PAGE>
Second Priority Aircraft Mortgage (Second).
Fourth Amendment to First Loan Agreement: that certain Fourth Amendment to
Aircraft Loan and Security Agreement dated as of November 5, 1991 by and between
Borrower and Lender.
Fourth Loan Documents: collectively, that certain Aircraft Loan and
Security Agreement dated as of February 15, 1995 by and between Borrower and
Lender, that certain USD12,000,000.00 Promissory Note of the Borrower payable to
the order of the Lender executed and delivered in connection therewith, that
certain Aircraft Mortgage dated February 15, 1995 executed and delivered in
connection therewith, the Fourth Priority Aircraft Mortgage, the Fourth Priority
Aircraft Engine Mortgage, the Third Priority Aircraft Mortgage (Second) and the
Third Priority Aircraft Engine Mortgage (Second).
Fourth Priority Aircraft Mortgage: that certain Fourth Priority Aircraft
Mortgage dated February 15, 1995 made by Borrower on the First Aircraft to and
for the benefit of the Lender.
Fourth Priority Aircraft Engine Mortgage: that certain Fourth Priority
Aircraft Engine Mortgage dated February 15, 1995 made by the Borrower on the
First Engines to and for the benefit of the Lender.
Funding Day: the date to be agreed upon by the Borrower and the Lender and
which shall occur subsequent to the fulfillment of all applicable conditions
precedent set forth in Section 8 hereof, upon which date the Loan shall be
advanced provided that such date shall not be later than January 31, 1996.
GAAP: means generally accepted accounting principles in the United States
of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application in which Borrower's
independent certified public accountants concur), applied both to classification
of items and amounts.
Impositions: sales, use, excise, gross receipts, value added, personal
property, stamp, documentary taxes, ad valorem taxes, license fees, registration
fees, assessments, fines, penalties and similar charges imposed on the Engines
and all other taxes of whatsoever kind (except federal or state income taxes)
imposed upon the Lender with respect to either Aircraft, the Documents, the
transactions contemplated by the Documents, the Installments and any other
payments of whatsoever kind made under the Documents.
Indemnitees: defined in Paragraph 5.12 hereof.
<PAGE>
Installments: defined in the Note.
Lender: above defined.
Loan: USD 20,000,000.00
Loan Agreement: above defined.
Mortgage: that certain Aircraft Mortgage to be made by the Borrower on the
Aircraft to and for the benefit of the Lender in form and substance satisfactory
to the Lender.
Mortgage Amendments:
(i) Second Amendment to First Priority Aircraft Mortgage (First);
(ii) Second Amendment to First Priority Aircraft Engine Mortgage (First);
(iii) First Amendment to First Priority Aircraft Mortgage (Second);
(iv) First Amendment to First Priority Aircraft Engine Mortgage (Second);
(v) First Amendment to Aircraft Mortgage (Third);
(vi) First Amendment to Second Priority Aircraft Engine Mortgage
(Second);
(vii) First Amendment to Third Priority Aircraft Engine Mortgage (First);
(viii) First Amendment to Second Priority Aircraft Mortgage (Second);
(ix) First Amendment to Fourth Priority Aircraft Mortgage (First);
(x) First Amendment to Fourth Priority Aircraft Engine Mortgage (First);
<PAGE>
(xi) First Amendment to Third Priority Aircraft Mortgage (Second);
(xii) First Amendment to Third Priority Aircraft Engine Mortgage (Second);
(xiii) Second Amendment to Second Priority Aircraft Engine Mortgage
(First);
(xiv) First Amendment to Third Priority Aircraft Mortgage (First);
(xv) Second Amendment to Second Priority Aircraft Mortgage (First); and
(xvi) Second Amendment to First Priority Aircraft Engine Mortgage (October
1990).
Note: that certain negotiable promissory note to be made and delivered by
the Borrower to the Lender on the Funding Day in the principal amount of the
Loan in form and substance satisfactory to the Lender.
Obligations: each and every obligation, duty, covenant, undertaking and
promise of the Borrower now existing or hereafter arising under the Documents.
Officer's Certificate: that certain certificate to be signed on the
Funding Day by (i) the President or Vice President and (ii) the Treasurer or
Secretary of the Borrower, in form and substance satisfactory to the Lender.
Opinion(s) of Counsel: those opinion(s) to be made and delivered on the
Funding Day by legal counsel (including, without limitation, legal counsel to
the Borrower and special FAA counsel), in form and substance satisfactory to the
Lender.
Overdue Rate: a rate of interest per annum equal to the Interest Rate plus
2%.
Second Aircraft: that certain Boeing Aircraft Model 747-130, bearing FAA
Registration No. N603FF and Manufacturer's Serial No. 19746, together with four
(4) installed Pratt & Whitney Engines Model JT9D-7A, bearing Manufacturer's
Serial Nos. P662756, 662711, 662934 and 662616, together with any and all
attachments, accessories, improvements and betterments thereto and replacements
thereof and all general intangibles and contract rights, including, but not
limited to, all rents, issues,
<PAGE>
proceeds, insurance proceeds, properties, revenues and other income in respect
of the Aircraft.
Second Amendment to First Loan Agreement: that certain Second Amendment to
Aircraft Loan and Security Agreement dated as of October 1, 1990 by and between
Borrower and Lender.
Second Amendment to Third Loan Agreement: that certain Second Amendment to
Aircraft and Engine Loan and Security Agreement dated February 15, 1995 by and
between Borrower and Lender, in form and substance satisfactory to Lender.
Second Engines: Three (3) Pratt & Whitney Model JT9D-3A engines bearing
Manufacturer's Serial Nos. P662804, P662787, P662821 and one ( 1) Pratt and
Whitney Model JT9D-7A engine bearing Manufacturer's Serial No. P663034.
Second Priority Aircraft Engine Mortgage (First): that certain Second
Priority Aircraft Engine Mortgage dated as of November 7, 1991 on the First
Engines made by Borrower to and for the benefit of Lender.
Second Priority Aircraft Engine Mortgage (Second): that certain Second
Priority Aircraft Engine Mortgage dated May 28, 1993 on the Second Engines made
by the Borrower to and for the benefit of Lender.
Second Priority Aircraft Mortgage (Second): that certain Second Priority
Aircraft Mortgage dated May 28, 1993 by the Borrower on the Second Aircraft to
and for the benefit of the Lender.
Security Interest: an interest, charge, lien, encumbrance, security
interest and claim in and to the Aircraft, securing the payment and performance
of the Obligations.
Sixth Amendment to First Loan Agreement: that certain Sixth Amendment to
Aircraft Loan and Security Agreement dated February 15, 1995 by and between
Borrower and Lender, in form and substance satisfactory to Lender.
Seventh Amendment to First Loan Agreement: that certain Seventh Amendment
to Aircraft Loan and Security Agreement to be entered into by and between
Borrower and Lender, in form and substance satisfactory to Lender.
Tangible Net Worth: shall mean the Net Worth, according to generally
accepted accounting principles, of Borrower less any intangible assets or
deferred loan
<PAGE>
costs.
Term: that period of time commencing on the Funding Date to and including
the date 60 months thereafter or, if earlier, the date on which the Obligations
are fully and completely paid and performed, as the case may be.
Third Aircraft: that certain Boeing Aircraft Model 747-124, bearing FAA
Registration No. N602FF and Manufacturer's Serial No. 19734, together with two
(2) Pratt & Whitney Engines Model JT9D-7A, bearing Manufacturer's Serial Nos.
P662280CN and P662923CN and two (2) Pratt & Whitney Engines Model JT9D-7,
bearing Manufacturer's Serial Nos. P662890 and P662938, together with any and
all attachments, accessories, improvements and betterments thereto and
replacements thereof and all general intangibles and contract rights, including,
but not limited to, all rents, issues, proceeds, insurance proceeds, properties,
revenues and other income in respect of the Aircraft.
Third Amendment to First Loan Agreement: that certain Third Amendment to
Loan and Security Agreement dated as of July 31, 1991 by and between the
Borrower and the Lender.
Third Amendment to Third Loan Agreement: that certain Third Amendment to
Aircraft and Engine Loan and Security Agreement to be entered into by and
between Borrower and Lender.
Third Loan Documents: collectively, that certain Aircraft and Engine Loan
and Security Agreement dated as of November 5, 1991 by and between Borrower and
Lender, as amended by the First Amendment to Third Loan Agreement and by the
Second Amendment to Third Loan Agreement that certain Aircraft Mortgage dated as
of November 7, 1991 executed and delivered in connection therewith, that certain
USD 12,000,000 Promissory Note [Aircraft] of the Borrower executed and delivered
in connection therewith, that certain Purchase Money Aircraft Engine Mortgage
dated as of March 20, 1992 executed and delivered in connection therewith, that
certain USD 4,000,000 Promissory Note [Engines] of the Borrower executed and
delivered in connection therewith, that certain USD 2,000,000 Promissory Note
[General] of the Borrower executed and delivered in connection therewith, the
Second Priority Aircraft Engine Mortgage (First) and the Third Priority Aircraft
Mortgage (First).
Third Priority Aircraft Engine Mortgage (First): that certain Third
Priority Aircraft Engine Mortgage dated May 28, 1993 made by the Borrower on the
First Engines to and for the benefit of the Lender.
Third Priority Aircraft Engine Mortgage (Second): that certain Third
<PAGE>
Priority Aircraft Engine Mortgage dated February 15, 1995 made by the Borrower
on the Second Engines to and for the benefit of the Lender, in form and
substance satisfactory to the Lender.
Third Priority Aircraft Mortgage (First): that certain Third Priority
Aircraft Mortgage dated as of November 7, 1991 by the Borrower on the First
Aircraft to and for the benefit of the Lender.
Third Priority Aircraft Mortgage (Second): that certain Third Priority
Aircraft Mortgage dated February 15, 1995 made by the Borrower on the Second
Aircraft to and for the benefit of the Lender, in form and substance
satisfactory to the Lender.
Total Loss: (i) extensive damage to or destruction of an Aircraft or any
Engine if repair cannot be made or if permanently rendered unfit for normal use
for any reason whatsoever; or (ii) condemnation, requisition of title or use,
confiscation, appropriation, nationalization or deprivation, de facto or de
-- ----- --
jure, by exercise of the power of eminent domain or by any governmental body, or
- ----
otherwise, which continues uninterrupted for a period in excess of 60 days;
provided, however, that at all times during said 60 day period, no other Event
of Default has occurred hereunder and the insurance required to be provided by
the Borrower pursuant to the terms hereof shall not be adversely affected by the
occurrence of any of the events set forth in this clause (ii); or (iii) theft
and such property is unrecovered for an uninterrupted period in excess of 60
days; or (iv) prohibition of use in the ordinary course of the business of
passenger air transportation or grounding as a result of a rule, regulation,
order, directive or other action by the governmental authority (including,
without limitation, legislative, executive, administrative or judicial bodies)
having jurisdiction, which prohibition of use or grounding continues
uninterrupted for a period in excess of 90 days, provided, however, that in the
event the Borrower has undertaken and is pursuing in a diligent manner those
actions necessary to remove such prohibition of use or grounding, then in such
event, same will not constitute a Total Loss (assuming no Event of Default has
occurred) unless such prohibition of use or grounding continues uninterrupted
for a period in excess of 180 days. Notwithstanding anything set forth in this
clause (iv) to the contrary, if a prohibition of use or grounding of the
Aircraft occurs due to a prohibition of use or grounding of all aircraft of the
same make and model as the Aircraft then, in such event, a Total Loss shall not
be deemed to have occurred provided, however, that no Event of Default has
occurred or with notice or passage of time would occur, that the insurance
required to be provided pursuant hereto shall not be adversely affected and, in
all events, such prohibition of use or grounding does not continue uninterrupted
for a period in excess of 120 days from the commencement of the prohibition or
grounding, unless the Borrower has undertaken and is pursuing, in a diligent
manner, those actions necessary to remove such prohibition of use or grounding
provided, that in all events, such prohibition of use or grounding does not
continue uninterrupted for a period in excess of 270 days
<PAGE>
from the commencement date of the prohibition or grounding. With respect to any
period of time set forth in this clause (iv) as to when a Total Loss shall be
deemed to have occurred, the Borrower agrees that in the event the Borrower has
entered into any loan or leasing agreement with respect to any other aircraft or
engines, as the case may be, owned or leased by the Borrower and which provides
with respect to the events mentioned in this clause (iv) for a shorter period of
time to have passed before a Total Loss will be deemed to have occurred, then,
in such event, the Borrower agrees that such shorter period of time shall apply
with respect to this Loan Agreement as to when a Total Loss shall be deemed to
have occurred. A Total Loss with respect to an Airframe shall be deemed a Total
Loss with respect to the related Aircraft.
Unpaid Amount: a stipulated sum of money equal to the aggregate of: (i)
the outstanding principal balance of the Loan as of the day the "Unpaid Amount"
is declared due and payable; plus (ii) all accrued and unpaid interest as of the
day the "Unpaid Amount" is declared due and payable; plus (iii) all other sums
of whatever nature due and unpaid as of the day the "Unpaid Amount" is declared
due and payable; plus (iv) interest at the Overdue Rate on those amounts set
forth in clauses (i), (ii) and (iii), commencing on the day the "Unpaid Amount"
is declared due and payable to and including the day(s) of payment thereof in
full.
USD: lawful currency of the United States of America.
1.2 It is the intention of the parties hereto to use herein such
definitions, descriptions and terms for and specifications of the Aircraft as
are necessary and/or desirable in accordance with the practice and procedure of
any governmental entity having jurisdiction to record and/or file mortgages on
the Aircraft and in order to accomplish such goal the parties hereto agree that
should redefinition and/or redescription of the terms for and specifications of
the Aircraft from time to time be necessary and/or desirable to facilitate such
recordation and/or filing, the parties hereto shall make such redefinition
and/or redescription of the terms for and specifications of the Aircraft as
shall be necessary and/or desirable together with such re-filings, re-
recordations and/or new or additional filings as shall be necessary and/or
desirable to protect and preserve the interest of the Lender hereunder;
provided, however, that such redefinition and/or redescription of the terms for
and specifications of the Aircraft and/or such re-filings, re-recordations
and/or new or additional filings shall not in any manner whatsoever change or
alter the respective and substantive powers, privileges, remedies and rights of
the parties hereto.
2. LOAN AND NOTES.
--------------
2.1 (i) The Lender hereby agrees to lend to the Borrower and the Borrower
hereby agrees to borrow from the Lender the Loan in accordance with the terms
<PAGE>
and conditions of this Loan Agreement.
(ii) The Loan shall be used to finance the acquisition of the Acquisition
Aircraft I and Acquisition Aircraft II.
2.2 On the Funding Date the Lender shall apply a portion of the Loan in
the amount of the fee referred to in Paragraph 9.18 hereof to the payment of
such fee and disburse the remainder of the Loan directly to Borrower, and the
disbursement thereof shall be evidenced and secured by the execution and
delivery by the Borrower on or prior to the Funding Date to the Lender of the
Documents as set forth in this Loan Agreement. The Loan shall be disbursed in
such a manner as to ensure the fulfillment of the conditions precedent as set
forth in Section 8 hereof and elsewhere in this Loan Agreement and the other
Documents and the disbursement thereof shall be directed in writing by Borrower
and approved by Lender.
2.3 The Borrower agrees to duly and punctually pay, or cause to be duly
and punctually paid, all amounts due and owing by the Borrower under the
Documents at the times and places and in the manner specified herein and therein
according to the terms hereof and thereof. If any Installment or any other
payment of whatsoever kind due under the Documents is not paid when due, an
additional fee for late payment shall be payable thereon at a rate of interest
equal to the Overdue Rate from the Due Date(s) and due date(s), respectively,
thereof to and including the earlier to occur of (i) the date(s) of payment in
full of such overdue Installment or other payment or (ii) the day the Unpaid
Amount is declared due and payable, in which event, interest shall be due
thereon at the Overdue Rate as is more particularly set forth in the Note. This
provision, or reliance thereon by the Lender, shall not be deemed a waiver of
any Event of Default.
2.4 (a) Interest shall accrue on the unpaid principal amount of the Loan
at a fixed rate per annum ("Interest Rate") of 4.07% above the yield to maturity
of that issue of U.S. Treasury notes maturing in February, 2001 with the highest
yield, as published in The Wall Street Journal three Banking Days preceding the
Funding Day, or, if such publication shall be suspended or terminated or such
yield shall otherwise not be so published for such Banking Day, on the basis of
such yield reported by dealers of U.S. Treasury notes to and published by the
Federal Reserve Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations of such yield received by the Lender from
three New York dealers of U.S. Treasury notes of recognized standing selected by
the Lender, calculated on a 360 day year based on the actual number of days
elapsed. Interest shall be payable monthly on each Due Date, and whenever else
principal is due and payable hereunder.
(b) The unpaid principal amount of the Loan together with any unpaid
accrued interest thereon and all other amounts owing hereunder shall be repaid
by
<PAGE>
the Borrower in full on January 26, 2001.
2.5 The Borrower's obligation to pay all interest, the principal and
all other payments of whatsoever kind under the Documents shall be absolute and
unconditional under any and all circumstances of whatever kind and shall not be
affected by any circumstance of any character, including, but not limited to,
(a) any set-off, counterclaim, recoupment, abatement, demand, deduction, defense
or any other circumstance of whatsoever kind which the Borrower may have against
the Lender, its successors and assigns, or anyone else for any reason
whatsoever, (b) any defect in the title, airworthiness, merchantability,
condition, design, operation or fitness for use of the Aircraft, (c) any damage
to or loss or destruction of the Aircraft, (d) any interruption or cessation in
the use or possession of the Aircraft, by the Borrower or by anyone entitled to
use or possess the same for any reason whatsoever and (e) any insolvency,
bankruptcy, reorganization or similar proceedings by or against the Borrower or
any third party whomsoever.
2.6 All Installments and any and all other payments of whatsoever kind
due under the Documents shall be paid without notice (except as otherwise
expressly provided herein). Each payment shall be final and the Borrower will
not seek to recover all or any part of such payment from the Lender or from
whosoever may be entitled thereto, for any reason whatsoever.
2.7 The Lender shall open and maintain on its books a loan account in
the Borrower's name showing the repayment of the Loan and other amounts due and
paid under the Documents. Such loan account shall be conclusive and binding on
the Borrower and any third party whosoever claiming through or by way of the
Borrower as to the amount at any time due to the Lender in respect of the
Obligations, except in the case of error in computation or willful
misrepresentation by the Lender.
2.8 Except where due to the negligence or willful misconduct of the
Lender, all Installments and other payments of whatever kind to be made by the
Borrower shall be free of expense to the Lender with respect to the amount of
any Impositions (all of which Impositions the Borrower assumes and agrees to pay
on demand in addition to the other payments to be made by the Borrower as
provided for in the Documents).
3. PREPAYMENT.
----------
3.1 There shall be no prepayment of the Notes or the Loan either in
whole or in part except as set fborth in Paragraphs 3.2, and 3.3 hereof.
3.2 Provided no Event of Default shall have occurred and be
continuing, the Borrower shall be entitled to prepay all, but not less than all,
of the Loan at any time
<PAGE>
by providing Lender with not less than thirty (30) days' prior written notice of
Borrower's intention to prepay, which notice will specify the date of
prepayment. Any prepayment, whether voluntary or involuntary (including,
without limitation, as a result of a Total Loss of Aircraft II) shall, subject
to Paragraph 3.3 hereof, be made together with: (i) accrued interest on the
amount of such prepayment through the date of such prepayment, (ii) a prepayment
fee equal to the following percentage of the principal amount of the Loan: (A)
if such prepayment is made on or prior to the first year anniversary of the
Funding Day, 4% of such principal amount; (B) if such prepayment is made after
the first year anniversary and on or prior to the second year anniversary of the
Funding Day, 3% of such principal amount; (C) if such prepayment is made after
the second year anniversary and on or prior to the third year anniversary of the
Funding Day, 2% of such principal amount; and (D) if such prepayment is made
after the third year anniversary and on or prior to the fourth year anniversary
of the Funding Day, 1% of such principal amount ; and (iii) all other sums due
and owing hereunder. No prepayment fee with respect to the Loan shall be
payable if any prepayment is made after the fourth year anniversary of the
Funding Day. No prepayment fee shall be payable if any prepayment is made as a
result of Borrower's refinancing this Loan with Lender.
3.3 Notwithstanding anything to the contrary in Paragraph 3.2, above,
in the event of a Total Loss with respect to either Aircraft, the Borrower shall
pay to Lender the amount of insurance proceeds paid with respect to such Total
Loss upon its receipt of such proceeds or, if no such proceeds have been
received within 120 days after the occurrence of such Total Loss, the Agreed
Value no later than 120 days after such occurrence. If Borrower receives such
proceeds later than 120 days after such occurrence, Borrower shall, promptly
upon its receipt of such proceeds, pay to Lender the amount of such proceeds,
less the amount of Agreed Value previously paid. Lender shall apply the amount
of the Agreed Value, or, subject to Borrower's right to replace an engine or
aircraft pursuant to the provisions of paragraph 5.4 hereof, the proceeds of
such insurance, as a prepayment of the Unpaid Amount under this Loan Agreement.
4. SECURITY.
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4.1 To secure payment of the Note and the full and complete
performance of the Obligations, the Borrower hereby grants and conveys to the
Lender a Security Interest in and to the Aircraft, all original books, records,
logs and other material pertaining to the use, operation and maintenance of the
Aircraft, and all the estate, right, title and interest of every nature
whatsoever of the Borrower at law or in equity in and to the Aircraft, and every
part and parcel thereof. Title to or a lien upon all property in which a
Security Interest is granted hereby, or is intended to be, and which is
hereafter acquired by the Borrower or to which the Borrower may at any time
hereafter be, in any manner, entitled at law or in equity, and required to be
subjected hereto or intended so to be, shall vest in the Lender, under the terms
and conditions of this Loan
<PAGE>
Agreement, forthwith upon acquisition thereof by the Borrower, and such property
shall be as fully embraced within the Security Interest granted by and pursuant
to this Loan Agreement and subject to the lien hereof as if such property were
now owned by the Borrower and were specifically described herein and a Security
Interest granted hereby.
4.2 The Documents and any or all agreements, documents and instruments
pertaining to the Aircraft, or counterparts or copies or other evidence hereof
or thereof may be filed or recorded in any public office of any jurisdiction as
may be necessary or appropriate to protect the perfection and/or existence of
the Lender's Security Interest in and to the Aircraft. Borrower hereby agrees
and covenants to execute and file such agreements, documents and instruments,
including, without limitation, Uniform Commercial Code financing statements,
with respect to agreements, documents and instruments previously executed and/or
filed relating to the Security Interest and interests created under the
Documents as shall from time to time be specified by the Lender.
4.3 The Borrower will not nor will the Borrower attempt to, nor will
the Borrower authorize, suffer or permit a third party to either assign, pledge,
mortgage, lease, hypothecate, encumber, sell or otherwise dispose of either
Aircraft. Notwithstanding the foregoing, nothing herein contained shall be
deemed to prohibit the Borrower from "wet leasing" either Aircraft. The Borrower
shall not "dry lease" either Aircraft, without the Lender's prior written
consent, which consent shall not be unreasonably withheld; except, that the
Borrower shall not dry lease either Aircraft, without the Lender's prior written
consent, which consent may be withheld in the Lender's sole and absolute
discretion, if said dry lease is for a term of more than six months or is to a
non-FAR Part 121 U.S. air carrier.
4.4 (a) The Borrower will not suffer or permit to be incurred any
liens, security interests, charges, claims or encumbrances of whatsoever nature
or kind on or in and to the Aircraft, or permit the Aircraft, to be subjected to
any unpaid charges whatsoever. The Borrower will defend the Aircraft, and its
interests therein against the claims and demands of all parties other than the
Lender. The Borrower shall notify the Lender in writing within 5 days of its
acquisition of knowledge thereof that a lien, security interest, charge, claim
or encumbrance of whatsoever kind has attached to or been asserted against the
Aircraft.
(b) (i) The Borrower shall have the right to contest by
appropriate proceedings duly instituted and diligently prosecuted or defended,
as applicable, without cost or expense to the Lender, the validity of any lien,
security interest, charge, claim or encumbrance of whatsoever nature referred to
in Paragraph 4.4(a) hereof or any law, ordinances or regulation the nature of
which it deems harmful to either Aircraft. However, for claims in excess of
USD 150,000 the Borrower shall upon commencing
<PAGE>
such contest furnish to the Lender a bond, guarantee or other document
satisfactory to the Lender, in the Lender's reasonable discretion, guaranteeing
that the Lender's interest in and to such Aircraft, shall be held harmless from
any penalty, damage, charge, claim or adverse judgment of whatsoever kind
resulting from such contest; and provided that the Borrower shall diligently
prosecute such contest, and maintain in force any required bond, guarantee or
other document, no Event of Default as set forth in Paragraph 7.1(g) or
otherwise shall be deemed to occur with respect to any such lien, security
interest, charge, claim or encumbrance.
(ii) The Borrower hereby irrevocably assigns, transfers and sets
over to the Lender all of its rights to any award or payment on account of any
confiscation of either Aircraft, and irrevocably authorizes and empowers the
Lender, in the name of the Borrower or otherwise, to file and prosecute what
would otherwise be the Borrower's claim for any such award or payment and to
collect, receipt for and retain the same. The Borrower will pay all costs, fees
and expenses incurred by the Lender in connection with any expropriation or
confiscation and seeking and obtaining any award or payment on account thereof.
Any monies received by the Lender under this Paragraph 4.4(b)(ii) shall be
applied by the Lender in the following order: (A) to the payment of all
reasonable out-of-pocket costs and expenses incurred in the collection of said
balance; then (B) to the payment of the Unpaid Amount; then (C) to the payment
of any other of the Borrower's Obligations due; then (D) any remainder shall be
paid to the Borrower.
(c) Nothing contained in this Paragraph 4.4 or elsewhere in the
Documents is intended to prohibit either Aircraft, from being subject to liens,
security interests, charges, claims or encumbrances of whatever nature that
arise in the normal course of the Borrower's business nor provide for the
posting by the Borrower of a bond, guarantee or other document, provided,
however, that such liens and encumbrances are cleared up in a reasonable period
of time and do not involve any material danger of the sale, forfeiture or loss
of such Aircraft, and do not adversely affect the Lender's rights in and to such
Aircraft, or any of the Lender's remedies with respect thereto and further
provided that the Borrower shall have set aside on its books reserves to the
extent required by generally accepted accounting principles, and adequate with
respect thereto.
4.5 The Borrower at its expense shall comply with and satisfy all the
provisions of all applicable laws as amended from time to time, and shall
establish and maintain the Mortgage as a first priority and perfected senior
lien and Security Interest on the Aircraft, under the laws of the United States
of America and the State of Arizona, including, without limitation, the Act.
The Borrower shall perform all acts and execute all instruments necessary or
required by the Lender in order to permit the immediate registration and
recordation of the Mortgage, and the Mortgage Amendments at the FAA and the
filing of Uniform Commercial Code financing statements in Queens County, New
York and with the Secretary of State of the State of New York. The Borrower
shall
<PAGE>
furnish to the Lender from time to time such proof as the Lender may reasonably
request with respect to the Borrower's compliance with the foregoing. Without
limiting the foregoing, the Borrower shall do or cause to be done, at its own
cost and expense, any and all acts and things which may be required under the
terms of the Convention for the International Recognition of Rights in Aircraft,
signed (ad referendum) at Geneva, Switzerland, on June 19, 1948, to perfect and
preserve title to the Aircraft, within the jurisdiction of any signatory state
which has ratified said Convention and the territory of which the Borrower may
operate the Aircraft. The Borrower shall also do or cause to be done, at its
own cost and expense, everything which may be required under the terms of any
other agreement, treaty, convention, pact or by a practice, custom, or
understanding involving any state in which the Borrower may operate the
Aircraft, or any and all acts and things which the Lender may reasonably
request, to perfect and preserve the rights of the Lender under the Mortgage in
and to the Aircraft, within the jurisdiction of any such state.
5. COVENANTS.
---------
5.1 Except as otherwise provided in the Documents, the Borrower shall
until the occurrence of an Event of Default remain in possession of the
Aircraft, and the Lender shall not interfere with the (a) possession, enjoyment,
use and control of the Aircraft, nor (b) rents, earnings, surplus, profits,
revenues and income therefrom, except as otherwise set forth herein.
5.2 [Intentionally Omitted]
5.3 The Borrower will maintain and deliver evidence to the Lender of
such insurance on the Aircraft, required by, written by insurers and in amounts
and forms satisfactory to, the Lender.
5.4 (a) In the event of any payment made to the Borrower by an insurer
in connection with either Aircraft pursuant to a claim by the Borrower, the
Borrower shall submit to the Lender for approval a proposal for the use of such
insurance proceeds. Notwithstanding the foregoing, subject to subparagraph
5.4(b) below, the Lender may in its sole discretion, apply such sum to the
satisfaction of the Obligations and to the extent not so applied shall be paid
over to the Borrower.
(b) Upon the occurrence of a Total Loss with respect to either of
the Aircraft, Borrower shall give Lender prompt (and in any event within 15 days
after such occurrence) written notice thereof. If as a result of the Total Loss,
the Borrower or Lender shall be entitled to receive insurance proceeds under the
insurance policies required to be maintained by the Borrower pursuant to the
terms hereof, Borrower, at its option, may acquire, within 120 days after the
occurrence of such Total Loss a
<PAGE>
replacement aircraft or engine with all or part of such insurance proceeds and
Lender shall apply proceeds held by it to such acquisition, provided, however,
that such replacement aircraft or engine shall have a value and utility at least
equal to, and being in as good operating condition as, the engine or aircraft
with respect to which such Total Loss occurred (assuming such engine or aircraft
was of the value and utility and in the condition and repair required by the
terms of this Loan Agreement immediately prior to the occurrence of such Total
Loss). In the event Borrower elects to acquire a replacement aircraft or engine
Borrower shall deliver to Lender: (i) at least 60 days prior to the acquisition
of a replacement engine or aircraft, notice stating the type of replacement
engine or aircraft; (ii) at least twenty days prior to the acquisition of such
replacement aircraft or engine, a written appraisal rendered by an independent
appraiser reasonably acceptable to Lender; (iii) a duly executed supplement
hereto and a supplement to each of the Documents pursuant to which the Lender
was granted a security interest in such engine or aircraft that was the subject
of the Total Loss; (iv) an opinion of the Borrower's counsel, satisfactory to
Lender, in form and substance satisfactory to Lender, to the effect that such
replacement engine or aircraft is free and clear of all liens, encumbrances and
rights of others and that the Lender has a perfected security interest therein,
(v) an officers' certificate certifying to the continued truth of all
representatives and warranties and that no Event of Default then exists and (vi)
Uniform Commercial Code financing statements covering such replacement engine or
aircraft. Borrower shall also take such other action and furnish such other
documents as Lender may reasonably request.
5.5 Except as expressly permitted in Paragraph 5.7(g) hereof, Borrower
shall not permit either Aircraft during the term hereof to be operated in any
manner contrary to any international treaties, conventions or statutes, rules or
regulations of the FAA or of any other country with jurisdiction or any
department or agency thereof, and Borrower covenants that the Aircraft will at
all times comply with the foregoing and the Aircraft shall have on board as and
when required thereby valid certificates showing compliance therewith.
5.6 (a) At all times during the term hereof, except as may be required
for normal maintenance, service, repair and overhaul, and except as otherwise
provided in this Loan Agreement, the Borrower will cause each Aircraft to be in
as good operating condition as at the time of funding, ordinary wear and tear
excepted, and will meet the standards of the FAA and any other governmental
authority having jurisdiction thereof, regardless of on whom such requirements
are, by their terms, nominally imposed, will meet the manufacturers' standards
and will be able to engage in scheduled operations. An Event of Default shall
not be deemed to occur by virtue of maintaining, servicing, repairing or
overhauling the Aircraft while the Borrower is diligently performing the same.
(b) The Borrower shall (i) comply with all applicable mandatory
<PAGE>
service, maintenance, repair and overhaul regulations, directives and
instructions, manuals and service bulletins of the FAA and of the manufacturers
of the Aircraft and all parts thereof including, without limitation, regulations
requiring the Aircraft to comply with, or be operated in accordance with, Stage
3 requirements; (ii) accurately maintain in the English language all records,
logs and other materials required by the FAA to be maintained in respect of the
Aircraft regardless of on whom such requirements are, by their terms, nominally
imposed; (iii) take all steps necessary which are within its power to assure
that the Aircraft remains certified by the FAA with appropriate airworthiness
certificates; (iv) comply with all laws, rules, regulations and orders of
applicable jurisdictions (domestic or foreign) and with all rules of the FAA
(including, but not limited to, the regulations set forth in FAR Part 121) and
any other legislative, executive, administrative or judicial body exercising any
power or jurisdiction over the Aircraft and in the event that such laws or rules
require the alteration of the Aircraft, the Borrower shall conform or obtain
conformance therewith at no expense to the Lender and will maintain the Aircraft
and each part thereof in proper condition for operation under such laws and
rules provided that no technical or nonsubstantial noncompliance with the
provisions of this Paragraph shall be deemed a breach thereof if the Borrower
shall have obtained in writing from the appropriate authorities permissions,
extensions or continuances to perform any and all requirements or conditions set
forth therein. In operating the Aircraft for hire or otherwise, the Borrower
shall at all times comply with all laws, rules, regulations and orders of
applicable jurisdictions (domestic or foreign) and with all rules, regulations
and orders of the FAA and any other legislative, executive, administrative or
judicial body, exercising any power or jurisdiction over the Aircraft.
(c) In addition to and not in limitation of the foregoing
requirements regarding the maintenance, use and operation of the Aircraft by the
Borrower, the Borrower shall service, repair, maintain and overhaul the Aircraft
in accordance with an FAA approved maintenance program acceptable to the Lender.
The Borrower shall submit to the Lender for the Lender's approval, details of
the maintenance program for the Aircraft.
(d) The Borrower shall furnish to Lender a copy of the Form 337
and the current life-limited parts summary relating to the four engines
undergoing maintenance on the Funding Day under the maintenance schedule
referred to in Section 8.1(t) hereof, within 30 days after the completion of the
maintenance on such engines.
5.7 (a) The Borrower shall promptly replace all appliances, parts,
instruments, accessories and other equipment, of whatever nature, which may from
time to time be incorporated or installed in or attached to the Aircraft
(including, without limitation, any engine constituting part of the Aircraft)
and which may from time to time become worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair, in any way rendered unfit for use or
unserviceable. The Borrower shall also replace any
<PAGE>
item of equipment installed on the Aircraft where necessary in the normal course
of the Borrower's maintenance program. All such replacement parts or items of
equipment shall be of at least equal utility, value and condition as the part or
item of equipment so replaced and in the same or better serviceable condition by
standards of the FAA as the unit so retired or rendered unfit for use assuming
such replaced property was maintained in accordance with the provisions hereof,
and shall be free and clear of all liens, charges, claims, encumbrances and
rights of others, except for the Security Interest to be granted by the Borrower
to the Lender in such replacement parts or items of equipment. In the case of
the replacement of an engine constituting part of the Aircraft, the replacement
engine shall be of the same type and model as such engine or shall be an
improved or advanced version thereof then operated on other aircraft of the same
make and same model and Borrower will, with respect to replacement engines,
execute and deliver to the Lender a Supplemental Chattel Mortgage and Form UCC-3
and such other documents as may be necessary to accord the Lender a first
priority lien under the security agreement with respect thereto. The Borrower
may remove accessories, equipment or parts from the Aircraft provided, however,
that such equipment or parts are promptly replaced by the Borrower with
equipment or parts in as good condition and value as the equipment or parts so
removed and, further provided, that (i) an Event of Default has not occurred nor
an event has occurred that with the giving of notice or passage of time, or
both, would become an Event of Default, (ii) the equipment to be removed is not
required by the FAA or any other governmental authority exercising jurisdiction
in respect of the Aircraft and (iii) the removal of the accessories, equipment
or parts will not interfere with or reduce the usefulness of the Aircraft in
regard to its intended use as of the date hereof. Any accessories, equipment or
parts added to the Aircraft by the Borrower may be removed by the Borrower,
provided, however, that: (x) such accessories, equipment or parts have not
replaced other accessories, equipment or parts on the Aircraft or (y) such
accessories, equipment or parts are not required by the FAA or any other
legislative, executive, administrative or judicial body exercising any power or
jurisdiction over the Aircraft or (z) such accessories, equipment or parts are
not otherwise required by the Loan Agreement.
(b) Any accessories, equipment or parts so installed on, incorporated in,
or attached to the Aircraft in replacement of any item of equipment or existing
parts and accessories, and any accessories, equipment or parts so installed,
incorporated or attached which are in addition to existing accessories,
equipment or parts and which are essential or required by the FAA or any other
governmental authority having jurisdiction thereof to the Aircraft will be
considered accessions to the Aircraft and/or the engines installed thereon,
provided, however, that any such engine or any item of equipment which shall
have been replaced by other engines, accessories, equipment or parts of at least
equal value installed on, incorporated in or attached to the Aircraft shall be
released from the lien of the Mortgage at such time as replacement has been
completed.
<PAGE>
(c) The Borrower shall promptly report to the Lender all replacements made
having a cost in excess of USD 250,000 and made pursuant hereto and submit
satisfactory evidence of compliance with the terms of this Loan Agreement with
respect thereto, and if it is necessary or advisable that this Loan Agreement be
amended or supplemented from time to time to protect the interest of the Lender
with respect thereto, the Lender and the Borrower shall do so.
(d) The Borrower shall not make any alterations in and to the Aircraft or
any part thereof which adversely affects the value or utility of the Aircraft
except as necessary for compliance with the provisions hereof.
(e) The Lender shall bear no liability whatsoever for the cost of
modifications to the Aircraft or any part thereof, whether in the event of
grounding, suspension of certifications or for any other cause.
(f) Borrower will not operate the Aircraft or suffer the Aircraft to be
operated except by pilots who are, at the time of operation, certified by the
FAA for the operation of the Aircraft and meeting the requirements of any
insurance policy in effect with respect to such Aircraft.
(g) The Aircraft shall not be used for any military operation or maneuver.
Notwithstanding the foregoing or any other provision of this Agreement to the
contrary (including, without limitation, the provisions of Paragraph 5.5
hereof), Borrower shall be permitted to operate the Aircraft in connection with
its present and future Air Mobility Command ("AMC") charter contracts with the
United States Department of Defense ("Department of Defense") and to place the
Aircraft in the Civil Reserve Air Fleet program ("CRAF"). If the Aircraft is
placed by Borrower in the CRAF and the CRAF is activated by the Department of
Defense during the Term ("CRAF Activation Period"), Borrower shall nevertheless
be obligated to retain control of the Aircraft. Lender agrees to accept
indemnification by the United States Government in lieu of the insurance
required pursuant to Paragraph 5.3 hereof during the Term if Borrower is unable
to provide such insurance required pursuant to Paragraph 5.3 provided, however,
that such indemnification shall provide substantially similar coverage as the
insurance required pursuant to Paragraph 5.3 and Lender shall have received
evidence of such indemnification reasonably satisfactory to Lender. Lender
agrees that the failure of Borrower to provide the insurance required pursuant
to Paragraph 5.3 during the Term shall not be an Event of Default hereunder so
long as such indemnification is in effect. Borrower may transfer possession of
the Aircraft to the Department of Defense during the CRAF Activation Period if
required to do so by the terms of the CRAF program, provided, however, that
Borrower will not volunteer the Aircraft for any CRAF activation without the
express prior written consent of Lender. In addition, Lender agrees to notify
the Commander, Air Mobility Command, Scott Air Force Base, Illinois 62225-5001
in
<PAGE>
the event that default of this Agreement is contemplated by Lender. All other
terms and provisions of this Agreement shall continue in full force and effect
during any CRAF Activation Period and until such time as Borrower has discharged
all its obligations under this Agreement.
5.8 The Borrower will plainly, distinctly and conspicuously place and
leave in the cockpit of each Aircraft and upon such other place as may
reasonably be designated by the Lender from time to time, a plate, insignia or
other identification bearing the name of the Borrower and the Lender and
identifying them as "Owner" and "Mortgagee", as applicable, in letters of a size
reasonable under the circumstances and acceptable to the Lender.
5.9 (a) Until the Borrower has fully and completely performed and paid
all of the Obligations, the Borrower shall furnish or cause to be furnished to
the Lender, as soon as the same are available, and in any event within 120 days
after the end of each fiscal year, a copy of the Borrower's current annual
audited financial statements. Such financial statements shall contain a balance
sheet as of the end of such fiscal year and statements of income and of changes
in cash flows for such fiscal year (together, in each case, with the comparable
figures for the same period during the immediately preceding fiscal year), all
in reasonable detail, prepared in accordance with generally accepted accounting
principles applied on a basis consistently maintained throughout the period
involved and with prior periods and certified to by a recognized firm of
independent certified public accountants satisfactory to Lender. Together with
such annual financial statements, the Borrower will deliver to the Lender (i) a
certificate from the accountants who audited such statements stating that in
making the examination necessary for the audit of such financial statements they
obtained no knowledge of any default by the Borrower in the full and complete
payment and performance of the Obligations, or if they shall have obtained
knowledge of any such default, specifying the same; and (ii) an officer's
certificate stating that there exists no Event of Default and no condition,
event or act which, with notice or lapse of time or both would become an Event
of Default or, if any such Event of Default or any such condition, event or act
exists, specifying the nature and period of existence thereof and what action
the Borrower proposes to take with respect thereto. The Borrower shall also
furnish from time to time, such additional financial and other information as
the Lender may reasonably request.
(b) Until the Borrower has fully and completely performed and paid all of
the Obligations, the Borrower shall furnish or cause to be furnished to the
Lender, as soon as the same are available, and in any event within 45 days after
the end of each quarter during each fiscal year, a copy of the Borrower's
current quarterly financial statements. Such financial statements shall contain
a balance sheet as of the end of such quarter and statements of income and of
changes in cash flows for such quarter
<PAGE>
(together, in each case, with the comparable figures for the same quarter during
the immediately preceding fiscal year), all in reasonable detail. Together with
such quarterly financial statements, the Borrower will deliver to the Lender a
certificate of the chief financial officer of the Borrower stating that there
exists no Event of Default and no condition, event or act which, with notice or
lapse of time or both would become an Event of Default or, if any such Event of
Default or any such condition, event or act exists, specifying the nature and
period of existence thereof and what action the Borrower proposes to take with
respect thereto.
(c) The Borrower shall promptly give notice to the Lender of (i) any
substantial dispute with respect to taxes or any other matter in connection with
the Aircraft or which might in any way interfere with the normal use and
operation thereof, or (ii) any substantial labor dispute threatening the
continued normal operations of the Borrower.
(d) The Borrower will at any and all times, on reasonable notice and
request of the Lender, permit the Lender or its representatives to inspect the
Aircraft and the records, reports, books of accounts, logs and other papers of
the Borrower relating to the Aircraft and the business operations of the
Borrower and to make copies and take extracts therefrom and will afford and
procure a reasonable opportunity to make any such inspections and will furnish
the Lender with any and all other information as the Lender may reasonably
request with respect to the Aircraft including information concerning the
location, condition, use and operation of the Aircraft. Such inspections shall
take place on dates, times and places mutually convenient to the Borrower and
the Lender and so as not to unreasonably interfere with the normal business
operations of the Borrower. The annual inspection of the Aircraft and any other
inspection made by the Lender in addition to the annual inspection (other than
in connection with the exercise of its rights after the occurrence of an Event
of Default) shall be at the Lender's sole cost and expense. Nothing contained
in the immediately preceding sentence shall be construed in any way to limit the
number of inspections the Lender may make of the Aircraft. Borrower shall also
provide Lender with not less than 60 days' prior written notice as to the time
and location of all "C" and "D" checks to be performed on the Aircraft. The
Lender shall have no duty to make any such inspections and shall not incur any
liability or obligation or be deemed to have waived any rights by reason of not
making any such inspection.
(e) The Borrower shall provide the Lender with the following information
within 30 days after the end of each year and at the following times upon
Lender's request: (i) at any time after the occurrence of an Event of Default,
or (ii) otherwise, no more frequently than once every quarter:
(i) the current location of each Engine (in the event that an
<PAGE>
Engine is attached to another aircraft, Borrower shall provide Lender with
information identifying such aircraft and if such aircraft is subject to a
lease, Borrower shall inform Lender of the name and address of the lessee
thereunder and the term of such lease and such other information as is
reasonably requested by Lender regarding the location of such Engine);
(ii) the total number of hours and cycles with respect to the
Aircraft and each Engine;
(iii) the number of hours remaining on the airframe of the Aircraft,
until the next required or scheduled "C" Check; and
(iv) the number of engine cycles remaining with respect to each
Engine prior to the next scheduled removal for maintenance of such Engine from
any aircraft;
5.10 If the Borrower shall fail to perform any of its covenants in the
Documents, including, without limitation, its covenant set forth in Paragraph
5.3 hereof to maintain insurance, the Lender may, in its sole and exclusive
discretion, at any time and from time to time, make advances to effect
performance of such covenant on behalf of the Borrower, including, with respect
to such insurance, to purchase such insurance, and all moneys so advanced by the
Lender, together with interest thereon at the Overdue Rate, shall be repaid by
the Borrower on demand, but no such advance shall constitute a waiver by the
Lender of or relieve the Borrower from any Event of Default.
5.11 Nothing contained in the Documents shall constitute any consent or
request by the Lender, express or implied, for the performance of any labor or
services or the furnishing of any materials or other property in respect of the
Aircraft or any part thereof, nor as giving the Borrower any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such a fashion as would
permit the making of any claim against the Lender in respect thereof or any
claim that any lien based on the performance of such labor or services or the
furnishing of any such materials or other property is superior to the Security
Interest herein granted in and to the Aircraft in favor of the Lender.
5.12 The Borrower hereby agrees to (a) indemnify, reimburse and save
harmless the Lender, its successors, assigns, shareholders (including corporate
shareholders) directors, officers, employees, agents and servants of the
foregoing (collectively, the "Indemnitees") from and against any and all
liability, loss, damages, costs and expenses which the Lender or the Indemnitees
may hereafter incur, suffer or be required to pay by reason of all manner of
action and actions, cause and causes of action, suits, debts, sums of money,
reckonings, controversies, suits, judgments, claims and
<PAGE>
demands howsoever arising and resulting from or growing out of the management,
control, condition, use, operation, destruction, damage, repossession, storage,
surrender, sale or other disposition of the Aircraft (whether or not the
Borrower is in possession of the Aircraft), or otherwise from this transaction
and (b) waive and release the Indemnitees from any and all action and actions,
cause and causes of action, reckonings, controversies, claims and demands
howsoever arising and resulting from or growing out of the management, control,
condition, use, operation, destruction, damage, repossession, storage,
surrender, sale or other disposition of the Aircraft (whether or not the
Borrower is in possession of the Aircraft or the Engines) or otherwise from this
transaction. This indemnification shall not cover liability, loss, damage, cost
or expense which is proximately caused solely by the negligence or willful
misconduct of an Indemnitee.
5.13 The Borrower's Obligations will rank at least pari passu in priority
---- -----
of payment and in all other respects with all other indebtedness or obligations
of the Borrower.
5.14 The Borrower shall provide the Lender with written notice of the
relocation of its chief executive office and/or principal place of business not
less than 30 days prior to the effective date thereof.
5.15 The Borrower shall maintain a Tangible Net Worth of not less than $14
million.
6. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
----------------------------------------------
The Borrower represents and warrants to the Lender as follows:
6.1 The Borrower is a corporation duly organized and validly existing and
in good standing under the laws of the State of Delaware and is duly qualified
to do business and in good standing in every jurisdiction in which the nature of
its business or properties requires such qualification, except where failure to
qualify will not have a material adverse affect upon the transaction embodied
herein. The Borrower maintains its chief executive office and principal place
of business at the address set forth in the preamble to this Loan Agreement.
6.2 The Borrower has taken all action which may be required by its
articles or certificate of incorporation and its by-laws, and by the laws of the
State of Delaware and all other applicable laws to (a) grant and convey to the
Lender the Security Interest in and to the Aircraft, and (b) authorize the
execution, delivery and performance of the Documents.
6.3 The execution and delivery of the Documents and the performance by the
Borrower of the Obligations under the Documents and the creation of the Security
<PAGE>
Interest in and to the Aircraft, will not conflict with or violate any
provisions of its articles or certificate of incorporation or its by-laws, or
any provisions thereof or result in a default or acceleration of any obligation
under any agreement or instrument of any kind or any undertaking, order, decree
or judgment to which the Borrower is a party or by which it is bound.
6.4 Except as set forth on Attachment A, hereto, and as further described
in the opinion of Borrower's counsel delivered pursuant to Paragraph 8.1(n)
hereof, there is no litigation currently pending or expected against the
Borrower before any court or administrative agency which may have a materially
adverse effect on the assets, business, financial condition or operations of the
Borrower or which would or do prevent or hinder the performance by the Borrower
of its obligations under the Documents.
6.5 The Documents are valid obligations of the Borrower, binding and
enforceable against it in accordance with the terms and conditions thereof.
6.6 The Borrower has read and is fully familiar with all the covenants,
terms and conditions of the Documents and has not relied on any representations
or warranties of the Lender, express or implied, except those representations
and warranties of the Lender, if any, expressly set forth in the Documents.
6.7 Simultaneously with the disbursement of the Loan, the Lender's
Security Interest in and to the Aircraft, will be duly and properly preserved
and perfected and will constitute a first priority security interest in and to
the Aircraft, in accordance with all applicable laws and regulations.
6.8 As of the Funding Day, the Borrower (i) owns and holds good and
marketable title to the First Engines, the First Aircraft, the Second Engines,
the Second Aircraft and the Third Aircraft, free and clear of all liens,
security interests, charges, claims and encumbrances of whatsoever nature (other
than the Security Interests granted and conveyed to the Lender by the First Loan
Documents, the Second Loan Documents and the Third Loan Documents and herein)
and (ii) will defend title to the First Engines, the First Aircraft, the Second
Engines, the Second Aircraft and the Third Aircraft against the claims and
demands of all parties.
6.9 As of the Funding Day, the Borrower (i) owns and holds good and
marketable title to each Aircraft, free and clear of all liens, security
interests, charges, claims and encumbrances of whatsoever nature (other than the
Security Interests granted and conveyed to the Lender by the Mortgage and
herein) and (ii) will defend title to each Aircraft against the claims and
demands of all parties.
6.10 On the Funding Day, no further registration, recording or filing with
<PAGE>
respect to the Aircraft, the First Engines, the First Aircraft, the Second
Aircraft, the Second Engines or the Third Aircraft will be necessary or
advisable in order to establish and perfect the Borrower's title thereto nor to
establish and perfect the Security Interest in favor of the Lender in and to the
Aircraft, other than the filing of the Mortgage, the Mortgage Amendments, and
Uniform Commercial Code financing statements.
6.11 All documents, instruments, certificates and agreements delivered to
the Lender in connection with the transaction contemplated herein, including,
but not limited to, the Note and the Mortgage, are complete and there are no
addenda thereto nor modifications thereof (whether written or verbal) which have
not been disclosed in writing to the Lender prior to the date hereof.
6.12 The Borrower is, and at all times will be, a "Citizen of the United
States" as defined in Title 49 United States Code, as in effect on the date
hereof, and as modified or amended hereafter, or any successor or substituted
legislation at the time in effect and applicable (the "Act").
6.13 The Borrower is, and at all times will be, an FAR Part 121 air
carrier.
6.14 Borrower has heretofore furnished to Lender audited annual financial
statements and related financial information as of [December 31, 1993], and
interim financial statements and related financial information for the 11-month
period ending [November 30, 1994] (together, "Financial Statements"). Such
Financial Statements (including the notes thereto) fully and fairly present the
financial condition of Borrower as of the dates of the balance sheets contained
therein, and the results of its operations for the periods then ended, all in
conformity with GAAP on a basis consistent with that of financial statements for
corresponding prior periods. Except as disclosed therein, Borrower has no
material contingent liabilities (including liabilities for taxes). Since
[November 30, 1994] there has been no material, adverse change in the business,
operations or financial condition of Borrower;
6.15 Neither the Documents nor any filing required or permitted thereunder
is subject to any registration tax, stamp duty or similar tax and to the extent
the same is due then the same shall be paid by the Borrower when due or
reimbursed to the Lender upon demand.
6.16 The Borrower will use the Loan for the purposes set forth in
Paragraph 2.1 hereof, and for no other purpose without the prior written consent
of the Lender.
6.17 The reports as to the status and condition of the Engines heretofore
delivered to Lender under the First Loan Agreement and the Third Loan Agreement
have
<PAGE>
been true and accurate in all material reports.
6.18 No information given by the Borrower in relation to this Loan
Agreement or the other Documents and the transaction contemplated herein and
therein and furnished pursuant hereto or thereto contains any misstatement of
fact or omits to state a fact which would be adverse to the interest of the
Lender or which would be necessary to make any statement or representation or
warranty contained herein or therein not misleading.
7. DEFAULT, ACCELERATION AND REMEDIES.
----------------------------------
7.1 Each of the following events and occurrences shall, at the Lender's
option, constitute a default (each, an "Event of Default") under the Documents:
(a) The Borrower fails to pay any payment of interest or principal
hereunder when and as the same is due and such failure continues for 5 days
subsequent to the receipt by the Borrower of written notice thereof;
(b) The Borrower fails to pay any payment due under the Documents when
and as the same is due, other than the payments referred to in Paragraph 7.1(a)
hereof, and such failure continues for 10 days subsequent to the receipt by the
Borrower of written notice thereof;
(c) A default or event of default occurs under the First Loan
Documents;
(d) A default or event of default occurs under the Third Loan
Documents or the Fourth Loan Documents;
(e) The Borrower fails to procure and/or maintain any insurance
coverage or knowingly violates or suffers or permits the violation of any of the
warranties or conditions of the policies of insurance required hereunder;
(f) The Borrower fails to perform or observe any material duty,
obligation or covenant contained in the Documents, other than that referred to
in Paragraphs 7.1(a) (b) or (e) hereof, and such failure continues for 15 days
subsequent to the receipt by the Borrower of written notice thereof;
(g) A default occurs under the Mortgage;
(h) The Borrower becomes insolvent or unable to pay its debts when due
or commits or permits any act of bankruptcy, including, but not limited to: (i)
<PAGE>
the filing by the Borrower of a petition in any bankruptcy, reorganization,
winding-up or liquidation proceeding or other proceeding analogous in purpose or
effect relating to itself; (ii) the filing by another of a petition instituting
any bankruptcy, reorganization, winding-up or liquidation proceeding or other
proceeding analogous in purpose or effect relating to the Borrower, which
petition is not dismissed or discharged within 60 days of its filing; (iii) its
application for or consent to the appointment of a receiver, custodian, or
trustee for the bankruptcy, reorganization, winding-up or liquidation of itself;
(iv) it makes an assignment for the benefit of creditors; or (v) any court order
for judgment is entered confirming the bankruptcy or insolvency of itself or
approving any reorganization, winding-up or liquidation of itself or a
substantial portion of its assets or providing other relief;
(i) A final non-appealable judgment or decree for money damages or for a
fine or penalty in excess of USD 1,000,000.00 is entered against the Borrower
and such judgment or decree is not paid or discharged within 45 days thereof;
(j) The Borrower has made a materially untrue, incorrect or misleading
representation or warranty herein or in any other Document;
(k) Borrower shall fail to pay any indebtedness in an amount, solely or in
the aggregate, of not less than $1,000,000.00 when and as payable (or within any
applicable grace period) or shall default with respect to any evidence of such
indebtedness or any obligation for borrowed money in such amount, or in the
performance of any other obligation incurred in connection with any such
indebtedness, if the effect of such default is to accelerate the maturity of
such evidence of indebtedness or obligation or to require the prepayment thereof
or to permit the holder or obligee thereof (or a trustee on behalf of such
holder or obligee) to cause any such indebtedness to become payable prior to its
stated maturity;
(l) Either Aircraft shall no longer be registered in the United States of
America;
(m) The Airworthiness Certificate for either Aircraft has been suspended or
revoked or the Borrower's Part 121 certificate is suspended or revoked and same
is not reinstated or reacquired within 30 days of the date of such suspension or
revocation (if the Borrower has undertaken and has diligently commenced such
action as is necessary to have the Airworthiness Certificate for such Aircraft
or the Borrower's Part 121 certificate reinstated or reacquired, then, in such
event, the 30 day cure period provided for in this subsection (n) shall be
extended to 60 days from the date of the suspension or revocation of same).
Notwithstanding the foregoing, in the event the Airworthiness Certificate for
such Aircraft have been suspended or revoked due to a suspension or revocation
of airworthiness certificates for all aircraft of the same type as
<PAGE>
such Aircraft then, in such event, provided no other Event of Default has
occurred hereunder or by the giving of notice or passage of time would be
constituted, and the insurance required to be provided pursuant hereto is not
adversely affected, then, in such instance, an Event of Default shall not be
deemed to have occurred unless the Airworthiness Certificate is not reinstated
or reacquired or the required certifications are not reinstated or reacquired,
respectively, within 120 days of the date of such suspension or revocation.
However, if the Borrower has undertaken and has diligently commenced such action
necessary in such event to remove such prohibition of use or grounding of all
aircraft of the same type as such Aircraft same shall not constitute an Event of
Default unless such prohibition of use or grounding of all aircraft of the same
type as the Aircraft continues uninterrupted for a period in excess of 270 days
from the commencement date of the prohibition or grounding; or
(n) The Lender has not received, within 14 days after the Funding Date, an
Opinion of Counsel referred to in Paragraph 8.1(j) and a Certificate of
Resolutions, certified by the corporate secretary of the Borrower and setting
forth a true, complete and accurate copy of the resolutions approved by the
Borrower's Board of Directors authorizing the entering into, execution and
delivery of the Documents (other than the First Loan Documents, the Second Loan
Documents, the Third Loan Documents and the Fourth Loan Documents, the entering
into, execution, delivery and performance of which has been previously
authorized) and performance by the Borrower thereunder and the incurring of the
Obligations by the Borrower.
7.2 (a) Upon the occurrence of an Event of Default, the Lender may, at
its option, declare the Unpaid Amount to be immediately due and payable,
whereupon the Unpaid Amount shall immediately be due and payable and the
Borrower shall immediately pay same to the Lender.
(b) In addition to exercising all rights, powers, privileges and
remedies available to the Lender under the Uniform Commercial Code or other
applicable law or as provided for elsewhere in the Documents, upon the
occurrence of an Event of Default, the Lender may, in each and every case: (i)
declare the Unpaid Amount immediately due and payable; (ii) enter into and take
possession of the Aircraft, (iii) sell, to the extent permitted by law, the
Aircraft, at such place or places and otherwise in such manner and on such
notice as may be required by law in order to collect the indebtedness of the
Borrower under the Documents and execute proper conveyances to the purchaser or
purchasers thereof; and/or (iv) proceed by a suit or suits in equity or at law
to protect and enforce the Lender's rights under the Documents, whether for the
specific performance of any covenant, condition, agreement or undertaking
therein contained, or in aid of the execution of any power therein granted, or
for the foreclosure of the Security Interests and sale of the Aircraft or any
part thereof under the judgment or decree of any court of competent
jurisdiction, or for the appointment of a receiver or receivers, or for
<PAGE>
the enforcement of such other appropriate legal or equitable remedy as may in
the opinion of the Lender's counsel be most effectual to protect and enforce the
rights aforesaid.
7.3 If an Event of Default shall have occurred and the Lender shall elect
to take possession of the Aircraft, as set forth in Paragraph 7.2(b) hereof, the
Lender, by its attorneys or agents, may enter into and take possession of the
Aircraft, and each and every part thereof and exclude the Borrower and its
agents, servants and employees wholly therefrom, and have, hold, use, operate,
manage and control the same and each and every part thereof and in the name of
the Borrower, or otherwise as the Lender shall deem best, use the Aircraft, and
at the expense of the Borrower, maintain, restore, insure and keep insured the
Aircraft, and likewise from time to time, at the expense of the Borrower, make
all such expenditures for maintenance, insurance, repairs, replacements,
alterations and, to the extent Lender considers reasonably necessary or
desirable in its sole discretion in order to effect a sale, additions and
improvements to and of such property. Lender shall be entitled to collect and
receive all earnings, income, rents, issues, profits, proceeds and revenues of
the same and of every part thereof, and after deducting therefrom the expenses
of operation and all expenses incurred hereunder and all other proper outlays
herein authorized, and all payments which may be made as just and reasonable
compensation for its own services, and for the services of its attorneys, agents
and assistants, the Lender shall apply the rest and residue of the monies
received by it in the following order: (i) to the payment of all reasonable
costs and expenses incurred in the collection of the Unpaid Amount, including,
but not limited to, reasonable attorney's fees; then (ii) to the payment of all
reasonable costs and expenses incurred by the Lender in taking any of the
actions specified above in this Paragraph 7.3; then (iii) to the payment of the
remaining Unpaid Amount; then (iv) to the payment of any other of the Borrower's
Obligations then due; then (v) any remainder shall be paid to the Borrower.
7.4 If an Event of Default shall have occurred and the Lender shall elect
to sell either or both Aircraft, or any part thereof, then the Lender shall
proceed to do so in a commercially reasonable manner in accordance with
applicable law and the proceeds of any such sale shall be applied in accordance
with Paragraph 7.3 hereof. In any such sale the Lender may bid for and purchase
either or both Aircraft, and on compliance with the terms of sale may hold,
retain, possess and dispose of such property in its own absolute right, without
further accountability.
7.5 On any sale, whether made under the power of sale hereby given or by
virtue of judicial proceedings, the receipt of the Lender or of the officer
making a sale under judicial proceedings shall be a sufficient discharge to the
purchaser(s) and his or their assigns or personal representatives, who shall,
after paying such purchase money and receiving such receipt of the Lender or of
such officer therefor, not be obliged to see to the application of such purchase
price or be in any way answerable for any loss,
<PAGE>
misapplication or non-application thereof.
7.6 (a) No failure or delay by the Lender to insist on the strict
performance of any term or condition of the Documents or to exercise any right,
remedy, power or privilege consequent on an Event of Default and no acceptance
of any payment of the principal of or interest on the Note or other payment of
whatsoever kind payable to the Lender during the continuance of any such Event
of Default shall constitute a waiver of any such term or condition or default or
of any such right, remedy, power or privilege, nor shall any single or partial
exercise of any such right, remedy, power or privilege preclude any other or
further exercise thereof or of the exercise of any other right, remedy, power or
privilege. No waiver of any Event of Default hereunder shall affect or alter
the Documents, which shall continue in full force and effect, or the rights of
the Lender with respect to any other then existing or subsequent Event of
Default.
(b) Each right, remedy, power or privilege of the Lender provided for
in the Documents or now or hereafter existing at law or in equity, by statute or
otherwise, shall be cumulative and concurrent and shall be in addition to every
other right, remedy, power or privilege by statute or otherwise, and the
exercise or beginning of the exercise by the Lender of any one or more of such
rights, remedies, powers or privileges shall not preclude the simultaneous or
later exercise of any or all other rights, remedies, powers or privileges.
7.7 The Borrower, for itself and for all who may claim through or under
it, hereby expressly waives and releases all right to have either or both
Aircraft, or any part thereof or any other of its property marshalled on any
foreclosure, sale or other enforcement hereof, and the Lender, or any court in
which the foreclosure of the Security Interests in either or both Aircraft is
sought, shall have the right to sell the Aircraft, as an entirety in a single
parcel or otherwise. The Borrower, if called upon to do so, shall provide the
Lender with a specific written waiver to evidence the intent of this Paragraph
7.7.
7.8 If any legal action or any other proceeding is brought for the
enforcement of this Loan Agreement or of any of the Documents or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Loan Agreement or of any of the Documents, the successful
or prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in connection with such action or proceeding and any appeal
thereof, in addition to any other remedies available.
8. CLOSING CONDITIONS.
------------------
8.1 Notwithstanding anything contained in this Loan Agreement or the
<PAGE>
other Documents to the contrary, the obligation of the Lender to advance the
Loan or any part thereof is expressly contingent on the fulfillment and/or
satisfaction in the sole discretion of the Lender of the following conditions
precedent and the receipt by the Lender (in form and substance satisfactory to
the Lender) of such documents and instruments, if any, therein required or
deemed necessary by the Lender to evidence the fulfillment and/or satisfaction
of said conditions precedent:
(a) The Borrower and the Lender have executed and delivered this Loan
Agreement or have caused the same to be done;
(b) The Borrower has executed and delivered to the Lender the Note in the
amount of the Loan and dated as of the Funding Day or has caused the same to be
done;
(c) The Borrower has executed and delivered the Mortgage or has caused the
same to be done;
(d) The Borrower has executed and delivered each of the Mortgage Amendments
or has caused the same to be done;
(e) The Borrower and the Lender have executed and delivered the Third
Amendment to Third Loan Agreement or have caused the same to be done;
(f) The Borrower and the Lender have executed and delivered the Seventh
Amendment to First Loan Agreement or have caused the same to be done;
(g) The Borrower and the Lender have executed and delivered the First
Amendment to Fourth Loan Agreement;
(h) The Lender has received certificates of insurance or other written
evidence that insurance required under this Loan Agreement and under the
Mortgage in respect of the Aircraft has been obtained;
(i) The Lender has received a Certificate of Resolutions, certified by the
corporate secretary of the Borrower and setting forth a true, complete and
accurate copy of the resolutions approved by the Board of Directors, of the
Borrower authorizing the entering into, execution and delivery of the Documents
and performance by the Borrower thereunder and the incurring of the Obligations
by the Borrower;
(j) The Lender has received an Opinion of Counsel from the Borrower's
counsel to the effect that the representations and warranties of the Borrower
set forth in Paragraphs 6.1, 6.2, 6.3, 6.4, 6.5, 6.7, 6.8(i), 6.9(i), 6.10,
6.12, 6.13 and 6.15,
<PAGE>
hereof are true and correct as of the Funding Day;
(k) The Lender has received evidence that the Borrower has good and
marketable title to the Aircraft free and clear of all liens, security
interests, claims, charges and other encumbrances of whatsoever kind, except the
Mortgage, in favor of and for the benefit of the Lender;
(l) The Lender has acquired a perfected first and senior Security Interest
and mortgage in and to the Aircraft;
(m) The Lender has received an Officer's Certificate setting forth the
following: (i) the name of each of the duly elected and acting officers of the
Borrower together with the title of each office each holds; (ii) the name and
title of each officer of the Borrower who is authorized by the Board of
Directors of the Borrower to enter into, execute and deliver the Documents on
behalf of the Borrower and a specimen signature of each of said officers and
(iii) a certified copy of a current Certificate of Good Standing of the Borrower
certified by the Secretary of State of the State of Delaware;
(n) The Lender has received a copy of the Borrower's articles of
incorporation;
(o) The Lender has received a copy of the by-laws, as amended, of the
Borrower;
(p) The Borrower has executed and delivered to the Lender such Uniform
Commercial Code financing statements as the Lender shall require;
(q) The Lender has completed a satisfactory inspection of both Airframes
and such Engines as Lender may select together with books and records relating
to both Aircraft and Lender shall have received an appraisal, in form and
substance reasonably satisfactory to it, of both Aircraft;
(r) The Lender has received an Opinion of Counsel from Daugherty, Fowler
and Peregrin, special FAA counsel;
(s) The Lender has received copies of all other licenses, consents and
approvals, if any, necessary to the operation of the Borrower's business; and
(t) The Lender has received a copy of the maintenance schedule with respect
to the maintenance being performed on Aircraft I; and
(u) Such other agreements, certificates instruments or legal
<PAGE>
opinions in writing as shall be deemed by the Lender or its counsel necessary or
desirable in order to more fully and completely service, protect, perfect or
preserve the Lender's Security Interests and other interests in and to the, the
Aircraft, and otherwise under the Documents and the Mortgage.
9. MISCELLANEOUS.
-------------
9.1 The Documents and the documents, instruments and agreements herein
referred to constitute the entire agreement between the parties hereto with
respect to the transaction embodied herein and shall supersede all other prior
agreements, written or oral, with respect thereto.
9.2 This Loan Agreement shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns, provided,
however, that the Borrower shall not have the right to assign or transfer its
rights or obligations under the Documents except with the prior written consent
thereto of the Lender. The Lender, at any time, may sell, assign, grant or
otherwise transfer its rights, interest and obligations under the Documents or
part thereof.
9.3 This Loan Agreement may be amended, modified, renewed or extended
but only by a written instrument, executed by both of the parties hereto, in the
manner of the execution of this Loan Agreement.
9.4 The validity, construction and interpretation of this Loan
Agreement and the other Documents, and all rights, obligations and liabilities
arising hereunder or thereunder, shall be governed by the laws of the State of
Arizona, United States of America, and for the purpose of legal proceedings this
Loan Agreement and the other Documents shall be deemed to have been made and to
be wholly performed in such jurisdiction.
9.5 Each of the parties hereto shall, from time to time, perform such
other and further acts and execute and deliver any and all such other and
further instruments as may be required or reasonably requested by the other
party to establish, maintain and protect the respective rights and remedies of
such other party and to carry out and effect the intents and purposes of this
Loan Agreement.
9.6 All documents, agreements, certificates and instruments herein
required shall be in form and substance satisfactory in all respects to the
Lender in its sole discretion and shall be provided at the sole cost and expense
of the Borrower.
9.7 The representations and warranties hereunder shall survive the
Funding Date and the Lender may enforce such representations and warranties at
any
<PAGE>
time. The Borrower's covenants shall survive the Funding Date and shall be
performed fully and faithfully by the Borrower at all times. The indemnities of
the Borrower in each case shall survive repayment of the Loan.
9.8 Any provision hereof prohibited by, or unlawful or unenforceable
under, any applicable law of any jurisdiction shall as to such jurisdiction be
ineffective without affecting the remaining provisions of this Loan Agreement
which shall remain in full force and effect. Where, however, the provisions of
any such applicable law may be waived they are hereby waived to the fullest
extent permitted by law so that this Loan Agreement shall be a valid and binding
agreement enforceable in accordance with its terms. In the event that any
provision of this Loan Agreement or the documents, instruments and agreements
pertaining hereto shall be deemed to be invalid or become invalid, the Borrower
agrees to substitute for such invalid provision a new provision which serves the
purpose of the invalid provision to the furthest possible extent permitted by
law.
9.9 The Borrower shall pay, on the Funding Date and thereafter, to the
extent required, on demand, all expenses incident to this transaction,
including, but not limited to, appraisal fees, the costs payable upon the filing
and recording of any of the Documents, recordation taxes, travel expenses,
transfer taxes and reasonable fees and disbursements of outside counsel.
9.10 This Loan Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
9.11 The headings of the Sections and Paragraphs of this Loan Agreement
have been inserted for convenience of reference only and shall in no way
restrict or otherwise modify any of the terms or provisions hereof.
9.12 The Documents have been reviewed and negotiated by counsel for
each party and no ambiguity in this Loan Agreement or the other Documents shall
be construed against either party based upon its having prepared any of the
Documents or part thereof.
9.13 It is the intention of the parties hereto to comply with
applicable state usury laws. Accordingly, it is agreed that notwithstanding any
provisions to the contrary in the Documents, the Documents shall not require the
payment or permit the collection of interest in excess of the maximum legal
amount permitted by law. If any such excess of interest otherwise is contracted
for, charged or received pursuant to the Documents or if the Obligations are
accelerated in whole or in part, so that under any of such circumstances the
amount contracted for, charged or received pursuant to the Documents
<PAGE>
would exceed the maximum legal amount of interest permitted by law, then, upon
such happenstance, (i) the provisions of this Paragraph 9.13 shall govern and
control, (ii) neither the Borrower nor any other person or entity now or
hereafter liable for payments under the Documents would be obligated to pay the
same to the extent that it is in excess of the maximum legal amount of interest
permitted by law, (iii) any such excess which may have been collected shall, at
the Lender's option, be either applied as a credit against the Unpaid Amount(s)
or refunded to the Borrower or the person or entity thereunto entitled and (iv)
the effective rate of interest shall be automatically reduced to the maximum
lawful rate allowed under law as now or hereafter construed by any court having
jurisdiction hereof.
9.14 (a) The Borrower (i) hereby irrevocably submits to the
jurisdiction of the Superior Court of Maricopa County, State of Arizona, or any
successor to said court, and to the jurisdiction of the United States District
Court for the District of Arizona, or any successor to said court (hereinafter
referred to collectively as the "Arizona Courts"), for purposes of any suit,
action or other proceeding which relates to the transactions contemplated in
this Loan Agreement, (ii) to the extent permitted by applicable law, hereby
irrevocably waives and agrees not to assert by way of motion as a defense or
otherwise in any such suit, action or proceeding any claim that it is not
personally subject to the jurisdiction of the Arizona Courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Loan Agreement or any
transaction provided for or contemplated herein may not be enforced in or by the
Arizona Courts, (iii) hereby agrees not to seek, and hereby waives, any
collateral review by any other court, which may be called upon to enforce the
judgment of any of the Arizona Courts, of the merits of any such suit, action or
proceeding or the jurisdiction of said Arizona Courts, and (iv) hereby
irrevocably waives, to the fullest extent permitted under applicable law, the
right to trial by jury in any action, suit or proceeding brought to enforce the
provisions of this Loan Agreement or any of the Documents. Nothing herein shall
limit the Lender's right to bring any suit, action or other proceeding against
the Borrower or any of the Borrower's assets or to serve process on the Borrower
by any means authorized by law.
(b) The Borrower hereby irrevocably designates and appoints C T
Corporation System, with offices on the date hereof at 3225 N. Central Avenue,
Phoenix, Arizona 85012, United States of America, as its agent for service of
process in the State of Arizona, United States of America. The foregoing,
however, shall not limit the right of the Lender to serve legal proceedings in
any other manner permitted by law or to bring any legal action or proceedings or
to obtain execution or judgment in any courts of competent jurisdiction.
9.15 Interest calculations under the Documents shall be made on a 360
day year based on the actual number of days elapsed.
<PAGE>
9.16 All demands, declaration, notices, consents, requests and other
communications hereunder shall be in writing and shall be deemed to have been
duly given five (5) days subsequent to its being deposited in the mail,
registered or certified, postage prepaid, addressed as follows to the party to
be given notice:
(i) To the Lender:
FINOVA Capital Corporation
1850 North Central Avenue
Phoenix, Arizona 85002
Attention: Operations Management -
Transportation
(ii) To the Borrower:
Tower Air, Inc.
Hangar No. 17
John F. Kennedy International Airport
Jamaica, New York 11430
Attention: Morris Nachtomi
Chairman-President & CEO
9.17 The Borrower hereby represents and warrants to the Lender that no
broker brought about the transaction contemplated hereby and the Borrower hereby
agrees to indemnify and hold the Lender harmless from any and all liabilities
and costs (including, without limitation, costs of counsel) to any person or
entity claiming brokerage commissions or finder's fees on account of this Loan
Agreement or the other Documents.
9.18 The Borrower has paid to the Lender the amount of USD 200,000 as
a non-interest bearing deposit (the "Deposit"). On the Funding Day, the Borrower
shall pay to the Lender a loan fee in the amount of $200,000.00 and Lender shall
apply the Deposit to the payment of such fee.
9.19 Both parties agree that they shall keep all proprietary
information and data provided with respect to the transaction embodied herein
confidential except as required by law.
9.20 Time is of the essence with respect to the terms and conditions
of this Loan Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as
of the day and year first above written.
TOWER AIR, INC.
By: /s/ Morris K. Nachtomi
-----------------------
Title: Chairman/CEO
Tax ID No.: 11-262-1046
FINOVA CAPITAL CORPORATION
By: /s/ Kathy A. Gross
-----------------------
Title: Vice President
<PAGE>
Exhibit 10(12)
FIRST AMENDMENT TO CONSOLIDATED, AMENDED AND
RESTATED AIRCRAFT AND ENGINE LOAN
AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO CONSOLIDATED, AMENDED AND RESTATED AIRCRAFT
AND ENGINE LOAN AND SECURITY AGREEMENT (this "Amendment") made and entered into
this 8th day of May, 1996 by and between FINOVA CAPITAL CORPORATION (formerly
GREYHOUND FINANCIAL CORPORATION) (the "Lender"), a corporation organized and
existing under the laws of the State of Delaware, with its chief executive
office and principal place of business at 1850 North Central Avenue, Phoenix,
Arizona 85002 and TOWER AIR, INC. (The "Borrower"), a corporation organized and
existing under the laws of the State of Delaware, with its chief executive
office and principal place of business at Hangar No. 17, John F. Kennedy
International Airport, Jamaica, New York 11430.
WITNESSETH:
WHEREAS, the Borrower and the Lender have previously entered into the
Consolidated, Amended and Restated Aircraft and Engine Loan and Security
Agreement dated as of March 25, 1996 (the "Loan Agreement");
WHEREAS, the Borrower desires to borrow from the Lender an additional
$21,000,000.00 (the "N616FF Loan") pursuant to the terms of that certain
Aircraft Loan and Security Agreement dated as of May 8, 1996 between the
Borrower and the Lender; and
WHEREAS, it is a condition precedent to the Lender's obligation to
make the N616FF Loan to the Borrower that the Borrower enter into this
Amendment.
NOW, THEREFORE, the undersigned hereto agree as follows:
1. DEFINITIONS.
-----------
Capitalized terms used herein unless otherwise defined herein shall
have the meaning ascribed to such terms in the Loan Agreement.
<PAGE>
2. AMENDMENTS TO LOAN AGREEMENT.
-----------------------------
2.1 Section 1.1 of the Loan Agreement is amended by inserting
immediately after the term "Loan Agreement [613FF/N617FF]" a new definition
which reads as follows:
"Loan Agreement [N616FF]: shall mean that
certain Aircraft Loan and Security Agreement
dated as of May 8, 1996 between the Borrower
and the Lender."
2.2 Section 8.1 of the Loan Agreement is amended by: (i) deleting the
word "or" at the end of clause (k) thereof; (ii) deleting the period at the end
of clause (l) thereof and inserting "; or" in place thereof and (iii) inserting
immediately after clause (l) a new clause (m) which reads as follows"
"(m) an "Event of Default" under and as defined in the Loan
Agreement [N616FF] has occurred and be continuing."
3. ACKNOWLEDGMENTS AND CONFIRMATIONS.
---------------------------------
3.1 All references in the Loan Agreement and every other
agreement, instrument and document executed and delivered by Borrower in
connection therewith, to the "Loan Agreement" shall be deemed to refer to the
Loan Agreement as amended hereby.
3.2 The Loan Agreement and all agreements, instruments and
documents executed and delivered in connection with any of the foregoing, shall
each be deemed amended hereby to the extent necessary, if any, to give effect
to the provisions of this Amendment.
4. MISCELLANEOUS.
-------------
4.1 Except as specifically amended hereby, the Loan Agreement
shall remain in full force and effect in accordance with its terms, and each
of the Borrower and Lender hereby ratify and affirm all of the terms and
conditions of the Loan Agreement as amended hereby.
<PAGE>
4.2 THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA.
4.3 This Amendment shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective successors and
assigns. The rights and obligations of the Borrower under this Amendment shall
not be assigned or delegated without the prior written consent of the Lender,
and any purported assignment or delegation without such consent shall be void.
4.4 Time is of the essence with respect to the terms and
provisions of this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Consolidated, Amended and Restated Aircraft and Engine Loan and
Security Agreement as of the day and year first above written.
TOWER AIR, INC.
By /s/ Josephina M. Essex
--------------------------------
Title: Chief Financial Officer
Tax ID No.: 11-262-1046
FINOVA CAPITAL CORPORATION
By /s/ Kathy A. Gross
---------------------------------
Title: Vice President
