UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): May 28, 1997
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Commission File No. 33-21977
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POLARIS AIRCRAFT INCOME FUND V,
A California Limited Partnership
State of Organization: California
IRS Employer Identification No. 94-3068259
201 Mission Street, 27th Floor, San Francisco, California 94105
Telephone - (415) 284-7400
This document consists of 7 pages.
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Item 2.
On May 28, 1997, Polaris Investment Management Corporation (the "General
Partner" or "PIMC"), on behalf of Polaris Aircraft Income Fund V (the
"Partnership"), executed definitive documentation for the purchase of all 12 of
the Partnership's remaining aircraft (the "Aircraft") by Triton Aviation
Services V LLC, a special purpose company (the "Purchaser"). The final closings
for the purchase of all 12 of the Aircraft had occurred as of June 6, 1997. The
Purchaser is managed by Triton Aviation Services, Ltd. ("Triton Aviation"), a
privately held aircraft leasing company which was formed in 1996 by Triton
Investments, Ltd., a company which has been in the marine cargo container
leasing business for 17 years and is diversifying its portfolio by leasing
commercial aircraft. Each Aircraft was sold subject to the existing leases.
The General Partner's Decision To Approve The Transaction
In determining whether the transaction was in the best interests of the
Partnership and its unitholders, the General Partner evaluated, among other
things, the risks and significant expenses associated with continuing to own and
remarket the Aircraft (many of which were subject to leases that were nearing
expiration). The General Partner determined that such a strategy could require
the Partnership to expend a significant portion of its cash reserves for
remarketing and that there was a substantial risk that this strategy could
result in the Partnership having to reduce or even suspend future cash
distributions to limited partners. The General Partner concluded that the
opportunity to sell the Aircraft at an attractive price would be beneficial in
the present market where demand for Stage II aircraft is relatively strong
rather than attempting to sell the aircraft "one-by-one" over the coming years
when the demand for such Aircraft might be weaker. During the months of intense
negotiations, GE Capital Aviation Services, Inc. ("GECAS"), which provides
aircraft marketing and management services to the General Partner, sought to
obtain the best price and terms available for these Stage II aircraft given the
aircraft market and the conditions and types of planes owned by the Partnership.
Both the General Partner and GECAS approved the sale terms of the Aircraft (as
described below) as being in the best interest of the Partnership and its
unitholders because both believe that this transaction will optimize the
potential cash distributions to be paid to limited partners. To ensure that no
better offer could be obtained, the terms of the transaction negotiated by GECAS
included a "market-out" provision that permitted the Partnership to elect to
accept an offer for all (but no less than all) of the assets to be sold by it to
the Purchaser on terms which it deemed more favorable, with the ability of the
Purchaser to match the offer or decline to match the offer and be entitled to be
compensated in an amount equal to 1 1/2% of the Purchaser's proposed purchase
price.
On May 9, 1997, the General Partner received a competing offer (the "Competing
Offer") from a third party to purchase the Partnership's twelve aircraft and
certain notes receivable, subject to a number of contingencies, as disclosed in
the Partnerships Quarterly Report to the Securities and Exchange Commission Form
10-Q at March 31, 1997. The Competing Offer included a higher purchase price
than the offer made by the Purchaser (the "Original Offer"). Both the Competing
Offer and the Original Offer contained similar financing structures, but the net
worth of the company submitting the Competing Offer was approximately $11
million, as compared to the approximately $150 million net worth of Triton
Investments, Ltd., the parent of the Purchaser's Manager. On May 14, 1997, upon
review and comparison of the Competing Offer with the Original Offer, the
General Partner determined that it would be in the best interests of the
Partnership to reject the Competing Offer due to the significant difference in
the net worth and the execution risks both at closing and thereafter, as well as
the payment of the 1 1/2% fee that would be due to the Purchaser under the
Original Offer representing approximately half of the premium represented by the
Competing Offer over the Original Offer.
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The Terms of the Transaction
The total purchase price (the "Purchase Price") to the Purchaser is $34,750,259
which is allocable to the Aircraft. The Purchaser is not receiving any of the
Partnership's cash reserves, estimated to be approximately $9,800,000 after the
anticipated July cash distribution is made to limited partners. The Purchaser
paid into an escrow account $3,914,964 of the Purchase Price in cash at the
closing and delivered a promissory note (the "Promissory Note") for the balance
of $30,835,295. As described below, this transaction will enable the Partnership
to distribute to limited partners the cash down payment received on the sale of
the Aircraft and permit the Partnership to distribute to limited partners a
substantial portion of cash reserves which have been held by the Partnership.
The Partnership intends to make this distribution as part of its July 1997
quarterly distribution to limited partners.
The Promissory Note is to be repaid beginning June 30, 1997 in 28 quarterly
installments of principal and interest in the amount of $1,512,367 over a period
of seven years bearing interest at a rate of 12% per annum with a balloon
principal payment in the amount of $5,621,617 due on March 31, 2004. The
Purchaser has the right to voluntarily prepay the Promissory Note in whole or in
part at any time without penalty. In addition, the Promissory Note is subject to
mandatory partial prepayment in certain specified instances.
Under the terms of the transaction, the Purchaser's assets, which are limited to
the Aircraft, including any income or proceeds therefrom, and any funds made
available to Purchaser under the working capital line described below constitute
the sole source of payments under the Promissory Note. Although no security
interest over the Aircraft or the leases is granted in favor of the Partnership,
the equity interests in the Purchaser have been pledged to the Partnership. In
connection with that pledge, the Purchaser is prohibited from incurring
indebtedness other than (i) the Promissory Note; (ii) deferred taxes not yet due
and payable; (iii) indebtedness incurred to hushkit Aircraft owned by the
Purchaser; (iv) demand loans to another SPC (defined below) at a market rate of
interest; and (v) debt to trade creditors incurred in the ordinary course of
business. In addition, the Purchaser undertakes to keep the Aircraft and leases
free of any lien, security interest or other encumbrance other than (i) inchoate
taxes and materialmen's liens and the like, (ii) in the event that the Purchaser
elects to install hushkits on any Aircraft, secured debt to the extent of the
full cost of such hushkit and other hushkits acquired with proceeds from the
same loan facility; (iii) liens lessees are customarily permitted to incur that
are required to be removed. The Purchaser has the right to sell any of the
Aircraft without the consent of the Partnership, except that the Partnership's
consent would be required in the event that the sale price is less than the
portion of the outstanding balance of the Promissory Note which is allocable to
the Aircraft in question and the Purchaser does not have sufficient funds to
make up the difference. In the event that any of the Aircraft are sold by the
Purchaser, the Promissory Note is subject to a mandatory prepayment of the
portion of the Promissory Note which is allocable to the Aircraft sold.
Polaris Aircraft Income Fund II, Polaris Aircraft Income Fund III, Polaris
Aircraft Income Fund IV and Polaris Aircraft Income Fund VI have also sold
certain aircraft assets to separate special purpose companies under common
management with the Purchaser (collectively, together with the Purchaser, the
"SPC's") on terms similar to those set forth above, with the exception of the
Polaris Aircraft Income Fund VI aircraft, which were sold on an all cash basis.
Under the terms of the transaction, the Purchaser's Manager has undertaken to
make available a working capital line to the Purchaser of up to approximately
$4,034,000 to fund operating obligations of the Purchaser. This working capital
line is guaranteed by Triton Investments, Ltd., the parent of the Purchaser's
Manager and such guarantor provided the Partnership with a copy of its most
recent balance sheet showing a consolidated net worth (net of minority
interests) of at least $150-million at December 31, 1996. Provided that the
Purchaser is not in default in making payments due under the
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Promissory Note to the Partnership, the Purchaser is permitted to dividend to
its equity owners an amount not to exceed approximately $108,000 per month. The
Purchaser may distribute additional dividends to the equity owners to the extent
of the working capital advances made by the Purchaser's Manager provided that
the working capital line available to the Purchaser will be deemed increased to
the extent of such dividends.
The Purchaser purchased the Aircraft effective as of April 1, 1997
notwithstanding the actual closing dates. The utilization of an effective date
facilitated the determination of rent and other allocations between the parties.
The Purchaser has the right to receive all income and proceeds, including rents
and receivables, from the Aircraft accruing from and after April 1, 1997, and
the Promissory Note commenced bearing interest as of April 1, 1997.
The Partnership continues to own the note receivable (the "AIA Receivable") from
American International Airways Limited ("AIA") with a current principal balance
of $11,437,741 plus accrued interest, which had initially been included in the
assets which were transferred to the Purchaser. After the date that the
Partnership and the Purchaser entered into the definitive documentation for the
sale transaction, but prior to the date that the AIA Receivable was transferred
to the Purchaser, AIA failed to make a scheduled principal payment under the AIA
Receivable and asked the Partnership to modify and restructure the AIA
Receivable. As a result, the Partnership and the Purchaser agreed to modify and
reform the definitive documentation for the sale transaction to exclude the AIA
Receivable. The General Partner is currently assessing the request made by AIA.
The AIA Receivable is secured by a mortgage on a Boeing 747-100 Special
Freighter aircraft.
Neither PIMC nor GECAS will receive a sales commission in connection with the
transaction. In addition, PIMC will not be paid a management fee with respect to
the collection of the Promissory Note. Neither PIMC nor GECAS or any of its
affiliates holds any interest in Triton Aviation or any of Triton Aviation's
affiliates. John Flynn, the current President of Triton Aviation, was a Polaris
executive until May 1996, has over 15 years experience in the commercial
aviation industry. At the time Mr. Flynn was employed at PIMC and he had no
affiliation with Triton Aviation or its affiliates.
Anticipated July Cash Distribution
The Partnership anticipates making a cash distribution to the limited partners
of approximately $11,485,000 ($22.97 per limited partnership unit) by July 30,
1997. Such distribution would be comprised of (i) the cash down payment received
from the sale of the Aircraft, less estimated transaction expenses (representing
approximately $6.75 per limited partnership unit); (ii) the Promissory Note
payment due from the Purchaser on June 30, 1997 (representing approximately
$2.72 per limited partnership unit); and (iii) the portion of the Partnership's
cash reserves which the General Partner determined is available for distribution
(representing approximately $13.50 per limited partnership unit). The foregoing
anticipated distribution is based on the assumptions that the closings for all
the Aircraft being sold to the Purchaser occur prior to July 1, 1997, the
Partnership timely receives all payments due from the Purchaser, and the
Partnership incurs estimated operating and administrative expenses (including
expenses in connection with the transaction) of approximately $1,534,000 for the
quarter ended June 30, 1997. The Partnership's estimated cash distributions to
limited partners constitutes forward looking information based upon the above
assumptions that may, for any number of reasons, not occur. Accordingly, there
can be no assurance that the Partnership will make a cash distribution in the
amount anticipated.
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Estimated Cash Reserves
The Partnership estimates its cash reserves will be approximately $9,800,000
($17.64 per limited partnership unit) after the cash distribution to limited
partners anticipated to be made in July 1997. PIMC has determined that the
Partnership maintain these cash reserves as a prudent measure to insure that the
Partnership has available funds in the event the Purchaser defaults under the
Promissory Note and for other contingencies including expenses of the
Partnership. The Partnership's cash reserves will be monitored and may be
revised from time to time as further information becomes available in the
future.
5
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a) Financial Statements. None
b) Pro Forma Information. None
c) Exhibits.
2.1 Purchase, Assignment and Assumption Agreement
2.2 Escrow Agreement
2.3 Pledge and Security Agreement
2.4 Keep Well Agreement
2.5 Promissory Note
2.6 Guaranty (Keep Well)
2.7 Guaranty (SPV Indebtedness)
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SIGNATURE
Pursuant to the requirements 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.
POLARIS AIRCRAFT INCOME FUND V
(Registrant)
By: Polaris Investment
Management Corporation,
General Partner
June 6, 1997 By: /S/Marc A. Meiches
- ------------------ ---------------------------------
Marc A. Meiches
Chief Financial Officer
(principal financial officer and
principal accounting officer of
Polaris Investment Management
Corporation, General Partner of
the Registrant)
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PURCHASE, ASSIGNMENT AND ASSUMPTION AGREEMENT
dated as of
April 1, 1997
between
POLARIS AIRCRAFT INCOME FUND V
as Assignor
and
TRITON AVIATION SERVICES V LLC
as Assignee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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SECTION 1. Definitions.......................................... 1
SECTION 2. Sale and Assignment.................................. 11
SECTION 3. Purchase and Assumption.............................. 12
SECTION 4. Purchase Price....................................... 12
(a) Payment of Purchase Price............................ 12
(b) Transfer of Income and Lessee Deposits............... 13
(c) First Effective Date; Mop-Up Date.................... 13
(d) Settlement of Income and Lessee Deposits............. 14
SECTION 5. Representations and Warranties of Assignor;
Limitation of Warranty; Covenant with Respect
to Pre-Closing Actions............................... 16
5.1 Representations and Warranties of Assignor........... 16
(a) Partnership Organization, Etc........................ 16
(b) Due Authorization; Non-Contravention................. 16
(c) Due Execution and Delivery; Enforceability........... 17
(d) Event of Default..................................... 17
(e) Total Loss........................................... 17
(f) Taxes................................................ 18
(g) Litigation........................................... 18
(h) Encumbrances......................................... 18
(i) Brokers' Fees........................................ 19
(j) Operative Agreements; Receivable Agreements.......... 19
(k) Title to Transferred Interests....................... 19
(l) Unfunded Commitments..................................... 20
(m) The outstanding principal amount of each Receivable...... 20
5.2 Supplements to Schedules; Post-Signing Information. 20
5.3 Limitation of Warranty............................... 20
5.4 Actions with Respect to Transferred Interests........ 21
SECTION 6. Representations and Warranties of Assignee;
Access Covenant...................................... 21
6.1 Representations and Warranties of Assignee........... 21
(a) LLC Organization, Etc................................ 21
(b) Due Authorization; Non-Contravention................. 22
(c) Due Execution and Delivery; Enforceability........... 22
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(d) Litigation........................................... 22
(e) Compliance with Operative Agreements and Receivable
Agreements........................................... 23
(f) Non-Airline.......................................... 23
(g) Brokers' Fees........................................ 23
(h) Acquisition For Own Account.......................... 23
6.2 Access Covenant...................................... 23
SECTION 7. Conditions Precedent to the Obligations of Assignor.. 24
(a) Purchase Price....................................... 24
(b) Affidavit of Limited Control by a Non-U.S. Citizen... 24
(c) Escrow Agreement..................................... 24
(d) TASL "Keep Well" Agreement........................... 25
(e) TIL Keep Well Guaranty and Loan Guaranty............. 25
(f) Assignee Security Agreement.......................... 25
(g) Approvals and Consents............................... 25
(h) Due Authorization, Execution and Delivery............ 25
(i) Representations and Warranties....................... 26
(j) Organizational and Authorization Matters............. 26
(k) Illegality; No Proceedings........................... 27
(l) No Total Loss........................................ 27
(m) Opinions............................................. 27
(n) Location of Aircraft................................. 28
(o) TIL Balance Sheets................................... 28
(p) Other Instruments and Documents; Additional
Information.......................................... 28
(q) Outside Date......................................... 28
(r) No Pending Superior Proposal......................... 28
(s) Satisfaction of Conditions........................... 28
(t) Opinions............................................. 29
(u) Outside Date......................................... 29
(v) Superior Proposal.................................... 29
SECTION 8. Conditions Precedent to the Obligations of Assignee.. 29
(a) Leases and Trust Agreements.......................... 29
(b) Due Authorization, Execution and Delivery............ 29
(c) Representations and Warranties....................... 29
(d) Schedules ........................................... 30
(e) Partnership Authorization Matters.................... 30
(f) Illegality; No Proceedings........................... 31
(g) Approvals and Consents............................... 31
(h) No Total Loss........................................ 31
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(i) Opinions............................................. 31
(j) Location of Aircraft................................. 32
(k) Other Instruments and Documents; Additional
Information.......................................... 32
(l) Outside Date......................................... 32
(m) Receivable Agreements................................ 32
(o) Opinion.............................................. 33
SECTION 9. Payments............................................. 33
SECTION 10. Certain Notices...................................... 33
SECTION 11. Superior Proposal.................................... 34
SECTION 12. Further Assurances................................... 35
SECTION 13. Taxes and Indemnities................................ 35
(a) Transfer Taxes....................................... 35
(b) Notice of IRS Reports................................ 36
(c) Assignor's Indemnity................................. 36
(d) Assignee's Indemnity................................. 37
(e) Survival of Representations and Warranties........... 38
SECTION 14. Indemnification Procedure............................ 38
SECTION 15. Termination.......................................... 40
SECTION 16. Miscellaneous........................................ 41
(a) Notices.............................................. 41
(b) Headings............................................. 42
(c) References........................................... 42
(d) GOVERNING LAW........................................ 42
(e) Severability......................................... 42
(f) Amendments in Writing................................ 42
(g) Expenses............................................. 43
(h) Execution in Counterparts............................ 43
(i) Entire Agreement..................................... 43
(j) Exhibits............................................. 43
(k) Assignment and Successors............................ 43
(l) Confidentiality...................................... 44
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EXHIBITS
Exhibit A -- Form of Promissory Note
Exhibit B -- Form of TASL Keep Well
Exhibit C-1 -- Form of TIL Keep Well Guaranty
Exhibit C-2 -- Form of TIL Loan Guaranty
Exhibit D -- Form of Pledge and Security Agreement
Exhibit E -- Form of SPV Provisions
SCHEDULES
Schedule 1 -- Aircraft
Schedule 2 -- Leases
Schedule 3 -- Foreign Aircraft Engines
Schedule 4 -- Other Operative Agreements
Schedule 4(a) -- Purchase Price
Schedule 5 -- Owner Trustees
Schedule 5(b) -- Consents
Schedule 5(d) -- Assignor Claims
Schedule 5(g) -- Pending Litigation
Schedule 5(h) -- Liens
Schedule 5(j) -- Missing Documents
Schedule 6 -- Trust Agreements
Schedule 7 -- Unfunded Commitments
Schedule 8 -- Receivables and Receivable Agreements
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This PURCHASE, ASSIGNMENT AND ASSUMPTION AGREEMENT (as the
same may be amended, modified or supplemented from time to time, this
"Agreement"), dated as of April 1, 1997, is by and between POLARIS AIRCRAFT
INCOME FUND V, a California limited partnership ("Assignor"), and TRITON
AVIATION SERVICES V LLC, a California limited liability company ("Assignee").
W I T N E S E T H:
WHEREAS, Assignor desires to sell and assign to Assignee and
Assignee desires to purchase and assume from Assignor all of Assignor's right,
title and interest in and to the Transferred Interests;
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements of the parties contained herein and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Assignor and Assignee agree as follows:
SECTION 1. Definitions
In addition to the terms defined elsewhere herein, when used
in this Agreement, the following terms have the meanings indicated below:
"Act" means Part A of subtitle VII of title 49, United
States Code.
"actual knowledge" of any Person, means the conscious
awareness of facts or other information by any director, officer, employee or
agent of such Person, in either such case, who is (i) actively involved in
negotiating the transactions contemplated by this Agreement or (ii) responsible,
in the ordinary course, for administering, on behalf of Assignor, the
transactions contemplated by the Operative Agreements or the Receivable
Agreements.
"Affiliate" means, with respect to any Person, (i) each
Person that, direct ly or indirectly, owns or controls, whether beneficially or
as a trustee, guardian or other fiduciary, 20% or more of the Stock having
ordinary voting power in the election of direc tors or manager of such Person,
(ii) each Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person and (iii) each of such Person's
officers, directors, members, joint venturers and partners. For the purpose of
this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
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"After-Tax Basis" means on a basis such that any payment
received or deemed to have been received by any Person shall be supplemented by
a further amount paid to that Person, so that the recipient is held harmless on
an after-Tax basis from all Taxes (calculated with respect to the highest
applicable tax rate and taking into account any related credits or deductions
allowed to the recipient of such payment in respect of the indemnified matters)
resulting from the receipt (actual or constructive) of such payments and where
the indemnitee is treated as a partnership for federal income tax purposes, the
"highest applicable tax rate" means the highest applicable federal tax rate in
effect for individuals at the time the indemnity payment is made plus 6%.
"Agreement" shall have the meaning assigned to it in the
preamble hereof.
"Aircraft" means the aircraft more fully described on Parts
A and B of Schedule 1 attached hereto and, with respect to each Foreign
Aircraft, shall include (i) any and all Parts installed on or attached to any
such Foreign Aircraft as of the Effective Time relating to such Foreign Aircraft
(subject to any pooling, replacement or exchange rights arising under the
Operative Agreements relating to such Foreign Aircraft), (ii) all Aircraft
Documents relating to such Foreign Aircraft, (iii) the Engines and (iv) to the
extent assignable by Assignor, all warranties of manufacturers or other vendors
of such Foreign Aircraft, Engines or Parts relating thereto that are in effect
on the Effective Date relating to such Foreign Aircraft.
"Aircraft Documents" mean, with respect to any Aircraft, all
records, logs, technical data and manuals relating to the maintenance or
operation of such Aircraft which are owned by Assignor.
"Aircraft Transferred Interests" means, collectively, all of
Assignor's present and future right, title and interest in, to and under the
Trust Estate, the Trust Agreements and all other Operative Agreements, all
Lessee Deposits, all Foreign Aircraft and all Income relating to or associated
with any of the foregoing, but excluding, in each case, the Reserved Rights
relating to or associated with any of the foregoing. The term Transferred
Interest followed immediately by a manufacturer's serial number of an Aircraft
(e.g., "Transferred Interest 19711") shall mean, in each case, collectively, all
of Assignor's present and future right, title and interest in, to and under the
Trust Estate, the Trust Agreement and other Operative Agreements, Lessee
Deposits and Income relating to or associated with the Aircraft bearing such
manufacturer's serial number.
"Allocable Portion Percentage" means, with respect to any
Aircraft, the amount obtained by dividing the Appraised Value of such Aircraft
(determined immediately before such Aircraft suffered a Total Loss or such
Aircraft is otherwise deleted from this Agreement) by the sum of the Appraised
Values of all the Aircraft (determined at the same time).
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"Ancillary Agreements" mean, collectively, the Promissory
Note, the Keep Well, the Keep Well Guaranty, the Loan Guaranty, the Security
Agreement, the Assignment and Assumption Agreements and all other agreements,
instruments, docu ments and certificates, including, without limitation,
consents, assignments, contracts, financing statements and all other written
matters whether now or hereafter executed by or on behalf of Assignor or
Assignee or any of their respective Affiliates and delivered in connection with
this Agreement or the transactions contemplated hereby.
"Appraised Value" means, with respect to any Aircraft, the
most recent semi-annual generic current fair market value of aircraft of the
same type, age, gross weight and configuration, including, without limitation,
engine type and hushkit status, published by Avitas Aircraft Appraisal Inc.
without adjustment for the maintenance "half-time" condition of such Aircraft.
"Assignee" shall have the meaning assigned to it in the
preamble hereof.
"Assignee Acceptance Notice" shall have the meaning assigned
to it in Section 11(c) hereof.
"Assignee Indemnitees" shall have the meaning assigned to it
in Section 13(c) hereof.
"Assignment and Assumption Agreement" shall mean (A) for
each Aircraft Transferred Interest, either (i) an Assignment and Assumption
Agreement (FAA), executed and delivered by Assignor and Assignee at the
applicable Effective Time, in form and substance satisfactory to Assignee and
Assignor or (ii) a Novation Agreement, executed and delivered by Assignor and
Assignee at the applicable Effective Time, in form and substance satisfactory to
Assignee and Assignor and (B) for each Receivable Transferred Interest, a Bill
of Sale and Assignment, executed and delivered by Assignor and Assignee at the
applicable Effective time, in form and substance satisfactory to Assignee and
Assignor.
"Assignor" shall have the meaning assigned to it in the
preamble hereof.
"Assignor Indemnitees" shall have the meaning assigned to it
in Section 13(d) hereof.
"Assumed Liabilities" mean (a) with respect to each Aircraft
Transferred Interest, (i) all of the obligations and liabilities of Assignor
relating to the applicable Trust Estate and under the applicable Trust Agreement
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and all other Operative Agreements relating to such Trust Estate or such
Aircraft Transferred Interest to the extent arising from acts, omissions, events
or circumstances occurring or accruing on or after the applicable Effective Time
for such Aircraft Transferred Interest, (ii) all Deposit Liabilities relating to
such Aircraft Transferred Interest, (iii) all Unfunded Commitments relating to
such Aircraft Transferred Interest and (b) with respect to each Receivable
Transferred Interest, all of the obligations and liabilities of Assignor
relating to such Receivable Transferred Interest and under the applicable
Receivable Agreements to the extent arising from acts, omissions, events or
circumstances occurring or accruing on or after the Receivable Effective Date.
"Business Day" means any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
States of California or New York.
"CAA" means the United Kingdom Civil Aviation Authority.
"Cash Account" shall have the meaning assigned to it in
Section 4(a) hereof.
"Citizen of the United States" means Citizen of the United
States as defined in Section 40102(a)(15) of the Act and in the FAA Regulations.
"Claim Notice" shall have the meaning assigned to it in
Section 14(a) hereof.
"Damages" means, in respect of any obligation to indemnify
any Person pursuant to the terms of this Agreement, any and all losses, claims,
damages, liabilities, obligations, actions, suits, judgments, settlements,
awards, reasonable and documented out-of-pocket costs, expenses and attorneys'
fees but shall exclude any consequential, expectancy or speculative Damages or
any Damages based on a claim of lost profits or opportunities.
"Daylight Effective Time" means any Effective Time that
occurs on a Business Day during the hours of 9:30 a.m. and 5:00 p.m. EDT, New
York City time.
"Deposit Liabilities" mean, with respect to any Lessee
Deposit transferred to Assignee pursuant to this Agreement, all liabilities,
obligations and duties owed by Assignor or any Owner Trustee to a Lessee or any
assignee of or successor to such Lessee relating to, based on or arising out of
such Lessee Deposit, whether known or unknown, contingent or absolute, or
arising before, on or after the Effective Time applicable to such Lessee
Deposit.
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"Effective Time" means, subject to the final sentence of
this definition, (i) with respect to the Aircraft Transferred Interests, each
date and time on which any Aircraft Transferred Interest is delivered by
Assignor to Assignee and accepted by Assignee in accordance with the terms of
this Agreement as specified in the Assignment and Assumption Agreement with
respect to such Aircraft Transferred Interest and (ii) with respect to the
Receivable Transferred Interests, 5:00 p.m. EDT on the Receivable Effective
Date. Each Transferred Interest may be delivered by Assignor to Assignee and
accepted by Assignee in accordance with the terms hereof and the terms of the
applicable Assignment and Assumption Agreement independently of any other
Transferred Interest and at different Effective Times. Notwithstanding the
foregoing, the Effective Time for each Transferred Interest assigned to Assignee
shall be deemed, with respect to the allocation of Income as between Assignor
and Assignee (but not for any other purpose), to be April 1, 1997.
"Engine" means each of the engines identified as to
manufacturer, type and manufacturer serial number on Schedule 3 hereto together,
in each case, with any and all Parts incorporated or installed in or attached
thereto as of the Effective Time relating to such Engine (subject to any
pooling, replacement or exchange rights arising under the Operative Agreements
relating to such Engine).
"Escrow Agent" means the escrow agent (and any financial
institution that succeeds such escrow agent) pursuant to the terms of the Escrow
Agreement.
"Escrow Agreement" means an Escrow Agreement among Assignor,
Assignee and the Escrow Agent, in form and substance satisfactory to each of
them.
"FAA" means the Federal Aviation Administration of the
United States or any Government Entity succeeding to the functions of the
Federal Aviation Administration.
"Foreign Aircraft" means, collectively, the Aircraft
described on Part B of Schedule 1.
"Government Entity" means (a) any federal, state, provincial
or similar government, and any body, board, department, commission, court,
tribunal, authority, agency or other instrumentality of any such government or
otherwise exercising any executive, legislative, judicial, administrative or
regulatory functions of such government or (b) any other government entity
having jurisdiction over any matter contemplated by the Operative Agreements or
the Receivable Agreements or relating to the observance or performance of the
obligations of any of the parties to the Operative Agreements or the Receivable
Agreements.
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"Income" means, with respect to a Transferred Interest, all
income, scheduled rental, principal or interest payments, payments in respect of
fees due to Assignor or the Owner Trustee and proceeds of such Transferred
Interest earned on or after April 1, 1997, but shall not be deemed to include
any Lessee Deposit or Reserved Rights relating to or associated with such
Transferred Interest.
"Indemnified Party" shall have the meaning assigned to it in
Section 14(a) hereof.
"Indemnitor" shall have the meaning assigned to it in
Section 14(a) hereof.
"IRS" means the Internal Revenue Service or any Government
Entity succeeding to the functions of the Internal Revenue Service.
"Keep Well" shall have the meaning assigned to it in Section
7(d) hereof.
"Keep Well Guaranty" shall have the meaning assigned to it
in Section 7(e) hereof.
"Leases" mean, collectively, the Leases listed on Schedule 2
attached hereto, as the same may have been amended, supplemented or modified
from time to time.
"Lessee Deposit" means any security deposit, maintenance
reserve or other funds held by Assignor or any Owner Trustee as security for the
performance by a Lessee of any of its obligations under a Lease or any of the
Operative Agreements relating to such Lease (including any interest or earnings
on any such funds which, pursuant to such Lease or such Operative Agreements
relating to such Lease, are for the account or the benefit of the Lessee).
"Lessees" mean, collectively, the Persons listed on Schedule
1 attached hereto.
"Lien" means any mortgage, pledge, lien, charge, claim,
encumbrance, lease or security interest affecting the title to or any interest
in property.
"Loan Guaranty" shall have the meaning assigned to it in
Section 7(e) hereof.
"Loss of Title" means, with respect to any Aircraft, the
condemnation, confiscation, appropriation or seizure of, or requisition of title
to such Aircraft by any Government Entity; provided, however, that requisition
of the use of an Aircraft shall not constitute a Loss of Title unless there has
also been a requisition of title to such Aircraft by a Governmental Entity.
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"Mop-Up Date" means the seventh (7th) Business Day after the
Start Date; provided, however, that if, on the seventh (7th) Business Day after
the Start Date, Assignee gives notice to Assignor that an Aircraft which is
subject of an Aircraft Transferred Interest not yet transferred to Assignee (i)
is located in a jurisdiction that is unacceptable to Assignee and (ii) cannot be
relocated to an acceptable jurisdiction because either (x) such Aircraft is
physically unable to be so relocated or (y) the Lessee of such Aircraft has
refused to cooperate in relocating it, then in such case "Mop-Up Date" shall
mean the earlier of (A) the thirtieth (30th) day following the seventh (7th)
Business Day after the Start Date or (B) June 30, 1997.
"Offering Party" means any Person making a bona fide
inquiry, offer or proposal to acquire, directly or indirectly, (a) all or
substantially all of the assets subject to the Trust Agreements and the
Receivables or (b) all or substantially all of the Transferred Interests or (c)
a combination thereof.
"Operative Agreements" means, collectively, each of the
Leases, the Trust Agreements, the tax indemnity agreements and the other
agreements listed on Schedule 4 attached hereto, as the same may have been
amended, supplemented or modified from time to time.
"Outside Date" shall have the meaning assigned to it in
Section 7(q) hereof.
"Owner Trustee" means each Owner Trustee listed on Schedule
5 attached hereto, not in its individual capacity but solely as owner trustee
under the applicable Trust Agreement.
"Parts" mean, with respect to any Aircraft or any Engine,
all appli ances, components, parts, instruments, appurtenances, accessories,
furnishings, spare parts, seats and other equipment of whatever nature (other
than complete engines), incorporated or installed in or attached to any such
Aircraft or Engine as of the Effective Time relating to any such Aircraft or
Engine (subject to any pooling, replacement or exchange rights arising under the
Operative Agreements relating to such Aircraft or Engine).
"Person" means any Government Entity, individual, sole
proprietor ship, partnership, limited liability company, joint venture, trust,
unincorporated organization, association, corporation, institution, public
benefit corporation or other entity.
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"PIMC" means Polaris Investment Management Corporation, a
California corporation.
"Promissory Note" shall have the meaning assigned to it in
Section 4(a) hereof.
"Purchase Price" shall have the meaning assigned to it in
Section 4(a) hereof.
"Purchase Price Interest" means an amount equal to interest
on the "Cash Amount" set forth on Schedule 4(a) hereto (as such Cash Amount may
be reduced pursuant to Section 4(c) or Section 4(d)(ii)), calculated for the
period from and including April 1, 1997 through but not including the date
Assignor receives the Cash Amount pursuant to Section 4(a), at a rate equal to
5.3% per annum.
"Receivable Agreements" mean, collectively, all of the
agreements, documents and instruments governing or evidencing any of the
Receivables including, without limitation, the agreements, documents and
instruments listed on Schedule 8 attached hereto, as the same may have been
amended, supplemented or modified from time to time.
"Receivable Effective Date" means, with respect to the
Receivables, the date on which Assignor transfers the Receivables to Assignee
pursuant to the terms of this Agreement.
"Receivable Transferred Interests" means, collectively, all
of Assignor's present and future right, title and interest in, to and under the
Receivables and all the Receivable Agreements and all of the Income relating to
the Receivables, but excluding, in each case, the Reserved Rights relating to or
associated with any of the foregoing.
"Receivables" mean, collectively, the receivable obligations
set forth on Schedule 8 attached hereto.
"Reserved Rights" mean, with respect to each Transferred
Interest, any of the right, title or interest of Assignor in, to or in respect
of each and every indemnity or other payment or obligation (whether in the form
of rent, principal, interest or otherwise), arising in connection with any
claim, cause of action or payment obligation payable to, on behalf or in favor
of Assignor, under or pursuant to any Trust Agreement or any other Operative
Agreements or Receivable Agreement relating to such Transferred Interest
(including, without limitation, any rights or causes of action Assignor may have
against any Owner Trustee pursuant to the terms of any Trust Agreement) to the
extent that such indemnities, payments or obligations vested or relate to an
act, omission, event or circumstance occurring or accruing prior to the
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Effective Time for such Transferred Interest other than Income, Lessee Deposits
or other rights specifically transferred to Assignee pursuant to this Agreement.
"Security Agreement" shall have the meaning assigned to it
in Section 7(f) hereof.
"SP Notice" shall have the meaning assigned to it in Section
11(b) hereof.
"Special CAA Counsel" shall have the meaning assigned to it
in Section 7(m) hereof.
"Special FAA Counsel" shall have the meaning assigned to it
in Section 7(m) hereof.
"Start Date" means the earlier of (i) a date mutually
acceptable to Assignor and Assignee or (ii) the sixth (6th) Business Day after
which, in the good faith judgement of Assignor, the conditions precedent set
forth in Section 7(g), (k) or (r) are first satisfied with respect to an
Aircraft Transferred Interest.
"Stock" means all shares, options, warrants, general or
limited partnership interests, membership interests, participations or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company or equivalent entity whether voting or nonvoting,
including, without limitation, common stock, preferred stock, membership
interest or any other "equity security" (as such term is defined in Rule 3a11-1
of the General Rules and Regula tions promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
"Superior Proposal" means any bona fide inquiry, offer or
proposal which, in the case of an offer or proposal, is made by a Person that,
in the good faith judgment of Assignor, is financially capable of consummating
such offer or proposal to acquire, directly or indirectly, (a) all or
substantially all of the Receivables and the assets subject to the Trust
Agreements or (b) all or substantially all of the Transferred Interests or (c)
any combination thereof, the terms of which, in the good faith judgment of
Assignor, provide aggregate present value consideration to Assignor that is
materially better or more advantageous than the aggregate present value
consideration provided by the transactions contemplated hereby; provided that in
making such judgment Assignor shall have no duty or obligation to seek the
advice of any outside advisors or appraisers.
"TASL" means Triton Aviation Services Limited, a Bermuda
corporation.
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"Taxes" mean all license, recording, documentary,
registration and other similar fees and all taxes, levies, imposts, duties,
charges, assessments or with holdings of any nature whatsoever imposed by any
Taxing Authority, together with any penalties, additions to tax, fines or
interest thereon or additions thereto.
"Taxing Authority" means any federal, state or local
Government Entity or other taxing authority in the United States, any foreign
government or any political subdivision or taxing authority thereof, any
international taxing authority or any territory or possession of the United
States or any taxing authority thereof.
"Third Party Action" shall have the meaning assigned to it
in Section 14(a) hereof.
"Threshold Amount" shall have the meaning assigned to it in
Section 13(c) hereof.
"TIL" means Triton Investments Limited, a Bermuda
corporation.
"Total Loss" means, with respect to any Aircraft, any of the
following events: (a) total loss of such Aircraft or the destruction, damage
beyond economic repair or rendition of such Aircraft permanently unfit for
normal use for any reason whatsoever; (b) any damage to such Aircraft which
results in an insurance settlement with respect to such Aircraft on the basis of
a total loss or on the basis of a compromised or constructive total loss; and
(c) Loss of Title.
"Transfer Taxes" shall have the meaning assigned to it in
Section 13(a) hereof.
"Transferred Interests" mean, collectively, all of the
Aircraft Transferred Interests and all of the Receivable Transferred Interests.
"Trust Agreements" mean, collectively, each Trust Agreement
listed on Schedule 6 attached hereto, as the same may have been amended,
supplemented or modified from time to time.
"Trust Estate" means, collectively, each Trust Estate as
defined in each of the Trust Agreements.
"Trusts" mean, collectively, each Trust as defined in each
of the Trust Agreements.
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"Unfunded Commitment" means, with respect to any Aircraft
Transferred Interest, any unfunded obligations of Assignor or the Owner Trustee
to make loans, advances or extensions of credit or to defer or extend the time
for payment of rent obligations for the purpose of funding or otherwise
financing modifications to the Aircraft to which such Aircraft Transferred
Interest relates or the acquisition of equipment.
"without special inquiry" means with respect to Assignor, no
inquiry other than that conducted in the ordinary course of administering the
transactions contemplated by the Operative Agreements or by the Receivable
Agreements and that conducted in the ordinary course of negotiating the
transactions contemplated by this Agreement, by any director, officer, employee
or agent of Assignor who is actively involved in negotiating the transactions
contemplated by this Agreement.
As used herein, each of "Assignor," "Assignee," "Lessee,"
"Owner Trustee" or any other Person includes, without prejudice to the
provisions of any Operative Agreements or any Receivable Agreements, any
successor in interest to it and any permitted transferee, permitted purchaser or
permitted assignee of it.
SECTION 2. Sale and Assignment
Subject to the terms and conditions of this Agreement and in
reliance on the representations and warranties of Assignee set forth herein, at
each applicable Effective Time, Assignor does hereby sell, assign and transfer
to Assignee all of Assignor's present and future right, title and interest in,
to and under each Trans ferred Interest including, without limitation, all of
the Assumed Liabilities relating to such Transferred Interest; provided that
such sale, assignment and transfer shall be effective only upon the satisfaction
or waiver, at or prior to the applicable Effective Time for each such
Transferred Interest, of the conditions set forth in Section 7, such
satisfaction or waiver to be evidenced by, Assignor's acceptance from Assignee
of an Assignment and Assumption Agreement for such Aircraft Transferred
Interest.
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SECTION 3. Purchase and Assumption
Subject to the terms and conditions of this Agreement and in
reliance on the representations and warranties of Assignor set forth herein, at
each applicable Effective Time, Assignee does hereby (i) purchase and accept
each Transferred Interest, (ii) assume all of the Assumed Liabilities relating
to any such Transferred Interest, (iii), if applicable, confirm that it shall be
deemed a party to any Trust Agreement as of the Effective Time relating, and
with respect, to the Transferred Interest referenced in such Trust Agreement,
and agrees to be bound by all the terms of each thereof and hereby undertakes
and assumes all of the Assumed Liabilities and (iv), if applicable, confirm that
it shall be deemed a party to all Receivable Agreements as of the Effective Time
relating, and with respect, to such Transferred Interest, and agrees to be bound
by all the terms of each thereof and hereby undertakes and assumes all of the
Assumed Liabilities contained in such Receivable Agreements; provided, however,
that Assignor shall remain liable for the obligations of Assignor relating to
Reserved Rights; provided, further, that such purchase, acceptance and
assumption shall be effective only upon the satisfaction or waiver, at or prior
to the applicable Effective Time for such Transferred Interest, of the
conditions set forth in Section 8, such satisfaction or waiver to be evidenced
by Assignee's delivery to Assignor of an Assignment and Assumption Agreement for
such Transferred Interest. The assumption contemplated hereby, at the applicable
Effective Time, as between Assignor and Assignee, shall be deemed to release
Assignor from all Assumed Liabilities relating to such Transferred Interest.
SECTION 4. Purchase Price
(a) Payment of Purchase Price
The purchase price for the Transferred Interests is
as set forth on Schedule 4(a) attached hereto plus the Purchase Price Interest
(the "Purchase Price"). The Purchase Price Interest shall be due and payable on
the Business Day after the earlier to occur of (i) the last Effective Time to
occur hereunder and (ii) the seventh Business Day after the Start Date and shall
be paid by Assignee to Assignor by wire transfer of immediately available funds
in accordance with the instructions of Assignor. At or prior to the first
Effective Time to occur pursuant to the terms hereof, Assignee shall (i) deliver
a note to Assignor in substantially the form attached hereto as Exhibit A (the
"Promissory Note"), in an amount equal to the amount set forth on Schedule 4(a)
as the "Note Amount" and (ii) wire transfer immediately available funds in an
amount equal to the amount set forth on Schedule 4(a) as the "Cash Amount" to
the Escrow Agent for deposit into the account established pursuant to the Escrow
Agreement (the "Cash Account").
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(b) Transfer of Income and Lessee Deposits
For the Receivable Effective Date, each Daylight
Effective Time and on the Mop-Up Date, contemporaneously with the Receivable
Effective Date, such Daylight Effective Time or on the Mop-Up Date, and for each
Effective Time that does not constitute a Daylight Effective Time or is not
deemed to occur on the Mop-Up Date, promptly at the beginning of the next
Business Day after such Effective Time, Assignor shall wire transfer immediately
available funds to Assignee, at an account designated in writing by Assignee, in
an amount equal to the Income and Lessee Deposits estimated by Assignor pursuant
to Section 4(d)(i) hereof to constitute part of the Transferred Interest
transferred (or deemed to be transferred) as of the Receivable Effective Date,
such Effective Time or as of the Mop-Up Date.
(c) First Effective Date; Mop-Up Date
Each of Assignor and Assignee covenants and agrees
that (i) if each of the conditions precedent in Section 7(a)-(r) (as to
Assignor) or Section 8(a)-(l) (as to Assignee) are satisfied or waived by the
appropriate party, the first Effective Time with respect to any Aircraft
Transferred Interest will occur on the Start Date and (ii) the Effective Time
for each and every Aircraft Transferred Interest will occur not later than the
close of business in New York on the Mop-Up Date. Each of Assignor and Assignee
covenants and agrees that the Receivable Effective Date will occur no later than
the sixth Business Day after each of the conditions precedent in Subsection 7(s)
through (v) (as to Assignor) or Subsection 8(m) through (o) (as to Assignee) are
satisfied or waived by the appropriate party. Each of Assignor and Assignee
further agrees that at any time after the earlier of (i) the seventh Business
Day after the Start Date and (ii) the last Effective Time to occur pursuant to
the terms hereof, (A) Assignor is hereby authorized to withdraw from the Cash
Account, an amount equal to the Cash Amount less any reduction of the Cash
Amount pursuant to the last sentence of this Section 4(c) or pursuant to Section
4(d)(ii) less one-half of the fees owed to the Escrow Agent and (B) Assignee is
hereby authorized to withdraw from the Cash Account all other funds in excess of
the amount set forth in clause (A); provided, however, if Assignee withdraws the
Cash Amount pursuant to the foregoing clause (i) and there is a subsequent
reduction in the Cash Amount pursuant to the last sentence of this Section 4(c),
then Assignor shall promptly return to Assignee an amount equal to such
subsequent reduction plus interest at the rate of 5.3% per annum from the
withdrawal date through the date of repayment to Assignee. On the Mop-Up Date,
so long as (i) the conditions precedent set forth in Section 7 hereof (other
than with respect to the location of the Aircraft) shall have been satisfied or
waived by Assignor, Assignor shall be obligated to deliver, with respect to each
Aircraft Transferred Interest that has not been assigned previously to Assignee
(including any Aircraft Transferred Interest which has not been transferred
previously because the Aircraft relating to such Aircraft Transferred Interest
has been the subject of a Loss of Title but as to which such Loss of Title has
been cured or otherwise corrected on or prior to the Mop-Up Date), Assignment
and Assumption Agreements, the evidence of authorization described in Section
8(e)(iv), any consents referred to in Section 5.1(b), the opinions described in
Section 8(i) and any other instruments or documents as Assignee or its counsel
shall reasonably request and (ii) the conditions precedent set forth in Section
8 hereof (other than with respect to the location of the Aircraft) shall have
been satisfied or waived by Assignee, Assignee shall be obligated to deliver,
with respect to each Aircraft Transferred Interest that has not been assigned
previously to Assignee (including any Aircraft Transferred Interest which has
not been transferred previously because the Aircraft relating to such Aircraft
Transferred Interest has been the subject of a Loss of Title but as to which
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such Loss of Title has been cured or otherwise corrected on or prior to the
Mop-Up Date), Assignment and Assumption Agreements, the evidence of
authorization described in Section 7(j)(v), any consents referred to in Section
6.1(b), the opinions described in Section 7(m) and any other instruments or
documents as Assignor or its counsel shall reasonably request. If on the Mop-Up
Date any of the conditions precedent set forth in Section 7 or Section 8 hereof
(other than with respect to the location of the Aircraft) are not satisfied or
waived by the applicable party with respect to any Aircraft Transferred
Interest, any Aircraft which is subject of such Aircraft Transferred Interest
will no longer be the subject of this Agreement and this Agreement will be
deemed to be reformed to delete all references to such Aircraft and the such
Aircraft Transferred Interest and the Purchase Price will be reduced in an
amount equal to the Allocable Portion Percentage for such Aircraft and each of
the Note Amount and the Cash Amount as set forth on Schedule 4(a) hereof will be
adjusted on a pro rata basis.
(d) Settlement of Income and Lessee Deposits
(i) Prior to assignment of a Transferred Interest to
Assignee hereunder, Assignor shall estimate the Income and any Lessee Deposits
that have been received by Assignor or the Owner Trustee relating to such
Transferred Interest as of the applicable Effective Time for such Transferred
Interest. Because the actual amount of the Income and any Lessee Deposits
relating to a Transferred Interest and received by Assignor or such Owner
Trustee will not be readily determinable until after the applicable Effective
Time, a final calculation cannot be made on that date. Therefore, within fifteen
(15) Business Days after the end of the month in which such Effective Time
occurs, Assignor shall provide Assignee with such final calculation (in
reasonable detail) of the Income and any Lessee Deposits that have been received
by Assignor or the Owner Trustee relating to such Transferred Interest. To the
extent the calculation indicates that the amounts transferred by Assignor
pursuant to Section 4(b) hereof with respect to such Transferred Interest were
in excess of the actual Income and any Lessee Deposits received by Assignor or
the Owner Trustee relating to such Transferred Interest, Assignee shall promptly
pay the amount of such excess to Assignor (plus interest on such amount at the
rate of 5.3% per annum from the applicable date of payment to Assignee to the
date of repayment to Assignor). To the extent the calculation indicates that the
amounts transferred by Assignor pursuant to Section 4(b) hereof with respect to
such Transferred Interest were less than the actual Income and any Lessee
Deposits received by Assignor or the Owner Trustee relating to such Transferred
Interest, Assignor shall promptly pay the amount of such deficiency to Assignee
(plus interest on such amount at the rate of 5.3% per annum from the Business
Day following the applicable Effective Time to the date of payment to Assignee).
An adjustment to the Purchase Price for Income under this Section 4(d)(i) shall
be treated by the parties as a purchase price adjustment for all income tax
purposes.
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(ii) If at any time prior to the last Effective Time
to occur pursuant to the terms hereof, any Aircraft which is subject of an
Aircraft Transferred Interest not yet transferred by Assignor to Assignee
suffers a Total Loss, such Aircraft will no longer be the subject of this
Agreement and this Agreement will be deemed to be reformed to delete all
references to such Aircraft and the related Aircraft Transferred Interests;
provided, however, that with respect to any such Aircraft, if such Total Loss is
due to a Loss of Title and if Assignor cures or otherwise corrects such Loss of
Title by regaining or recovering the use thereof or title thereto on or prior to
the Mop-Up Date, such Aircraft will be deemed to be reinstated and once more
subject to this Agreement and this Agreement will be deemed to be reformed to
include all previously deleted references to such Aircraft and the related
Aircraft Transferred Interests. Contemporaneously with the removal of any
Aircraft from the terms of this Agreement, the Purchase Price will be reduced in
an amount equal to the Allocable Portion Percentage for such Aircraft and each
of the Note Amount and the Cash Amount as set forth on Schedule 4(a) hereof will
be adjusted on a pro rata basis. Contemporaneously with the reinstatement of an
Aircraft into this Agreement, the Purchase Price will be increased in an amount
equal to the Allocable Portion Percentage for such Aircraft and each of the Note
Amount and the Cash Amount as set forth on Schedule 4(a) hereof will be adjusted
on a pro rata basis. If at any time prior to the last Effective Time to occur
pursuant to the terms hereof, any Aircraft which is subject of an Aircraft
Transferred Interest not yet transferred by Assignor to Assignee suffers any
property damage or loss not constituting a Total Loss and such property damage
or loss is not cured or corrected prior to the time when such Aircraft
Transferred Interest is transferred (or deemed to be transferred) by Assignor to
Assignee, Assignor shall pay to Assignee any insurance proceeds received by
Assignor with respect to such property damage or loss promptly after receipt by
Assignor of such insurance proceeds; provided, however, that Assignor shall not
enter into any settlement of any insurance claim without the prior written
consent of Assignee, which consent may not be unreasonably withheld.
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SECTION 5. Representations and Warranties of Assignor; Limitation of
Warranty; Covenant with Respect to Pre-Closing Actions
5.1 Representations and Warranties of Assignor. As of the
date hereof and as of each Effective Time with respect to the Transferred
Interest being transferred at such Effective Time, Assignor makes the following
representations and warranties to Assignee:
(a) Partnership Organization, Etc.
Assignor (i) is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of California,
(ii) is a Citizen of the United States and (iii) has the requisite partnership
power and authority to carry on its business as presently conducted, to own or
hold under lease its properties, and to enter into and perform its obligations
under this Agreement and each of the Ancillary Agreements to which it is a
party.
(b) Due Authorization; Non-Contravention
The execution and delivery by Assignor of this
Agreement and each of the Ancillary Agreements to which it is a party, and the
performance by Assignor of its obligations hereunder and thereunder, (i) have
been duly authorized by all necessary partnership action on the part of
Assignor, (ii) do not require any part nership approval, or approval or consent
of any trustee or holder of any indebtedness or obligations of Assignor not
already obtained, (iii) do not contravene any law, governmental rule,
regulation, judgment or order applicable to or binding on Assignor, or the
limited partnership agreement of Assignor or contravene the provi sions of, or
constitute a default under or result in the creation of any Lien (other than as
provided for or otherwise permitted in the Operative Agreements or the
Receivable Agreements, as applicable) upon the Trust Estate or any other
Transferred Interest under any indenture, mortgage, bank credit agreement, note
or bond purchase agree ment, long-term lease, license or other agreement or
instrument to which Assignor is a party or by which Assignor is bound and (iv)
except as set forth on Schedule 5(b) attached hereto, do not require the consent
or approval of, the giving of notice to, the registration with, or the taking of
any other action in respect of, any federal, state or foreign governmental
authority or agency or any other Person, except those already obtained.
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(c) Due Execution and Delivery; Enforceability
This Agreement and each of the Ancillary Agreements
to which it is a party have been duly executed and delivered and are enforceable
against Assignor in accordance with their terms, subject to the effect of
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights and remedies of creditors generally and, with
respect to the enforceability of this Agreement or any such Ancillary Agreement,
by general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).
(d) Event of Default
Except as set forth on Schedule 5(d), no claims have
been made by or at the direction of Assignor that remain unresolved under any of
the Operative Agreements or any of the Receivable Agreements, and to the actual
knowledge of Assignor, without special inquiry, no basis for such claims exists
(excluding in all cases claims for reimbursement of fees, costs and expenses
which are either immaterial or incurred in the ordinary course). Except as set
forth on Schedule 5(d), to the actual knowledge of Assignor, without special
inquiry, (i) no disputes exist among any of the parties to the Operative
Agreements or any of the Receivable Agreements concerning the rights or
obligations of such parties thereunder, (ii) there exists no default or event of
default under any Leases, any Trust Agreement, any other Operative Agreement or
any of the Receivable Agreements attributable to any act or omission of
Assignor, (iii) Assignor is not in default under any of the Operative Agreements
or any of the Receivable Agreements, (iv) no default under any Operative
Agreement or any Receivable Agreement has occurred and is continuing as a result
of any action taken by the Owner Trustee in accordance with any express
instruction by Assignor, (v) there has been no assertion by any Lessee of any
default on the part of Assignor or the Owner Trustee under any Operative
Agreement and (vi) there has been no assertion by any obligor under any
Receivable of any default on the part of Assignor or the Owner Trustee under any
of the Receivable Agreements.
(e) Total Loss
To the actual knowledge of Assignor, without special
inquiry, none of the Aircraft are the subject of any Total Loss.
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(f) Taxes
(i) All tax returns and reports required to be filed
by or on behalf of each Owner Trustee (solely in its capacity as Owner Trustee
and not in its individual capacity), and all federal income tax returns required
to be filed by or on behalf of Assignor on or before the Effective Time have
been timely filed with the appropriate taxing authorities in all jurisdictions
in which such tax returns were required to be filed and all taxes shown due on
such tax returns have been paid in full; and
(ii) No claims have been made by or on behalf of
Assignor or any other Person in respect of any obligation under the Operative
Agreements or the Receivable Agreements to indemnify any Owner Trustee or
Assignor for or with respect to Taxes, and Assignor has no present intention of
making any such claim (other than possible claims for state, local and foreign
Taxes or foreign tax credits arising from the use or operation of the Aircraft
by the applicable Lessee or any sublessee prior to the applicable Effective
Time).
(g) Litigation
Except as set forth on Schedule 5(g) hereof, there
are no legal or governmental actions, suits or proceedings pending or, to the
actual knowledge of Assignor, threatened against Assignor before any court,
administrative agency or tribunal which, if determined adversely to Assignor,
would materially adversely affect the ability of Assignor to perform its
obligations under this Agreement or any of the Ancillary Agreements to which it
is a party.
(h) Encumbrances
Except as set forth on Schedule 5(h) hereof, Assignor
is the sole legal and beneficial owner of (i) each of the Transferred Interests
(other than the Foreign Aircraft), free and clear of all Liens and, except as
set forth on Schedule 5(b), transfer restrictions and (ii) each of the Foreign
Aircraft, free and clear of all Liens and, except as set forth on Schedule 5(b),
transfer restrictions other than (A) Liens that are permitted by the terms of
the leases relating to such Foreign Aircraft and (B) the rights of the Lessee
with respect to such Foreign Aircraft. Except as set forth on Schedule 5(h)
hereof, each Owner Trustee is the sole legal owner of (x) each Trust Estate for
which such Owner Trustee is owner trustee pursuant to the applicable Trust
Agreement, free and clear of all Liens and, except as set forth on Schedule
5(b), transfer restrictions other than Liens permitted by and transfer
restrictions contained in the Operative Agreements relating to such Trust Estate
and (y) each Receivable pursuant to the Receivable Agreements relating to such
Receivable, free and clear of all Liens and transfer restrictions other than
Liens permitted by and transfer restrictions contained in the Receivable
Agreements relating to such Receivable. Except as otherwise provided in the
Operative Agreements or the Receivable Agreements, Assignor has not previously
sold, assigned, encumbered, transferred or conveyed, and other than as provided
in this Agreement, has no obligation to sell, assign, encumber, transfer or
convey, any of its right, title or interest in, to or under the Transferred
Interests to any Person.
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(i) Brokers' Fees
Assignor is not liable for the fees of any broker or
Person acting on Assignor's behalf in connection with the transactions
contemplated hereby or by any of the Ancillary Agreements to which it is a
party.
(j) Operative Agreements; Receivable Agreements
Except as set forth on Schedule 5(j), Assignor has
provided Assignee with true and complete originals of each of the Leases, the
Trust Agree ments and the promissory notes representing the Receivables and with
true and complete copies of each of the other Operative Agreements, the
Receivable Agreements and all amendments and supplements thereto. The Leases,
Trust Agreements, the promissory notes representing the Receivables, the
Receivable Agreements, the other Operative Agreements and the amendments and
supplements thereto set forth on Schedules 2, 4, 6 and 8 hereto (as applicable)
represent, collectively, all of the agreements, instruments and documents among
(i) Assignor and the parties to the Operative Agreements with respect to the
Aircraft Transferred Interests and no other agreements, instruments or
documents, among Assignor and the parties to the Operative Agreements, with
respect to the Aircraft Transferred Interests exist and (ii) Assignor and the
parties to the Receivable Agreements with respect to the Receivable Transferred
Interests and no other agreements, instruments or documents, among Assignor and
the parties to the Receivable Agreements, with respect to the Receivable
Transferred Interests exist.
(k) Title to Transferred Interests
Upon execution and delivery to Assignee of each of
the Assign ment and Assumption Agreements and the consummation of the
transactions contem plated hereunder and thereunder, Assignee will acquire legal
title to the Transferred Interests, free and clear of all Liens and transfer
restrictions other than as set forth on Schedule 5(h).
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(l) Unfunded Commitments
Except as set forth on Schedule 7 hereof, there are
no Unfunded Commitments in respect of any Transferred Interest.
(m) The outstanding principal amount of each Receivable as
of April 1, 1997 is set forth on Schedule 8 hereto.
5.2 Supplements to Schedules; Post-Signing Information.
Assignor may supplement or amend Schedules 5(d), 5(g) and 5(h) to this Agreement
with respect to any matter, condition or occurrence hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Schedules or would otherwise have been
inconsistent with its representations herein.
5.3 Limitation of Warranty. Assignor's representations and
warranties are limited as set forth below:
(a) THE AIRCRAFT, EACH ENGINE AND EACH PART THAT
CONSTITUTE A PORTION OF ANY TRANSFERRED
INTEREST IS BEING TRANSFERRED AND DELIVERED
TO ASSIGNEE "AS IS" AND "WHERE IS," AND EXCEPT
AS EXPRESSLY SET FORTH IN SECTION 5.1 HEREOF,
WITHOUT ANY REPRESENTATION, GUARANTEE OR
WARRANTY OF ASSIGNOR, EXPRESS OR IMPLIED, OF
ANY KIND, ARISING BY LAW OR OTHERWISE; AND
(b) WITHOUT LIMITING THE GENERALITY OF THE FORE
GOING, ASSIGNOR SPECIFICALLY DISCLAIMS, AND
EXCLUDES HEREFROM (i) ANY EXPRESS OR IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, (ii) ANY IMPLIED WARRANTY
OF FREEDOM FROM ANY RIGHTFUL CLAIM BY WAY
OF INFRINGEMENT OF PATENT, COPYRIGHT, TRADE
MARK, DESIGN OR OTHER PROPRIETARY RIGHT,
(iii) ANY IMPLIED WARRANTY ARISING FROM COURSE
OF PERFORMANCE, COURSE OF DEALING OR USAGE
OF TRADE, AND (iv) EXCEPT AS EXPRESSLY SET
FORTH IN SECTION 13(c) HEREOF, ANY OBLIGATION
OR LIABILITY OF ASSIGNOR ARISING IN TORT,
WHETHER OR NOT ARISING FROM THE NEGLIGENCE
OF ASSIGNOR, ACTUAL OR IMPLIED, OR IN STRICT
LIABILITY, INCLUDING ANY OBLIGATION OR LIABILITY
FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT
TO THE AIRCRAFT OR ENGINE OR PART OR FOR ANY
LIABILITY OF ASSIGNOR TO ANY THIRD PARTY OR ANY OTHER
DIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES
WHATSOEVER.
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5.4 Actions with Respect to Transferred Interests. From the
date this Agreement is executed and delivered by Assignor to Assignee to the
earlier to occur of (i) the termination of this Agreement pursuant to Section 15
hereof or (ii) the Effective Time with respect to a Transferred Interest, except
as otherwise expressly required or permitted by this Agreement, Assignor shall
not and shall not direct the Owner Trustee to, without the prior written consent
of Assignee:
(a) enter into or materially modify any agreement, contract
or commitment which, if entered into, created or established prior to the date
of this Agreement, would be required to be listed (or, in the case of
modifications and amendments, pertains to an agreement, contract, commitment or
arrangement which is presently listed) on Schedule 2, 4, 6, 7 or 8 of this
Agreement or waive any default or event of default under any Operative Agreement
or Receivable Agreement; or
(b) mortgage, pledge or otherwise encumber any of the
Transferred Interests, any Aircraft which is part of a Trust Estate, or any
Receivable; or
(c) sell, lease, transfer or otherwise dispose of any of the
Transferred Interests, any Aircraft which is a part of a Trust Estate or any
Receivable; or
(d) enter into an agreement or arrangement to do any of the
above.
SECTION 6. Representations and Warranties of Assignee; Access Covenant
6.1 Representations and Warranties of Assignee. As of the
date hereof and as of each Effective Time with respect to the Transferred
Interest being transferred at such Effective Time, Assignee makes the following
representations and warranties to Assignor:
(a) LLC Organization, Etc.
Assignee (i) is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
California, and (ii) has the requisite power and authority to carry on its
business as presently conducted and as proposed to be conducted after the date
of this Agreement, to own or hold under lease its properties, and to enter into
and perform its obligations under this Agreement, each of the Ancillary
Agreements to which it is a party, each of the Trust Agreements and each of the
other Operative Agreements.
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(b) Due Authorization; Non-Contravention
The execution and delivery by Assignee of this
Agreement and each of the Ancillary Agreements to which it is a party, and the
performance by Assignee of its obligations hereunder, thereunder, under the
Trust Agreements and the other Operative Agreements and under the Receivable
Agreements (i) have been duly authorized by all necessary action on the part of
Assignee, (ii) do not require any member approval or any approval or consent of
any trustee or holder of any indebtedness or obligations of Assignee except
those already obtained, (iii) do not contravene any provision of the Act or any
other law, governmental rule, regulation, judgment or order applicable to or
binding on Assignee, or the organizational documents of Assignee or contravene
the provisions of, or constitute a default under, or result in the creation of
any Lien (other than as provided for or otherwise permitted in the Operative
Agreements or the Receivable Agreements) upon the Trust Estate or any Receivable
under any indenture, mortgage, bank credit agreement, note or bond purchase
agreement, long-term lease, license or other agreement or instrument to which
Assignee is a party or by which Assignee is bound and (iv) except as set forth
on Schedule 6(b) attached hereto, do not require the consent or approval of, the
giving of notice to, the registration with, or the taking of any other action in
respect of, any federal, state or foreign governmental authority or agency or
any other Person, except those already obtained.
(c) Due Execution and Delivery; Enforceability
This Agreement and each of the Ancillary Agreements
to which it is a party have been duly executed and delivered and are enforceable
against Assignee in accordance with their terms, subject to the effect of
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights and remedies of creditors generally and, with
respect to the enforceability of this Agreement or any such Ancillary Agreement,
by general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).
(d) Litigation
There are no legal or governmental actions, suits or
proceedings pending or, to the actual knowledge of Assignee, threatened against
Assignee before any court, administrative agency or tribunal which, if
determined adversely to Assignee, would materially adversely affect the ability
of Assignee to perform its obligations under this Agreement, any of the
Ancillary Agreements, the Trust Agreements, the other Operative Agreements or
any of the Receivable Agreements.
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(e) Compliance with Operative Agreements and Receivable
Agreements
Prior to the Effective Time for a Transferred
Interest, Assignee will have complied with and satisfied all of the conditions,
requirements and other obligations imposed on Assignee pursuant to each of the
Leases, Trust Agreements, other Operative Agreements or any of the Receivable
Agreements which have not been waived by the party entitled to require
compliance with such conditions, requirements or other obligations in order to
effect a permitted binding transfer of such Transferred Interests to Assignee.
(f) Non-Airline
Assignee is not a commercial air carrier or Affiliate
thereof that is in direct competition with any Lessee.
(g) Brokers' Fees
Assignee is not liable for the fees of any broker or
Person acting as a broker on Assignee's behalf in connection with the
transactions contemplated hereby.
(h) Acquisition For Own Account
The Transferred Interests are being acquired by
Assignee for its own account, for investment and not with a view to any resale
or distribution thereof. Assignee acknowledges that it has received, or has had
access to, all information which it considers necessary or advisable to enable
it to make a decision concerning the transfer of the Transferred Interests
including, without limitation, access to the Leases, the Trust Agreements, the
other Operative Agreements and the Receivable Agreements and an opportunity to
inspect the Aircraft.
6.2 Access Covenant. Assignee agrees that it shall use its
best efforts to retain the Operative Agreements and the Receivable Agreements
with respect to each of the Transferred Interests transferred to it hereunder in
perpetuity; provided, however, that Assignee shall have the right to (a)
transfer any Operative Agreements or Receivable Agreements relating to a
Transferred Interest or Aircraft to the purchaser of such Transferred Interest
or Aircraft, as the case may be, subject to such purchaser's agreement to retain
such Operative Agreements or Receivable Agreements and to permit Assignor and
its agents and representatives access to such Operative Agreements or Receivable
Agreements for the remaining term of the Promissory Note and (b) dispose of or
destroy any such Operative Agreements or Receivable Agreements at any time which
is after payment in full and discharge of the Promissory Note. Assignee will
allow or will cause Assignor and its agents and representatives to be allowed
access, during regular business hours at the offices of Assignee, to all of the
Operative Agreements or Receivable Agreements and to any Persons having
possession of or information relating to the Operative Agreements or Receivable
Agreements.
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SECTION 7. Conditions Precedent to the Obligations of Assignor
The obligation of Assignor to sell and assign any Aircraft Transferred Interest
to Assignee is subject to the satisfaction of the following conditions with
respect to such Aircraft Transferred Interest:
(a) Purchase Price
Assignee shall have paid the Purchase Price in the
manner specified in Section 4.
(b) Affidavit of Limited Control by a Non-U.S. Citizen
Not later than the first Effective Time, an affidavit
shall have been duly authorized, executed, notarized and delivered by Owner
Trustee to FAA Counsel in form suitable for filing with the FAA pursuant to the
Act certifying that (i) contemporaneously with the Effective Time with respect
to each Aircraft Transferred Interest, the Trust Agreement with respect thereto
shall have been amended to include limitations on the voting rights of Assignee
thereunder and (ii) Owner Trustee is a Citizen of the United States pursuant to
the Act.
(c) Escrow Agreement
Assignor shall have received a copy of the Escrow
Agreement, dated as of a date not later than the first Effective Time to occur
under this Agree ment which shall have been executed and delivered by Assignee,
Assignor and the Escrow Agent.
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(d) TASL "Keep Well" Agreement
Assignor shall have received a copy of the Keep Well
Agree ment, dated as of a date not later than the first Effective Time to occur
under this Agreement which shall have been executed and delivered by Assignee
and TASL, in substantially the form attached hereto as Exhibit B (the "Keep
Well").
(e) TIL Keep Well Guaranty and Loan Guaranty
Assignor shall have received an original counterpart
of the Keep Well Guaranty and the Loan Guaranty, each dated as of a date not
later than the first Effective Time to occur under this Agreement, each of which
shall have been executed and delivered by TIL, in substantially the form
attached hereto as Exhibit C- 1 (the "Keep Well Guaranty") or C-2 (the "Loan
Guaranty"), as applicable.
(f) Assignee Security Agreement
Assignor shall have received an original counterpart
of the Pledge and Security Agreement, dated as of a date not later than the
first Effective Time, which shall have been executed and delivered by Assignee,
TASL and each member of Assignee in substantially the form attached hereto as
Exhibit D (the "Security Agreement") together with evidence that all other
actions necessary or, in the opinion of Assignor, desirable to perfect and
protect the security interests and liens created by the Security Agreement have
been taken including, without limitation, the filing of financing statements
against Assignee, TASL and each member of Assignee.
(g) Approvals and Consents
All approvals, consents and other items listed on
Schedule 5(b) shall have been obtained, satisfactory to Assignor in all
respects, as determined by Assignor in its sole discretion and any
authorizations which may be required for the valid consummation by Assignor and
Assignee of the transactions contemplated by this Agreement under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall have
been obtained (including, but not limited to, the expiration of any applicable
waiting period thereunder).
(h) Due Authorization, Execution and Delivery
This Agreement, the Assignment and Assumption
Agreement and any other Ancillary Agreements with respect to such Transferred
Interest shall have been duly authorized, executed and delivered by Assignee.
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(i) Representations and Warranties
The representations and warranties of Assignee
contained herein shall be true and correct in all material respects as of the
applicable Effective Time with the same force and effect as though such
representations and warranties had been made on and as of such Effective Time.
(j) Organizational and Authorization Matters
Assignor shall have received:
(i) Resolutions of the boards of directors of each of
TASL, TIL, each member of Assignee that is not a natural person and of the
manager of Assignee, certified by the respective Secretary or Assistant
Secretary thereof, as of the date of this Agreement, to be duly adopted and in
full force and effect on such date, authorizing (a) the consummation of each of
the transactions contemplated by this Agreement and each of the Ancillary
Agreements and (b) specific officers or representatives of TASL, TIL and
Assignee to execute and deliver this Agreement and the Ancillary Agreements to
which any of them is a party.
(ii) Governmental certificates, dated the most recent
practicable date prior to the date of this Agreement with telegram updates where
available, showing that each of Assignee, TASL, TIL and each member of Assignee
that is not a natural person is organized and in good standing in the
jurisdiction of its organization and that each of Assignee, TASL, TIL and each
member of Assignee that is not a natural person is qualified as a foreign
corporation, partnership or limited liability company, as applicable, and in
good standing in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification.
(iii) A copy of (a) the certificate of formation and
all amend ments thereto of Assignee and the articles of incorporation and all
amendments thereto of each of TASL, TIL and each member of Assignee that is not
a natural person, each certified as of a recent date by the Secretary of State
of the jurisdiction of its organization, (b) the bylaws of each of TASL, TIL and
each member of Assignee that is not a natural person, certified by the Secretary
or Assistant Secretary thereof as true and correct as of the date of this
Agreement and (c) the operating agreement of Assignee (which shall include
provisions that are substantially in the form attached hereto as Exhibit E) and
the articles of incorporation and all amendments thereto of each of TASL, TIL
and each member of Assignee that is not a natural person, certified by its
manager as true and correct on the date of this Agreement (with tax allocation
and cash distribution provisions deleted).
(iv) Certificates of the Secretary or an Assistant
Secretary of each of TASL, TIL and each member of Assignee that is not a natural
person and of the manager of Assignee, as to the incumbency and signatures of
the representatives thereof executing this Agreement or any of the Ancillary
Agreements to which any of them is a party, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
(v) As of each Effective Time, a certificate of the
Secretary, an Assistant Secretary or an Attesting Secretary of each of TASL,
TIL, each member of Assignee that is not a natural person and the manager of
Assignee certifying that the certificates delivered in accordance with clauses
(i), (ii), (iii) and (iv) above are true and correct as of such Effective Time.
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(k) Illegality; No Proceedings
At the applicable Effective Time, the performance of
the trans actions contemplated hereby, upon the terms and conditions set forth
herein, shall not, in the reasonable judgment of Assignor, violate, and shall
not subject Assignor to any penalty or liability under, any law, rule or
regulation binding upon Assignor. At the applicable Effective Time, no legal or
governmental action, suit or proceeding shall have been instituted or threatened
before any court, administrative agency or tribunal, nor shall any order,
judgment or decree have been issued or proposed to be issued by any court,
administrative agency or tribunal to set aside, restrain, enjoin or prevent the
consummation of this Agreement or the transactions contemplated hereby.
(l) No Total Loss
At the applicable Effective Time, there shall not
exist a Total Loss with respect to the Aircraft related to such Aircraft
Transferred Interest.
(m) Opinions
Assignor shall have received opinion reasonably
satisfactory to Assignor, dated as of the first Effective Time from Manwell &
Milton, counsel to Assignee, each member of Assignee, TASL and TIL, with respect
to such matters and to such effect as Assignor shall reasonably request.
Assignor shall also have received, with respect to each Aircraft Transferred
Interest, at the applicable Effective Time for such Aircraft Transferred
Interest, an opinion from (i) Manwell & Milton, counsel to Assignee and (ii)
Crowe & Dunleavy, special FAA counsel ("Special FAA Counsel") or Theodore
Goddard ("Special CAA Counsel"), in each case with respect to such matters
relating to such Aircraft Transferred Interest and to such effect as Assignor
shall reasonably request.
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(n) Location of Aircraft
Subject to Section 4(c) hereof, the location of the
Aircraft relating to each Aircraft Transferred Interest shall be acceptable to
Assignor at the applicable Effective Time for such Aircraft Transferred
Interest.
(o) TIL Balance Sheets
Assignor shall have received an audited balance sheet
of TIL as of December 31, 1996 reflecting a consolidated net worth, net of
minority interests, of at least $150,000,000.
(p) Other Instruments and Documents; Additional
Information
Assignor shall have received such other instruments
and docu ments as Assignor or its counsel shall reasonably request. Assignor
shall have received such other documents and evidence with respect to Assignee
as Assignor may reasonably request in order to establish the authority of
Assignee to consummate the transactions contemplated by this Agreement, the
consummation of the transac tions contemplated by this Agreement, the taking of
all appropriate action in connec tion therewith and compliance with the
conditions set forth in this Agreement.
(q) Outside Date
Except as otherwise agreed by the parties hereto, all
of the fore going conditions shall have been satisfied or waived on or before
5:00 p.m. E.D.T. on June 30, 1997 (the "Outside Date").
(r) No Pending Superior Proposal
Assignor shall not have received and have accepted or
be considering any Superior Proposal with respect to such Transferred Interest
in accordance with Section 11 hereof.
The obligation of Assignor to assign its interest in the Receivable Transferred
Interests to Assignee is subject to satisfaction of the following conditions
with respect to the Receivable Transferred Interests, in each case, on or prior
to the Receivable Effective Date:
(s) Satisfaction of Conditions
The conditions contained in Sections 7(a), 7(c), 7(d)
7(e), 7(f) 7(g), 7(i), 7(j) (including the certificate described in clause (v)
dated as of the Receivable Effective Date, 7(k), 7(o) and 7(p) shall have been
satisfied or waived by Assignor as they relate to the Receivable Transferred
Interests.
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(t) Opinions
Assignor shall have received an opinion reasonably
satisfactory to Assignor, dated as of the Receivable Effective Date, from
Manwell & Milton with respect to such matters and to such effect as Assignor
shall reasonably request.
(u) Outside Date
The Outside Date shall not have occurred.
(v) Superior Proposal
Assignor shall not have received and have accepted or
be considering any Superior Proposal with respect to the Receivables in
accordance with Section 11 hereof.
SECTION 8. Conditions Precedent to the Obligations of Assignee
The obligation of Assignee to purchase any Aircraft Transferred Interest from
Assignor and assume the obligations related thereto at the applicable Effective
Time is subject to the satisfaction of the following conditions:
(a) Leases and Trust Agreements
The Lease and Trust Agreement and, as applicable,
each other Operative Agreement with respect to such Aircraft Transferred
Interest shall be in full force and effect.
(b) Due Authorization, Execution and Delivery
This Agreement, the Assignment and Assumption
Agreement and any of the other Ancillary Agreements with respect to such
Aircraft Transferred Interest to which Assignor is a party shall have been duly
authorized, executed and delivered by Assignor.
(c) Representations and Warranties
The representations and warranties of Assignor
contained herein shall be true and correct in all material respects as of the
Effective Time with the same force and effect as though such representations and
warranties had been made on and as of such Effective Time.
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(d) Schedules
Schedule 5(d) shall not have been supplemented or
amended by Assignor to include a default or event of default caused by the
filing by the Lessee of the Aircraft that is the subject of such Transferred
Interest for protection from its creditors.
(e) Partnership Authorization Matters
Assignee shall have received:
(i) Resolutions of the board of directors of PIMC,
general partner of Assignor, certified by the Secretary or Assistant Secretary
thereof, as of the date of this Agreement, to be duly adopted and in full force
and effect on such date, authorizing (i) the consummation of each of the
transactions contemplated by this Agreement and each of the Ancillary Agreements
to which Assignor is a party and (ii) specific officers or representatives to
execute and deliver this Agreement and the Ancillary Agreements to which
Assignor is a party.
(ii) A copy of the certificate of limited partnership
and all amendments thereto of Assignor, certified as of a recent date by the
Secretary of State of the jurisdiction of its organization and a copy of the
agreement of limited partnership, as amended, certified by an officer of the
general partner.
(iii) Certificates of the Secretary or an Assistant
Secretary of PIMC, certified by the Secretary or Assistant Secretary thereof, as
to the incumbency and signatures of the representatives thereof executing this
Agreement or any of the Ancillary Agreements to which Assignor is a party,
together with evidence of the incumbency of such Secretary or Assistant
Secretary.
(iv) As of each Effective Time, for such Transferred
Interest, a certificate of the Secretary or an Assistant Secretary of PIMC
certifying that the certificates delivered in accordance with clauses (i), (ii)
and (iii) above are true and correct with respect to the Transferred Interest
being conveyed as of the applicable Effective Time.
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(f) Illegality; No Proceedings
At the applicable Effective Time, the performance of
the trans actions contemplated hereby, upon the terms and conditions set forth
herein, shall not, in the reasonable judgment of Assignee, violate, and shall
not subject Assignee to any penalty or liability under, any law, rule or
regulation binding upon Assignee. At the applicable Effective Time, no legal or
governmental action, suit or proceeding shall have been instituted or threatened
before any court, administrative agency or tribunal, nor shall any order,
judgment or decree have been issued or proposed to be issued by any court,
administrative agency or tribunal to set aside, restrain, enjoin or prevent the
consummation of this Agreement or the transactions contemplated hereby.
(g) Approvals and Consents
All approvals and consents and other items listed on
Schedule 5(b) shall have been obtained.
(h) No Total Loss
At the applicable Effective Time, there shall not
exist a Total Loss with respect to the Aircraft related to such Aircraft
Transferred Interest.
(i) Opinions
Assignee shall have received opinions reasonably
satisfactory to Assignee, dated as of the first Effective Time from (i) Haight,
Gardner, Poor & Havens, California counsel to Assignor with respect to due
organization and good standing and (ii) Weil, Gotshal & Manges LLP, counsel to
Assignor, that the execution and delivery of this Agreement and the consummation
of the transactions contemplated thereby and compliance by the Company with the
provisions thereof will not conflict with or violate any federal law or
regulation (other than federal securities laws, the Hart-Scott Rodino Act or any
federal laws or regulations relating to the Federal Aviation Administration or
civil or commercial aviation). Assignee shall also have received, with respect
to each Aircraft Transferred Interest, at the applicable Effective Time for such
Aircraft Transferred Interest, an opinion from (i) Haight, Gardner, Poor &
Havens, California counsel to Assignor and (ii) Special FAA Counsel or Special
CAA Counsel, as applicable, in each case with respect to such matters relating
to such Aircraft Transferred Interest and to such effect as Assignee shall
reasonably request.
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(j) Location of Aircraft
Subject to Section 4(c) hereof, the location of the
Aircraft relating to each Aircraft Transferred Interest shall be acceptable to
Assignee at the applicable Effective Time for such Aircraft Transferred
Interest.
(k) Other Instruments and Documents; Additional
Information
Assignee shall have received such other instruments
and docu ments as Assignee or its counsel shall reasonably request. Assignee
shall have received such other documents and evidence with respect to Assignor
as Assignee may reasonably request in order to establish the authority of
Assignor to consummate the transactions contemplated by this Agreement, the
consummation of the transac tions contemplated by this Agreement, the taking of
all appropriate partnership action in connection therewith and compliance with
the conditions set forth in this Agreement.
(l) Outside Date
Except as otherwise agreed by the parties hereto, all
of the fore going conditions shall have been satisfied or waived on or before
5:00 p.m. E.D.T. on the Outside Date.
The obligation of Assignee to purchase the Receivable Transferred Interests from
Assignor and assume the obligations is subject to the satisfaction, in each
case, of the following conditions with respect to the Receivable Transferred
Interests, on or prior to the Receivable Effective Date:
(m) Receivable Agreements
Each of the Receivable Agreements shall be in full
force and effect.
(n) Satisfaction of Conditions
The conditions contained in Sections 8(b), 8(c), 8(e)
(including the certificate described in clause (iv) dated as of the Receivable
Effective Date, 8(f) and 8(g) shall have been satisfied or waived by Assignee as
they relate to the Receivable Transferred Interests.
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(o) Opinion
Assignee shall have receive an opinion reasonably
satisfactory to Assignee, dated as of the Receivable Effective Date, from
Haight, Gardner, Poor & Havens with respect to such matters and to such effect
as Assignee shall reasonably request.
(p) Outside Date
The Outside Date shall not have occurred.
SECTION 9. Payments
To the extent not transferred in accordance with Section 4,
Assignor hereby covenants and agrees to pay over to Assignee, no later than five
(5) Business Days after receipt by Assignor from and after the applicable
Effective Time, any Income or Lessee Deposits paid to or for the benefit of
Assignor that constitute a Transferred Interest earlier transferred to Assignee
hereunder (including any amounts payable as interest in respect thereof), and
until so paid over, any Income or Lessee Deposits received by Assignor in
respect of any such Transferred Interest shall be received and held by Assignor
in trust for Assignee. Assignee hereby covenants and agrees to pay over to
Assignor, no later than five (5) Business Days after receipt by Assignee from
and after the applicable Effective Time, any amounts paid to or for the benefit
of Assignee that constitute Reserved Rights which relate to a Transferred
Interest earlier transferred (including any amounts payable as interest in
respect thereof), and until so paid over any such amounts received by Assignee
shall be received and held by Assignee in trust for Assignor.
SECTION 10. Certain Notices
Assignor hereby covenants and agrees promptly to forward to
Assignee any notice Assignor receives from any party to any of the Operative
Agreements or any of the Receivable Agreements (other than Assignee) relating to
any of the Transferred Interests. Assignee hereby covenants and agrees promptly
to forward to Assignor any notice Assignee receives from any party to any of the
Operative Agreements or any of the Receivable Agreements (other than Assignor)
pursuant to and in accordance with this Agreement, the Assignment and Assumption
Agreement, the Trust Agreements, any other Operative Agreement or any of the
Receivable Agreements related to the Reserved Rights. Assignor hereby covenants
and agrees to notify Assignee of any Reserved Right, describing the
circumstances of such Reserved Right in reasonable detail, promptly after
Assignor has actual knowledge of facts or circumstances giving rise to a
Reserved Right and that such facts and circumstances constitute a Reserved
Right.
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SECTION 11. Superior Proposal
(a) Each party agrees and acknowledges that from and after
the date hereof until the close of business on April 28, 1997, if Assignor
receives a Superior Proposal, Assignor may (i) furnish any information requested
by the Offering Party with respect to such Superior Proposal (other than the
contents of this Agreement or any Ancillary Agreement), (ii) participate in
negotiations with such Offering Party regarding such Superior Proposal or (iii)
enter into one or more letters of intent, term sheets or agreements with respect
to any Superior Proposals; provided, however, that if Assignor proposes to take
any of the actions specified in clause (iii) hereof, Assignor shall give
Assignee prior written notice setting forth Assignor's proposed actions.
(b) Not later than the close of business on May 12, 1997,
Assignor shall require each Offering Party with whom it is still engaged in
discussions to submit a final binding offer, subject only to acceptance by
Assignor. Not later than the close of business on May 16, 1997, Assignor shall
(i) determine whether any such offer constitutes a Superior Proposal, (ii) if
there is more than one Superior Proposal, select which Superior Proposal
Assignor intends to accept and (iii) provide written notice to Assignee setting
forth all the material terms and conditions of such selected Superior Proposal
("SP Notice").
(c) After receipt of the SP Notice, Assignee shall have five
(5) days to notify Assignor of its agreement to modify this Agreement and any
Ancillary Agreement as necessary to acquire the Transferred Interests at the
same price and under the same terms and conditions as set forth in the SP Notice
("Assignee Acceptance Notice"); provided further, however, if under the terms
set forth in the SP Notice Assignor is proposing to accept property (other than
cash or promissory notes), Assignee shall have the right to substitute cash in
an amount equal to the value of such other property.
(d) If Assignor does not give an SP Notice to Assignee on or
before May 16, 1997, or if Assignee gives an Assignee Acceptance Notice to
Assignor in accordance with subsection (c) hereof, neither Assignor nor Assignee
shall thereafter have any right to terminate this Agreement pursuant to Section
15(c).
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SECTION 12. Further Assurances
Each party agrees, upon the reasonable request of the other
party at any time and from time to time, promptly to execute and deliver all
such further documents and promptly to take and forbear from all such action as
may be reason ably necessary or appropriate in order to more effectively confirm
or carry out the provisions of this Agreement or any of the Ancillary
Agreements, including, without limitation, the filing of any Assignment and
Assumption Agreement with the FAA pursuant to the Act or the CAA. The parties
agree that the transactions are fully effective as of the applicable Effective
Time and that they will treat the transactions as such for all purposes and
acknowledge that any filings with the FAA or the CAA are merely ministerial in
nature.
SECTION 13. Taxes and Indemnities
(a) Transfer Taxes
Assignee hereby covenants and agrees to pay (and indemnify
and hold Assignor harmless on an After-Tax Basis for) any and all registration,
docu ment or filing fees and any and all sales taxes, use taxes and similar
transfer taxes (including, without limitation, any charges, such as gross
receipts taxes (but excluding any taxes in the nature of any income tax) in lieu
thereof) (collectively, "Transfer Taxes"), that may be imposed in connection
with the sale, assignment and transfer of any Transferred Interests including,
without limitation, any penalties, fines or interest thereon and those Transfer
Taxes relating to the transfer of rights and other interests in and to, and the
act of assuming duties, liabilities and obligations in, to and under this
Agreement, the Assignment and Assumption Agreements, the Transferred Interests,
the Aircraft, the Operative Agreements or any of the Receivable Agreements
together with all reasonable and documented out-of-pocket costs, expenses and
attorney's fees incurred in connection therewith. Assignor hereby agrees to
perform such acts, including, without limitation, attending the closing of the
transactions contemplated hereby at a site or sites selected by Assignee, and
executing such documents as may be reasonably necessary to minimize Transfer
Taxes. The parties further agree to furnish each other with such documents and
certificates as they may reasonably request in connection with any claims for
exemption from the payment of Transfer Taxes.
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(b) Notice of IRS Reports
(i) Assignor shall promptly notify Assignee of
receipt from the IRS of any written proposed or final revenue agent's report,
30-day letter or notice of deficiency in which an adjustment is proposed to the
federal income taxes of Assignor for which any of the Lessees would be required
to indemnify Assignor under any Operative Agreement or any of the Receivable
Agreements and, thereafter, shall upon request keep Assignee apprised at least
monthly of the progress of any protest or proceeding in respect of such
adjustment.
(ii) Assignee shall promptly notify Assignor of
receipt from the IRS of any written proposed or final revenue agent's report,
30-day letter or notice of deficiency in which an adjustment is proposed to the
federal income taxes of Assignee for which any of the Lessees would be required
to indemnify Assignee under any Operative Agreement and, thereafter, shall upon
request keep Assignor apprised at least monthly of the progress of any protest
or proceeding in respect of such adjustment.
(c) Assignor's Indemnity
Assignor hereby covenants and agrees upon demand of
Assignee to pay and assume liability for, and indemnify, protect, defend, save
and keep harmless Assignee and each of its Affiliates and in each such case
their respective directors, officers, employees and agents (the "Assignee
Indemnitees"), on an After-Tax Basis, from and against any and all Damages which
may at any time or from time to time be imposed upon, incurred by or asserted
against any of the Assignee Indemnitees in any way relating directly or
indirectly to, or arising out of, (i) any inaccuracy or breach of any
representation or warranty made by Assignor under this Agreement or any
Ancillary Agreement to which it is a party, (ii) the ownership, leasing, use or
operation of any Transferred Interest prior to the Effective Time applicable to
such Transferred Interest including, without limitation, any obligations
relating to the Trust Estate, any of the Operative Agreements or any of the
Receivable Agreements relating to such Transferred Interest which arise from
acts, omissions, events or circumstances occurring or accruing prior to the
Effective Time with respect to such Transferred Interest, but not including any
Assumed Liabilities, (iii) the failure of Assignor to perform or observe any of
its obligations under this Agreement or any Ancillary Agreement to which it is a
party, (iv) any litigation, claim or action brought by a limited partner of
Assignor against any Assignee Indemnitee to the extent such litigation, claim or
action directly arises out of and relates to the transactions contemplated by
this Agreement other than to the extent any litigation, claim or action relates
directly or indirectly to, or arises out of, the breach by such Assignee
Indemnitee of the terms of this Agreement or any Ancillary Agreement, or (v) any
Liens set forth on Schedule 5(h) hereto; provided that (a) Assignor shall not be
liable for any Damages to the extent that Assignee has a recovery available to
it under any insurance policy which was in effect on or prior to the applicable
Effective Time; (b) Assignor shall not be liable for any Damages attributable to
the gross negligence or willful misconduct of Assignee or its Affiliates; and
(c) Assignor shall not be liable for any Damages in excess of the Purchase
Price. Notwithstanding the foregoing, Assignor shall be liable pursuant to this
Section 13(c) only to the extent that the aggregate cumulative Damages incurred
by the Assignee Indemnitees which are required to be indemnified by Assignor
exceed $50,000 (the "Threshold Amount") in which event, Assignor shall then also
be liable for the initial $50,000 of aggregate cumulative Damages incurred by
the Assignee Indemnitees; provided, that, with respect to any Lien set forth on
Schedule 5(h) hereto, (x) the Threshold Amount limitation shall not apply and
Assignor shall be liable for all Damages arising from such Liens and (y) amounts
expended by Assignor to discharge and release such Liens shall not constitute
Damages to be applied toward the Threshold Amount and only those expenses, if
any, actually incurred by Assignee in connection with such discharge or release
shall be so applied.
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(d) Assignee's Indemnity
Assignee hereby covenants and agrees upon demand of
Assignor to pay and assume liability for, and indemnify, protect, defend, save
and keep harmless, Assignor and each of its Affiliates and in each such case
their respective directors, officers, employees and agents (the "Assignor
Indemnitees"), on an After-Tax Basis, from and against any and all Damages which
at any time or from time to time may be imposed upon, incurred by or asserted
against the Assignor Indemnitees in any way relating directly or indirectly to,
or arising out of, (i) any inaccuracy or breach of any representation or
warranty made by Assignee or any of its Affiliates under this Agreement or any
Ancillary Agreement to which it or any of its Affiliates is a party, (ii) the
ownership, leasing, use or operation of any Transferred Interest on or after the
Effective Time applicable to such Transferred Interest including, without
limitation, any obligations relating to the Trust Estate, any of the Operative
Agreements or any of the Receivable Agreements relating to such Transferred
Interest which arise from acts, omissions, events or circumstances occurring or
accruing on or after the Effective Time with respect to such Transferred
Interest, (iii) the failure of Assignee or any of its Affiliates to perform or
observe any of their respective obligations under this Agreement or any
Ancillary Agreement to which it or any of its Affiliates is a party, (iv) any
Assumed Liabilities or (v) any modification, amendment or other change to any of
the Operative Agreements or any of the Receivable Agreements entered into by
Assignee, or to which Assignee consents or forbears, in any such case without
the prior written consent of Assignor (such consent not to be unreasonably
withheld) that affects any of the Reserved Rights; provided, however, that with
respect to any Transferred Interest which includes a Lease, such indemnification
obligation shall only relate to modifications, amendments or other changes made
or agreed to during the period beginning on the Effective Date applicable to
such Transferred Interest and ending on the date that is twenty-four (24) months
after the termination of the Lease included in such Transferred Interest (which
period shall be deemed to include any renewals, extensions or continuations of
such Lease). Notwithstanding the foregoing, (a) Assignee shall not be liable for
any Damages to the extent that Assignor has a recovery available to it under any
insurance policy which was in effect on or prior to the Effective Time; (b)
Assignee shall not be liable for any Damages attributable to the gross
negligence or willful misconduct of Assignor; (c) Assignee shall not be liable
for any Damages in excess of the Purchase Price and (d) Assignee shall be liable
pursuant to this Section 13(d) only to the extent that the aggregate Damages
incurred by the Assignor Indemnitees which are required to be indemnified by
Assignee exceed $50,000 in which event, Assignee shall then also be liable for
the initial $50,000 of aggregate cumulative Damages incurred by the Assignor
Indemnitees.
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(e) Survival of Representations and Warranties
All representations and warranties of the parties
hereto contained in this Agreement (including all Schedules hereto) or in any
document, statement, certificate or other instrument referred to herein or
delivered at the applicable Effective Time in connection with the transactions
contemplated hereby, that (i) relate to any Transferred Interest which includes
a Lease, shall survive until the later of (A) twenty-four (24) months after the
Effective Time applicable to such Transferred Interest or (B) twelve (12) months
after the expiry of the Lease included in such Transferred Interest (which
period shall not be deemed to include any renewals, extensions or continuations
of such Lease), (ii) relate to any Transferred Interest which does not include a
Lease, shall survive until twenty-four (24) months after the Effective Time
applicable to such Transferred Interest and (iii) do not relate to a Transferred
Interest, shall survive until twenty-four (24) months after the first Effective
Time to occur under this Agreement.
SECTION 14. Indemnification Procedure
(a) Any Assignee Indemnitee or Assignor Indemnitee (the "Indemnified Party")
seeking indemnification hereunder shall give to the party obligated under this
Agreement to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice ("Claim Notice") describing in reasonable detail the
facts giving rise to its claim for indemnification hereunder, and shall include
in such Claim Notice (if then known) the amount or method of computation of the
amount of the claim, and a reference to the provision of this Agreement or any
other agreement, document or instrument executed and delivered hereunder or in
connection herewith upon which such claim is based; provided that a Claim Notice
in respect of any action at law or suit in equity against an Indemnified Party
by a third party, as to which indemnification will be sought (a "Third Party
Action"), shall be given promptly after the action or suit is commenced;
provided, further, that failure of the Indemnified Party to give the Indemnitor
prompt notice in respect of any such Third Party Action as provided herein shall
not relieve the Indemnitor of its obligations hereunder, except to the extent
such Indemnitor shall have been materially prejudiced by such failure.
(b) The Indemnitor shall be entitled (but not obligated) to
assume the defense or settlement of such Third Party Action, or to conduct any
negotiations or proceedings to settle or otherwise eliminate any Third Party
Claim and shall pay the reasonable fees and disbursements of such counsel
related to such Third Party Action. If the Indemnitor assumes any such defense
or settlement or any such negotiations, it shall pursue such defense, settlement
or negotiations in good faith. If the Indemnitor fails to elect in writing
within 30 Business Days of the notification referred to above to assume such
defense, the Indemnified Party may engage counsel to defend, settle or otherwise
dispose of such action or proceeding, which counsel shall be reasonably
satisfactory to the Indemnitor. In any such Third Party Action, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnitor and the Indemnified Party shall have mutually agreed to the retention
of such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnitor and the Indemnified Party and
representation of both the Indemnitor and the Indemnified Party by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnitor shall not, in connection with
any Third Party Action or related Third Party Action in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to local counsel) for all Persons to be indemnified pursuant to Section 13;
provided that the Indemnitor will be so liable if (x) the Indemnified Party has
reasonably concluded that there may be legal defenses available to it in such
Third Party Action that are different from or in addition to those available to
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the Indemnitor or (y) a conflict or potential conflict exists between the
Indemnified Party and the Indemnitor in such Third Party Action (in which case
the Indemnitor will not have the right to direct the defense of such Third Party
Action with respect to which such conflict exists on behalf of the Indemnified
Party), but only to the extent such fees and expenses are incurred in connection
with such conflicting issues. Any such separate firm shall be designated in
writing by the Indemnified Party. The Indemnitor shall not be liable for any
settlement of any proceeding of such Third Party Action effected without its
written consent, but if the Indemnitor consents to any such settlement, the
Indemnitor agrees to indemnify the Indemnified Party from and against any loss
or liability for which indemnity is available hereunder and which is specified
in such settlement or judgment. No Indemnitor shall, without the prior written
consent of the Indemnified Party (which consent shall not be unreasonably
withheld or delayed), effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability or claims that are the subject matter of such
proceeding and such settlement only involves the payment of money.
(c) Assignor shall be entitled in all cases (but not
obligated) to assume the settlement and to conduct negotiations or proceedings
to obtain the discharge and release of or otherwise eliminate any Lien set forth
on Schedule 5(h) hereto. If Assignor assumes any such settlement or any such
negotiations, it shall pursue such settlement or negotiations in good faith.
Assignor shall not be liable for any settlement or discharge of any such Lien
effected without its written consent, but if Assignor consents to any such
settlement or discharge, Assignor agrees to indemnify Assignee from and against
any loss or liability for which indemnity is available hereunder and which is
specified in such settlement or discharge.
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SECTION 15. Termination
This Agreement may be terminated at any time prior to the
first Effective Time to occur pursuant to the terms hereof:
(a) by mutual written consent of Assignee and Assignor;
(b) by either party by written notice to the other party if
the transactions contemplated hereby have not been consummated on or before the
Outside Date; provided, however, that the right to terminate this Agreement
under this Section 15(b) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause of or has
resulted in the failure of the transactions contemplated hereby being
consummated on or before the Outside Date; or
(c) by (i) Assignor if (a) Assignor accepts or recommends
one or more Superior Proposals to its partners or resolves to do either of the
foregoing and (b) Assignee no longer has the right pursuant to Section 11(c) to
deliver an Assignee Acceptance Notice to Assignor or (ii) by Assignee if (x)
Assignor has given an SP Notice and (y) at least fourteen (14) days have passed
since the date on which Assignee's right pursuant to Section 11(c) to deliver an
Assignee Acceptance Notice terminated.
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SECTION 16. Miscellaneous
(a) Notices
All notices, demands, declarations and other
communications required by this Agreement shall be in writing and shall be
effective (i) if given by facsimile, when transmitted, (ii) if given by
registered or certified mail, three (3) Business Days after being deposited with
the U.S. Postal Service, (iii) if given by courier, when received, or (iv) if
personally delivered, when so delivered, addressed:
If to Assignor, to:
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, CA 94105
Attention: President
Facsimile Number:
With a copy to:
c/o Polaris Investment Management Corporation
201 High Ridge Road, 1st Floor
Stamford, CT 06927-4900
Attention: Portfolio Management
Facsimile Number: (203) 357-4585
or to such other address as Assignor shall from time to time designate in
writing to Assignee; and
If to Assignee, to:
Triton Aviation Services V LLC
55 Green Street, Suite 500
San Francisco, CA 94111
Attn: President
Facsimile Number: (415) 398-9184
or to such other address as Assignee may from time to time designate in writing
to Assignor.
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(b) Headings
Headings used herein are for convenience only and
shall not in any way affect the construction of, or be taken into consideration
in interpreting, this Agreement.
(c) References
Any reference to a specific Section or Section number
shall be interpreted as a reference to that Section of this Agreement unless
otherwise expressly provided.
(d) GOVERNING LAW
THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE
INTERPRETATION, CONSTRUCTION, VALIDITY AND ENFORCE ABILITY THEREOF, SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA,
EXCLUDING ANY CONFLICT OF LAWS RULES THEREOF.
(e) Severability
If any provision hereof should be held invalid,
illegal or unenforceable in any respect in any jurisdiction, then, to the
fullest extent permitted by law, (i) all other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be construed in order to
carry out the intentions of the parties hereto as nearly as may be possible and
(ii) such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.
(f) Amendments in Writing
No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor any consent to any departure
by Assignor or Assignee from any provision hereof, shall in any event be
effective unless the same shall be in writing and signed by Assignor and
Assignee, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by Assignor and Assignee.
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(g) Expenses
Each of Assignor and Assignee shall be responsible
for all fees and expenses incurred by it, including for legal counsel and other
advisors, in connection with this Agreement, any Ancillary Agreement or
otherwise relating to the transactions contemplated hereby; provided, however,
all costs and expenses incurred in connection with Special FAA Counsel or with
Special CAA Counsel and all fees and expenses payable to the Escrow Agent
pursuant to the Escrow Agreement shall be shared equally by Assignor and
Assignee; provided, further, if either Assignor or Assignee terminates this
Agreement in accordance with Section 15(c) hereof, Assignor shall pay or cause
to be paid to Assignee within two (2) Business Days of such termination a fee in
immediately available funds in an amount equal to one and one-half percent
(1.5%) of the Purchase Price.
(h) Execution in Counterparts
This Agreement and any amendments, waivers or
consents hereto may be executed by Assignor and Assignee in separate
counterparts (or upon separate signature pages bound together into one or more
counterparts), each of which, when so executed and delivered, shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
(i) Entire Agreement
This Agreement and the Ancillary Agreements
constitute the entire agreement of Assignor and Assignee with respect to the
subject matter hereof or thereof, and all prior understandings or agreements,
whether written or oral, between Assignor and Assignee with respect to such
subject matter are hereby superseded in their entirety.
(j) Exhibits
The exhibits attached hereto are incorporated by
reference herein and shall have the same force and effect with respect to the
provisions set forth therein as though fully set forth in this Agreement.
(k) Assignment and Successors
This Agreement may not be assigned except by
operation of law. This Agreement shall be binding upon, shall inure to the
benefit of and shall be enforceable by Assignor and Assignee and their
respective successors.
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(l) Confidentiality
This Agreement and the Ancillary Agreements are
confidential documents between the parties thereto and shall not be disclosed by
either party to third parties without the prior written consent of the other
party other than (i) to such party's directors, officers, employees, advisors,
auditors, agents or representatives who are advised of the confidential nature
of this Agreement and the Ancillary Agreements (and for whose compliance with
the terms hereof, such party shall be liable), (ii) to the extent disclosure as
required by any applicable law, regulation or judicial order or (iii) in
connection with the disclosure requirements of the Securities and Exchange
Commission. The obligations and protections contained in this Section 16(l) are
in addition to and not a replacement of any obligations and protections provided
pursuant to any confidentiality agreement executed by and currently in effect
between the parties hereto or any of their respective Affiliates.
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IN WITNESS WHEREOF, the undersigned have caused this PURCHASE,
ASSIGNMENT AND ASSUMPTION AGREEMENT to be duly executed as of the day and year
first written above.
POLARIS AIRCRAFT INCOME FUND V
By: Polaris Investment Management Corporation,
General Partner
By: /S/ ERIC DULL
--------------------------------
Name: ERIC DULL
--------------------------------
Title: PRESIDENT
--------------------------------
TRITON AVIATION SERVICES V LLC
By: Triton Aviation Services Limited,
Manager
By: /S/ JOHN E. FLYNN
--------------------------------
Name: JOHN E. FLYNN
--------------------------------
Title: PRESIDENT
--------------------------------
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of May 28, 1997, (the "Agreement")
by and among POLARIS AIRCRAFT INCOME FUND V, a California limited partnership
("Polaris"), TRITON AVIATION SERVICES V LLC, a California limited liability
company ("Triton") and Bankers Trust Company, a New York banking corporation (as
escrow agent hereunder, the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the parties hereto, other than the Escrow Agent, have
entered into a Purchase, Assignment and Assumption Agreement dated as of April
1, 1997 (the "Purchase Agreement") pursuant to which Polaris has agreed to sell
to Triton and Triton has agreed to purchase from Polaris, certain assets, as
provided therein (the "Assets"); and
WHEREAS, pursuant to Section 4 of the Purchase Agreement,
Polaris and Triton have agreed that Triton shall deposit or cause to be
deposited the purchase price for the Assets, to be held in escrow and
distributed in accordance with the terms of this Escrow Agreement and the
Purchase Agreement; and
WHEREAS, the Escrow Agent is willing to serve as escrow agent
and hold the Escrowed Property (as hereinafter defined) in accordance with the
terms and conditions hereof.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by each of the parties
hereto, the parties hereto, intending to be legally bound, do hereby agree as
follows:
1. Appointment of Escrow Agent. Polaris and Triton hereby
appoint Bankers Trust Company as escrow agent in accordance with the terms and
conditions set forth herein, and the Escrow Agent hereby accepts such
appointment.
2. Deposit into the Escrow Fund. Triton, simultaneously with
the execution and delivery of this Agreement, has deposited or caused to be
deposited with the Escrow Agent the sum of $5,204,540 (of which $1,000
represents one-half of the Escrow Fees (as defined in paragraph 8 hereof)) in
immediately available funds (together with any interest earned thereon, the
"Escrowed Property"), the receipt of which will be acknowledged by the Escrow
Agent, and which Escrowed Property shall be held by the Escrow Agent upon the
terms and conditions hereinafter set forth.
<PAGE>
3. Deposit of Escrowed Property.
(a) During the term of this Agreement, the Escrow Agent is
hereby directed to deposit the Escrowed Property and any interest or income
earned thereon in the BT Institutional Cash Management Fund.
(b) The Escrow Agent shall not have any liability for any loss
sustained as a result of any investment made as provided above, any liquidation
of any such investment prior to its maturity, or the failure of an authorized
person of the Company to give the Escrow Agent any written instruction to invest
or reinvest the Escrowed Funds or any earnings thereon.
4. Distribution of Escrowed Property.
(a) The Escrow Agent shall hold the Escrowed Property in its
possession until instructed hereunder to deliver the Escrowed Property or any
specified portion thereof as provided in paragraph 4(b) below.
(b) At such time as Polaris delivers a written notice
substantially in the form of Exhibit A hereto (the "Release Notice") to the
Escrow Agent, signed by an authorized representative of Polaris, stating that
the requirements under the Purchase Agreement for release of the Escrowed
Property have been met, the Escrow Agent shall promptly disburse to Polaris to
the account specified by Polaris in the Release Notice, the amount set forth in
the Release Notice (which amount shall be the Cash Amount, as defined in the
Purchase Agreement), less one-half of the Escrow Fees payable to the Escrow
Agent hereunder, and shall disburse the balance of the Escrowed Property to
Triton to an account specified by Triton to the Escrow Agent.
(c) The Escrow Agent is acting as a stakeholder only with
respect to the Escrowed Property. If any dispute arises as to whether the Escrow
Agent is obligated to deliver the Escrowed Property or as to whom the Escrowed
Property is to be delivered or the amount thereof, the Escrow Agent shall not be
required to make any delivery, but in such event the Escrow Agent may hold the
Escrowed Property until receipt by the Escrow Agent of instructions in writing,
signed by all parties which have, or claim to have, an interest in the Escrowed
Property, directing the disposition of the Escrowed Property, or in the absence
of such authorization, the Escrow Agent may hold the Escrowed Property until
receipt of a certified copy of a final judgment of a court of competent
jurisdiction providing for the disposition of the Escrowed Property. The Escrow
Agent may require, as a condition to the disposition of the Escrowed Property
pursuant to written instructions, indemnification and/or opinions of counsel, in
form and substance satisfactory to the Escrow Agent, from each party providing
such instructions. If such written instructions, indemnification and opinions
2
<PAGE>
are not received, or proceedings for such determination are not commenced,
within 30 days after receipt by the Escrow Agent of notice of any such dispute
and diligently continued, or if the Escrow Agent is uncertain as to which party
or parties are entitled to the Escrowed Property, the Escrow Agent may either
(i) hold the Escrowed Property until receipt of such written instructions and
indemnification or a certified copy of a final judgment of a court of competent
jurisdiction providing for the disposition of the Escrowed Property, or (ii)
deposit the Escrowed Property in the registry of a court of competent
jurisdiction; provided, however, that notwithstanding the foregoing, the Escrow
Agent may, but shall not be required to, institute legal proceedings of any
kind.
5. Resignation of Escrow Agent. The Escrow Agent may resign
and be discharged from its duties hereunder at any time by giving written notice
of such resignation to Polaris and Triton specifying a date when such
resignation shall take effect and upon delivery of the Escrowed Property to the
successor escrow agent designated by all parties hereto (other than the Escrow
Agent) in writing. Upon such notice, a successor escrow agent shall be appointed
with the mutual consent of Polaris and Triton. Such successor escrow agent shall
become the escrow agent hereunder upon the resignation date specified in such
notice. If Polaris and Triton are unable to agree upon a successor escrow agent
within thirty (30) days after such notice, the Escrow Agent shall be entitled to
apply to a court of competent jurisdiction for the appointment of a successor.
The Escrow Agent shall continue to serve until its successor accepts the escrow
and receives the Escrowed Property. Polaris and Triton shall have the right at
any time upon their mutual consent to substitute a new Escrow Agent by giving
notice thereof to the Escrow Agent then acting. Upon its resignation (or
replacement) and delivery of the Escrowed Property as set forth in this
Paragraph 5, the Escrow Agent shall be discharged of and from any and all
further obligations arising in connection with the escrow contemplated by this
Agreement.
6. Indemnification of Escrow Agent.
(a) The Escrow Agent shall exercise ordinary care in
fulfilling its duties and obligations hereunder. The Escrow Agent shall have no
duties or responsibilities whatsoever with respect to the Escrowed Property
except as are specifically set forth herein. The Escrow Agent shall neither be
responsible for or under, nor chargeable with knowledge of the terms and
conditions of any other agreement, instrument or document in connection
herewith. Except as otherwise provided in subsection (b) hereof, the Escrow
Agent may conclusively rely upon, and shall be fully protected from all
liability, loss, cost, damage or expense in acting or omitting to act pursuant
to any written notice, instrument, request, consent, certificate, document,
letter, telegram, opinion, order, resolution or other writing hereunder without
being required to determine the authenticity of such document, the correctness
of any fact stated therein, the propriety of the service thereof or the
capacity, identity or authority of any party purporting to sign or deliver such
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<PAGE>
document. The Escrow Agent shall have no responsibility for the contents of any
such writing contemplated herein and may conclusively rely without any liability
upon the contents thereof.
(b) The Escrow Agent shall not be liable for any action taken
or omitted by it in good faith and reasonably believed by it to be authorized
hereby or with the rights or powers conferred upon it hereunder, nor for action
taken or omitted by it in good faith, and in accordance with advice of counsel
(which counsel may be of the Escrow Agent's own choosing), and shall not be
liable for any mistake of fact or error of judgment or for any acts or omissions
of any kind except for its own willful misconduct or negligence.
(c) Polaris and Triton agree severally and not jointly to
indemnify the Escrow Agent and its employees, directors, officers and agents and
hold each harmless against any and all liabilities incurred by it hereunder as a
consequence of such party's action, and both Polaris and Triton agree severally
and not jointly to indemnify the Escrow Agent and hold it harmless against any
and all liabilities incurred by it and them hereunder that are not a consequence
of any party's action, except in either case for liabilities incurred by the
Escrow Agent resulting from its own willful misconduct or negligence. In
connection therewith, Polaris and Triton shall each be liable for 50% of any
such liabilities.
7. Compensation of Escrow Agent. The Escrow Agent shall be
entitled to payment for customary fees and expenses for all services rendered by
it here under in accordance with Schedule B attached hereto (as such schedule
may be amended from time to time by Polaris, Triton and the Escrow Agent)
("Escrow Fees"). The Escrow Agent shall also be entitled to reimbursement on
demand for all reasonable loss, liability, damage or expenses paid or incurred
by it in the administration of its duties hereunder, including, but not limited
to, all reasonable counsel, advisors' and agents' fees and disbursements and all
taxes or other governmental charges.
8. Further Assurances. From time to time on and after the date
hereof, the other parties hereto shall deliver or cause to be delivered to the
Escrow Agent such further documents and instruments and shall do and cause to be
done such further acts as the Escrow Agent shall reasonably request (it being
understood that the Escrow Agent shall have no obligation to make any such
request) to carry out more effectively the provisions and purposes of this
Agreement, to evidence compliance herewith or to assure itself that it is
protected in acting hereunder.
9. Termination of Agreement. This Agreement shall terminate on
the final disposition of the Escrowed Property provided that the rights of the
Escrow Agent and the obligations of the other parties hereto under Sections 6
and 7 shall survive the termination hereof and the resignation or removal of the
Escrow Agent.
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10. Consents to Service of Process. Each of the parties hereto
hereby irrevocably consents to the jurisdiction of the courts of the State of
New York and of any Federal Court located in the Borough of Manhattan in such
State in connection with any action, suit or other proceeding arising out of or
relating to this Agreement or any action taken or omitted hereunder, and waives
any claim of forum non conveniens and any objections as to laying of venue. Each
party further waives personal service of any summons, complaint or other process
and agrees that the service thereof may be made by certified or registered mail
directed to such person at such person's address for purposes of notices
hereunder.
11. Waiver. THE PARTIES TO THIS AGREEMENT HEREBY
UNCONDITIONALLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
AGREEMENT, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS AMONG THEM RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED AMONG THEM. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS
IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND
THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, AND RELATED DOCUMENTS, OR TO ANY OTHER
DOCUMENTS OR AGREEMENT, AND RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
12. Miscellaneous.
(a) This Agreement embodies the entire agreement and
understanding among these parties relating to the subject matter hereof except,
as to Polaris and Triton, the Purchase Agreement.
(b) All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally, on the
next Business Day after delivery to a recognized overnight courier or when sent
by facsimile to the parties (which facsimile copy shall be followed, in the case
of notices or other communications sent to the Escrow Agent, by a hard copy) at
the following addresses (or to such other address as a party may have specified
by notice given to the other parties pursuant to this provision);
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<PAGE>
If to Polaris, to:
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, California 94105
Attention: President
Facsimile Number: (415) 284-7460
With a copy to:
c/o Polaris Investment Management Corporation
201 High Ridge Road
Stamford, Connecticut 06927-4900
Attention: Portfolio Management
Facsimile Number: (203) 357-4585
If to Triton, to:
Triton Aviation Services V LLC
55 Green Street
San Francisco, California 94111
Attention: President
Facsimile Number: (415) 398-9184
If to the Escrow Agent, to:
Bankers Trust Company
Corporate Trust and Agency Group
Four Albany Street
New York, New York 10006
Attention: Corporate Market Services
Facsimile Number: (212) 250-6961/6392
(c) The headings of the Paragraphs of this Agreement have been
inserted for convenience and shall not modify, define, limit or expand the
express provisions of this Agreement.
(d) This Agreement and the rights and obligations hereunder of
parties hereto may not be assigned except with the prior written consent of the
other parties hereto. This Agreement shall be binding upon and inure to the
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<PAGE>
benefit of each party's respective successors and permitted assigns. Except as
expressly provided herein, no other person shall acquire or have any rights
under or by virtue of this Agreement. This Agreement is intended to be for the
sole benefit of the parties hereto, and (subject to the provisions of this
Paragraph 12(d)) their respective successors and assigns, and none of the
provisions of this Agreement are intended to be, nor shall they be construed to
be, for the benefit of any third person.
(e) This Agreement may not be amended, supplemented or
otherwise modified without the prior written consent of the parties hereto.
(f) The Escrow Agent makes no representation as to the
validity, value, genuineness or the collectability of any security or other
document or instrument held by or delivered to it.
(g) The Escrow Agent shall not be called upon to advise any
party as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
(h) Any payments of income from the Escrowed Property shall be
subject to withholding regulations then in force with respect to United States
taxes. Each of Polaris and Triton will provide the Escrow Agent with its
Employer Identification Number for use by the Escrow Agent if necessary. It is
understood that the Escrow Agent shall be responsible for income reporting only
with respect to income earned on the Escrowed Property and will not be
responsible for any other reporting.
(i) This Agreement shall be governed by and construed in
accordance with laws of the State of New York without reference to the
principles of conflict of laws.
(j) This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
(k) Time is of the essence in each and every term and
provision of this Agreement.
(l) In the event that the interpretation of any provision of
this Agreement conflicts in any way with any other provision of any other
document related to the transactions contemplated herein, then the provisions of
this Agreement shall be controlling between these parties and will take
precedence.
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(m) For purposes of this Agreement, "Business Day" shall mean
any day that is not a Saturday or a day on which banks are required or permitted
by law or executive order to be closed in The City of New York.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
POLARIS AIRCRAFT INCOME
FUND V
By: Polaris Investment Management
Corporation, General Partner
By:/S/MARY DUNNE
-----------------------------
Name: MARY DUNNE
Title: ATTORNEY IN FACT
TRITON AVIATION SERVICES V LLC
By: Triton Aviation Services Limited,
Manager
By:/S/CHARLES F. HORNECKER
------------------------------
Name: CHARLES F. HORNECKER
Title: ATTORNEY IN FACT
BANKERS TRUST COMPANY
By:/S/KEVIN WEEKS
----------------------------------
Name: KEVIN WEEKS
Title: ASSISTANT TREASURER
<PAGE>
Schedule A
Schedule of Fees
Prepared For
Escrow Agreement
A. Acceptance Fee: $2,000 one time fee.
(Includes acceptance of appointment, review of
documentation, establishment of account and records.
This fee is intended to cover costs and set up of a
standard escrow agreement. Any escrow that
substantially alters the agreement may incur
additional costs which would be billed as an
acceptance fee.)
B. Annual Administrative Fee: None.
(Payable annually in advance. Includes normal
administrative duties as stipulated in the
agreement.)
C. Investment Transactions: None.
(Covers all costs associated with investing in
eligible investments at the direction of the client,
including ticket charges, custody and tax reporting.)
D. Wire Transfer Fee: None.
(Pertains to outgoing wires only.)
The fees set forth in this schedule are subject to review of
documentation. The fees are also subject to change should circumstances
warrant. As provided in the Escrow Agreement, reimbursement for all
out-of-pocket expenses, disbursements and fees of counsel (including
their disbursements and expenses) incurred in the performance of the
Escrow Agent's duties will be added to billed fees. Once appointed, if
the deal should fail to close for reasons beyond our control, we
reserve the right to charge a fee not to exceed the amount of our
acceptance fee, and we will require reimbursement in full for our legal
fees and any out-of-pocket expenses related to the deal.
Fees for any services not specifically covered in this or other
applicable schedules will be based on an appraisal of services
rendered.
<PAGE>
Exhibit A
Release Notice
Pursuant to Paragraph 4(b) of the Escrow Agreement dated May
__, 1997 (the "Escrow Agreement") among Polaris Aircraft Income Fund V
("Polaris"), Triton Aviation Services V LLC ("Triton") and Bankers Trust
Company, as escrow agent (the "Escrow Agent"), the undersigned hereby certifies
that the requirements under the Purchase Agreement for release of the Escrowed
Property have been met and directs the Escrow Agent to promptly disburse the
Escrowed Property (as defined in the Escrow Agreement) as follows:
(i) $__________ to Polaris to [account information]; and
(ii) the balance of the Escrowed Property to an account
specified by Triton.
IN WITNESS WHEREOF, the undersigned has executed this Release
Notice this __ day of ________, 19__.
POLARIS AIRCRAFT INCOME FUND V
By: Polaris Investment Management
Corporation, general partner
By:
Name:
Title:
<PAGE>
Exhibit B
Receipt of Funds by Escrow Agent
BANKERS TRUST COMPANY, a New York banking corporation, as
escrow agent (the "Escrow Agent") under that certain Escrow Agreement dated May
__, 1997 (the "Escrow Agreement") among Polaris Aircraft Income Fund V
("Polaris"), Triton Aviation Services V LLC ("Triton"), and the Escrow Agent,
hereby acknowledges receipt from Triton, by wire transfer of immediately
available funds to the account specified by the Escrow Agent, of the aggregate
amount of [$__________], to be held in escrow pursuant to the terms of the
Escrow Agreement.
Dated: __________, 1997
BANKERS TRUST COMPANY,
as Escrow Agent
By:
Name:
Title:
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of April 1, 1997,
among Triton Aviation Services V LLC, a California limited liability company
("Borrower"), Triton Aviation Services Limited, a Bermuda corporation ("TASL"),
the other parties executing the signature pages hereto as pledgors (Borrower,
TASL, and such other parties, collectively, "Pledgors" and each of them
individually a "Pledgor") and Polaris Aircraft Income Fund V, a California
limited partnership ("Lender").
R E C I T A L S:
WHEREAS, Pledgors are the sole members of Borrower; and
WHEREAS, Pledgors are the record and beneficial owners of the
membership interests described in Schedule I hereto (the "Pledged Interests" of
each such Pledgor) issued by Borrower; and
WHEREAS, Borrower has executed and delivered to Lender a
Promissory Note (as the same may be amended, modified or supplemented from time
to time, the "Note"), pursuant to the Purchase, Assignment and Assumption
Agreement, dated as of April 1, 1997 (the "Purchase Agreement"), between Lender
and Borrower; and
WHEREAS, Pledgors, as the sole members of Borrower, will
derive substantial direct and indirect economic benefit from the transactions
contemplated by the Purchase Agreement and the delivery of the Note to Lender;
and
WHEREAS, in connection with the making of the Purchase
Agreement and the delivery of the Note and as security for all of the
Obligations, Lender is requiring that Pledgors shall have executed and delivered
this Pledge and Security Agreement and granted the security interest
contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained the receipt and sufficiency of which are hereby
agreed and acknowledged and to induce Lender to provide the seller financing
evidenced by the Note, it is agreed as follows:
<PAGE>
1. Definitions. Unless otherwise defined herein, terms defined in the Note are
used herein as therein defined, and the following shall have (unless otherwise
provided elsewhere in this Agreement) the following respective meanings (such
meanings being equally applicable to both the singular and plural form of the
terms defined):
"Additional Holder" shall have the meaning assigned to such
term in Section 7(d) hereof.
"Agreement" shall mean this Pledge and Security Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to this Agreement as the same
may be in effect at the time such reference becomes operative.
"Ancillary Agreements" shall have the meaning assigned to it
in the Purchase Agreement.
"Bankruptcy Code" shall mean title 11, United States Code, as
amended from time to time, and any successor statute thereto
"Equity Dividend Amount" means, (i) for any calendar month
that ends prior to the first Effective Time to occur under the Purchase
Agreement, an amount equal to $64,760 and (ii) for the calendar month in which
the first Effective Time occurs under the Purchase Agreement and for each
calendar month thereafter, the Purchase Agreement, an amount equal to $107,933,
and for any period that is less than a calendar month, a proportionate amount
thereof calculated using the same proportion that the number of days in such
period bears to thirty days.
"General Intangibles" shall mean all "general intangibles" as
such term is defined in Section 9-106 of the Uniform Commercial Code, now owned
or hereafter acquired by any Pledgor relating to the collateral of such Pledgor
pledged hereby.
"Governmental Authority" shall mean (a) any federal, state,
provincial or similar government, and any body, board, department, commission,
court, tribunal, author ity, agency or other instrumentality of any such
government or otherwise exercising any executive, legislative, judicial,
administrative or regulatory functions of such government or (b) any other
government entity having jurisdiction over any matter contemplated by this
Agreement, the Purchase Agreement or any other Ancillary Agreements or relating
to the observance or performance of the obligations of any of the parties hereto
or thereto.
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<PAGE>
"Interests" shall mean all shares, options, warrants, general
or limited partnership interests, membership interests, participations or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company or equivalent entity whether voting or nonvoting,
including, without limitation, common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Keep Well" shall mean that certain Keep Well Agreement, dated
as of the date hereof, among TASL, Borrower and Lender.
"Keep Well Guaranty" shall mean that certain Guaranty (Keep
Well), dated as of the date hereof, among TIL, Lender and Borrower.
"Loan Guaranty" shall mean that certain Guaranty (SPV
Indebtedness), dated as of the date hereof, between TIL and Borrower.
"Obligations" shall mean (i) all loans, advances, debts,
liabilities and obligations, for monetary amounts (whether or not such amounts
are liquidated or determinable) owing by Borrower to Lender, and all covenants
and duties regarding such amounts, of any kind or nature, present or future,
whether or not evidenced by any note, agreement or other instrument, arising
under the Purchase Agreement or the Note including, without limitation, all
interest, fees, charges, expenses, attorneys' fees and any other sum chargeable
to Borrower under the Purchase Agreement or the Note, (ii) all obligations of
any kind or nature, present or future, of TASL under the Keep Well, (iii) all
obligations of any kind or nature, present or future, of TIL under the Keep Well
Guaranty and (iv) all obligations of any kind or nature, present or future, of
TIL under the Loan Guaranty.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether Federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"Pledged Collateral" shall have the meaning assigned to such
term in Section 2 hereof.
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<PAGE>
"Pledged Interests" shall have the meaning assigned to such
term in the recitals hereof.
"Secured Obligations" shall have the meaning assigned to such
term in Section 3 hereof.
"Termination Date" shall mean the date on which all
determinable and liquidated Obligations have been completely discharged.
"TIL" shall mean Triton Investments Limited, a Bermuda
corporation.
"Transferee" shall have the meaning assigned to such term in
Section 7(d) hereof.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as the same may, from time to time, be in effect in the State of
California; provided, however, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of
Lender's security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
California, Uniform Commercial Code shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfec tion or priority and for purposes of definitions
related to such provisions.
2. Pledge. Each Pledgor hereby pledges to Lender, and grants
to Lender, a first priority security interest in, all of the following (the
"Pledged Collateral"):
(a) in the case of each Pledgor other than Borrower, the
Pledged Interests of such Pledgor and all dividends, distributions, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed by Borrower in respect of or in exchange for
any or all of the Pledged Interests of such Pledgor; provided, however, that
Pledged Collateral shall not include any distributions made by Borrower which
are permitted to be made by it under Section 7(b) hereof;
(b) in the case of each Pledgor other than Borrower, all
additional Interests issued by Borrower to such Pledgor or from time to time
acquired by such Pledgor in any manner (which Interests shall be deemed to be
part of the Pledged Interests), and the certificates, if any, representing such
additional Interests, and all dividends, distributions, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such Interests;
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<PAGE>
(c) in the case of Borrower, all rights under the Keep Well,
the Keep Well Guaranty and the Loan Guaranty;
(d) in the case of each Pledgor, all General Intangibles; and
(e) all proceeds of any of the foregoing.
3. Security for Obligations. This Agreement secures, and the
Pledged Collateral is security for, the prompt payment in full when due, whether
at stated maturity, by acceleration or otherwise, and performance of the
Obligations, whether for principal, premium, interest, fees, costs and expenses,
and all obligations of Pledgors now or hereafter existing under this Agreement
(collectively, the "Secured Obligations").
4. Delivery of Pledged Collateral. All certificates, if any,
representing or evidencing the Pledged Interests shall be delivered to and held
by or on behalf of Lender pursuant hereto and shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Lender. Lender shall have the right, at any time in
its discretion and without notice to Pledgors, to transfer to or to register in
the name of Lender or any of its nominees, as pledgees, any or all of the
Pledged Interests. In addition, Lender shall have the right at any time to
exchange certificates or instruments representing or evidencing Pledged
Interests for certificates or instruments of smaller or larger denominations.
5. Representations and Warranties. Each Pledgor represents and
warrants to Lender that:
(a) Such Pledgor is, and at the time of delivery of the
Pledged Interests to Lender pursuant to Section 4 hereof will be, the sole
holder of record and the sole beneficial owner of the Pledged Collateral pledged
by such Pledgor free and clear of any Lien thereon or affecting the title
thereto, except for the Lien created by this Agreement.
(b) All of the Pledged Interests of such Pledgor have been
duly authorized, validly issued and are fully paid and nonassessable.
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<PAGE>
(c) Such Pledgor has the right and requisite authority to
pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral
pledged by such Pledgor to Lender as provided herein.
(d) None of the Pledged Interests of such Pledgor has been
issued or transferred in violation of the securities registration, securities
disclosure or similar laws of any jurisdiction to which such issuance or
transfer may be subject.
(e) As of the date hereof, the authorized, issued and
outstanding Interests of Borrower consist solely of the membership interests
that are described in Schedule I hereto. As of the date hereof, there are no
existing options, warrants, calls or commitments of any character whatsoever
relating to any Interests of Borrower other than as set forth on Exhibit A
hereto.
(f) No consent, approval, authorization or other order of any
Person and no consent, authorization, approval, or other action by, and no
notice to or filing with, any Governmental Authority, other than as already
obtained, given or filed, is required by Pledgor either (i) for the pledge by
such Pledgor of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement or the Ancillary Agreements
to which such Pledgor is a party, by such Pledgor or (ii) for the exercise by
Lender of the voting or other rights provided for in this Agreement or the
remedies in respect of the Pledged Collateral pursuant to this Agreement, except
as may be required in connection with such disposition by laws affecting the
offering and sale of securities generally.
(g) The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement will create a valid first priority lien on
and a first priority perfected security interest in the Pledged Collateral
pledged by such Pledgor, and the proceeds thereof, securing the payment of the
Secured Obligations.
(h) This Agreement and the Ancillary Agreements to which such
Pledgor is a party have been duly authorized, executed and delivered by such
Pledgor and constitute legal, valid and binding obligations of such Pledgor
enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, or other similar laws affecting the rights of
creditors generally or by the application of general equity principles.
(i) Borrower has no subsidiaries.
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The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Agreement.
6. Covenants.
(a) Each Pledgor jointly and severally covenants and agrees
that until the Termination Date:
(i) Subject to Section 7(d), without the prior
written consent of Lender, such Pledgor will not sell, assign,
transfer, pledge or otherwise encumber any of its rights in or to the
Pledged Collateral pledged by such Pledgor or any unpaid dividends or
other distributions or payments with respect thereto or grant a Lien in
any therein.
(ii) Such Pledgor will, at its expense, promptly
execute, acknowledge and deliver all such instruments and take all such
action as Lender from time to time may reasonably request in order to
ensure to Lender the benefits of the Liens in and to the Pledged
Collateral intended to be created by this Agreement, including the
filing of any necessary Uniform Commercial Code financing statements,
which may be filed by Lender with or without the signature of such
Pledgor, and will cooperate with Lender, at such Pledgor's expense, in
obtaining all necessary governmental approvals and making all necessary
filings under federal or state law in connection with such Liens or any
sale or transfer of the Pledged Collateral.
(iii) Such Pledgor has and will defend the title to
the Pledged Collateral and the Liens of Lender thereon against the
claim of any Person and will maintain and preserve such Liens until the
Termination Date.
(iv) Each of them will, upon obtaining any additional
Interest of Borrower, which Interest is not already Pledged Collateral,
promptly (and in any event within three (3) business days) deliver to
Lender a Pledge Amendment, duly executed by such Pledgor, in
substantially the form of Schedule II hereto (a "Pledge Amendment"), in
respect of the additional Pledged Interests which are to be pledged
pursuant to this Agreement. Each Pledgor hereby authorizes Lender to
attach each Pledge Amendment to this Agreement and agrees that all
Pledged Interests listed on any Pledge Amendment delivered to Lender
shall for all purposes hereunder be considered Pledged Collateral.
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<PAGE>
(v) None of them will take any action to amend, alter
or change Borrower's articles of organization or operating agreement
(other than amendments permitted under the Note), the Keep Well, the
Keep Well Guaranty or the Loan Guaranty or permit Borrower to repeal
its articles of organization.
(vi) None of them will take any action that would
authorize or permit Borrower to take any of the actions specified in
Paragraph 2.4 of its operating agreement.
(vii) TASL covenants and agrees that it will cause
Borrower to comply with the terms of and limitations contained in
Borrower's articles of organization or in its operating agreement.
(b) TASL shall deliver to Lender written notice of (i) any
payments made by it to Borrower pursuant to the Keep Well and (ii) any dividend
or distribution received by it from Borrower other than Equity Dividend Amounts,
in each case no later than three (3) business days after disbursing such payment
or the receipt of any such dividend or distribution, as applicable.
(c) TASL covenants and agrees that it will at all times during
the term of this Agreement maintain management personnel who are qualified and
competent to manage and direct the business and operations of Borrower and who
have experience in the commercial aviation industry.
(d) TASL covenants and agrees that, at all times, Triton
Members shall hold, in the aggregate, at least fifty percent (50%) of the
Economic Interests of Borrower. TASL covenants and agrees that, at all times, it
shall be the sole manager of Borrower and shall have all responsibilities and
duties allocated to TASL as manager of Borrower pursuant to Borrower's operating
agreement or articles of organization and shall not make any delegation or
assignment to any other Person of such responsibility or duty except as
permitted thereby.
7. Pledgors' Rights. (a) As long as no Default or Event of
Default shall have occurred and be continuing and until written notice shall be
given to each Pledgor in accordance with Section 8(a) hereof, such Pledgor shall
have the right, from time to time, to vote and give consents with respect to the
Pledged Collateral or any part thereof for all purposes not inconsistent with
the provisions of this Agreement, the Note or any Ancillary Agreement; provided,
however, that no vote shall be cast, and no consent shall be given or action
taken, which would have the effect of impairing the position or interest of
8
<PAGE>
Lender in respect of the Pledged Collateral or which would authorize or effect
(i) the dissolution or liquidation, in whole or in part, of Borrower, (ii) the
consolidation or merger of Borrower with any other Person, (iii) except as
permitted under this Agreement or the Note, the sale, disposition or encumbrance
of all or substantially all of the assets of Borrower, (iv) except as permitted
by Section 7(d) hereof and Section 4.4 of the Note, any change in the authorized
number of Interests or the stated capital of Borrower and the issuance of any
additional Interests, (v) the alteration of the voting rights with respect to
the Interests of Borrower, or (vi) any change, alteration or modification of
Borrower's articles of organization, operating agreement (other than amendments
permitted under the Note, the Keep Well, the Keep Well Guaranty or the Loan
Guaranty.
(b) No Pledgor shall be entitled to collect and receive any
dividend or other distribution paid in respect of the Pledged Interests whether
paid or payable in cash, instruments or other property other than (1) beginning
as of April 1, 1997, payable in the next calendar month, the Equity Dividend
Amount and any accrued and unpaid Equity Dividend Amount for each month
thereafter, (2) with respect to TASL only, amounts equal to equity contributions
made by TASL pursuant to the Keep Well which have not been previously recouped
through the payment of any dividend or distribution by Borrower and (3) amounts
equal to any reduction of the Cash Amount pursuant to Section 4(c) or Section
4(d)(ii) of the Purchase Agreement; provided, however, that during any period in
which any payment under the Note is overdue or a Default has occurred and is
continuing, no Pledgor shall be entitled to collect and receive any dividend or
other distribution whatsoever but Borrower may continue to accrue a liability
equal to the Equity Dividend Amount during such period and Borrower may make
payments in respect of any such accrued liability so long as no amounts due and
payable under the Note are overdue and no Default thereunder is continuing, and
provided, further, that any permitted dividends or distributions in respect of
the Pledged Interests shall be paid only to the extent permitted by applicable
law.
(c) Other than dividends and distributions permitted to be
received by a Pledgor pursuant to subsection (b) above, all dividends or other
distributions paid in respect of any of the Pledged Interests, whenever paid or
made, shall be delivered to Lender to hold as Pledged Collateral and shall, if
received by such Pledgor, be received in trust for the benefit of Lender, be
segregated from the other property or funds of such Pledgor, and be forthwith
delivered to Lender as Pledged Collateral in the same form as so received (with
any necessary endorsement).
9
<PAGE>
(d) (i) Borrower shall be permitted to issue additional
Interests to any Person (each, an "Additional Holder") and (ii) each member of
Borrower shall be permitted to sell or otherwise transfer Pledged Interests to
any Person (each, a "Transferee"); provided, in each case that after giving
effect to any such issuance or transfer (A) the number of members of Borrower
who are not Triton Members shall not exceed three (3) as a result of any such
issuance or transfer, (B) the Triton Members shall hold, in the aggregate, at
least 50% of the Economic Interests of Borrower, (C) the Additional Holder or
Transferee of such equity interest shall be a Qualified Holder, (D) such
Additional Holder or Transferee shall expressly agree to the pledge of such
Interests under this Agreement and to be bound by the terms and conditions
hereof by delivery of a duly executed Pledge Amendment, and (E) after notice to
Lender by the applicable Pledgor, pursuant to the terms of Section 19 hereof,
Lender shall consent to such transfer or issuance, such consent not to be
unreasonably withheld; provided, however, that if Lender does not respond to
such notice within ten (10) days after receipt by Lender of such notice, such
consent shall be deemed granted. Notwithstanding the foregoing, no such issuance
or transfer shall be permitted if such issuance or transfer would violate any
applicable law or cause the Aircraft owned, directly or indirectly, by Borrower
then registered under the Act to no longer be eligible for registration under
the Act.
8. Defaults and Remedies. (a) Upon the occurrence of an Event
of Default and during the continuation of such Event of Default, then or at any
time after the declaration of such Event of Default (provided that such
declaration is not rescinded by Lender) and following written notice to each
Pledgor, Lender (personally or through an agent) is hereby authorized and
empowered to transfer and register in its name or in the name of its nominee the
whole or any part of the Pledged Collateral, to exercise the voting rights with
respect thereto, to collect and receive all dividends and other distributions
made thereon, to sell in one or more sales after seven (7) days' notice of the
time and place of any public sale or of the time after which a private sale is
to take place (which notice each Pledgor agrees is commercially reasonable), but
without any previous notice or advertisement, the whole or any part of the
Pledged Collateral and to otherwise act with respect to the Pledged Collateral
as though Lender was the outright owner thereof, each Pledgor hereby irrevocably
constituting and appointing Lender as the proxy and attorney-in-fact of such
Pledgor, with full power of substitution to do so; provided, however, Lender
shall not have any duty to exercise any such right or to preserve the same and
shall not be liable for any failure to do so or for any delay in doing so. Any
sale shall be made at a public or private sale at Lender's place of business, or
at any public building in the City and County of San Francisco or elsewhere to
be named in the notice of sale, either for cash or upon credit or for future
delivery at such price as Lender may deem fair, and Lender may be the purchaser
of the whole or any part of the Pledged Collateral so sold and hold the same
10
<PAGE>
thereafter in its own right free from any claim of such Pledgor or any right of
redemption. Each sale shall be made to the highest bidder, but Lender reserves
the right to reject any and all bids at such sale which, in its discretion, it
shall deem inadequate. Demands of performance, except as otherwise herein
specifically provided for, notices of sale, advertisements and the presence of
property at sale are hereby waived and any sale hereunder may be conducted by an
auctioneer or any officer or agent of Lender.
(b) If, at the original time or times appointed for the sale
of the whole or any part of the Pledged Collateral, the highest bid, if there be
but one sale, shall be inadequate to discharge in full all the Secured
Obligations, or if the Pledged Collateral be offered for sale in lots, if at any
of such sales, the highest bid for the lot offered for sale would indicate to
Lender, in its discretion, the unlikelihood of the proceeds of the sales of the
whole of the Pledged Collateral being sufficient to discharge all the Secured
Obligations, Lender may, on one or more occasions and in its discretion,
postpone any of said sales by public announcement at the time of sale or the
time of previous postponement of sale, and no other notice of such postponement
or postponements of sale need be given, any other notice being hereby waived;
provided, however, that any sale or sales made after such postponement shall be
after seven (7) days' notice to Pledgors.
(c) In the event of any sales hereunder Lender shall, after
deducting all costs or expenses of every kind (including reasonable attorneys'
fees and disbursements) for care, safekeeping, collection, sale, delivery or
otherwise, apply the residue of the proceeds of the sales to the payment or
reduction, either in whole or in part, of the Secured Obligations in accordance
with the agreements and instruments governing and evidencing such Obligations,
returning the surplus, if any, to Pledgors.
(d) If, at any time when Lender shall determine to exercise
its right to sell the whole or any part of the Pledged Collateral hereunder,
such Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act of 1933, as
amended (or any similar statute then in effect) (the "Act"), Lender may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as Lender may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event Lender in its discretion (x) may,
in accordance with applicable securities laws, proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Collateral or part thereof could be or shall have been filed under
11
<PAGE>
the Act, (y) may approach and negotiate with a single possible purchaser to
effect such sale and (z) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment and not with a view to the distribution or sale of such Pledged
Collateral or part thereof. In addition to a private sale as provided above in
this Section 8, if any of the Pledged Collateral shall not be freely
distributable to the public without registration under the Act at the time of
any proposed sale pursuant to this Section 8, then Lender shall not be required
to effect such registration or cause the same to be effected but, in its
discretion (subject only to applicable requirements of law), may require that
any sale hereunder (including a sale at auction) be conducted subject to
restrictions (i) as to the financial sophistication and ability of any Person
permitted to bid or purchase at any such sale, (ii) as to the content of legends
to be placed upon any certificates representing the Pledged Collateral sold in
such sale, including restrictions on future transfer thereof, (iii) as to the
representations required to be made by each Person bidding or purchasing at such
sale relating to that Person's access to financial information about Pledgors
and such Person's intentions as to the holding of the Pledged Collateral so sold
for investment, for its own account, and not with a view to the distribution
thereof, and (iv) as to such other matters as Lender may, in its discretion,
deem necessary or appropriate in order that such sale (notwithstanding any
failure so to register) may be effected in compliance with the Bankruptcy Code
and other laws affecting the enforcement of creditors' rights and the Act and
all applicable state securities laws.
(e) Each Pledgor recognizes that any such private sale may
result in prices and other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. Lender shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit the registrant to
register such securities for public sale under the Act, or under applicable
state securities laws, even if any Pledgor would agree to do so.
(f) Each Pledgor agrees that following the occurrence and
during the continuance of an Event of Default it will not at any time plead,
claim or take the benefit of any appraisal, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in order to prevent or
delay the enforcement of this Agreement, or the absolute sale of the whole or
any part of the Pledged Collateral or the possession thereof by any purchaser at
any sale hereunder, and each Pledgor waives the benefit of all such laws to the
extent it lawfully may do so. Each Pledgor agrees that it will not interfere
with any right, power and remedy of Lender provided for in this Agreement or now
or hereafter existing at law or in equity or by statute or otherwise, or the
12
<PAGE>
exercise or beginning of the exercise by Lender of any one or more of such
rights, powers or remedies. No failure or delay on the part of Lender to
exercise any such right, power or remedy and no notice or demand which may be
given to or made upon any Pledgor by Lender with respect to any such remedies
shall operate as a waiver thereof, or limit or impair Lender's right to take any
action or to exercise any power or remedy hereunder, without notice or demand,
or prejudice its rights as against any Pledgor in any respect.
(g) Each Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to Lender,
that Lender has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 8
shall be specifically enforceable against such Pledgor, and such Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that the Secured Obligations
are not then due and payable in accordance with the agreements and instruments
governing and evidencing such obligations.
9. Application of Proceeds. Any cash held by Lender as Pledged
Collateral and all cash proceeds received by Lender in respect of any sale of,
liquidation of, or other realization upon all or any part of the Pledged
Collateral or pursuant to Section 8(g) hereof shall be applied by Lender as
follows:
(a) First, to the payment of the costs and expenses of such
sale, including reasonable compensation to Lender and its agents and counsel,
and all expenses, liabilities and advances made or incurred by Lender in
connection therewith;
(b) Next, to the payment of the Secured Obligations; and
(c) Finally, after payment in full of all Secured Obligations,
to the payment to Pledgors, or their successors or assigns, or to whomsoever may
be lawfully entitled to receive the same or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds.
10. Waiver. No delay on Lender's part in exercising any power
of sale, Lien, option or other right hereunder, and no notice or demand which
may be given to or made upon Pledgors by Lender with respect to any power of
sale, Lien, option or other right hereunder, shall constitute a waiver thereof,
or limit or impair Lender's right to take any action or to exercise any power of
sale, Lien, option, or any other right hereunder, without notice or demand, or
prejudice Lender's rights as against Pledgors in any respect.
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<PAGE>
11. Assignment. Lender may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the Note, the Keep Well, the Keep Well Guaranty and the
Loan Guaranty, as applicable, and the holder of such instrument shall be
entitled to the benefits of this Agreement.
12. Termination. Immediately following the payment of all
Secured Obligations, Lender shall deliver to each Pledgor the Pledged Collateral
pledged by such Pledgor at the time subject to this Agreement and all
instruments of assignment executed in connection therewith, free and clear of
the Liens hereof and, except as otherwise provided herein, all of Pledgors'
obligations hereunder shall at such time terminate.
13. Lien Absolute. All rights of Lender hereunder, and all
obligations of Pledgors hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Note, the
Purchase Agreement, the Keep Well, the Keep Well Guaranty, the Loan Guaranty or
any other agreement or instrument governing or evidencing any Secured
Obligations;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any part of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Note, the Keep
Well, the Keep Well Guaranty, the Loan Guaranty or any other agreement or
instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Pledgor.
14. Release. Each Pledgor consents and agrees that Lender may
at any time, or from time to time, in its discretion (a) renew, extend or change
(pursuant to any right to do so provided in the relevant agreement) the time of
payment, and/or the manner, place or terms of payment of all or any part of the
Secured Obligations and (b) exchange, release and/or surrender all or any of the
Pledged Collateral, or any part thereof, by whomsoever deposited, which is now
or may hereafter be held by Lender in connection with all or any of the Secured
Obligations; all in such manner and upon such terms as Lender may deem proper,
14
<PAGE>
and without notice to or further assent from such Pledgor, it being hereby
agreed that such Pledgor shall be and remain bound upon this Agreement,
irrespective of the existence, value or condition of any of the Pledged
Collateral, and notwithstanding any such change, exchange, settlement,
compromise, surrender, release, renewal or extension, and notwithstanding also
that the Secured Obligations may, at any time, exceed the aggregate principal
amount thereof set forth in the Note, the Keep Well, the Keep Well Guaranty, the
Loan Guaranty or any other agreement governing any Secured Obligations. Each
Pledgor hereby waives notice of acceptance of this Agreement, and also
presentment, demand, protest and notice of dishonor of any and all of the
Secured Obligations, and promptness in commencing suit against any party hereto
or liable hereon, and in giving any notice to or of making any claim or demand
hereunder upon such Pledgor. No act or omission of any kind on Lender's part
shall in any event affect or impair this Agreement.
15. Indemnification. Each Pledgor jointly and severally agrees
to indemnify and hold Lender harmless from and against any taxes, liabilities,
claims and damages, including reasonable attorney's fees and disbursements, and
other expenses incurred or arising by reason of the taking or the failure to
take action by Lender, in good faith, in respect of any transaction effected
under this Agreement or in connection with the Lien provided for herein,
including, without limitation, any taxes payable in connection with the delivery
or registration of any of the Pledged Collateral as provided herein. Each
Pledgor jointly and severally agrees to promptly reimburse Lender for all actual
reasonable out-of-pocket costs and expenses, including, without limitation,
reasonable counsel fees, incurred by Lender, in connection with the
administration and enforcement of this Agreement and all reasonable fees,
expenses and disbursements, including the reasonable fees of Lender's agents or
representatives, incurred in connection with any lien searches and filings made
by Lender, any amendments hereto or waivers or modifications hereof; provided,
however, that Pledgors shall not be obligated to pay any costs or expenses
(including attorney's fees) incurred by Lender in connection with preparation of
this Agreement or any other Ancillary Agreement or any ordinary administrative
costs and expenses of Lender in the absence of a Default by Borrower under this
Agreement, the Note or any other Ancillary Agreement or a Default by any Pledgor
under this Agreement or any other Ancillary Agreement; and provided, further,
that nothing contained herein shall limit or be deemed to limit any right of
Borrower under Section 13 of the Purchase Agreement. The obligations of Pledgors
under this Section 15 shall survive the termination of this Agreement.
16. Reinstatement. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Pledgor for liquidation or reorganization, should any Pledgor become
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<PAGE>
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of any
Pledgor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
17. Miscellaneous. (a) Lender may execute any of its duties
hereunder by or through agents or employees and shall be entitled to advice of
counsel concerning all matters pertaining to its duties hereunder.
(b) Neither Lender nor any of its officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(c) This Agreement shall be binding upon Pledgors and their
successors and assigns, and shall inure to the benefit of, and be enforceable
by, Lender and its successor and assigns, and shall be governed by, and
construed and enforced in accordance with, the internal laws in effect in the
State of California without giving effect to principles of conflicts of laws,
and none of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for and on behalf of Lender
and Pledgors.
18. Severability. If for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid.
19. Notices. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
16
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receipt acknowledged or sent by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by telecopy answerback
addressed as follows:
(a) If to Lender, at
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, CA 94105
Attention: President
Telecopy Number: (415) 284-7460
With copies to
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
201 High Ridge Road, 1st Floor
Stamford, CT 06927-4900
Attention: Portfolio Management
Telecopy Number: (203) 357-4585
(b) If to any Pledgor other than Rosemont Leasing, Inc.,
at
c/o Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Telecopy Number: (415) 398-9184
(c) If to Rosemont Leasing, Inc., at
200 West Madison Street, 42nd Floor
Chicago, Illinois 60606
Attention: Kenneth R. Posner
17
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or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) business days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
20. Confidentiality. Lender agrees that it will keep
confidential all information regarding Pledgors that it may receive in
connection with the transactions contemplated hereunder and agrees that it will
only use such information in connection with such transactions and will not
disclose any of such information other than (i) to its directors, officers,
employees, advisors, auditors, agents or representatives who are or are expected
to be involved in the evaluation of such information in connection with such
transactions and who are advised of the confidential nature of such information
(and for whose compliance Lender shall be liable), (ii) to the extent such
information presently is or hereafter becomes available to Lender on a
non-confidential basis from a source other than a Pledgor, (iii) to the extent
such information has been independently acquired or developed by Lender without
violating any of its obligations under the Purchase Agreement or any Ancillar
Agreement or (iv) to the extent disclosure is required by law, regulation or
judicial order.
21. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
22. Counterparts. This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one
agreement.
23. Limited Recourse. Notwithstanding anything to the contrary
contained herein, in the Ancillary Agreements, the Keep Well, the Keep Well
Guaranty, the Loan Guaranty or any other document or instrument executed and
delivered in connection with the consummation of the transactions contemplated
hereby and thereby (the "Loan Documents"), none of Rosemont Leasing, Inc.,
Edward P. Schneider, Steven C. Wight and John E. Flynn shall have personal
liability for the payment or performance of the Obligations or for the
representations, warranties or covenants contained in the Loan Documents, and
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Lender and each transferee, holder or assignee of all or any part of the Loan
Documents agree not to seek any damages or personal money judgement against any
of Rosemont Leasing, Inc., Edward P. Schneider, Steven C. Wight or John E. Flynn
for any default under any or all of the Loan Documents, but in any such event,
will look solely to the Pledged Collateral. Nothing herein or in any of the Loan
Documents shall be construed to prevent Lender and each transferee, holder or
assignee of any such Loan Document from exercising and enforcing any other
remedy (not involving personal liability) allowed at law or equity or by any
statute. The foregoing exculpation shall not limit or be construed to limit the
personal liability of any Rosemont Leasing, Inc., Edward P. Schneider, Steven C.
Wight or John E. Flynn to the extent that after a default shall have occurred
under one or more of the Loan Documents, any thereof shall collect rents, issues
or profits of any of the property secured by the Loan Documents and shall not
promptly apply the same in the manner required or permitted by the Loan
Documents, it being intended that Rosemont Leasing, Inc., Edward P. Schneider,
Steven C. Wight and John E. Flynn shall be personally liable to the full extent
of such misapplication after a default.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
and Security Agreement to be duly executed as of the date first written above.
TRITON AVIATION SERVICES V LLC
By: Triton Aviation Services Limited, its
Manager
By: /S/ John E. Flynn
---------------------------------------
Title: John E. Flynn, President
TRITON AVIATION SERVICES LIMITED
By: /S/ John E. Flynn
---------------------------------------
Title: John E. Flynn, President
ROSEMONT LEASING INC.
By: /S/ H. Handelsman
---------------------------------------
Title: VP - H. Handelsman
/S/ Edward Schneider
--------------------------------------------
Edward Schneider
/S/ Steven C. Wight
--------------------------------------------
Steven C. Wight
/S/ John E. Flynn
--------------------------------------------
John E. Flynn
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<PAGE>
Accepted and Acknowledged by:
POLARIS AIRCRAFT INCOME FUND V
By: Polaris Investment Management
Corporation, General Partner
By: /S/ Marc A. Meiches
--------------------------------------
Title: Marc A. Meiches, Vice President
21
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SCHEDULE I
Attached to a d forming a part of that certain Pledge and
Security Agreement dated as of April 1, 1997 among Triton Aviation Services V
LLC, a California limited liability company ("Borrower"), Triton Aviation
Services Limited, a Bermuda corporation ("TASL"), Rosemont Leasing, Inc., a
Delaware corporation, Edward Schneider, Steven C. Wight and John E. Flynn
(collectively, "Pledgors" and each of them individually a "Pledgor") to Polaris
Aircraft Income Fund V, a California limited partnership.
Name and
Address of
Pledgor Interests
- ---------- ---------
Triton Aviation Services Limited 48.5%
55 Green Street, Suite 500
San Francisco, California 94111
Rosemont Leasing, Inc. 48.5%
200 West Madison Street, 42nd Floor
Chicago, Illinois 60606
Edward Schneider 1%
c/o Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, California 94111
Steven C. Wight 1%
c/o Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, California 94111
John E. Flynn 1%
c/o Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, California 94111
<PAGE>
SCHEDULE II
to the Pledge and Security Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated ______, 19__ is delivered
pursuant to [Section 6(a)(iv)/Section 7(d)] of the Pledge and Security Agreement
referred to below. The undersigned hereby agrees that this Pledge Amendment may
be attached to that certain Pledge and Security Agreement, dated ________ __,
1997 among the undersigned and others, as Pledgors, to Polaris Aircraft Income
Fund V, a California limited partnership, that the Pledged Interests listed on
this Pledge Amendment shall be and become a part of the Pledged Collateral
referred to in said Pledge and Security Agreement and shall secure all Secured
Obligations referred to in said Pledge and Security Agreement and that the
undersigned shall be deemed to be a Pledgor under said Pledge and Security
Agreement.
[Name of Pledgor]
By:
---------------------------------
Title:
Name and
Address of
Pledgor Interests
- ---------- ---------
<PAGE>
EXHIBIT A
Agreement, dated April 2, 1997, by and among Rosemont
Leasing, Inc., Edward P. Schneider, Steven C. Wight and John E. Flynn regarding
mutual options on the Pledged Interests.
KEEP WELL AGREEMENT
This KEEP WELL AGREEMENT is dated as of April 1, 1997, and
made by TRITON AVIATION SERVICES LIMITED, a Bermuda corporation ("TASL"), in
favor of TRITON AVIATION SERVICES V LLC, a California limited liability company
(the "Borrower"), and in favor of POLARIS AIRCRAFT INCOME FUND V, a California
limited partnership (the "Lender") (the "Agreement").
R E C I T A L S:
WHEREAS, the Lender has entered into a Purchase, Assignment
and Assumption Agreement dated as of April 1, 1997 with the Borrower (said
Agreement, as it may hereafter be amended or otherwise modified from time to
time, being the "Purchase Agreement", the terms defined therein and not
otherwise defined herein being used herein as therein defined) and, in
connection therewith, the Borrower has delivered to the Lender a promissory note
effective as of April 1, 1997 in the amount of $40,984,460 (the "Note"); and
WHEREAS, TASL, as the owner of 99 percent of the outstanding
member interests in the Borrower, will derive substantial direct and indirect
economic benefit from the transactions contemplated by the Purchase Agreement
and the delivery of the Note to the Lender; and
WHEREAS, in connection with the execution and delivery of the
Purchase Agreement and the Note, the Lender is requiring that TASL shall have
executed and delivered this Agreement;
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lender to enter into the Purchase Agreement and accept delivery of
the Note, TASL hereby agrees as follows:
SECTION 1. Obligation to Cause the Borrower to Perform. (a) TASL shall pay to
the Borrower from time to time, in cash in United States dollars through
additional contributions to the equity of the Borrower, amounts sufficient to
permit the Borrower promptly to perform all of its obligations under the Note,
the Security Agreement and the Purchase Agreement.
<PAGE>
(b) Notwithstanding anything to the contrary contained herein,
TASL shall not be required to make unrecouped payments under this Agreement to
the Borrower or the Lender in excess of an aggregate of $4,034,060 (the "Maximum
Obligation") at any time outstanding; provided, however, that any dividends or
other distributions made by the Borrower (other than dividends or distributions
made in respect of any Equity Dividend Amount, as such term is defined in the
Note), shall be deemed to be made in recoupment of any payments made by TASL
hereunder and the aggregate amount of TASL's obligation under subsection (a)
above shall be restored by the amount of such dividend or distribution, up to
the Maximum Obligation.
(c) If TASL shall at any time and from time to time fail to
perform or comply with any of its obligations contained in subsection (a) above
and if for any reason the Lender shall have failed to receive when due and
payable (whether at stated maturity, by acceleration, or otherwise) the payment
of all or any part of the principal of or interest on the Note or any other
amount payable by the Borrower thereunder or under the Security Agreement or the
Purchase Agreement, then in each such case:
(i) it shall be conclusively assumed without necessity of
proof that such failure by TASL was the sole and direct cause of the
Lender failing to receive such payment when due irrespective of any
other contributing or intervening cause whatsoever;
(ii) TASL agrees that it will be unconditionally liable
to the Lender for liquidated damages (for loss of a bargain and not as
a penalty) for the amount of such payment not received by the Lender
when so due and payable as well as for all costs and expenses, if any,
incurred by the Lender in enforcing this Agreement (but only to the
extent of and as a reduction of the Maximum Obligation);
(iii) TASL further irrevocably waives to the full extent
permitted by applicable law any right or defense TASL may have to cause
the Lender to prove the cause or amount of such damages or to mitigate
the same; and
(iv) since TASL has agreed to liquidated damages in the
amount specified above, the Lender shall not be entitled to any damages
in excess of such amount with respect to such payment.
(d) Notwithstanding anything herein to the contrary, during
any period in which the Lender shall have failed to receive when due and payable
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<PAGE>
(whether at stated maturity, by acceleration or otherwise) the payment of all or
any part of the principal of or interest on the Note or any other amount payable
by the Borrower thereunder or under the Security Agreement or the Purchase
Agreement, TASL shall make payment of all funds under this Agreement directly to
the Lender c/o Polaris Investment Management Corporation, 201 Mission Street,
27th Floor, San Francisco, CA 94105, and the Lender shall apply such funds in
the same manner as though paid directly by the Borrower. All payments which are
received by the Borrower contrary to the provisions of this subsection (d) shall
be received in trust for the benefit of the Lender, shall be segregated from
other funds and property held by the Borrower, and shall be paid over to the
Lender in the same form as so received (with any necessary indorsement).
SECTION 2. Other Permitted Payments. If and to the extent that
amounts paid to the Borrower pursuant to Section 1(a) do not exceed the Maximum
Obligation, TASL may make payments to the Borrower from time to time for any
purpose in which the Borrower is permitted to engage, and in each case the
amount of such payment shall be credited against TASL's obligation to make
payments to the Borrower under Section 1(a) hereof up to the Maximum Obligation;
provided, however, that if the Borrower sells, transfers, conveys or otherwise
disposes of an Asset (as such term is defined in the Note) for an amount (the
"Sale Price") that is less than 90% of the product of (x) the Allocable Portion
Percentage (as defined in the Note) for such Asset multiplied by (y) the then
outstanding balance of the Note, then any payment made by TASL to the Borrower
in the 60 day period preceding or the 60 day period following such sale,
transfer, conveyance or other disposition shall be included in determining if
the Maximum Obligation has been reached only after deducting (a) the Shortfall
Amount (as defined below) and (b) any dividends or other distributions (other
than dividends or distributions in respect of any Equity Dividend Amount) made
by the Borrower during both such periods. For purposes of this Section 2,
"Shortfall Amount" means the amount that is the difference between (i) the
product of the Allocable Portion Percentage for the Asset which has been sold,
transferred, conveyed or otherwise disposed of multiplied by the then
outstanding balance of the Note and (ii) the Sale Price.
SECTION 3. Taxes, Authorizations, Etc. (a) TASL will pay any
stamp or other tax (including any interest and penalties) with respect to the
performance by TASL of its obligations pursuant to this Agreement; provided,
however, in no event shall such taxes include any taxes imposed upon or measured
by the gross or net income of the Borrower or the Lender. If any such tax is
paid by the Lender in the good faith belief that such tax is owing, TASL will,
upon demand of the Lender, indemnify the Lender for such payment, together with
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<PAGE>
any interest, penalties and expenses in connection therewith plus interest
thereon at the lesser of 10% or the maximum rate under applicable law. The
Lender shall thereafter cooperate in a commercially reasonable manner with TASL
in seeking any refunds of such taxes, interest, penalties and expenses which
refunds and any interest thereon shall be paid by the Lender to TASL within five
(5) business days of receipt by the Lender, provided, that in no event shall the
Lender be required to expend its own funds in seeking any such refund and
provided, further, that any expenses incurred in connection therewith shall be
paid by TASL.
(b) TASL will obtain any authorization, approval or other
action by, and will give any notice to or make any filing with, any governmental
authority or regulatory body required in connection with the performance by TASL
of its obligations pursuant to this Agreement.
SECTION 4. Obligation Absolute. TASL will perform its
obligations under this Agreement regardless of any law, regulation or order now
or hereafter in effect in any jurisdiction affecting any of the terms of the
Note, the Security Agreement or the Purchase Agreement or any other document
related thereto or the rights of the Lender with respect thereto. The
obligations of TASL under this Agreement shall be absolute and unconditional
irrespective of:
(i) any lack of validity, enforceability or value of the
Purchase Agreement, the Note, the Security Agreement or any other
agreement or instrument relating thereto or any collateral therefor;
(ii) any change in any term of the Note (including any
change in the time, manner or place of payment thereof), the Security
Agreement or the Purchase Agreement, or any other amendment or waiver
of or any consent to departure from the Note, the Security Agreement or
the Purchase Agreement;
(iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for the Note, the Security Agreement or
the Purchase Agreement;
(iv) any failure to pay any taxes which may be payable
with respect to the performance of such obligations by TASL, or any
failure to obtain any authorization or approval from or other action
by, or to notify or file with, any Government Entity required in
connection with the performance of such obligations by TASL; or
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<PAGE>
(v) any impossibility or impracticality of performance,
illegality, force majeure, any act of any Government Entity, or any
other circumstance which might constitute a defense available to, or a
discharge of, TASL or a surety, or any other circumstance, event or
happening whatsoever, whether foreseen or unforeseen and whether
similar or dissimilar to anything referred to above in this Section 4.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment is rescinded or must otherwise be returned by the
Lender upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, all as though such payment had not been made. The obligations of TASL
under this Agreement shall not be subject to reduction, termination or other
impairment by reason of any set-off, recoupment, counterclaim or defense or for
any other reason.
SECTION 5. Waiver. TASL hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to the Purchase
Agreement, the Note and this Agreement and any requirement that the Lender
protect, secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against the Borrower or
any other person or entity or any collateral.
SECTION 6. Separate Undertaking. Without limiting the
generality of any of the foregoing provisions of this Agreement, TASL
irrevocably waives, to the full extent permitted by applicable law and for the
benefit of, and as a separate undertaking with, the Lender, any defense to the
performance of this Agreement which may be available to TASL as a consequence of
this Agreement being rejected or otherwise not assumed by the Borrower or any
trustee or other similar official for the Borrower or for any substantial part
of the property of the Borrower, or as a consequence of this Agreement being
otherwise terminated or modified, in any proceeding seeking to adjudicate the
Borrower a bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, protection, relief or composition of the Borrower
or the debts of the Borrower under any law relating to bankruptcy, insolvency or
reorganization or relief or protection of debtors, whether such rejection,
non-assumption, termination or modification be by reason of this Agreement being
held to be an executory contract or by reason of any other circumstance. If this
Agreement shall be so rejected or otherwise not assumed, or so terminated or
modified, TASL agrees for the benefit of, and as a separate undertaking with,
the Lender, that it will be unconditionally liable to pay to the Lender an
amount equal to each payment which would otherwise be payable by TASL under or
in connection with this Agreement if this Agreement were not so rejected or
otherwise not assumed or were otherwise not so terminated or modified, such
5
<PAGE>
amount to be payable to the Lender, as and when such payment would otherwise be
payable hereunder and such amount to be applied as such payment would otherwise
be applied under the Note.
SECTION 7. Representations and Warranties. TASL hereby
represents and warrants to Borrower and Lender as follows:
(a) TASL (i) is a corporation duly organized, validly existing
and in good standing under the laws of Bermuda and (ii) has the
requisite power and authority to carry on its business as presently
conducted and as proposed to be conducted after the date of this
Agreement and to enter into and perform its obligations under this
Agreement.
(b) TASL is the beneficial and record owner of 99% of all
outstanding member interests of the Borrower free and clear of any
lien, security interest or other charge or encumbrance other than that
set forth in the Security Agreement.
(c) The execution and delivery by TASL of this Agreement, and
the performance by TASL of its obligations hereunder (i) have been duly
authorized by all necessary action on the part of TASL, (ii) do not
contravene any provision of law, governmental rule, regulation,
judgment or order applicable to or binding on TASL, or the
organizational documents of TASL and (iii) do not require the consent
or approval of, the giving of notice to, the registration with, or the
taking of any other action in respect of, any federal, state or foreign
governmental authority or agency or any other Person, except those
already obtained.
(d) This Agreement has been duly executed and delivered and is
enforceable against TASL in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws affecting the rights and remedies of
creditors generally and, with respect to the enforceability of this
Agreement, by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).
SECTION 8. No Transfer of Interest. TASL covenants and agrees
that, so long as the Note shall remain unpaid, TASL will not sell, assign,
pledge, encumber or otherwise dispose of any member interest of the Borrower
except to the extent and in the manner permitted by the Security Agreement and
that any transfer by it of any interest in the Borrower shall not reduce,
release or lessen its obligations under this Agreement.
SECTION 9. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by TASL therefrom shall
in any event be effective unless the same shall be in writing and signed by the
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<PAGE>
Borrower and the Lender, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 10. Expenses. TASL will upon demand pay to the
Borrower and the Lender, respectively, the amount of any and all reasonable
expenses, including attorneys' fees and expenses, which the Borrower and the
Lender, as the case may be, may incur in connection with the exercise or
enforcement of any of their respective rights or interests hereunder; provided,
however, that TASL shall not be obligated to pay any costs or expenses
(including attorney's fees) incurred by the Borrower or the Lender in connection
with the preparation of this Agreement or (x) any ordinary administrative costs
and expenses of the Borrower so long as there is no default by TASL under this
Agreement or (y) any ordinary administrative costs and expenses of the Lender so
long as there is no default by TASL under this Agreement or a default by the
Borrower under the Purchase Agreement, the Note or any other Ancillary
Agreement.
SECTION 11. Addresses for Notices. All notices, demands,
declarations and other communications required by this Agreement shall be in
writing and shall be effective (i) if given by facsimile, when transmitted, (ii)
if given by registered or certified mail, three business days after being
deposited with the U.S. Postal Service, (iii) if given by courier, when
received, or (iv) if personally delivered, when so delivered, addressed:
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<PAGE>
If to TASL, to:
Triton Aviation Services Limited
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Facsimile: (415) 398-9184
or to such other address as TASL may from time to time designate in writing to
the Borrower and Lender.
If to the Borrower, to:
Triton Aviation Services V LLC
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Facsimile: (415) 398-9184
or to such other address as the Borrower may from time to time designate in
writing to TASL and Lender.
If to Lender, to:
Polaris Aircraft Income Fund V
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, CA 94105
Attention: President
Facsimile: (415) 284-7460
With a copy to:
Polaris Aircraft Income Fund V
c/o Polaris Investment Management Corporation
201 High Ridge Road, 1st Floor
Stamford, CT 06927-4900
Attention: Portfolio Management
Facsimile: (203) 357-4585
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<PAGE>
or to such other address as Lender shall from time to time designate in writing
to the Borrower and TASL.
SECTION 12. No Waiver; Remedies. No failure on the part of the
Borrower or the Lender to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 13. Continuing Agreement; Transfer of Note. This
Agreement is a continuing agreement and shall (i) remain in full force and
effect until payment in full and discharge of the Note, (ii) be binding upon
TASL, its successors and assigns, and (iii) inure to the benefit of and be
enforceable by the Borrower, the Lender and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), the Lender may assign or otherwise transfer the Note held by it to any
other person or entity, and such other person or entity shall thereupon become
vested with all the rights in respect thereof granted to the Lender herein or
otherwise.
SECTION 14. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of California.
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<PAGE>
IN WITNESS WHEREOF, TASL has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
TRITON AVIATION SERVICES
LIMITED
By:/s/JOHN E. FLYNN
--------------------
Name: JOHN E. FLYNN
Title: PRESIDENT
The foregoing Agreement
is hereby accepted and
agreed to as of the date
first above written:
TRITON AVIATION SERVICES V LLC
By: Triton Aviation Services
Limited, Manager
By:/S/JOHN E. FLYNN
--------------------
Name: JOHN E. FLYNN
Title: PRESIDENT
POLARIS AIRCRAFT INCOME FUND V
By: Polaris Investment Management
Corporation, General Partner
By:/S/MARC A. MEICHES
----------------------
Name: MARC A. MEICHES
Title: VICE PRESIDENT
10
PROMISSORY NOTE
$30,835,295.20 Effective as of
April 1, 1997
FOR VALUE RECEIVED, the undersigned, TRITON AVIATION SERVICES
V LLC, a California limited liability company having its principal office at 55
Green Street, San Francisco, California 94111 ("Borrower"), hereby promises to
pay to the order of POLARIS AIRCRAFT INCOME FUND V, a California limited
partnership ("Lender"), having an office c/o General Electric Capital Aviation
Services, Inc. at 201 High Ridge Road, Stamford, CT 06925, the principal amount
of THIRTY MILLION EIGHT HUNDRED THIRTY-FIVE THOUSAND TWO HUNDRED NINETY-FIVE
AND 20/100 DOLLARS ($30,835,295.20) (hereinafter referred to as the principal
amount hereof), together with interest thereon (computed on the basis of a 360
day year) on the unpaid balance thereof, commencing from the effective date
hereof. Interest shall accrue and be payable at a rate equal to the lesser of
the maximum lawful rate under applicable law or twelve percent (12%) per annum
(the "Interest Rate"). All past due installments of principal and, if permitted
by applicable law, of interest, shall bear interest at a rate equal to the
Interest Rate plus two percent (2%) per annum (the "Default Interest Rate").
During the existence of any Event of Default (as such term is defined in Section
5 of this Promissory Note), the entire unpaid balance of principal shall, at the
option of the holder hereof, bear interest at the Default Interest Rate.
Borrower agrees to pay Lender quarterly, as it accrues, interest on the
principal amount hereunder. Subject to Sections 1.2 and 1.4 hereof, the
principal amount hereof, together with interest at the Interest Rate, shall be
payable as provided in Schedule A hereto in twenty-seven (27) quarterly payments
of principal and interest payable on each March 31, June 30, September 30 and
December 31, beginning June 30, 1997 and one balloon payment of all remaining
principal and accrued interest on March 31, 2004. Each payment of principal and
interest shall be made by wire transfer to a bank account designated by the
holder to Borrower in writing.
The further terms and conditions of this Promissory Note are
as follows:
<PAGE>
1.0 Seller Financing; Defined Terms.
1.1. Borrower and Lender have entered into that certain
Purchase, Assignment and Assumption Agreement (the "Purchase Agreement") dated
as of April 1, 1997. This Promissory Note is given in respect of certain
obligations as more fully set forth in Section 6 hereof, in connection with
Borrower's acquisition of the Transferred Interests.
1.2. The principal amount of this Promissory Note and the
principal repayments set forth on Schedule A shall be recalculated in accordance
with Section 1.4 hereof to give effect to any reduction to the Purchase Price
pursuant to Section 4(c) or Section 4(d)(ii) of the Purchase Agreement.
1.3. This Promissory Note may be prepaid in whole or in part
at any time without penalty.
1.4. Amounts prepaid pursuant to Sections 1.3 or 3.8 hereof
shall be applied on a pro rata basis to reduce all remaining payments of
principal and the interest payable thereon shall be recalculated based on such
reduced outstanding principal amount in accordance with a mortgage style
amortization schedule determined with reference to the remaining term of this
Promissory Note plus four quarters with a balloon payment due at March 31, 2004.
1.5. Unless otherwise defined herein, terms defined in the
Purchase Agreement are used herein as therein defined, and the following shall
have (unless otherwise provided elsewhere in this Promissory Note) the following
respective meanings (such meanings being equally applicable to both the singular
and plural form of the terms defined):
"Economic Interest" means with respect to a member of Borrower
(i) if such member's capital account is a positive amount, the percentage
obtained by dividing such member's capital account by the total positive capital
accounts of all members of Borrower, (ii) if such member's capital account is
zero or less, a percentage equal to zero, or (iii) if the capital accounts of
all members are zero or less, the percentage interest of such member in
distributions of Borrower's cash flow from operations. The capital account
amounts set forth in the most recently filed Federal income tax return of
Borrower and the cash flow percentages set forth in Borrower's operating
agreement shall be used for the foregoing determination.
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<PAGE>
"Equity Dividend Amount" means, (i) for any calendar month
that ends prior to the first Effective Time to occur under the Purchase
Agreement, an amount equal to $64,760, and (ii) for the calendar month in which
the first Effective Time occurs under the Purchase Agreement and for each
calendar month thereafter, an amount equal to $107,933 and for any period that
is less than a calendar month, a proportionate amount thereof calculated using
the same proportion that the number of days in such period bears to thirty days.
"Indebtedness" of any Person means any (i) indebtedness for
borrowed money or for the deferred purchase price of property or services (but
not including obligations to trade creditors incurred in the ordinary course of
business that are not yet due and payable), (ii) obligations evidenced by notes,
bonds, debentures or similar instruments, (iii) indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
acquired property, (iv) capitalized lease obligations of such Person, (v)
obligations guaranteeing, indemnifying, assuming, purchasing or repaying any
indebtedness, lease, dividend, or other obligation of any other Person in any
manner, (vi) indebtedness referred to in clause (i), (ii), (iii), (iv) or (v)
above secured by (or for which the holder of such indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
owned by such Person, or (vii) liabilities under Title IV of ERISA (as such term
is defined in Section 2.11).
"Letter of Credit" means an irrevocable direct-pay letter of
credit issued by a bank (i) whose long term debt obligations are rated "AA" or
better by Thompson's Bankwatch or (ii) that is rated "AA" or better by Standard
& Poor's in the Financial Institutions Rating Service and that is payable upon
presentation by the beneficiary of such Letter of Credit of a sight draft (it
being understood, but without any impairment of the issuing bank's obligations
under such Letter of Credit, that the beneficiary shall not present such sight
draft unless (x) there has been a default under the promissory note secured by
such Letter of Credit or (y) the Letter of Credit would expire within 45 days of
such presentation and an extension of such expiration date shall not have been
granted nor an acceptable replacement Letter of Credit been provided).
"Permitted Investment" means (i) any Permitted SPV Investment
and (ii) (A) any evidence of Indebtedness, maturing not more than one year after
its acquisition by Borrower, issued or unconditionally guaranteed by the United
States Government, (B) commercial paper, maturing not more than twelve months
from the date of issue, which is issued by a Person having a rating of A-1 or
P-1 or the equivalent or higher from at least one of Standard & Poor's Ratings
Services, Moody's Investors Service, Inc., Phoenix Duff & Phelps or Fitch
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<PAGE>
Investors Services, (C) any certificate of deposit or bankers acceptance,
maturing not more than one year after its acquisition by Borrower, which is
issued by a commercial banking institution organized under the laws of the
United States that has a combined capital and surplus and undivided profits of
not less than $250,000,000, (D) any repurchase agreement entered into with any
commercial banking institution described in the foregoing clause (C) which is
secured by a security interest in any obligation of a type described in any of
the foregoing clauses (A) through (C), or (E) any money market account or
similar investment account that invests solely in securities of the type
described in clause (A), (B) or (C) of this definition.
"Permitted SPV Indebtedness" means any indebtedness of
Borrower: (i) owed to any Triton LLC, (ii) for monies borrowed solely for the
purpose of (x) funding any maintenance, improvements, additions, refurbishments
or modifications to any Aircraft owned, directly or indirectly, by Borrower or
(y) making payments due and owing to Lender under this Promissory Note, (iii)
evidenced by a note payable to such Triton LLC on demand, bearing interest at a
rate equal to the higher of 12% per annum or Bank of America's prime rate plus
2%, but not exceeding the maximum lawful rate under applicable law and (iv)
guaranteed by TIL and secured by a Letter of Credit in an amount equal to the
outstanding balance of such promissory note plus six months interest thereon
(calculated at 10% per annum), all as provided in the Loan Guaranty.
"Permitted SPV Investment" means a demand loan made: (i) to
any Triton LLC, (ii) solely for the purpose of (a) funding any maintenance,
improvements, additions, refurbishments or modifications to any Aircraft owned,
directly or indirectly, by such Triton LLC or (b) making payments due and owing
to a Polaris Entity by such Triton LLC under a promissory note entered into in
connection with an SPV Purchase Agreement, (iii) evidenced by a promissory note
made by such Triton LLC payable to Borrower on Borrower's demand, (iv) bearing
interest at a rate equal to the higher of 10% per annum or Bank of America's
prime rate plus 2%, but not exceeding the maximum lawful rate under applicable
law and (v) guaranteed by TIL and secured by a Letter of Credit issued in favor
of Borrower in an amount equal to the outstanding balance of such promissory
note plus six months interest thereon (calculated at 10% per annum).
"Polaris Entity" means any of Polaris Aircraft Income Fund II,
Polaris Aircraft Income Fund III, Polaris Aircraft Income Fund IV, Polaris
Aircraft Income Fund V or Polaris Aircraft Income Fund VI, each a California
limited partnership.
"Qualified Holder" means (i) any Person who is Triton
Management, (ii) any Triton Member or (iii) any Person with a consolidated net
worth, net of minority interests and, if such Person is a natural person,
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exclusive of his principal residence, of an amount that is not less than the
greater of (x) $3,000,000 or (y) the product of the aggregate consideration
(including cash, notes or other deferred compensation) paid by such Person for
all ownership interests owned by such Person in Borrower multiplied by two.
"SPV Purchase Agreements" means those certain Purchase,
Assignment and Assumption Agreements, each by and between a Polaris Entity, as
assignor, and a Triton LLC, as assignee, entered into simultaneously with the
Purchase Agreement.
"TAL" means Triton Aviation Limited, a Bermuda corporation.
"TASL" means Triton Aviation Services Limited, a Bermuda
corporation.
"TIL" means Triton Investment Limited, a Bermuda corporation.
"Triton Container" means Triton Container International
Limited, a Bermuda corporation.
"Triton LLC" means any of Triton Aviation Services II LLC,
Triton Aviation Services III LLC, Triton Aviation Services IV LLC or Triton
Aviation Services V LLC, each a California limited liability company.
"Triton Management" means any director, officer or other
member of senior management of TASL, or TIL or any Triton Member.
"Triton Member" means (i) TAL, TASL and Triton Container and
(ii) any other Person 90% or more of the ownership interest in which is held,
directly or indirectly, by TIL and which Person has a consolidated net worth,
net of minority interests, that is not less than the greater of (x) $3,000,000
or (y) the product of the aggregate consideration (including cash, notes or
other deferred compensation) paid by such Person for all ownership interests
owned by such Person in Borrower multiplied by two.
2.0 Representations and Warranties. To induce Lender to accept this
Note and extend seller financing to Borrower, Borrower hereby makes the
following representations and warranties:
2.1. Borrower is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of California
and is duly qualified as a foreign limited liability company and in good
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standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification (except for
jurisdictions in which failure to so qualify or be in good standing would not
have a material adverse effect on the business, assets, operations, prospects,
or financial or other condition of Borrower (a "Material Adverse Effect")).
2.2. The execution, delivery and performance by Borrower of
this Promissory Note are within Borrower's power, have been duly authorized by
all necessary or proper limited liability company action, are not in
contravention of any provision of Borrower's articles of organization, operating
agreement, or any other such governing document, will not violate any law or
regulation, or any order or decree of any Government Entity, will not conflict
with or result in the breach or termination of, constitute a default under or
accelerate any performance required by, any indenture, mortgage, deed of trust,
lease, agreement, or other instrument to which Borrower is a party or by which
Borrower or its property is bound, and do not require the consent or approval of
any Person except those already obtained. This Promissory Note constitutes the
legal, valid and binding obligation of Borrower enforceable against it in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws affecting the
rights and remedies of creditors generally and, with respect to the
enforceability of this Promissory Note, by general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
2.3. The pro forma balance sheet of Borrower as of May 1,
1997, a copy of which has been furnished to Lender, was prepared in accordance
with generally accepted accounting principles ("GAAP") and reflects the
assignment of all Transferred Interests and the seller financing transactions
contemplated hereunder and under the Purchase Agreement as if they had occurred
as at the date of such balance sheet and presents fairly on a pro forma basis
the financial position of Borrower at such date assuming the events specified in
this paragraph had actually occurred on such date. Borrower, as of the date of
this Promissory Note, had no obligations, contingent liabilities or liabilities
for taxes or other charges, long-term leases or unusual forward or long-term
commitments which were not reflected in the aforementioned pro forma balance
sheet of Borrower.
2.4. No dividends or other distributions have been declared,
paid or made upon any membership interest (or any other equity interest) of
Borrower nor have any membership interests (or any other equity interest) of
Borrower been redeemed, retired, purchased or otherwise acquired for value by
Borrower.
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2.5. Borrower owns full, complete and good title to all of its
properties and assets and none of its properties and assets is subject to any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, easement or encumbrance, or
other security agreement of any kind or nature whatsoever (collectively, "Liens"
and individually, a "Lien"), except Permitted Encumbrances (as defined in
Section 4.3 hereof).
2.6. Borrower has insurance on all its properties or assets,
including, without limitation, policies of fire, theft and other casualty and
liability insurance on terms and conditions and in amounts that are customary
for owners of commercial aircraft. All such policies are in full force and
effect and there are no defaults by any party under any provision thereof.
2.7. Borrower is not in default, nor is any third party in
default, under or with respect to any contract, agreement, lease or other
instrument to which Borrower is a party.
2.8. Borrower is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended. The obligations evidenced by this Promissory Note, the repayment
thereof and the consummation of the transactions contemplated by this Promissory
Note will not violate any provision of such Act or any rule, regulation or order
issued by the Securities and Exchange Commission thereunder.
2.9. The seller financing evidenced by this Promissory Note
will be used only for the purposes contemplated hereunder and under the Purchase
Agreement.
2.10. All federal, state, local and foreign tax returns,
reports and statements required to be filed by Borrower have been filed with the
appropriate governmental agencies and all taxes, charges and other impositions
shown thereon to be due and payable have been paid prior to the date on which
any fine, penalty, interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest or late charge has been paid.
Borrower has paid when due and payable all taxes and other charges required to
be paid by it except those contested in good faith by appropriate proceedings,
with adequate reserves made in respect thereof in accordance with and to the
extent required by GAAP.
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2.11. Borrower does not maintain or contribute to and is not
obligated to contribute to, and has not maintained or contributed to and was not
obligated to contribute to, any employee benefit plan as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
2.12. No action, claim or proceeding is now pending or
threatened against Borrower, at law, in equity or otherwise, before any court,
board, commission, agency or instrumentality of any federal, state, or local
government or of any agency or subdivision thereof, or before any arbitrator or
panel of arbitrators nor does a state of facts exist which is reasonably likely
to give rise to such proceedings.
2.13. All representations and warranties made by Borrower in
the Purchase Agreement are true and correct in all material respects on and as
of the date hereof as though made on and as of this date.
3.0 Affirmative Covenants. Borrower covenants and agrees that, unless
Lender shall otherwise consent in writing, from and after the date hereof and
until this Promissory Note is paid in full:
3.1. Borrower shall (i) do or cause to be done all things
necessary to preserve and keep in full force and effect its existence as a
California limited liability company and its rights; (ii) continue to conduct
its business in accordance with its operating agreement and articles of
organization as permitted hereunder; and (iii) at all times use its best efforts
to maintain, preserve and protect, or cause to be maintained, preserved and
protected, all of its property, in use or useful in the conduct of its business
and keep the same in good repair, working order and condition (taking into
consideration ordinary wear and tear).
3.2. Borrower shall (i) pay and discharge or cause to be paid
and discharged all its Indebtedness, including, without limitation, all amounts
outstanding hereunder as and when due and payable, and (ii) except where
contested, in good faith, by proper legal actions or proceedings with adequate
cash reserves therefor, pay and discharge or cause to be paid and discharged
promptly all (A) taxes or other charges imposed upon it, its income and profits,
or any of its real or personal property, whether tangible or intangible, and (B)
lawful claims for labor, materials, supplies and services or otherwise before
any thereof shall become in default.
3.3. Borrower shall deliver to Lender (i) within 60 days after
the end of each of the first three fiscal quarters of Borrower, a copy of the
unaudited balance sheet
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of Borrower as of the end of such fiscal quarter and an unaudited statement of
income and cash flow of Borrower for such fiscal quarter, all prepared in
accordance with GAAP (subject to normal year end adjustment), accompanied by a
certification of the chief executive officer or chief financial officer of the
manager of Borrower that all such financial statements are complete and correct
and present fairly, all in accordance with GAAP (subject to normal year end
adjustments), the financial position, the results of operations and cash flow
statements of Borrower as at the end of such quarter and for the period then
ended and that no Event of Default or event which with the giving of notice or
lapse of time or both would become an Event of Default (a "Default") is in
existence as of such time, (ii) within 120 days after the end of each fiscal
year of Borrower, a copy of the audited balance sheet of Borrower as of the end
of such fiscal year and an audited statement of income and cash flow of Borrower
for such fiscal year, all prepared in accordance with GAAP, accompanied by (x) a
certification of the chief executive officer or chief financial officer of
Borrower that all such financial statements are complete and correct and present
fairly, all in accordance with GAAP, the financial position, the results of
operations and the changes in financial position of Borrower as at the end of
such year and for the period then ended and that no Default or Event of Default
is in existence as of such time and (y) an auditor's report unqualified as to
the scope of the audit and as to the Borrower being a going concern, from KPMG
Peat Marwick LLP, or any other firm of independent certified public accountants
of recognized national standing selected by Borrower and acceptable to Lender,
(iii) copies of any documents relating to or evidencing any Permitted SPV
Indebtedness incurred by or any Permitted SPV Investment made by Borrower, no
later than three (3) business days after Borrower incurring or making, as
applicable, any Permitted SPV Indebtedness or Permitted SPV Investment, (iv)
notice that the Borrower has incurred any other Indebtedness or acquired any
Permitted Investments (other than Permitted SPV Investments) no later than 30
days after Borrower incurring or making, as applicable, any such Indebtedness or
Permitted Investment together with such other information about any Indebtedness
or Permitted Investment as Lender may reasonably request, (v) written notice of
any Keep Well proceeds received by Borrower and of any dividend or distribution
declared or made by Borrower, in each case no later than three (3) business days
after receipt of such proceeds or the declaration or payment of any such
dividend or distribution, as applicable and (vi) written notice of any
transaction by Borrower with an Affiliate setting forth the identity of each
Affiliate that is a party to such transaction, the material terms of such
transaction and any amounts required to be paid by, on behalf of or to Borrower
in respect of such transaction.
3.4. Borrower shall deliver to Lender as soon as practicable,
but in any event within two (2) business days after Borrower becomes aware of
the existence of any Default or Event of Default, or any development or other
information which would have a
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Material Adverse Effect, telephonic or facsimile notice specifying the nature of
such Default, Event of Default or development or information, including the
anticipated effect thereof, which notice, if telephonic, shall be promptly
confirmed in writing to Lender within three (3) business days.
3.5. Borrower shall deliver to Lender such other information
respecting Borrower's business, financial condition or prospects as Lender may,
from time to time, reasonably request including, without limitation, monthly
reports of the outstanding balances of accounts receivable since the last
monthly report; a detailed aged trial balance of all then-existing accounts
receivable by Lessee and specifying the names of account debtors and such other
information relating to the accounts receivable as Lender may reasonably
require; and a certificate of the gross revenues of Borrower for the preceding
month. Lender and any of its officers, employees and/or agents shall have the
right, exercisable as frequently as Lender reasonably determines to be
appropriate, during normal business hours (or at such other times as may
reasonably be requested by Lender), to inspect the properties and facilities of
Borrower and to inspect, audit and make extracts from all of Borrower's records,
files and books of account. Borrower shall deliver any document or instrument
reasonably necessary for Lender to obtain records from any service bureau
maintaining records for Borrower.
3.6. (a) Borrower shall, either directly or indirectly,
procure and maintain insurance policies with reputable insurers, covering all of
its properties or assets, including, without limitation, policies of fire, theft
and other casualty and liability insurance on terms and conditions and for
amounts that are customary for owners of commercial aircraft. Without limiting
the foregoing, Borrower shall, directly or indirectly, procure and maintain, at
all times, (i) all risk hull insurance (including the War and Allied Perils
Endorsement insurance) written by recognized aircraft insurers on each Aircraft
owned, directly or indirectly, by Borrower in an amount equal, at all times, to
the Appraised Value of such Aircraft and (ii) comprehensive liability insurance
written in an amount not less than $500,000,000. Lender shall be named as an
additional insured on all such insurance policies and named as additional
insured on all liability policies.
(b) All such policies of insurance shall provide (i) by means
of endorsements or otherwise, in form and manner satisfactory to Lender, that
such insurance shall not be invalidated by any action or inaction of Borrower
and shall insure Lender, regardless of any breach or violation of any warranty,
declaration or condition contained in such policies by Borrower; (ii) by means
of endorsements or otherwise in form and manner satisfactory to Lender, that if
such insurance is cancelled for any reason whatever, or any substantial change
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<PAGE>
is made in the coverage which affects the interests of Lender or if such
insurance is allowed to lapse for nonpayment of premium, such cancellation,
change or lapse shall not be effective as to Lender for 30 days (or, in the case
of any war risks or allied perils coverage, seven (7) days, or such other period
as may from time to time be customarily obtainable in the industry) after
receipt by Lender of written notice from such insurers of such cancellation,
change or lapse; (iii) by means of endorsements or otherwise in form and manner
satisfactory to Lender, that such insurers shall waive any rights of subrogation
against Lender; (iv) that they are primary without right of contribution from
any other insurance which is carried by Lender with respect to any Aircraft that
is owned, directly or indirectly, by Borrower (or any engines or other parts
thereof); and (v) that all provisions thereof, except the limits of liability,
shall operate in the same manner as if there were a separate policy with and
covering each insured.
(c) Borrower shall arrange for appropriate certification, to
the reasonable satisfaction of Lender, as to the scope and existence of such
insurance and the terms thereof to be made to Lender on or prior to the
occurrence of the first Effective Time under the Purchase Agreement and annually
thereafter, until this Promissory Note is paid in full, and thereafter not later
than fourteen (14) days after the renewal date of each of the insurances by each
insurer (or by a firm of independent insurance brokers of reorganized standing
in the placement of similar coverage) in such form and dealing with such matters
relating to the obligations of Borrower hereunder as Lender may reasonably
require.
3.7. Borrower shall comply with all Federal, state and local
laws and regulations applicable to it, including, without limitation, those
relating to environmental matters and perform, within all required time periods,
all of its obligations and enforce all of its rights under each agreement to
which it is a party. Borrower shall not terminate or modify in any manner
materially adverse to Borrower any provision of any agreement to which it is a
party.
3.8. (a) Borrower shall make a prepayment on this Promissory
Note on the terms hereinafter set forth in the event of any sale or casualty
loss (each a "Prepayment Event") relating to any Aircraft or any property
comprising all or any portion of any Transferred Interest acquired by Borrower
pursuant to the Purchase Agreement (an "Asset") (each such Asset that is the
subject of a Prepayment Event is hereinafter referred to as a "Removed Asset");
provided, however, a Prepayment Event shall not be deemed to include (i) any
sale of an engine or a part if, within 45 days (with respect to engines) or 90
days (with respect to parts) after such sale, Borrower obtains a replacement for
such engine or part that has the same or greater value as the engine or part
that was the subject of such sale, (ii) any sale of obsolete or surplus parts,
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at their fair market value, to the extent that the aggregate of all such sales
in a calendar year do not exceed $200,000 or (iii) any casualty loss of an
engine or any part if Borrower causes such engine or part to be repaired or
replaced, within 45 days (with respect to engines) or 90 days (with respect to
parts) after such casualty loss, and such repaired or replaced engine or part
has the same or greater value as the engine or part that was the subject of such
casualty loss. If a Prepayment Event relates to a Removed Asset but relates to
less than the entire Removed Asset, Borrower and Lender shall negotiate in good
faith to determine the appropriate percentage of such Removed Asset that was the
subject of such Prepayment Event. Such percentage shall then be multiplied by
the appraised value of the entire Removed Asset (calculated immediately prior to
the Prepayment Event), and the amount therefrom shall be used to calculate the
Allocable Portion Percentage (as defined below) of the Removed Asset.
(b) The amount of the prepayment required as a result of a
Prepayment Event shall be an amount equal to the greater of (1) 100% of the
Allocable Portion Percentage for the Removed Asset multiplied by the then
outstanding principal balance of this Promissory Note and (2) the proceeds
actually received by Borrower in respect of the Removed Asset, net of any
reasonable out of pocket costs and expenses incurred by Borrower in connection
with such Prepayment Event (but not to exceed an amount equal to 120% of the
Allocable Portion Percentage with respect to the Removed Asset multiplied by the
then outstanding principal balance of this Promissory Note). The Allocable
Portion Percentage shall mean, with respect to any Asset, the amount obtained by
dividing the appraised value of the Asset immediately prior to the Prepayment
Event by the sum of the appraised values of all Assets owned, directly or
indirectly, by Borrower immediately prior to the Prepayment Event. For this
purpose, appraised value of an Aircraft owned, directly or indirectly, by
Borrower shall be the Appraised Value. The appraised value of any receivable
that constitutes a Removed Asset shall be the aggregate outstanding amount of
the principal and accrued interest and fees on such receivable as of the date of
the Prepayment Event.
(c) Any prepayment required as a result of a Prepayment Event
shall be due and payable hereunder no later than three (3) days after the date
of the Prepayment Event; provided, that if such Prepayment Event is a casualty
loss that is insured, the portion of the prepayment required as a result of such
Prepayment Event that is payable pursuant to such insurance coverage shall be
due and payable hereunder no later than the first to occur of (i) three (3) days
after receipt by Borrower of such insurance coverage or (ii) 15 days after the
date of the Prepayment Event. Amounts prepaid pursuant to this Section 3.8 shall
be applied as provided in Section 1.4 hereof.
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4.0 Negative Covenants. Borrower covenants and agrees that, without
Lender's prior written consent, from and after the date hereof and until this
Promissory Note is paid in full:
4.1. Borrower shall not, directly or indirectly, by operation
of law or otherwise, merge with, consolidate with, acquire all or substantially
all of the assets or capital stock or other equity interests in, or otherwise
combine with, any Person (excluding the acquisition of the Transferred Interests
pursuant to the Purchase Agreement), nor form any subsidiary.
4.2. (a) Except as otherwise expressly permitted by this
Promissory Note, Borrower shall not create, incur, assume or permit to exist any
Indebtedness except (i) Indebtedness evidenced by this Promissory Note, (ii)
Permitted SPV Indebtedness, (iii) Indebtedness to trade creditors incurred in
the ordinary course of business that is due and payable but is being contested
in good faith, by proper legal actions or proceedings, if Borrower has cash
reserves on hand adequate to pay such Indebtedness, (iv) deferred taxes that are
either not yet due and payable or are being contested in good faith by proper
legal actions or proceedings, if Borrower has cash reserves on hand adequate to
pay such deferred taxes, and (v) Indebtedness, not to exceed $26,000,000, in the
aggregate, during the term of this Promissory Note that is incurred and used
solely to hushkit an Aircraft that is owned, directly or indirectly, by Borrower
(or to refinance any Indebtedness incurred solely to hushkit such Aircraft;
provided, however, that (x) the amount of such Indebtedness does not exceed the
then outstanding principal amount of the Indebtedness being so refinanced and
(y) the term of such Indebtedness does not materially extend beyond the term of
the Indebtedness being so refinanced). Indebtedness incurred by Borrower to
hushkit an Aircraft that is owned, directly or indirectly, by it shall not
exceed the aggregate fair market value of such hushkit equipment and labor costs
necessary to install such hushkit equipment on such Aircraft.
(b) Borrower shall not make investments in, or make or
accrue loans or advances of money through the direct or indirect holding of
securities or otherwise to any Person; provided, however, that Borrower may own
the Transferred Interests and may invest in Permitted Investments. Borrower
shall demand payment under any Permitted SPV Investment (or any guaranty or
Letter of Credit guaranteeing or securing such Permitted SPV Investment) to the
extent Borrower needs funds to make any payments due to Lender under this
Promissory Note.
4.3. Borrower shall not create or permit any Lien on any of
its properties or assets except any of the following ("Permitted Encumbrances"):
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(A) Liens for taxes or assessments or other governmental charges or levies, not
yet due and payable, (B) Liens in favor of such Owner Trustee pursuant to a
Trust Agreement or, in each case, workers', mechanics', suppliers', carriers',
warehousemen's or other similar Liens arising in the ordinary course of business
and securing obligations that are not yet due and payable, (C) Liens on an
Aircraft securing Indebtedness of Borrower which is permitted by the terms of
this Promissory Note and which is incurred solely to hushkit such Aircraft (a
"Current Loan"); provided, however, that if such Current Loan constitutes an
extension of credit pursuant to an existing financing facility of Borrower,
Borrower may grant, to secure such Current Loan, a Lien on one or more other
Aircraft if each such other Aircraft is at such time subject to a Lien that
secures such existing financing facility, (D) any renewal or replacement of any
Lien permitted by (C) above (in connection with refinancing of Indebtedness
permitted by subsection 4.2(a)(v) hereof); provided, however, that (x) the
amount of Indebtedness secured by any such renewal or replacement Lien does not
exceed the then outstanding principal amount of the Indebtedness being so
refinanced, (y) such renewal or replacement Lien does not spread to cover any
additional asset and (z) the term of the Indebtedness secured by any such
replacement Lien does not materially extend beyond the term of the Indebtedness
being so refinanced; (E) leases of the Aircraft and (F) Liens on Aircraft owned,
directly or indirectly, by Borrower of a type that a lessee of such Aircraft
would customarily be permitted to incur and be required to remove from such
Aircraft.
4.4. Borrower shall not issue or sell or enter into any
agreement, contract or commitment to issue or sell any equity interest (other
than those outstanding as of the date of this Agreement) unless, after giving
effect to such issuance or sale (a) TASL shall remain the sole manager of
Borrower, retaining all responsibilities and duties allocated to TASL as manager
of Borrower pursuant to Borrower's operating agreement or certificate of
formation and shall make no delegation or assignment to any other Person of any
such responsibility or duty except as permitted thereby, (b) the number of
members of Borrower (x) who are not Triton Members or Triton Management shall
not exceed three (3) (y) who are Triton Management shall not exceed five (5) and
(z) who are Triton Members (excluding TAL, TASL and Triton Container) shall not
exceed five (5), (c) the Triton Members shall hold, in the aggregate, at least
50% of the Economic Interests of Borrower, (d) the holder of such equity
interest shall be a Qualified Holder, (e) such Qualified Holder shall expressly
agree to the pledge of such Interests under the Security Agreement and to be
bound by the terms and conditions thereof, and (f) after notice to Lender given
pursuant to the terms of Section 10 hereof, Lender shall consent to such
transfer or issuance (such consent not to be unreasonably withheld); provided,
however, that if Lender does not respond to such notice within ten (10) days
after receipt by Lender of such notice, such consent shall be deemed granted.
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Notwithstanding the foregoing, no such issuance or sale shall be made if it
would violate any applicable law or cause the Aircraft owned, directly or
indirectly, by Borrower then registered under the Act no longer to be eligible
for registration under the Act.
4.5. Borrower shall not (i) make any changes in its capital
structure (including, without limitation, in the terms of its outstanding
membership interests, stock or any other equity interests, as the case may be)
except as permitted by Section 4.4 or (ii) amend its operating agreement or any
other such governing document (other than amendments (1) with respect to
allocations of (A) profits and losses, (B) tax income or gains or tax losses or
any components thereof or (C) cash distributions among members or (2) to
implement actions permitted under this Promissory Note, provided, however,
notice of amendments to implement such actions shall be given to Lender no later
than ten (10) days prior to their effectiveness).
4.6. Borrower shall not engage in any business or activities
except to the extent permitted by Borrower's articles of organization or
operating agreement.
4.7. Except as otherwise expressly permitted by this
Promissory Note, Borrower shall not (i) pay or enter into any agreement or
transaction to pay to any of its Affiliates any management, advisory,
consulting, service or similar fee or any fee based on or related to Borrower's
operating performance or income or any percentage thereof; or (ii) enter into
any other transaction with any of its Affiliates, except (A) any agreement or
transaction entered into pursuant to the reasonable requirements of Borrower's
ordinary course of business and upon terms that are no less favorable to
Borrower than Borrower could obtain in a comparable arm's length transaction
with a Person not an Affiliate of Borrower and (B) reimbursement to TASL for the
costs and expenses incurred by TASL in connection with the repair and
refurbishment of the aircraft bearing manufacturer's serial numbers 20925 and
21117. Borrower shall not enter into or be a party to any transaction with any
Person except for transactions entered into upon arm's length terms and
conditions that are commercially reasonable and fair to Borrower. Borrower shall
not enter into any employment agreements or pay any management or similar fee to
any Person or become obligated to pay any Person any advisory, consulting or
service fee except in accordance with the reasonable needs of Borrower's
business and operations. Borrower shall not amend or agree to amend the Keep
Well, the Keep Well Guaranty or the Loan Guaranty.
4.8. Borrower shall not make capital expenditures during the
term of this Promissory Note, except for capital expenditures made to fund any
maintenance, improvements, additions, refurbishments or modifications to any
Aircraft owned, directly or indirectly, by Borrower.
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4.9. (a) Borrower shall not sell, transfer, convey or
otherwise dispose of any assets or properties; provided, however, that the
foregoing shall not prohibit (i) transfers resulting from any casualty or
condemnation of assets or properties or (ii) sales of engines or parts that do
not constitute Prepayment Events pursuant to Section 3.8(a). Notwithstanding the
foregoing, Borrower may, subject to Section 3.8 hereof, sell Assets without the
consent of the holder of this Promissory Note if the proceeds from any such sale
(net of any costs and expenses or other obligations incurred by Borrower in
connection with such sale) equal or exceed 100% of the Allocable Portion
Percentage for such Asset multiplied by the then outstanding balance of this
Promissory Note.
(b) Borrower shall not sell, transfer, convey or
otherwise dispose of all or any portion of any Asset for an amount (net of any
costs, expenses or other obligations incurred by Borrower in connection with
such sale, transfer, conveyance or disposition) less than 100% of the Allocable
Portion Percentage of such Asset multiplied by the then outstanding balance of
this Promissory Note without the prior written consent of the holder of this
Promissory Note unless Borrower has sufficient funds available from (a)
operating cash flow, exclusive of security deposits, maintenance reserves or
other property held by it as collateral, (b) the issuance or sale of equity
interests in Borrower, (c) sale proceeds held by it from the sale of other
Aircraft owned, directly or indirectly by it, (d) funds paid to Borrower by TASL
under the Keep Well if the Asset is disposed of for an amount equal to or
greater than the product of (1) 90% of the Allocable Portion Percentage for such
Asset multiplied by (2) the then outstanding balance of this Promissory Note, or
(e) any combination of the foregoing, which funds, when added to the proceeds of
the disposition of such Asset (net of any costs and expenses or other
obligations incurred by Borrower in connection with such sale, transfer,
conveyance or disposition) will equal the product of (A) 100% of the Allocable
Portion Percentage of such Asset multiplied by (B) the then outstanding balance
of this Promissory Note. If Borrower sells, transfers, conveys or otherwise
disposes of less than 100% of an Asset, the percentage interest sold,
transferred, conveyed or otherwise disposed of shall be multiplied by the
appraised value of the entire Asset and the product thereof shall be used to
calculate the Allocable Portion Percentage of such Asset for the purposes of the
immediately preceding sentence.
4.10. Borrower shall not (A) prepay, defease, redeem, retire
or otherwise acquire any obligation or Indebtedness owed by it except as
permitted by this Promissory Note, as required by Section 3.8 of this Promissory
16
<PAGE>
Note or as required by any Permitted SPV Indebtedness, (B) cancel, forgive or
waive any claim, debt or Indebtedness owing to it, (C) declare any dividend or
other distribution or incur any liability in respect thereof, with respect to
the membership interests (or any other equity interest) in Borrower other than
(1) beginning as of April 1, 1997, payable in the next following calendar month,
the Equity Dividend Amount and any accrued and unpaid Equity Dividend Amount for
each month thereafter, (2) amounts equal to equity contributions made pursuant
to the Keep Well which have not been previously recouped through the payment of
any dividend or distribution and (3) amounts equal to any reduction of the Cash
Amount pursuant to Section 4(c) or Section 4(d)(ii) of the Purchase Agreement;
provided, however, that during any period in which any payment under this
Promissory Note is overdue or a Default has occurred and is continuing, Borrower
shall not declare, pay, incur any liability in respect of or make any dividend
or other distribution whatsoever but Borrower may continue to accrue a liability
equal to the Equity Dividend Amount during such period and Borrower may make
payments in respect of any such accrued liability so long as no amounts due and
payable under this Promissory Note are overdue and no Default is continuing and
provided, further, that all dividends or distributions by Borrower shall be
declared, paid or made only in accordance with applicable law, or (D) incur any
liability to, or engage in any purchase, redemption or retirement transaction,
with respect to the membership interests (or any other equity interest) of
Borrower.
4.11. Borrower shall not directly or indirectly enter into any
employee benefit plan as defined in Section 3(3) of ERISA, nor any other
employee benefit arrangements or payroll practices, including, without
limitation, severance pay, sick leave, vacation pay, salary continuation for
disability, consulting or other compensation agreements, retirement, deferred
compensation, bonus, stock purchase, hospitalization, medical insurance, life
insurance or scholarship programs.
5.0 Events of Default. The following shall be Events of Default
hereunder:
5.1. Borrower shall fail to make any payment of principal or
interest owing in respect of this Promissory Note including, without limitation,
any prepayment required pursuant to Section 3.8 hereof, when due and payable.
5.2. Borrower shall fail to make any payment of any other
amount owing in respect of this Promissory Note within five (5) days after such
other amount becomes due and payable.
5.3. Borrower shall fail to perform, keep or observe any of
the covenants contained in Sections 3, 4 or 8 of this Promissory Note.
17
<PAGE>
5.4. Borrower shall fail to perform, keep or observe any other
provision of this Promissory Note or any provision of the Security Agreement,
and the same shall remain unremedied for a period of ten (10) days after receipt
of written notice thereof from Lender.
5.5. Any representation or warranty made herein by Borrower or
in any Ancillary Agreement to which it is a party shall be untrue or incorrect
in any material respect as of the date when made.
5.6. Any provision of the Security Agreement, the Keep Well,
the Keep Well Guaranty or the Loan Guaranty shall cease to be valid and
enforceable in any material respect in accordance with its terms.
5.7. Any Person (other than Lender) shall fail or neglect to
perform, keep or observe any provision of any of the Ancillary Agreement to
which it is a party, and the same shall remain unremedied for a period of ten
(10) days after receipt by such Person of written notice thereof from Lender.
5.8. Any other event shall have occurred which would have a
Material Adverse Effect.
5.9. Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $347,502 shall
be rendered against Borrower and the same shall not be fully covered by
insurance or vacated, stayed, bonded, paid or discharged for a period of thirty
(30) days.
5.10. There shall occur any default under any agreement,
document or instrument to which Borrower is a party or by which Borrower or any
of Borrower's property is bound (other than this Promissory Note), and such
default results in the acceleration, maturity, demand or required repayment of
Indebtedness or other obligations due thereunder that singly or in the aggregate
exceeds $347,502.
5.11. Borrower shall fail to maintain insurance as required by
Section 3.6 of this Promissory Note.
5.12. Any of the assets (with value, individually or in the
aggregate, in excess of $347,502 of Borrower shall be attached, seized, levied
upon or subjected to a writ or distress warrant, or come within the possession
of any receiver, trustee, custodian or assignee for the benefit of creditors of
Borrower and shall remain unstayed or
18
<PAGE>
undismissed for thirty (30) consecutive days; or any person other than Borrower
shall apply for the appointment of a receiver, trustee or custodian for any of
the assets of Borrower and shall remain unstayed or undismissed for thirty (30)
consecutive days; or Borrower shall have concealed, removed or permitted to be
concealed or removed, any part of the property of Borrower with intent to
hinder, delay or defraud its creditors or any of them or made or suffered a
transfer of any of its property or the incurring of any obligation which may be
fraudulent under bankruptcy, fraudulent conveyance or other similar law.
5.13. A case or proceeding shall have been commenced against
Borrower in a court having competent jurisdiction seeking a decree or order in
respect of Borrower (i) under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal, state or
foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of Borrower
or of any substantial part of its properties, or (iii) ordering the winding-up
or liquidation of the affairs of Borrower and such case or proceeding shall
remain undismissed or unstayed for thirty (30) consecutive days or such court
shall enter a decree or order granting the relief sought in such case or
proceeding.
5.14. Borrower shall (i) file a petition seeking relief under
title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable Federal, state or foreign bankruptcy or other similar law,
(ii) consent to the institution of proceedings thereunder or to the filing of
any such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
Borrower or of any substantial part of the property of Borrower, (iii) fail
generally to pay its debts as such debts become due or (iv) take any action in
furtherance of the foregoing.
Upon the occurrence and during the continuance of any such
Event of Default under Sections 5.1 through 5.11 hereof, the holder hereof may,
by written notice to Borrower, declare the entire unpaid balance of this
Promissory Note to be immediately due and payable, whereupon the same shall
forthwith mature without presentment, demand, protest or other notice, all of
which are hereby waived. Upon the occurrence and during the continuance of any
Event of Default under Sections 5.12 through 5.14 hereof, this Promissory Note
shall immediately mature and be due and payable without presentment, demand,
protest or other notice, all of which are hereby waived.
19
<PAGE>
6.0 Purchase, Assignment and Assumption Agreement. This Promissory Note
represents the Note Amount due under the Purchase Agreement in respect of the
Transferred Interests.
7.0 Security Agreement. All obligations due Lender by Borrower,
including, without limitation, those evidenced by this Promissory Note, shall be
secured pursuant to the Security Agreement.
8.0 Costs and Expenses. Borrower shall reimburse Lender for all of its
costs and expenses (including reasonable attorneys' fees) incurred by it in
connection with the indebtedness evidenced hereby, lien searches and filings,
the Security Agreement and related documents and any amendments thereto or
waivers or modifications thereof; provided, however, that Borrower shall not be
obligated to pay any costs or expenses (including attorney's fees) incurred by
Lender in connection with preparation of this Promissory Note or any other
Ancillary Agreement or any ordinary administrative costs and expenses of Lender
in the absence of a default by Borrower under this Promissory Note or any other
Ancillary Agreement to which it is a party. Borrower shall also reimburse Lender
or any other holder hereof for all costs incurred by it (including reasonable
attorneys' fees) in the enforcement or collection of any amounts due under this
Promissory Note. Borrower shall indemnify and hold Lender harmless from and
against all losses, claims, damages, costs and expenses, arising from the seller
financing evidenced by this Promissory Note or the transactions contemplated
hereby; provided, however, that such indemnity obligation shall not limit or be
deemed to limit Borrower's rights under Section 13 of the Purchase Agreement.
9.0 No Waiver. No delay, failure or omission by the holder hereof in
respect of any default by Borrower to exercise any right or remedy granted to
the holder hereof or allowed to the holder hereof by law shall constitute a
waiver of the right to exercise such right or remedy upon any default or
subsequent default.
10.0 Notices. All notices, demands, declarations and other
communications required by this Promissory Note shall be in writing and shall be
effective (i) if given by facsimile, when transmitted, (ii) if given by
registered or certified mail, three (3) Business
20
<PAGE>
Days after being deposited with the U.S. Postal Service, (iii) if given by
courier, when received, or (iv) if personally delivered, when so delivered,
addressed:
If to Borrower, to:
Triton Aviation Services V LLC
55 Green Street, Suite 500
San Francisco, CA 94111
Attn: President
Facsimile Number: (415) 398-9184
or to such other address as Borrower shall from time to time designate in
writing to Lender; and
If to Lender, to:
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, CA 94105
Attention: President
Facsimile Number: (415) 284-7460
With a copy to:
c/o Polaris Investment Management Corporation
201 High Ridge Road, 1st Floor
Stamford, CT 06927-4900
Attention: Portfolio Management
Facsimile Number: (203) 357-4585
or to such other address as Lender may from time to time designate in writing to
Borrower.
11.0 Confidentiality. Lender agrees that it shall keep confidential all
information regarding Borrower that it may receive in connection with the
transactions contemplated by this Promissory Note and agrees that it will only
use such information in connection with such transactions and will not disclose
any of such information other than (i) to its directors, officers, employees,
advisors, auditors, agents or representatives who are or are expected to be
21
<PAGE>
involved in the evaluation of such information in connection with such
transactions and who are advised of the confidential nature of such information
(and for whose compliance Lender shall be liable), (ii) to the extent such
information presently is or hereafter becomes available to Lender on a
non-confidential basis from a source other than Borrower, (iii) to the extent
such information has been independently acquired or developed by Lender without
violating any of its obligations under this Promissory Note, or (iv) to the
extent disclosure is required by law, regulation or judicial order.
12.0 Permitted Indebtedness. Lender agrees to execute from time to time
a certificate verifying whether or not Lender has declared an Event of Default
that is continuing as of the date of such certificate and stating the
outstanding principal amount of and interest accrued on this Promissory Note as
of the date of such certificate as Borrower may reasonably request in connection
with incurring Indebtedness for hushkit financing that is permitted by the terms
of this Promissory Note.
13.0 No Recourse to Members. Without impairing any of the other rights,
powers, privileges, liens or security interests of Lender hereunder or under any
other Ancillary Agreement (which term for purposes of this Section 13.0 shall
include the Purchase Agreement), Lender and each subsequent holder of this
Promissory Note agrees that (i) the obligations of Borrower under this
Promissory Note and the other Ancillary Agreements, howsoever created, arising
or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due, including, without limitation,
obligations relating to principal, interest or any breach by Borrower of any
representation, warranty, covenant or indemnity made by Borrower, shall be
payable only from the assets of Borrower, and all of the statements,
representations, covenants and agreements made by Borrower herein and in any
other Ancillary Agreement are made and intended only for the purpose of
establishing the existence of rights and remedies which can be exercised and
enforced against the assets of Borrower; and (ii) no recourse shall be had with
respect to any representation, warranty, covenant or indemnity made by this
Promissory Note or any other Ancillary Agreement against any member of Borrower
or any officer, director, employee, trustee, servant or direct or indirect
controlling Person or Persons of any member, and no such Persons shall have any
personal liability for any amounts payable hereunder or under any other
Ancillary Agreement or for any damages for breach thereof; provided, however,
nothing contained in this Section 13.0 shall be construed to limit the exercise
or enforcement, in accordance with the terms hereof or any Ancillary Agreement,
of rights and remedies against the assets of Borrower; and provided further,
however, that nothing in this Section 13.0 shall (A) release any Person
(including, without limitation, any member or the manager of Borrower) from
personal liability for any obligation of such Person under any Ancillary
Agreement to which it is a party, howsoever created, arising or evidenced,
22
<PAGE>
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due, including, without limitation, obligations relating to
(1) breach by such Person of any representation, warranty, covenant or indemnity
made by such Person or (2) any actual fraud by the manager or any member of
Borrower, or (B) release TIL from personal liability for any breach of its
obligations under or resulting from the breach by TIL of any representation
warranty, covenant or indemnity made by TIL pursuant to the Loan Guaranty or the
Keep Well Guaranty or release TASL from personal liability for any of its
obligations under or resulting from the breach by TASL of any representation,
warranty, covenant or indemnity made by TASL pursuant to the Keep Well or the
Security Agreement. For purposes of this Promissory Note and the Ancillary
Agreements, the assets of Borrower shall in no event include, nor shall Lender
or any subsequent holder have any recourse against or claim to, any deficit
capital account owed to Borrower by a member of Borrower, except to the extent
of distributions made to such member by Borrower in violation of the terms of
this Promissory Note.
14.0 Waiver of Trial by Jury. THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES HEREUNDER, OR UNDER THE SECURITY AGREEMENT.
15.0 Waiver. Borrower and all endorsers and guarantors hereby severally
waive demand, presentment, notice of dishonor, diligence in collection, notice
of protest, notice of intent to accelerate, notice of acceleration, and agree to
all extensions and partial payments before or after maturity, without prejudice
to the holder of this Promissory Note.
23
<PAGE>
16.0. Governing Law. THIS PROMISSORY NOTE SHALL BE DEEMED TO BE A
CONTRACT UNDER, AND SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE PRINCIPLES
THEREOF RELATING TO CONFLICT OF LAWS.
TRITON AVIATION SERVICES V LLC
By: Triton Aviation Services
Limited, Manager
By:/S/JOHN E. FLYNN
--------------------------
Name: JOHN E. FLYNN
Title: PRESIDENT
Accepted and Acknowledged by
POLARIS AIRCRAFT INCOME FUND V
By: Polaris Investment Management
Corporation, General Partner
By:/S/MARC A. MEICHES
--------------------------------
Name: MARC A. MEICHES
Title: VICE PRESIDENT
24
<PAGE>
SCHEDULE A
Principal Payments as a Percentage
of Original Balance
Principal Balloon Total
Payments Payment Payments
-------- ------- --------
1.9047% 1.9047%
1.9618% 1.9618%
2.0207% 2.0207%
2.0813% 2.0813%
2.1437% 2.1437%
2.2080% 2.2080%
2.2743% 2.2743%
2.3425% 2.3425%
2.4128% 2.4128%
2.4852% 2.4852%
2.5597% 2.5597%
2.6365% 2.6365%
2.7156% 2.7156%
2.7971% 2.7971%
2.8810% 2.8810%
2.9674% 2.9674%
3.0564% 3.0564%
3.1481% 3.1481%
3.2426% 3.2426%
3.3398% 3.3398%
3.4400% 3.4400%
3.5432% 3.5432%
3.6495% 3.6495%
3.7590% 3.7590%
3.8718% 3.8718%
3.9879% 3.9879%
<PAGE>
Principal Payments as a Percentage
of Original Balance
Principal Balloon Total
Payments Payment Payments
-------- ------- --------
4.1076% 4.1076%
4.2308% 18.23% 22.4619%
0.0000% 0.0000% 0.0000%
0.0000% 0.0000% 0.0000%
0.0000% 0.0000% 0.0000%
0.0000% 0.0000% 0.0000%
------- ------- -------
81.7689% 18.2311% 100.0000%
GUARANTY (KEEP WELL)
GUARANTY, dated as of April 1, 1997, of TRITON INVESTMENTS
LIMITED, a Bermuda corporation ("Guarantor"), in favor of TRITON AVIATION
SERVICES V LLC, a California limited liability company ("Borrower") and POLARIS
AIRCRAFT INCOME FUND V, a California limited partnership ("Lender") (Borrower
and Lender each sometimes referred to herein as a "Beneficiary" and, together,
as the "Beneficiaries").
W I T N E S S E T H:
WHEREAS, Borrower and Lender have entered into a Purchase,
Assignment and Assumption Agreement dated as of April 1, 1997 (as at any time
amended, modified or supplemented, the "Purchase Agreement") and, in connection
therewith, Borrower has delivered to Lender a promissory note effective as of
April 1, 1997 (the "Note"); and
WHEREAS, Triton Aviation Services Limited, a Bermuda
corporation and a majority-owned and controlled subsidiary of Guarantor ("TASL")
is the record and beneficial owner of 99% of the member interests in Borrower;
and
WHEREAS, TASL, Borrower and Lender have entered into a Keep
Well Agreement of even date herewith (the "Keep Well"), pursuant to which TASL
has agreed to pay certain amounts to Borrower as a contribution to Borrower's
equity in order to permit Borrower promptly to perform all of its obligations
under the Note and the Purchase Agreement; and
WHEREAS, Guarantor, as the majority owner of TASL, will derive
substantial direct and indirect economic benefit from the transactions
contemplated by the Purchase Agreement, the Keep Well and the delivery of the
Note to Lender; and
WHEREAS, in connection with the execution and delivery of the
Purchase Agreement, the Keep Well and the Note and as security for the
Obligations (as defined below), each of the Beneficiaries is requiring that
Guarantor shall have executed and delivered this Guaranty;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce Lender to enter into the Purchase
Agreement, it is agreed as follows:
1. DEFINITIONS. Unless otherwise defined herein, terms defined
in the Note are used herein as therein defined, and the following shall have
(unless otherwise provided elsewhere in this Guaranty) the following respective
meanings (such meanings being equally applicable to both the singular and plural
form of the terms defined):
"Obligations" means all obligations of any kind or nature,
present or future, of TASL under the Keep Well.
References to this "Guaranty" shall mean this Guaranty,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to this Guaranty as the same
may be in effect at the time such reference becomes operative.
2. THE GUARANTY. The guaranty of Guarantor hereunder is as
follows:
2.1. Guaranty of Obligations of TASL. Guarantor hereby
unconditionally guarantees to each of the Beneficiaries and their respective
successors, endorsees, transferees and assigns, the prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of the
Obligations. Guarantor agrees that this Guaranty is a guaranty of payment and
performance and not of collection, and that its obligations under this Guaranty
shall be primary, absolute and unconditional, irrespective of, and unaffected
by:
(a) the genuineness, validity, regularity,
enforceability or any future amendment of, or change in this Guaranty,
the Keep Well, the Note or any other agreement, document or instrument
to which Borrower, TASL, Lender and/or Guarantor is or are or may
become a party;
(b) the absence of any action to enforce this
Guaranty, the Keep Well, the Note or any other agreement, document or
instrument to which Borrower, TASL, Lender and/or Guarantor is or are
or may become a party, or the waiver or consent by Lender with respect
to any of the provisions thereof;
2
<PAGE>
(c) the existence, value or condition of, or failure
to perfect its lien against, any security for the Obligations or any
action, or the absence of any action, by any Beneficiary in respect
thereof (including, without limitation, the release of any such
security); or
(d) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor,
it being agreed by Guarantor that its obligations under this Guaranty shall not
be discharged until the payment and performance, in full, of the Obligations.
Guarantor shall be regarded, and shall be in the same position, as principal
debtor with respect to the Obligations. Guarantor expressly waives all rights it
may have now or in the future under any statute, or at common law, or at law or
in equity, or otherwise, to compel (i) Borrower to proceed in respect of the
Obligations against TASL or any other party or (ii) Lender to proceed in respect
of the Obligations against Borrower or TASL or any other party, or against any
security for the payment and performance of the Obligations before proceeding
against, or as a condition to proceeding against, Guarantor. Guarantor agrees
that any notice or directive given at any time to a Beneficiary which is
inconsistent with the waiver in the immediately preceding sentence shall be null
and void and may be ignored by such Beneficiary, and, in addition, may not be
pleaded or introduced as evidence in any litigation relating to this Guaranty
for the reason that such pleading or introduction would be at variance with the
written terms of this Guaranty, unless such Beneficiary has specifically agreed
otherwise in writing. It is agreed among Guarantor and each of the Beneficiaries
that the foregoing waivers are of the essence of the transaction contemplated by
the Purchase Agreement and the Note and that, but for this Guaranty and such
waivers, the Beneficiaries would decline to enter into the Purchase Agreement
and to deliver the Note.
2.2. Demand by Beneficiary. In addition to the terms of the
Guaranty set forth in Section 2.1 hereof, and in no manner imposing any
limitation on such terms, it is expressly understood and agreed that, if TASL
has failed to make any payments required to be made under the Keep Well, then
Guarantor shall, upon demand in writing therefor by a Beneficiary to Guarantor,
pay to such Beneficiary the entire outstanding Obligations due and owing to such
Beneficiary; provided, however, if both Beneficiaries shall make demand,
Guarantor shall make the payment to Lender and Borrower shall give Lender 10
days prior written notice of the failure of TASL to make any payments due under
the Keep Well prior to demand by Borrower upon Guarantor; provided, further,
that if at any time Lender shall notify Guarantor that any amounts are due and
owing to it by Borrower, then until such notice has been revoked by Lender, any
payments to be made by Guarantor hereunder shall be made by Guarantor directly
3
<PAGE>
to Lender and Lender shall apply all payments received from Guarantor in the
same manner as though paid directly by Borrower.
2.3. Enforcement of Guaranty. In no event shall (i) Borrower
have any obligation (although it is entitled at its option) to proceed against
TASL or any other Person or any real or personal property pledged to secure the
Obligations, or (ii) Lender have any obligation (although it is entitled, at its
option) to proceed against Borrower or TASL or any other Person or any real or
personal property pledged to secure the Obligations, before seeking satisfaction
from Guarantor. A Beneficiary may proceed, prior or subsequent to, or
simultaneously with, the enforcement of such Beneficiary's rights hereunder, to
exercise any right or remedy which it may have against any property, real or
personal, as a result of any lien it may have as security for all or any portion
of the Obligations.
2.4. Waiver. In addition to the waivers contained in Section
2.1 hereof, Guarantor waives, and agrees that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage of,
any appraisal, valuation, stay, extension, marshalling of assets or redemption
laws, or exemption, whether now or at any time hereafter in force, which may
delay, prevent or otherwise affect the performance by Guarantor of its
obligations under, or the enforcement by the Beneficiaries of, this Guaranty.
Guarantor hereby waives diligence, presentment and demand (whether for
non-payment or protest or of acceptance, maturity, extension of time, change in
nature or form of the Obligations, acceptance of further security, release of
further security, composition or agreement arrived at as to the amount of, or
the terms of, the Obligations, notice of adverse change in Borrower's or TASL's
financial condition or any other fact which might materially increase the risk
to Guarantor) with respect to any of the Obligations or all other demands
whatsoever and waives the benefit of all provisions of law which are or might be
in conflict with the terms of this Guaranty. Guarantor repre sents, warrants and
agrees that, as of the date of this Guaranty, its obligations under this
Guaranty are not subject to any offsets or defenses against Lender, TASL or
Borrower of any kind. Guarantor further agrees that its obligations under this
Guaranty shall not be subject to any counterclaims, offsets or defenses against
Lender or against Borrower or TASL of any kind which may arise in the future.
2.5. Benefit of Guaranty. The provisions of this Guaranty are
for the benefit of the Beneficiaries and their respective successors,
transferees, endorsees and assigns, and nothing herein contained shall impair,
as between TASL and Lender or TASL and Borrower, as the case may be, the
obligations of TASL under the Keep Well. In the event all or any part of the
4
<PAGE>
Obligations are transferred, indorsed or assigned by Lender to any Person or
Persons, any reference to "Lender" herein shall be deemed to refer equally to
such Person or Persons.
2.6. Modification of Obligations, Etc. If Lender and/or
Borrower shall at any time or from time to time, with or without the consent of,
or notice to, Guarantor:
(a) change or extend the manner, place or terms of
payment of, or renew or alter all or any portion of, the Obligations;
(b) take any action under or in respect of the Keep
Well in the exercise of any remedy, power or privilege contained
therein or available to it at law, equity or otherwise, or waive or
refrain from exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the
Keep Well;
(d) extend or waive the time for any of Guarantor's,
Borrower's, TASL's or any other Person's performance of, or compliance
with, any term, covenant or agreement on its part to be performed or
observed under the Keep Well, or waive such performance or compliance
or consent to a failure of, or departure from, such performance or
compliance;
(e) take and hold security or collateral for the
payment of the Obligations guaranteed hereby or sell, exchange,
release, dispose of, or otherwise deal with, any property pledged,
mortgaged or conveyed, or in which Lender has been granted a lien, to
secure any indebtedness of Guarantor, Borrower or TASL to Lender or of
Guarantor or TASL to Borrower, as the case may be;
(f) release anyone who may be liable in any manner
for the payment of any amounts owed by Guarantor, Borrower or TASL to
Lender or by Guarantor or TASL to Borrower, as the case may be;
(g) modify or terminate the terms of any
intercreditor or subordination agreement pursuant to which claims of
other creditors of Guarantor, Borrower or TASL are subordinated to the
claims of Lender and/or
(h) apply any sums by whomever paid or however
realized to any amounts owing by Guarantor, Borrower or TASL to Lender
or by Guarantor, or TASL to Borrower, in such manner as Lender or
5
<PAGE>
Borrower, as the case may be, shall determine in its discretion;
then Lender and/or Borrower shall not incur any liability to Guarantor pursuant
hereto as a result thereof, and no such action shall impair or release the
obligations of Guarantor under this Guaranty.
2.7. Reinstatement. This Guaranty shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Borrower, TASL or Guarantor for liquidation or reorganization, should
Borrower, TASL or Guarantor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of Borrower's, TASL's or Guarantor's assets, and shall continue
to be effective or be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by a Beneficiary, whether as a "voidable preference", "fraudulent conveyance",
or otherwise, all as though such payment or performance had not been made. In
the event that any pay ment, or any part thereof, is rescinded, reduced,
restored or returned, the Obligations shall be reinstated and deemed reduced
only by such amount paid and not so rescinded, reduced, restored or returned.
2.8. Waiver of Subrogation Etc. (a) If, pursuant to applicable
law, Guarantor, by payment or otherwise, becomes subrogated to all or any of the
rights of the Beneficiaries or either of them under the Keep Well, the rights of
such Beneficiary to which Guarantor shall be subrogated shall be accepted by
Guarantor "as is" and without any representation or warranty of any kind by such
Beneficiary, express or implied, with respect to the legality, value, validity
or enforceability of any of such rights, or the existence, availability, value,
merchantability or fitness for any particular purpose of any collateral and
shall be without recourse to such Beneficiary.
(b) If a Beneficiary may, under applicable law, proceed to
realize its benefits under the Keep Well, giving such Beneficiary a lien upon
any collateral, whether owned by TASL or by any other Person, either by judicial
foreclosure or by non-judicial sale or enforcement, such Beneficiary may, at its
sole option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Guaranty. If, in the
exercise of any of its rights and remedies, such Beneficiary shall forfeit any
of its rights or remedies, including its right to enter a deficiency judgment
against TASL or any other Person, whether because of any applicable laws
pertaining to "election of remedies" or the like, Guarantor hereby consents to
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such action by such Beneficiary and waives any claim based upon such action,
even if such action by such Beneficiary shall result in a full or partial loss
of any rights of subrogation which Guarantor might otherwise have had but for
such action by such Beneficiary. Any election of remedies which results in the
denial or impairment of the right of a Beneficiary to seek a deficiency judgment
against TASL or any other Person shall not impair Guarantor's obligation to pay
the full amount of the Obligations. In the event a Beneficiary shall bid at any
foreclosure or trustee's sale or at any private sale permitted by law or the
Keep Well, such Beneficiary may bid all or less than the amount of the
Obligations and the amount of such bid need not be paid by such Beneficiary but
shall be credited against the Obligations. The amount of the successful bid at
any such sale, whether a Beneficiary or any other party is the successful
bidder, shall be conclusively deemed to be the fair market value of the
collateral and the difference between such bid amount and the remaining balance
of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this Guaranty, notwithstanding that any present or
future law or court decision or ruling may have the effect of reducing the
amount of any deficiency claim to which such Beneficiary might otherwise be
entitled but for such bidding at any such sale.
2.9. Continuing Guaranty. Guarantor agrees that this Guaranty
is a continuing guaranty and shall remain in full force and effect until the
payment and performance in full of the Obligations.
2.10. Limitation on Guaranty. Notwithstanding anything to the
contrary contained herein, in no event shall Guarantor's obligation under this
Guaranty with respect to the Obligations exceed an amount equal to the
outstanding Maximum Obligation (as defined in the Keep Well) of TASL under the
Keep Well; provided, however, that nothing in this Section 2.10 shall limit
Guarantor's obligations or liabilities in respect of the representations,
warranties and covenants of Guarantor set forth in this Guaranty. Except as
expressly set forth in this Guaranty, Guarantor shall have no obligation with
respect to the Note.
3. REPRESENTATIONS AND WARRANTIES. To induce the Beneficiaries
to enter into the Purchase Agreement and accept the Note, Guarantor makes the
following representations and warranties to the Beneficiaries, each and all of
which shall survive the execution and delivery of this Guaranty:
3.1. Corporate Existence; Compliance with Law. Guarantor (i)
is a corporation duly organized, validly existing and in good standing under the
laws of Bermuda; (ii) is duly qualified to do business and is in good standing
under the laws of each jurisdiction where its ownership or lease of property or
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the conduct of its business requires such qualification (except for
jurisdictions in which such failure so to qualify or to be in good standing
would not have a materially adverse effect on (A) the business, operations,
prospects or financial condition of Guarantor, or (B) Guarantor's ability to pay
or perform the Obligations in accordance with the terms hereof); (iii) has the
requisite corporate power and authority and the legal right to own, pledge,
mortgage and operate its properties, to lease the property it operates under
lease, and to conduct its business as now, heretofore and proposed to be
conducted; (iv) has all material licenses, permits, consents or approvals from
or by, and has made all material filings with, and has given all material
notices to, all governmental authorities having jurisdiction, to the extent
required for such ownership, operation and conduct; (v) is in compliance with
its articles of incorporation and by-laws or other organizational documents; and
(vi) is in compliance with all applicable provisions of law where the failure to
so comply would have a materially adverse effect on (A) the business,
operations, prospects, assets or financial or other condition of Guarantor or
(B) the Guarantor's ability to pay or perform the Obligations in accordance with
the terms hereof.
3.2. Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery and performance of this Guaranty and all other
instruments and documents to be delivered by Guarantor hereunder and under the
Purchase Agreement are within Guarantor's corporate powers, have been duly
authorized by all necessary or proper corporate action, including the consent of
stockholders where required, are not in contravention of any provision of
Guarantor's articles of incorporation or by-laws (or other organizational
documents), will not violate any law or regulation, or any order or decree of
any court or governmental instrumentality, will not conflict with or result in
the breach of, or constitute a default under, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which Guarantor is a party or by
which Guarantor or any of its property is bound, will not result in the creation
or imposition of any lien upon any of the property of Guarantor, and the same do
not require the consent or approval of any governmental body, agency, authority
or any other Person except those already obtained. At or prior to the Closing
Date, this Guaranty and each of the Ancillary Agreements to which Guarantor is a
party shall have been duly executed and delivered for the benefit of or on
behalf of Guarantor, and each shall then constitute a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting the rights and
remedies of creditors generally and, with respect to the enforceability of this
Guaranty, by general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).
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3.3. No Material Adverse Change. Since December 31, 1996,
there has been no material adverse change in the business, financial condition,
results of operations or liabilities of Guarantor.
4. Covenants. Guarantor hereby covenants and agrees that:
4.1. Guarantor will not take any action, directly or
indirectly, to authorize or permit any amendment, alteration or change to
Borrower's articles of organization or operating agreement (other than
amendments permitted under the Note), the Keep Well, the Keep Well Guaranty or
the Loan Guaranty or permit Borrower to repeal its articles of organization.
4.2. Guarantor covenants and agrees that it will not take any
action, directly or indirectly, to authorize or permit Borrower to take any of
the actions set forth on Annex A attached hereto; provided, however, that with
respect to all prohibited actions included on Annex A attached hereto, Guarantor
shall have no obligation under this Section 4.2 to provide any funds to Borrower
which Borrower may require in order to avoid or cure any violation or breach
thereof; provided, further that the failure of Guarantor to change or replace
the management, directors or Persons holding similar offices of TASL or Borrower
will not be deemed, in and of itself, to constitute Guarantor's authorization or
permission of actions taken by such management, directors or Persons which cause
or result in Borrower taking any of the prohibited actions set forth on Annex A.
4.3. Guarantor shall deliver to Lender (i) within 60 days
after the end of each of the first three fiscal quarters of Guarantor, a copy of
the unaudited balance sheet of Guarantor as of the end of such fiscal quarter
and an unaudited statement of income and cash flow of Guarantor for such fiscal
quarter, all prepared in accordance with GAAP (subject to normal year end
adjustment), accompanied by a certification of the chief executive officer or
chief financial officer of Guarantor that all such financial statements are
complete and correct and present fairly, all in accordance with GAAP, the
financial position, the results of operations and the changes in financial
position of Guarantor as at the end of such quarter and for the period then
ended and (ii) within 120 days after the end of each fiscal year of Guarantor, a
copy of the audited balance sheet of Guarantor as of the end of such fiscal year
and an audited statement of income and cash flow of Guarantor for such fiscal
year, all prepared in accordance with GAAP, accompanied by (x) a certification
of the chief executive officer or chief financial officer of Guarantor that (1)
all such financial statements are complete and correct and present fairly in
accordance with GAAP the financial position, the results of operations and the
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changes in financial position of Guarantor as at the end of such year and for
the period then ended and (2) there have been no amendments, modifications or
changes to Borrower's articles of organization or operating agreement other than
those which are permitted pursuant the Note hereof and (y) an auditor's report
unqualified as to the scope of the audit and as to Guarantor being a going
concern, from KPMG Peat Marwick LLP, or any other firm of independent certified
public accountants of recognized national standing selected by Guarantor and
acceptable to Lender together with a certification from such firm that the
Economic Interests held by all Triton Members in Borrower as of the end of such
fiscal year are, in the aggregate, at least fifty percent (50%) of the Economic
Interests of Borrower.
4.4. At all times, Triton Members shall hold, in the
aggregate, at least fifty percent (50%) of the Economic Interests of Borrower.
5. PERMITTED ASSIGNMENT BY LENDER. Lender may freely assign
its rights and delegate its duties under this Guaranty, but no such assignment
or delegation shall increase or diminish Guarantor's obligations hereunder.
Lender shall give Guarantor prompt notice of such assignment or delegation and
agrees to use its best efforts to give such notice at least three (3) Business
Days prior to such assignment or delegation, but the consent of Guarantor shall
not be required for any such assignment or delegation and failure to give such
notice shall not affect the validity or enforceability of any such assignment or
delegation or this Guaranty or subject Lender to any liability.
6. FURTHER ASSURANCES. Guarantor agrees, upon the written
request of the Beneficiaries or either of them, to execute and deliver to such
Beneficiary, from time to time, any additional instruments or documents
reasonably considered necessary by such Beneficiary to cause this Guaranty to
be, become or remain valid and effective in accordance with its terms.
7. PAYMENTS FREE AND CLEAR OF TAXES. All payments required to
be made by Guarantor hereunder shall be made to the Beneficiaries free and clear
of, and without deduction for, any and all present and future taxes,
withholdings, levies, duties, and other governmental charges ("Taxes"),
excluding such income and franchise taxes thereof which would otherwise have
been payable (i) by Borrower if TASL had paid the Obligations to Borrower, or
(ii) by Lender if Borrower or TASL, as the case may be, had paid the Obligations
to Lender, in accordance with the terms of the Keep Well. Upon request by the
Beneficiaries or either of them, Guarantor shall furnish to such Beneficiary a
receipt for any Taxes paid by Guarantor pursuant to this Section 6 or, if no
Taxes are payable with respect to any payments required to be made by Guarantor
hereunder, either a certificate from each appropriate taxing authority or an
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opinion of counsel acceptable to such Beneficiary, in either case stating that
such payment is exempt from or not subject to Taxes. If Taxes are paid by a
Beneficiary in the good faith belief that such taxes are owing, Guarantor will,
upon demand of such Beneficiary, and whether or not such Taxes shall be
correctly or legally asserted, indemnify such Beneficiary for such payments,
together with any interest, penalties and expenses in connection therewith plus
interest thereon at the lesser of 10% or the maximum lawful rate under
applicable law. Such Beneficiary shall thereafter cooperate in a commercially
reasonable manner with Guarantor in seeking any refunds of such Taxes, interest,
penalties and expenses, which refunds and any interest thereon shall be paid by
such Beneficiary to Guarantor within five (5) business days of receipt by such
Beneficiary; provided, that in no event shall any Beneficiary be required to
expend its own funds in seeking any such refund and provided, further, that any
expenses incurred in connection therewith shall be paid by Guarantor.
8. MISCELLANEOUS.
8.1. Entire Agreement; Amendments. This Guaranty, together
with the Purchase Agreement, the Note, the Keep Well and the other Ancillary
Documents, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreements relating to a
guaranty of payment and performance of the Obligations and may not be amended or
supplemented except by a writing signed by Guarantor and each of the
Beneficiaries.
8.2. Headings. The headings in this Guaranty are for
convenience of reference only and are not part of the substance of this
Guaranty.
8.3. Severability. In the event that any one or more of the
provisions contained in this Guaranty shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Guaranty shall not be in any way impaired.
8.4. Notices. All notices, demands, declarations and other
communications required by this Guaranty shall be in writing and shall be
effective (i) if given by facsimile, when transmitted, (ii) if given by
registered or certified mail, three (3) Business Days after being deposited with
the U.S. Postal Service, (iii) if given by courier, when received, or (iv) if
personally delivered, when so delivered, addressed:
(a) If to Lender at:
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c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, CA 94105
Attention: President
Telecopy Number: (415) 284-7460
With a copy to:
c/o Polaris Investment Management Corporation
201 High Ridge Road
Stamford, Connecticut 06927-4900
Attention: Portfolio Management
Telecopy Number: (203) 357-4585
or to such other address as Lender may from time to time designate in writing to
Borrower and Guarantor.
(b) If to Borrower, at:
Triton Aviation Services V LLC
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Telecopy Number: (415) 398-9184
or to such other address as Borrower may from time to time designate in writing
to Lender and Guarantor.
(c) If to Guarantor, at:
Triton Investments Limited
c/o Triton Container International Inc.
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Telecopy Number: (415) 398-9184
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or to such other address as Guarantor may from time to time designate in writing
to Lender and Borrower. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice.
8.5. Binding Effect. This Guaranty shall bind Guarantor and
shall inure to the benefit of each of the Beneficiaries and its respective
successors and assigns. Guarantor may not assign this Guaranty.
8.6. Non-Waiver. The failure of the Beneficiaries or either of
them to enforce any right or remedy hereunder, or promptly to enforce any such
right or remedy, shall not constitute a waiver thereof, nor give rise to any
estoppel against such Beneficiary, nor excuse Guarantor from its Obligations
hereunder. Any waiver of any such right or remedy by a Beneficiary must be in
writing and signed by such Beneficiary.
8.7. Termination. This Guaranty shall terminate and be of no
further force or effect at such time as the Obligations shall be paid and
performed in full. Upon payment and performance in full of the Obligations, the
Beneficiaries shall deliver to Guarantor such documents as Guarantor may
reasonably request to evidence such termination.
8.8. Governing Law. The terms of this Guaranty shall be
governed by, and shall be construed and enforced in accordance with, the laws of
the State of California (exclusive of any rules as to conflict of laws) and the
laws of the United States applicable therein. Guarantor hereby submits to
personal jurisdiction and waives any objection as to venue in the County of San
Francisco, State of California. Service of process on Guarantor in any action
arising out of or relating to this Guaranty shall be effective if mailed to
Guarantor in accordance with Section 7.4 hereof. Nothing herein shall preclude
the Beneficiaries from bringing suit or taking other legal action in any other
jurisdiction.
8.9. Counterparts. This Guaranty may be executed in any number
of counterparts which shall individually and collectively constitute one
agreement.
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IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the date first above written.
TRITON INVESTMENTS LIMITED
By:/S/ STEVEN C. WIGHT
----------------------------------
Name: STEVEN C. WIGHT
Title: EXECUTIVE VICE PRESIDENT
Accepted and acknowledged by:
POLARIS AIRCRAFT INVESTMENT FUND V
By: Polaris Investment Management
Corporation, General Partner
By:/S/ MARC A. MEICHES
----------------------------------
Name: MARC A. MEICHES
Title: VICE PRESIDENT
TRITON AVIATION SERVICES V LLC
By: Triton Aviation Services Limited,
its Manager
By:/S/ JOHN E. FLYNN
----------------------------------
Name: JOHN E. FLYNN
Title: PRESIDENT
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Annex A
Borrower will not:
(a) engage in any business or activity other than (i)
acquiring, holding, maintaining, improving, refurbishing, modifying,
selling, leasing, transferring and disposing of all right, title and
interest in those certain trust estates, subject of the Trust
Agreements, and the related Aircraft and (ii) any activity or exercise
of any powers permitted to limited liability companies under the laws
of the State of California that are incident, necessary and appropriate
to accomplish the activities specified in clause (i) of this subsection
(a);
(b) liquidate or take any affirmative action to
dissolve, in whole or in part;
(c) acquire any interest in any aircraft other than
the Aircraft;
(d) consolidate or merge with or into any other
entity or convey or transfer its properties and assets substantially as
an entirety to any entity, except as permitted under the Note;
(e) engage in transactions with Affiliates other than
any agreement or transaction entered into pursuant to the reasonable
requirements of Borrower's ordinary course of business and upon terms
that are no less favorable to Borrower than Borrower could obtain in a
comparable arm's-length transaction with any person or entity not an
Affiliate of Borrower;
(f) declare any dividend or other distribution or
incur any liability in respect thereof, with respect to the membership
interests (or any other equity interest) of Borrower, other than as
permitted by the Note;
(g) employ any employees;
(h) institute proceedings to be adjudicated bankrupt
or insolvent;
(i) consent to the institution of bankruptcy or
insolvency proceedings against it;
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(j) file a petition seeking, or consent to,
reorganization or relief under any applicable federal or state law
relating to bankruptcy;
(k) seek or consent to the appointment of a receiver,
liquidator, conservator, assignee, trustee, sequestrator, custodian or
any other similar official of Borrower or a substantial part of its
properties;
(l) make any assignment for the benefit of creditors;
(m) admit in writing its inability to pay its debts
generally as they become due;
(n) otherwise seek relief under any laws relating to
the relief from debts or the protection of debtors generally;
(o) guarantee or become obligated for the debts of
any other entity or person;
(p) hold out its credit as being available to satisfy
the obligations of any other person or entity;
(q) acquire the obligations or securities of its
affiliates or owners other than Permitted SPV Investments;
(r) make loans to any other person or entity or buy
or hold evidence of indebtedness issued by any other person or entity
(except for Permitted Investments);
(s) create, incur, assume or permit to exist any
Indebtedness except Indebtedness permitted to be incurred by Borrower
pursuant to Section 4.2 of the Note;
(t) except for Permitted Encumbrances, pledge its
assets for the benefit of any other person or entity or create any Lien
on any of its properties or assets;
(u) permit any Lien to exist on any of its properties
or assets except for (i) involuntary or inchoate Liens that are
incurred by Borrower in the ordinary course of Borrower's business
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conducted in compliance with the provisions of subsection (a) hereof
or (ii) Permitted Encumbrances;
(v) take any action in furtherance of any of the
preceding actions.
17
GUARANTY (SPV INDEBTEDNESS)
GUARANTY, dated as of April 1, 1997, of TRITON INVESTMENTS
LIMITED, a Bermuda corporation ("Guarantor"), in favor of TRITON AVIATION
SERVICES V LLC, a California limited liability company ("Lender").
W I T N E S S E T H:
WHEREAS, Triton Aviation Services Limited, a Bermuda
corporation and a majority-owned and controlled subsidiary of Guarantor ("TASL")
is the record and beneficial owner of 48.5% of the member interests in each of
Lender and Triton Aviation Services V LLC, Triton Aviation Services III LLC and
Triton Aviation Services IV LLC, each a California limited liability company
(each a "Triton LLC"; collectively, the "Triton LLC's"); and
WHEREAS, Guarantor, as the majority owner of TASL, will derive
substantial direct and indirect economic benefit from the making of loans from
time to time by Lender to the Triton LLC's ("SPV Loans"); and
WHEREAS, in connection with the making of SPV Loans from time
to time to the Triton LLC's, Lender is requiring that Guarantor shall have
executed and delivered this Guaranty;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce Lender to make SPV Loans, it is
agreed as follows:
1. DEFINITIONS. The following shall have (unless otherwise
provided elsewhere in this Guaranty) the following respective meanings (such
meanings being equally applicable to both the singular and plural form of the
terms defined):
"Letter of Credit" means an irrevocable direct pay letter of credit
issued by a bank (i) whose long term debt is rated "AA" or better by Thompson's
Bankwatch or (ii) rated "AA" or better by Standard & Poor's in the Financial
Institutions Rating Service and that is payable upon presentation by the
beneficiary of such Letter of Credit of a sight draft (it being understood, but
without any impairment of the issuing bank's obligations under such Letter of
Credit, that the beneficiary shall not present such sight draft unless (x) there
has been a default under the promissory note secured by such Letter of Credit or
(y) the Letter of Credit would expire within 45 days of such presentation and an
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extension of such expiration date shall not have been granted nor an acceptable
replacement Letter of Credit been provided).
"Obligations" means all obligations of any kind or nature, present or
future, owed by any of the Triton LLC's to Lender with respect to any SPV
Indebtedness incurred by such Triton LLC.
"SPV Indebtedness" means any and all monies borrowed by a Triton LLC
from Lender pursuant to an SPV Loan.
References to this "Guaranty" shall mean this Guaranty, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to this Guaranty as the same may be in effect
at the time such reference becomes operative.
2. THE GUARANTY. The guaranty of Guarantor hereunder is as
follows:
2.1. Guaranty of Obligations of Triton LLC's. Guarantor hereby
unconditionally guarantees to Lender, and its respective successors, endorsees,
transferees and assigns, the prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance of the Obligations. Guarantor agrees
that this Guaranty is a guaranty of payment and performance and not of
collection, and that its obligations under this Guaranty shall be primary,
absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity,
enforceability or any future amendment of, or change in this Guaranty,
any SPV Indebtedness or any other agreement, document or instrument to
which the Triton LLC's, Lender and/or Guarantor is or are or may become
a party;
(b) the absence of any action to enforce this
Guaranty, any SPV Indebtedness or any other agreement, document or
instrument to which the Triton LLC's, Lender and/or Guarantor is or are
or may become a party, or the waiver or consent by Lender with respect
to any of the provisions thereof;
(c) the existence, value or condition of, or failure
to perfect its lien against, any security for the Obligations or any
action, or the absence of an action, by Lender in respect thereof
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(including, without limitationn, the release of any such security); or
(d) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor,
it being agreed by Guarantor that its obligations under this Guaranty shall not
be discharged until the payment and performance, in full, of the Obligations.
Guarantor shall be regarded, and shall be in the same position, as principal
debtor with respect to the Obligations. Guarantor expressly waives all rights it
may have now or in the future under any statute, or at common law, or at law or
in equity, or otherwise, to compel Lender to proceed in respect of the
Obligations against any Triton LLC or any other party or against any security
for the payment and performance of the Obligations before proceeding against, or
as a condition to proceeding against, Guarantor. Guarantor agrees that any
notice or directive given at any time to Lender which is inconsistent with the
waiver in the immediately preceding sentence shall be null and void and may be
ignored by Lender, and, in addition, may not be pleaded or introduced as
evidence in any litigation relating to this Guaranty for the reason that such
pleading or introduction would be at variance with the written terms of this
Guaranty, unless Lender has specifically agreed otherwise in writing. It is
agreed among Guarantor and Lender that the foregoing waivers are of the essence
of the transactions contemplated in connection with the making of SPV Loans and
that, but for this Guaranty and such waivers, Lender would decline to make such
SPV Loan(s).
2.2. Additional Provisions Relating to SPV Indebtedness. (a)
Guarantor hereby acknowledges and agrees that it is a condition to the
incurrence of each SPV Loan that the Triton LLC incurring such SPV Indebtedness
obtain a Letter of Credit in favor of Lender in an amount equal to the
outstanding principal amount of such SPV Loan plus six months interest thereon
(calculated at the lesser of 10% per annum and the maximum rate under applicable
law) and Guarantor hereby agrees that it will cause such Triton LLC to obtain
and maintain in existence such Letter of Credit so long as there is any SPV
Indebtedness outstanding under such SPV Loan.
(b) Upon the failure of a Triton LLC to pay any amounts demanded under
any promissory note evidencing any SPV Indebtedness, Guarantor (i) hereby
waives, releases and disclaims any right of subrogation, reimbursement,
contribution or other similar rights against the Triton LLC that is the borrower
in respect of such SPV Indebtedness, (ii) is hereby deemed to release, forgive
and discharge such Triton LLC from any obligation of such Triton LLC to pay any
amount to Guarantor in the event that Guarantor is obligated to make any payment
hereunder or to the issuer of any Letter of Credit with respect to such SPV
Indebtedness; provided, however that any such payment by Guarantor hereunder or
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or to the issuer of any Letter of Credit shall be deemed to be a capital
contribution by Guarantor to such Triton LLC.
2.3. Demand by Lender. In addition to the terms of the
Guaranty set forth in Sections 2.1 and 2.2 hereof, and in no manner imposing any
limitation on such terms, it is expressly understood and agreed that, if the
then outstanding principal amount of any of the Obligations (together with all
accrued interest thereon) is declared to be immediately due and payable, then
Guarantor shall, upon demand in writing therefor by Lender to Guarantor but
subject to Section 2.6(b) hereof, pay to Lender the entire outstanding
Obligations due and owing to Lender.
2.4. Enforcement of Guaranty. In no event shall Lender have
any obligation (although it is entitled, at its option) to proceed against any
Triton LLC or any other Person or any Letter of Credit or any real or personal
property pledged to secure the Obligations before seeking satisfaction from
Guarantor. Lender may proceed, prior or subsequent to, or simultaneously with,
the enforcement of Lender's rights hereunder, to exercise any right or remedy
which it may have against any Letter of Credit or any property, real or
personal, as a result of any lien it may have as security for all or any portion
of the Obligations.
2.5. Waiver. In addition to the waivers contained in Section
2.1 or 2.2 hereof, Guarantor waives, and agrees that it shall not at any time
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshalling of assets
or redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by Guarantor of its
obligations under, or the enforcement by Lender of, this Guaranty. Guarantor
hereby waives diligence, presentment and demand (whether for non-payment or
protest or of acceptance, maturity, extension of time, change in nature or form
of the Obligations, acceptance of further security, release of further security,
composition or agreement arrived at as to the amount of, or the terms of, the
Obligations, notice of adverse change in any Triton LLC's financial condition or
any other fact which might materially increase the risk to Guarantor) with
respect to any of the Obligations or all other demands whatsoever and waives the
benefit of all provisions of law which are or might be in conflict with the
terms of this Guaranty. Guarantor represents, warrants and agrees that, as of
the date of this Guaranty, its obligations under this Guaranty are not subject
to any offsets or defenses against Lender or any Triton LLC of any kind.
Guarantor further agrees that its obligations under this Guaranty shall not be
subject to any counterclaims, offsets or defenses against Lender or against any
Triton LLC of any kind which may arise in the future.
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2.6. Benefit of Guaranty. (a) Except as provided in paragraph
(b) below, the provisions of this Guaranty are solely for the benefit of Lender
and its successors, transferees, endorsees and assigns. Nothing herein contained
shall impair, as between any Triton LLC and Lender, the obligations of such
Triton LLC under any SPV Indebtedness. In the event all or any part of the
Obligations are transferred, indorsed or assigned by Lender to any Person or
Persons, any reference to "Lender" herein shall be deemed to refer equally to
such Person or Persons.
(b) Guarantor and Lender agree that this Guaranty is executed
in part to induce Polaris Aircraft Income Fund V, a California limited
partnership ("Polaris"), to enter into that certain Purchase, Assignment and
Assumption Agreement dated as of April, 1997 with Lender and to accept the
delivery by Lender of that certain Promissory Note effective as of April 1, 1997
in connection therewith, and accordingly the provisions of this Guaranty are
hereby declared to be for the benefit of Polaris and its successors,
transferees, endorsees and assigns, and may be enforced by them. Guarantor and
Lender further agree that in the event Polaris notifies Guarantor that any
amounts are due and owing to it by Lender, then until such notice has been
revoked by Polaris, any payments to be made by Guarantor hereunder shall instead
be made by Guarantor directly to Polaris and Polaris shall apply all payments
received from Guarantor in the same manner as though paid directly by Lender.
2.7. Modification of Obligations, Etc. If Lender shall at any
time or from time to time, with or without the consent of, or notice to,
Guarantor:
(a) change or extend the manner, place or terms of payment of,
or renew or alter all or any portion of, the Obligations;
(b) take any action under or in respect of any SPV
Indebtedness in the exercise of any remedy, power or privilege contained therein
or available to it at law, equity or otherwise, or waive or refrain from
exercising any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, any document,
instrument or agreement with respect to SPV Indebtedness;
(d) extend or waive the time for any of Guarantor's, any
Triton LLC's or other Person's performance of, or compliance with, any term,
covenant or agreement on its part to be performed or observed under any
document, instrument or agreement with respect to SPV Indebtedness, or waive
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such performance or compliance or consent to a failure of, or departure
from, such performance or compliance;
(e) take and hold security or collateral for the
payment of the Obligations guaranteed hereby or sell, exchange,
release, dispose of, or otherwise deal with, any property pledged,
mortgaged or conveyed, or in which Lender has been granted a lien, to
secure any indebtedness of Guarantor or any Triton LLC to Lender;
(f) release anyone who may be liable in any manner
for the payment of any amounts owed by Guarantor or any Triton LLC to
Lender;
(g) modify or terminate the terms of any
intercreditor or subordination agreement pursuant to which claims of
other creditors of Guarantor or any Triton LLC are subordinated to the
claims of Lender and/or
(h) apply any sums by whomever paid or however
realized to any amounts owing by Guarantor or any Triton LLC to Lender
in such manner as Lender shall determine in its discretion;
then Lender shall not incur any liability to Guarantor pursuant hereto as a
result thereof, and no such action shall impair or release the obligations of
Guarantor under this Guaranty.
2.8. Reinstatement. This Guaranty shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Triton LLC or Guarantor for liquidation or reorganization, should
such Triton LLC or Guarantor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of such Triton LLC's or Guarantor's assets, and shall continue
to be effective or be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by Lender, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
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2.9. Waiver of Claims, Etc. If Lender may, under applicable
law, proceed to realize its benefits under any SPV Indebtedness, giving Lender a
lien upon any collateral, whether owned by the Triton LLC that is the borrower
under such SPV Indebtedness or by any other Person, either by judicial
foreclosure or by non-judicial sale or enforcement, Lender may, at its sole
option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Guaranty. If, in the
exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against a
Triton LLC or any other Person, whether because of any applicable laws
pertaining to "election of remedies" or the like, Guarantor hereby consents to
such action by Lender and waives any claim based upon such action. Any election
of remedies which results in the denial or impairment of the right of Lender to
seek a deficiency judgment against a Triton LLC or any other Person shall not
impair Guarantor's obligation to pay the full amount of the Obligations. In the
event Lender shall bid at any foreclosure or trustee's sale or at any private
sale permitted by law or the under any SPV Indebtedness, Lender may bid all or
less than the amount of the Obligations and the amount of such bid need not be
paid by Lender but shall be credited against the Obligations. The amount of the
successful bid at any such sale, whether Lender or any other party is the
successful bidder, shall be conclusively deemed to be the fair market value of
the collateral and the difference between such bid amount and the remaining
balance of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this Guaranty, notwithstanding that any present or
future law or court decision or ruling may have the effect of reducing the
amount of any deficiency claim to which Lender might otherwise be entitled but
for such bidding at any such sale.
2.10. Continuing Guaranty. Guarantor agrees that this Guaranty
is a continuing guaranty and shall remain in full force and effect until the
payment and performance in full of the Obligations.
3. REPRESENTATIONS AND WARRANTIES. To induce Lender to make
SPV Loans from time to time, Guarantor makes the following representations and
warranties to Lender, each and all of which shall survive the execution and
delivery of this Guaranty:
3.1. Corporate Existence; Compliance with Law. Guarantor (i)
is a corporation duly organized, validly existing and in good standing under the
laws of Bermuda; (ii) is duly qualified to do business and is in good standing
under the laws of each jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification (except for
jurisdictions in which such failure so to qualify or to be in good standing
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would not have a materially adverse effect on (A) the business, operations,
prospects or financial condition of Guarantor or (B) Guarantor's ability to pay
the Obligations in accordance with the terms hereof); (iii) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage and
operate its properties, to lease the property it operates under lease, and to
conduct its business as now, heretofore and proposed to be conducted; (iv) has
all material licenses, permits, consents or approvals from or by, and has made
all material filings with, and has given all material notices to, all
governmental authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (v) is in compliance with its articles of
incorporation and by-laws or other organizational documents; and (vi) is in
compliance with all applicable provisions of law where the failure to so comply
would have a materially adverse effect on (A) the business, operations,
prospects, assets or financial or other condition of Guarantor or (B) the
Guarantor's ability to pay the Obligations in accordance with the terms hereof.
3.2. Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery and performance of this Guaranty and all other
instruments and documents to be delivered by Guarantor hereunder and under the
Purchase Agreement are within Guarantor's corporate powers, have been duly
authorized by all necessary or proper corporate action, including the consent of
stockholders where required, are not in contravention of any provision of
Guarantor's articles of incorporation or by-laws (or other organizational
documents), will not violate any law or regulation, or any order or decree of
any court or governmental instrumentality, will not conflict with or result in
the breach of, or constitute a default under, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which Guarantor is a party or by
which Guarantor or any of its property is bound, will not result in the creation
or imposition of any lien upon any of the property of Guarantor and the same do
not require the consent or approval of any governmental body, agency, authority
or any other Person except those already obtained. At or prior to the closing
date for any SPV Indebtedness, this Guaranty shall have been duly executed and
delivered for the benefit of or on behalf of Guarantor, and shall then
constitute a legal, valid and binding obligation of Guarantor, enforceable
against Guarantor in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights and remedies of creditors generally and, with
respect to the enforceability of this Guaranty, by general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
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3.3. No Material Adverse Change. Since December 31, 1996,
there has been no material adverse change in the business, financial condition,
results of operations or liabilities of Guarantor.
4. NO ASSIGNMENT. Neither Guarantor nor Lender may assign
their respective rights or delegate their respective duties under this Guaranty.
5. FURTHER ASSURANCES. Guarantor agrees, upon the written
request of Lender, to execute and deliver to Lender, from time to time, any
additional instruments or documents reasonably considered necessary by Lender to
cause this Guaranty to be, become or remain valid and effective in accordance
with its terms.
6. PAYMENTS FREE AND CLEAR OF TAXES. All payments required to
be made by Guarantor hereunder shall be made to Lender free and clear of, and
without deduction for, any and all present and future taxes, withholdings,
levies, duties, and other governmental charges ("Taxes"), excluding such income
and franchise taxes thereof which would otherwise have been payable by Lender if
the Triton LLC that is the borrower under any SPV Indebtedness, as the case may
be, had paid the Obligations to Lender in accordance with the terms of any SPV
Indebtedness. Upon request by Lender, Guarantor shall furnish to Lender a
receipt for any Taxes paid by Guarantor pursuant to this Section 6 or, if no
Taxes are payable with respect to any payments required to be made by Guarantor
hereunder, either a certificate from each appropriate taxing authority or an
opinion of counsel acceptable to Lender, in either case stating that such
payment is exempt from or not subject to Taxes. If Taxes are paid by Lender in
the good faith belief that such taxes are owing, Guarantor will, upon demand of
Lender, and whether or not such Taxes shall be correctly or legally asserted,
indemnify Lender for such payments, together with any interest, penalties and
expenses in connection therewith plus interest thereon at the lesser of 10% or
the maximum rate under applicable law. Lender shall thereafter cooperate in a
commercially reasonable manner with Guarantor in seeking any refunds of such
taxes, interest, penalties and expenses which refunds and any interest thereon
shall be paid by Lender to Guarantor within five (5) business days of receipt by
Lender; provided, that in no event shall Lender be required to expend its own
funds in seeking any such refund and provided, further, that any expenses
incurred in connection therewith shall be paid by Guarantor.
7. MISCELLANEOUS.
7.1. Entire Agreement; Amendments. This Guaranty, together
with any documents, instruments and agreements with respect to SPV Indebtedness,
constitutes the entire agreement between the parties with respect to the subject
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matter hereof and supersedes all prior agreements relating to a guaranty of
payment and performance of the Obligations and may not be amended or
supplemented except by a writing signed by Guarantor, Lender and Polaris.
7.2. Headings. The headings in this Guaranty are for
convenience of reference only and are not part of the substance of this
Guaranty.
7.3. Severability. In the event that any one or more of the
provisions contained in this Guaranty shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Guaranty shall not be in any way impaired.
7.4. Notices. All notices, demands, declarations and other
communications required by this Guaranty shall be in writing and shall be
effective (i) if given by facsimile, when transmitted, (ii) if given by
registered or certified mail, three (3) Business Days after being deposited with
the U.S. Postal Service, (iii) if given by courier, when received, or (iv) if
personally delivered, when so delivered, addressed:
(a) If to Lender at:
Triton Aviation Services V LLC
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Telecopy Number: (415) 398-9184
With a copy to:
Polaris Investment Management Corporation
201 High Ridge Road
Stamford, Connecticut 06927-4900
Attention:
Telecopy Number: (203) 357-4585
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or to such other address as Lender may from time to time designate in writing to
Guarantor.
(b) If to Guarantor, at:
Triton Investments Limited
55 Green Street, Suite 500
San Francisco, CA 94111
Attention: President
Telecopy Number: (415) 398-9184
or to such other address as Guarantor may from time to time designate in writing
to Lender.
(c) If to Polaris at:
c/o Polaris Investment Management Corporation
201 Mission Street, 27th Floor
San Francisco, CA 94105
Attention: President
Telecopy Number: (415) 284-7460
With a copy to:
c/o Polaris Investment Management Corporation
201 High Ridge Road
Stamford, Connecticut 06927-4900
Attention: Portfolio Management
Telecopy Number: (203) 357-4585
or to such other address as Polaris may from time to time designate in writing
to Lender and Guarantor.
7.5. Binding Effect. This Guaranty shall bind Guarantor and
shall inure to the benefit of Lender and its respective successors and assigns.
Guarantor may not assign this Guaranty.
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7.6. Non-Waiver. The failure of Lender to enforce any right or
remedy hereunder, or promptly to enforce any such right or remedy, shall not
constitute a waiver thereof, nor give rise to any estoppel against Lender, nor
excuse Guarantor from its Obligations hereunder. Any waiver of any such right or
remedy by Lender must be in writing and signed by Lender.
7.7. Termination. This Guaranty shall terminate and be of no
further force or effect at such time as the Obligations shall be paid and
performed in full. Upon payment and performance in full of the Obligations,
Lender shall deliver to Guarantor such documents as Guarantor may reasonably
request to evidence such termination.
7.8. Governing Law. The terms of this Guaranty shall be
governed by, and shall be construed and enforced in accordance with, the laws of
the State of California (exclusive of any rules as to conflict of laws) and the
laws of the United States applicable therein. Guarantor hereby submits to
personal jurisdiction and waives any objection as to venue in the County of San
Francisco, State of California. Service of process on Guarantor in any action
arising out of or relating to this Guaranty shall be effective if mailed to
Guarantor in accordance with Section 7.4 hereof. Nothing herein shall preclude
Lender from bringing suit or taking other legal action in any other
jurisdiction.
7.9. Counterparts. This Guaranty may be executed in any number
of counterparts which shall individually and collectively constitute one
agreement.
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IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the date first above written.
TRITON INVESTMENTS LIMITED
By:/S/ STEVEN C. WIGHT
-------------------------------
Name: STEVEN C. WIGHT
Title: EXECUTIVE VICE PRESIDENT
Accepted and acknowledged by:
TRITON AVIATION SERVICES V LLC
By: Triton Aviation Services Limited,
its Manager
By:/S/ JOHN E. FLYNN
-------------------------------
Name: JOHN E. FLYNN
Title: PRESIDENT
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Solely in its capacity as a
third party beneficiary,
POLARIS AIRCRAFT INCOME FUND V
By: Polaris Investment Management Corporation,
General Partner
By:/S/ MARC A. MEICHES
--------------------------------
Name: MARC A. MEICHES
Title: VICE PRESIDENT
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