SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 0-21976
ATLANTIC COAST AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3621051
(State of incorporation) (IRS Employer
Identification
No.)
515-A Shaw Road, Dulles, Virginia
20166
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (703) 925-6000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock par value $ .02 NASDAQ National Market
(Title of Class) (Name of each exchange on which registered)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No__
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ______
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of March 11, 1997 was approximately $112,810,113
As of March 11, 1997 there were 8,519,578 shares of Common Stock of
the registrant issued and 8,507,078 shares of Common Stock were
outstanding.
Documents Incorporated by Reference
Certain portions of the documents listed below have been incorporated by
reference into the indicated part of this Form 10-K.
Document Incorporated Part of Form 10-K
Proxy Statement for 1996 Annual Meeting of Shareholders Part III, Items 10-13
Introductory Statement
The following is being filed to amend the Company's Annual Report on
Form 10-K for the year ended December 31, 1996. The Annual Report on
Form 10-K for the year ended December 31, 1996 was filed with U.S.
Securities and Exchange Commission on March 25, 1997 at 8:05pm EST.
(Accession Number 0000904020-97-000004)
The purpose of the amendment is to file the required exhibits on the
Company's Annual Report Form 10-K for the year ended December 31, 1996.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
(a) 1. Financial Statements
The Financial Statements listed in the accompanying
index to financial statements are filed as part of
this Annual Report on Form 10-K.
2. Financial Statement Schedules
The Financial Statement Schedules listed in the
accompanying index to financial statements are filed
as part of this Annual Report on Form 10-K.
3. Exhibits
Exhibit
Number Description of Exhibit
3.1*** Restated Certificate of Incorporation of the Company.
3.1(a)** Certificate of Correction to the Restated Certificate of
Incorporation.
3.2** Restated By-laws of the Company.
4.1* Specimen Common Stock Certificate.
4.2* Stockholders' Agreement, effective as of October 15, 1991,
among the Company, the stockholders and the holder of
warrants of the Company named on the signature pages thereto
and a trust established pursuant to the Atlantic Coast
Airlines, Inc. Employee Stock Ownership Plan, together with
Amendment and Second Amendment thereto dated as of February
24, 1992 and May 1, 1992 respectively.
4.3* Registration Rights Agreement, dated as of September 30,
1991, among the Company and the stockholders named on the
signature pages thereto (the "Stockholders Registration
Rights Agreement").
4.4* Form of amendment to the Stockholders Registration Rights
Agreement.
4.16*** Registration Rights Agreement, dated as of December 30,
1994, by and between JSX Capital Corporation and Atlantic
Coast Airlines, Inc.
10.1* Atlantic Coast Airlines, Inc. 1992 Stock Option Plan.
10.2** Restated Atlantic Coast Airlines, Inc. Employee Stock
Ownership Plan, effective October 11, 1991, as amended
through December 31, 1996.
10.4** Restated Atlantic Coast Airlines 401(k) Plan, as amended
through February 3, 1997.
10.6#* United Express Agreement, dated October 1, 1991, among
United Airlines, Inc., Atlantic Coast Airlines and the
Company, together with Amendment No. 1, dated as of April 1,
1993.
10.7#* Agreement to Lease British Aerospace Jetstream-41 Aircraft,
dated December 23, 1992, between British Aerospace, Inc. and
Atlantic Coast Airlines.
10.12(b)**** Amendment and Restated Severance Agreement, dated as
of October 18, 1995 between the Company and Kerry B. Skeen.
10.12(c)** First Amendment To Severance Agreement For Kerry B. Skeen
effective as of October 16, 1996.
10.12(h)** Form of Severance Agreement. The Company has entered into
substantially identical agreements with Thomas J. Moore and
with Michael S. Davis, both dated as of January 1, 1997.
10.12(i)** Severance Agreement dated as of January 28, 1997, between
the Company and James B. Glennon.
10.12(j)** Promissory Note in the amount of $75,000 issued by Paul
H. Tate to the Company dated February 19,1997 and payable
September 30, 1997.
10.13(a)** Form of Indemnity Agreement. The Company has entered into
substantially identical agreements with the individual
members of its Board of Directors.
10.20*** Stock Purchase Agreement, dated the 30th day of December
1994, by and among JSX Capital Corporation, Atlantic Coast
Airlines, and Atlantic Coast Airlines, Inc.
10.21*** Acquisition Agreement, dated as of December 30, 1994, by and
among Jetstream Aircraft, Inc., JSX Capital Corporation, and
Atlantic Coast Airlines.
10.21(a)** Amendment Number One to Acquisition Agreement, dated as of
June 17, 1996, by and among Jetstream Aircraft, Inc., JSX
Capital Corporation, and Atlantic Coast Airlines.
10.23** Loan and Security Agreement, dated as of October 12, 1995,
between Atlantic Coast Airlines and Shawmut Capital
Corporation.
10.24**** Stock Incentive Plan of 1995.
10.25**** Form of Incentive Stock Option Agreement. The Company
enters into this agreement with employees who have been
granted incentive stock options pursuant to the Stock
Incentive Plans.
10.26**** Form of Non-Qualified Stock Option Agreement. The Company
enters into this agreement with employees who have been
granted non-qualified stock options pursuant to the Stock
Incentive Plans.
10.27**** Split Dollar Agreement, dated as of December 29, 1995,
between the Company and Kerry B. Skeen.
10.27(a)** Form of Split Dollar Agreement. The Company has entered
into substantially identical agreements with Thomas J. Moore
and with Michael S. Davis, both dated as of July 1, 1996.
10.28**** Split Dollar Agreement, dated as of December 29, 1995,
between the Company and James B. Glennon.
10.29**** Agreement of Assignment of Life Insurance Death Benefit As
Collateral, dated as of December 29, 1995, between the
Company and Kerry B. Skeen.
10.29(a)** Form of Agreement of Assignment of Life Insurance Death
Benefit As Collateral. The Company has entered into
substantially identical agreements with Thomas J. Moore and
with Michael S. Davis, both dated as of July 1, 1996.
10.30**** Agreement of Assignment of Life Insurance Death Benefit As
Collateral, dated as of December 29, 1995, between the
Company and James B. Glennon.
10.31** Summary of Senior Management Bonus Program. The Company has
adopted a plan in substantially the form as outlined in this
exhibit for 1997.
10.32**** Summary of "Share the Success" Profit Sharing Plan. The
Company has adopted a plan in substantially this form for
1997 and 1996.
10.40#** Purchase Agreement between Bombardier Inc. and Atlantic
Coast Airlines Relating to the Purchase of Canadair Regional
Jet Aircraft dated January 8, 1997.
10.50#** Purchase Agreement for Twelve Jetstream 4100 Aircraft
between Atlantic Coast Airlines and Aero International
(Regional) as agent for and on behalf of British Aerospace
(Operations) Limited dated February 23, 1997.
10.60** Form of Lease Agreement between Atlantic Coast Airlines and
Finova Capital Corporation. The Company has entered into
four substantially identical agreements during 1996 for four
J-41 aircraft.
11.1** Computation of Per Share Earnings.
21.1* Subsidiaries of the Company.
23.1** Consent of BDO Seidman.
# Portions of this document have been omitted pursuant to a
request for confidential treatment.
* Filed as an Exhibit to Form S-1, Registration No. 33-62206,
effective July 20, 1993, incorporated herein by reference.
** Filed herewith.
*** Filed as an Exhibit to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, incorporated herein by
reference.
**** Filed as an Exhibit to the Annual report on Form 10-K for the
fiscal year ended December 31, 1995, incorporated herein by
reference.
(b) Reports on Form 8-K. The Company did not file any current
reports on Form 8-K during the fourth quarter of 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ATLANTIC COAST AIRLINES, INC.
March 31, 1997 By: /S/ Paul H. Tate
Paul H. Tate
Senior Vice President and
Chief Financial Officer
March 31, 1997 By: /S/ Kerry B. Skeen
Kerry B. Skeen
President and Chief
Executive Officer
CERTIFICATE OF CORRECTION FILED TO CORRECT
CERTAIN ERRORS IN THE RESTATED CERTIFICATE OF INCORPORATION
OF ATLANTIC COAST AIRLINES, INC.
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON JUNE 17, 1993
Atlantic Coast Airlines, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
1. The name of the Corporation is Atlantic Coast Airlines, Inc.
2. The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on June 14,
1991.
3. The original Certificate of Incorporation was amended and
restated pursuant to a Restated Certificate of Incorporation which was filed
with the Secretary of State of the State of Delaware on October 11, 1991 (the
"First Restated Certificate").
4. The First Restated Certificate was amended and restated
pursuant to a Restated Certificate of Incorporation which was filed with the
Secretary of State of the State of Delaware on June 17, 1993 (the "Restated
Certificate").
5. The Restated Certificate requires correction as permitted by
Section 103 of the General Corporation Law of the State of Delaware.
6. The inaccuracies or defects of the Restated Certificate to
be corrected are as follow:
a. The word "appeal" in Article VI should be deleted and
the word "repeal" inserted in lieu thereof.
b. The first sentence of Section 2(a) of Article VIII
should be corrected by deleting the phrase "or is otherwise involved in".
c. The fourth sentence of Section 2(a) of Article VIII
should be corrected by inserting the phrase "who initiates a proceeding"
between the words "officer" and "only".
7. Article VI of the Restated Certificate is corrected to read
as follows:
"In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly
authorized to make, alter or repeal the by-laws of the
Corporation."
8. The first sentence of Section 2(a) of Article VIII is
corrected to read as follows:
"Each person who was or is made a party or is threatened to
be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding")
(including an action by or in the right of the Corporation),
by reason of the fact that he is or was serving as a
director or officer of the Corporation (or is or was serving
at the request of the Corporation in a similar capacity with
another entity, including employee benefit plans), shall be
indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General
Corporation Law.
9. The fourth sentence of Section 2(a) of Article VIII is
corrected to read as follows:
"Except as provided in paragraph (b) hereof with respect to
proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such director or officer who
initiates a proceeding only if such proceeding was
authorized by the Board of Directors of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Correction to be signed by Kerry B. Skeen, its Chief Executive Officer, and
attested by Richard J. Kennedy, its Secretary, this 19th day of March, 1997.
ATLANTIC COAST AIRLINES, INC.
By: ____________________________
Kerry B. Skeen
Chief Executive Officer
ATTEST:
By: _______________________
Richard J. Kennedy
Secretary
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2
ATLANTIC COAST AIRLINES, INC.
Incorporated Under the Laws of the State of Delaware
RESTATED BY-LAWS
ARTICLE I
OFFICES
The registered office of Atlantic Coast Airlines, Inc. (the
"Corporation") in Delaware shall be at 1209 Orange Street in the City of
Wilmington, County of New Castle, in the State of Delaware, and The
Corporation Trust Company shall be the resident agent of this Corporation in
charge thereof. The Corporation may also have such other offices at such
other places, within or without the State of Delaware, as the Board of
Directors may from time to time designate or the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meetings. An annual meeting of stockholders shall
be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by resolution of
the Board of Directors from time to time. At the annual meeting, any business
may be transacted and any corporate action may be taken whether stated in the
notice of meeting or not, except as otherwise expressly provided by statute or
the Restated Certificate of Incorporation of the Corporation (the "Restated
Certificate").
Section 2.2. Special Meetings. Special meetings of stockholders for
any purpose or purposes may be called at any time by the Board of Directors,
or by a committee of the Board of Directors which has been duly designated by
the Board of Directors and whose powers and authority, as expressly provided
in a resolution of the Board of Directors, include the power to call such
meetings, but such special meetings may not be called by any other person or
persons. Special meetings shall be held at such place or places within or
without the State of Delaware as shall from time to time be designated by the
Board of Directors and stated in the notice of such meeting. At a special
meeting, no business shall be transacted and no corporate action shall be
taken other than that stated in the notice of the meeting.
Section 2.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the
meeting is called. Unless otherwise provided by law, the Restated Certificate
of Incorporation or these by-laws, the written notice of any meeting shall be
given not less than ten nor more than 60 days before the date of the meeting
to each stockholder entitled to vote at such meeting. If mailed, such notice
shall be deemed to be given when deposited in the mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
Section 2.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than 30 days or, if after the adjournment, a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 2.5. Quorum. Except as otherwise provided by law, the Restated
Certificate of Incorporation or these by-laws, at each meeting of
stockholders, the presence in person or by proxy of the holders of shares of
stock having a majority of the votes which could be cast by the holders of all
outstanding shares of stock entitled to vote at the meeting shall be necessary
and sufficient to constitute a quorum. In the absence of a quorum, the
stockholders so present may, by majority vote, adjourn the meeting from time
to time in the manner provided in Section 2.4 of these by-laws until a quorum
shall attend. Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not limited to
its own stock, held by it in a fiduciary capacity.
Section 2.6. Organization. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence, by the Vice
Chairman of the Board, if any, or in his absence, by the President, or in his
absence, by a Vice President, or in the absence of the foregoing persons, by a
chairman designated by the Board of Directors, or in the absence of such
designation, by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. To the maximum extent
permitted by law, such presiding person shall have the power to set procedural
rules, including but not limited to, rules respecting the time allotted to
stockholders to speak, governing all aspects of the conduct of such meetings.
Section 2.7. Voting; Proxies. Except as otherwise provided by the
Restated Certificate of Incorporation, each stockholder entitled to vote at
any meeting of stockholders shall be limited to one vote for each share of
stock held by him which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders may authorize
another person or persons to act for him by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting
in person or by filing an instrument in writing revoking the proxy or another
duly executed proxy bearing a later date with the Secretary of the
Corporation. Voting at meetings of stockholders need not be by written ballot
and need not be conducted by inspectors of election unless so determined by
the holders of shares of stock having a majority of the votes which could be
cast by the holders of all outstanding shares of stock entitled to vote
thereon which are present in person or by proxy at such meeting. At all
meetings of stockholders for the election of directors, a plurality of the
votes cast shall be sufficient to elect. All other elections and questions
shall, unless otherwise provided by law, the Restated Certificate of
Incorporation or these by-laws, be decided by the vote of the holders of
shares of stock having a majority of the vote which could be cast by the
holders of all shares of stock entitled to vote thereon which are present in
person or represented by proxy at the meeting.
Section 2.8. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to
notice of, or to vote at, any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders
or adjournment thereof, shall, unless otherwise required by law, not be more
than 60 nor less than ten days before the date of such meeting; (2) in the
case of determination of stockholders entitled to express consent to corporate
action in writing without a meeting, shall not be more than ten days from the
date upon which the resolution fixing the record date is adopted by the Board
of Directors; and (3) in the case of any other action, shall not be more than
60 days prior to such other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of, or to vote at,
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting when no prior action
of the Board of Directors is required by law, shall be the first date on which
a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation in accordance with applicable law, or,
if prior action by the Board of Directors is required by law, shall be at the
close of business on the day on which the Board of Directors adopts the
resolution taking such prior action; and (3) the record date for determining
stockholders for any other purpose shall be at the close of business on the
day on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
Section 2.9. List of Stockholders Entitled to Vote. The Secretary
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder who is present. Upon the willful neglect or refusal of the
directors to produce such a list at any meeting for the election of directors,
they shall be ineligible for election to any office at such meeting. The
stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list of stockholders or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 2.10. Action By Consent of Stockholders. Unless otherwise
restricted by the Restated Certificate of Incorporation, any action required
or permitted to be taken at any annual or special meeting of the stockholders
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. Number; Qualifications. The Board of Directors of the
Corporation shall consist of three or more members, the number thereof to be
determined from time to time by resolution of the Board of Directors.
Directors need not be stockholders.
Section 3.2. Election; Resignation; Vacancies. The Board of Directors
shall initially consist of the persons named as directors in the certificate
of incorporation, and each director so elected shall hold office until the
first annual meeting of stockholders or until his successor is elected and
qualified. At the first annual meeting of stockholders and at each annual
meeting thereafter, the stockholders shall elect directors each of whom shall
hold office for a term of one year or until his successor is elected and
qualified. Any director may resign at any time upon written notice to the
Corporation. Such resignation shall take effect at the time specified
therein, and if no time be specified, at the time of its receipt by the
President. The acceptance of a resignation shall not be necessary to make it
effective, unless so specified therein.
Any newly created directorship or any vacancy occurring in the Board of
Directors for any cause may be filled by a majority of the remaining members
of the Board of Directors, although such majority is less than a quorum, or by
a plurality of the votes cast at a meeting of stockholders, and each director
so elected shall hold office until the expiration of the term of office of the
director whom he has replaced or until his successor is duly elected and
qualified.
Section 3.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware
and at such times as the Board of Directors may from time to time determine
and, if so determined, notices thereof need not be given.
Section 3.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary,
or any member of the Board of Directors. Notice of a special meeting of the
Board of Directors shall be given by the person or persons calling the meeting
at least twenty-four hours before the special meeting.
Section 3.5. Notice and Place of Meetings. Meetings of the Board of
Directors may be held at the principal office of the Corporation, or at such
other place as shall be stated in the notice of such meeting. Notice of any
special meeting, and, except as the Board of Directors may otherwise determine
by resolution, notice of any regular meeting also, shall be mailed to each
director addressed to him at his residence or usual place of business at least
two days before the day on which the meeting is to be held, or if sent to him,
at such place by telegraph or cable, or delivered personally or by telephone,
not later than the day before the day on which the meeting is to be held. No
notice of the annual meeting of the Board of Directors shall be required if it
is held immediately after the annual meeting of the stockholders and if a
quorum is present.
Section 3.6. Business Transacted at Meetings, etc. Any business may be
transacted and any corporate action may be taken at any regular or special
meeting of the Board of Directors at which a quorum shall be present, whether
such business or proposed action be stated in the notice of such meeting or
not, unless special notice of such business or proposed action shall be
required by statute.
Section 3.7. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of which all persons participating
in the meeting can hear each other, and participation in a meeting in
accordance with this Section 3.7 shall constitute presence in person at such
meeting.
Section 3.8. Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the whole Board of Directors shall constitute
a quorum for the transaction of business. Except in cases in which the
Restated Certificate of Incorporation or these by-laws otherwise provide, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. The members of the Board
of Directors shall act only as the Board of Directors and the individual
members thereof shall not have any powers as such.
Section 3.9. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
their absence, by a chairman chosen at the meeting. The Secretary shall act
as secretary of the meeting, but in his absence the chairman of the meeting
may appoint any person to act as secretary of the meeting.
Section 3.10. Informal Action by Directors. Unless otherwise
restricted by the Restated Certificate of Incorporation or these by-laws, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board of Directors or such committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or such committee.
Section 3.11. Removal. Any director may be removed, only for cause by
the holders of a majority of shares entitled to vote at any special meeting of
stockholders of the Corporation called for that purpose.
Section 3.12. Compensation. Directors shall be entitled to such
compensation for their services as may be approved by resolution of the Board
of Directors, including, if so approved by resolution of the Board of
Directors, a fixed sum and expenses for attendance at each regular or special
meeting of the Board of Directors or any committee thereof. No such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor.
Section 3.13. Action by Consent of the Board of Directors. Any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of the Board
or committee.
Section 3.14. Meetings Through Use of Communications Equipment.
Members of the Board of Directors, or any committee designated by the Board of
Directors, shall, except as otherwise provided by law, the Restated
Certificate of Incorporation or these by-laws, have the power to participate
in a meeting of the Board of Directors, or any committee, by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at the meeting.
ARTICLE IV
COMMITTEES
Section 4.1. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of
a member of the committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in place of any such absent or disqualified member. Any
such committee, to the extent permitted by law and to the extent provided in
the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have such power or authority in reference to amending the
Restated Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the by-laws of the Corporation; and,
unless the resolution or the Restated Certificate of Incorporation expressly
so provide, no committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger as provided by law. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes
of its meetings and report the same to the Board of Directors when required.
Members of special or standing committees shall be entitled to receive such
compensation for serving on such committees as the Board of Directors shall
determine.
Section 4.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such
rules each committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article IV of these by-
laws.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers; Election; Qualifications; Term of
Office; Resignation; Removal; Vacancies. The officers of the Corporation
shall be elected or appointed by the Board of Directors and may include, at
the discretion of the Board, a President, a Secretary, a Chairman of the
Board, one or more Vice Presidents, one or more Assistant Secretaries, a
Treasurer and one or more Assistant Treasurers and any other officers as may
be elected or appointed from time to time by the Board. Each such officer
shall hold office until the first meeting of the Board of Directors after the
annual meeting of stockholders next succeeding his election, and until his
successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. The Board of Directors may remove any officer with or without
cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Corporation. Except as
otherwise provided by law, any number of offices may be held by the same
person. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise may be filled for the unexpired portion of
the term by the Board of Directors at any regular or special meeting.
Section 5.2. Chairman of the Board. The Chairman of the Board, if any,
shall be elected as provided in Section 3.2 of these by-laws, shall preside at
all meetings of the Board of Directors and shall have such other powers and
duties as may from time to time be prescribed by the Board of Directors, upon
directions given to them pursuant to resolutions duly adopted by the Board of
Directors.
Section 5.3. President. The President shall be the chief executive
officer of the Corporation, shall have general and active management of the
business of the corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. The President shall preside
at all meetings of the stockholders. The President shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except (i) where required or permitted by law to be otherwise
signed and executed or (ii) delegated by the Board of Directors to some other
officer or agent of the Corporation.
Section 5.4. Vice President. In the absence of the President or in the
event of his inability or refusal to act, the Vice President (or in the event
there be more than one Vice President, the Vice Presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the President. The Vice Presidents shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 5.5. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors
in a book to be kept for that purpose. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board
of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or the President, under whose supervision he shall be. He
shall have custody of the corporate seal of the Corporation and he, or an
Assistant Secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by
the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the corporation
and to attest the affixing by his signature.
Section 5.6. Assistant Secretary. The Assistant Secretary, or if there
by more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or, if there be no such determination, then in the order
of their election) shall, in the absence of the Secretary, or in the event of
his inability or refusal to act, perform the duties and exercise the powers of
the Secretary and shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
Section 5.7. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all his transactions as Treasurer and of the financial
condition of the Corporation.
If required by the Board of Directors, he shall give the corporation a
bond (which shall be renewed every six years) in such sum and with such surety
or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 5.8. Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by
the Board of Directors (or if there be no such determination, then in the
order of their election) shall in the absence of the Treasurer, or in the
event of his inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 5.9. Other Officers. Other officers, including one or more
additional vice-presidents, assistant secretaries or assistant treasurers, may
from time to time be appointed by the Board of Directors, which other officers
shall have such powers and perform such duties as may be assigned to them by
the Board of Directors or the officer or committee appointing them.
Section 5.10. Resignation. Any officer of the Corporation may resign
at any time. Such resignation shall be in writing and shall take effect at
the time specified therein, and if no time be specified, at the time of its
receipt by the President or the Secretary. The acceptance of a resignation
shall not be necessary in order to make it effective, unless so specified
therein.
Section 5.11. Filing of Vacancies. A vacancy in any office shall be
filled by the Board of Directors or by the authority appointing the
predecessor in such office.
Section 5.12. Compensation. The compensation of the officers shall be
fixed by the Board of Directors, or by any committee upon whom power in that
regard may be conferred by the Board of Directors.
ARTICLE VI
CAPITAL STOCK
Section 6.1. Certificates. Certificates of capital stock shall be in
such form as shall be approved by the Board of Directors. They shall be
numbered in the order of their issue and shall be signed by the President and
the Secretary and the seal of the Corporation or a facsimile thereof shall be
impressed or affixed or reproduced thereon, provided, however, that where such
certificates are signed by a transfer agent or an assistant transfer agent or
by a transfer clerk acting on behalf of the Corporation and a registrar, the
signatures of the President and the Secretary may be a facsimile thereof. In
case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued,
it may be issued by the Corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 6.2. Registration and Transfer of Shares. The name of each
person owning a share of the capital stock of the Corporation shall be entered
on the books of the Corporation together with the number of shares held by
him, the numbers of the certificates covering such shares and the dates of
issue of such certificates. The shares of stock of the Corporation shall be
transferable on the books of the Corporation by the holders thereof in person,
or by their duly authorized attorneys or legal representatives, on surrender
and cancellation of certificates for a like number of shares, accompanied by
an assignment or power of transfer endorsed thereon or attached thereto, duly
executed, and with such proof of the authenticity of the signature as the
Corporation or its agents may reasonably require. A record shall be made of
each transfer.
The Board of Directors may make other and further rules and regulations
concerning the transfer and registration of certificates for stock and may
appoint a transfer agent or registrar or both and may require all certificates
of stock to bear the signature of either or both.
Section 6.3. Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The holder of any stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction or
mutilation of the certificate therefor. The Corporation may issue a new
certificate of stock in place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation may
require the owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate, or may remit such owner to such remedy or remedies as he may have
under the laws of the State of Delaware.
Section 6.4. Certificates Issued for Partly Paid Shares. Certificates
may be issued for partly paid shares and in such case upon the face and back
of the certificates issued to represent any such partly paid shares the total
amount of consideration to be paid therefor, and the amount paid thereon shall
be specified.
Section 6.5. Facsimile Signatures. Any of or all the signatures on the
certificates may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent or registrar at the
date of issue.
ARTICLE VII
INDEMNIFICATION
Section 7.1. The Corporation shall be authorized to indemnify any
person entitled to indemnity under the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended ("DGCL") to the
fullest extent permitted by the DGCL; provided, however, that the Corporation
shall not be permitted to indemnify any person in connection with any
proceeding initiated by such person, unless such proceeding is authorized by a
majority of the directors of the Corporation.
Section 7.2. Alternative Sources of Funding. The Corporation may
create a trust fund, purchase a letter of credit or obtain other sources of
funding, which the Board of Directors determines to be in the best interest of
the Corporation, to secure payment or proper advances and indemnification
under this Article VII or under Article VIII of the Restated Articles of
Incorporation.
ARTICLE VIII
DIVIDENDS, SURPLUS, ETC.
Section 8.1. General Discretion of Directors. The Board of Directors
shall have power to fix and vary the amount to be set aside or reserved as
working capital of the Corporation, and, subject to the requirements of the
Restated Certificate of Incorporation, to determine whether any, if any, part
of the surplus or net profits of the Corporation shall be declared as
dividends and paid to the stockholders, and to fix the date or dates for the
payment of dividends.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Fiscal year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
Section 9.2. Corporate Seal. The corporate seal shall have the name of
the Corporation inscribed thereon and shall be in such form as may be approved
from time to time by the Board of Directors. The corporate seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced
otherwise.
Section 9.3. Notices. Except as otherwise expressly provided, any
notice required by these By-laws to be given shall be sufficient if given by
depositing the same in a post office or letter box in a sealed postpaid
wrapper addressed to the person entitled thereto at his address, as the same
appears upon the books of the Corporation, or by faxing, telegraphing or
cabling the same to such person at such addresses; and such notice shall be
deemed to be given at the time it is mailed, faxed, telegraphed or cabled.
Section 9.4. Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Any written waiver of notice, signed by the person entitled
to notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 9.5. Deposits. All funds of the Corporation shall be deposited
from time to time to the credit of the Corporation in such bank or banks,
trust companies or other depositories as the Board of Directors may select,
and, for the purpose of such deposit, checks, drafts, warrants and other
orders for the payment of money which are payable to the order of the
Corporation, may be endorsed for deposit, assigned and delivered by any
officer of the Corporation, or by such agents of the Corporation as the Board
of Directors, the President or the Secretary may authorize for that purpose.
Section 9.8. Voting Stock of Other Corporations. Except as otherwise
ordered by the Board of Directors, the President or the Secretary shall have
full power and authority on behalf of the Corporation to attend and to act and
to vote at any meeting of the stockholders of any corporation of which the
Corporation is a stockholder and to execute a proxy to any other person to
represent the Corporation at any such meeting, the President or the Secretary
or the holder of any such proxy, as the case may be, shall possess and may
exercise any and all rights and powers incident to ownership of such stock and
which, as owner thereof the Corporation might have possessed and exercised if
present. The Board of Directors may from time to time confer like powers upon
any other person or persons.
Section 9.9. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present
at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if (1) the material facts as to his
relationship of interest and as to the contract or transaction are disclosed
or are known to the Board of Directors of the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (2) the material
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and
the contract or transaction is specifically approved in good faith by the vote
of the stockholders; or (3) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, or the stockholder. Common or
interested directors may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
Section 9.10. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account, and minute books, may be kept on, or be in the form of,
punch cards, magnetic tape, photographs, microphotographs, or any other
information storage device, provided that the records so kept can be converted
into clearly legible form within a reasonable time. The Corporation shall so
convert any records so kept upon the request of any person entitled to inspect
the same.
Section 9.11. Amendment of By-Laws. These by-laws may be altered or
repealed, and new by-laws made, by the Board of Directors, but the
stockholders may make additional by-laws and may alter and repeal any by-laws
whether adopted by them or otherwise.
SECRETARY'S CERTIFICATE
I, Edward J. Wegel, Secretary of Atlantic Coast Airlines, Inc., hereby
certify that the attached is a true, correct and complete copy of the By-Laws
of Atlantic Coast Airlines, as amended, if applicable as in effect on the date
hereof.
Date: June 15, 1993
______________//s//___________
Edward J. Wegel
Vice President
[Footnote continued from previous page]
[Footnote continued on next page]
14
Exhibit 10.2
ATLANTIC COAST AIRLINES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
RESTATED AS AMENDED THROUGH DECEMBER 31, 1996
THIS AGREEMENT, hereby made and entered into this 29th day of December,
1994, by and between Atlantic Coast Airlines, Inc. (herein referred to as the
"Employer") and Bank One, Texas (herein referred to as the "Trustee").
W I T N E S S E T H :
WHEREAS, the Employer heretofore established an Employee Stock Ownership
Plan and Trust effective October 11, 1991 (hereinafter called the "Effective
Date"), known as Atlantic Coast Airlines, Inc. Employee Stock Ownership Plan
(herein referred to as the "Plan") in recognition of the contribution made to
its successful operation by its employees and for the exclusive benefit of its
eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has the ability to
amend the Plan, provided the Trustee joins in such amendment if the provisions
of the Plan affecting the Trustee are amended; and
WHEREAS, contributions to the Plan will be made by the Employer and such
contributions made to the trust will be invested primarily in the capital
stock of the Employer;
NOW, THEREFORE, effective October 11, 1991, except as otherwise
provided, the Employer and the Trustee in accordance with the provisions of
the Plan pertaining to amendments thereof, hereby amend the Plan in its
entirety and restate the Plan to provide as follows:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.
1.2 "Administrator" means the person or entity designated by the
Employer pursuant to Section 2.4 to administer the Plan on behalf of the
Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled Group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated)
which is under common control (as defined in Code Section 414(c)) with the
Employer; any organization (whether or not incorporated) which is a member of
an affiliated service Group (as defined in Code Section 414(m)) which includes
the Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.4 "Aggregate Account" means, with respect to each Participant, the
value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions
of Section 2.2.
1.5 "Anniversary Date" means December 31.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of
Sections 7.2 and 7.5.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
1.8 "Company Stock" means common stock issued by the Employer (or by a
corporation which is a member of the controlled group of corporations of which
the Employer is a member) which is readily tradeable on an established
securities market. If there is no common stock which meets the foregoing
requirement, the term "Company Stock" means common stock issued by the
Employer (or by a corporation which is a member of the same controlled group)
having a combination of voting power and dividend rights equal to or in excess
of: (A) that class of common stock of the Employer (or of any other such
corporation) having the greatest voting power, and (B) that class of common
stock of the Employer (or of any other such corporation) having the greatest
dividend rights. Noncallable preferred stock shall be deemed to be "Company
Stock" if such stock is convertible at any time into stock which constitutes
"Company Stock" hereunder and if such conversion is at a conversion price
which (as of the date of the acquisition by the Trust) is reasonable. For
purposes of the preceding sentence, pursuant to Regulations, preferred stock
shall be treated as noncallable if after the call there will be a reasonable
opportunity for a conversion which meets the requirements of the preceding
sentence.
1.9 "Company Stock Account" means the account of a Participant which
is credited with the shares of Company Stock purchased and paid for by the
Trust Fund or contributed to the Trust Fund.
1.10 "Compensations" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments
of compensation by the Employer (in the course of the Employer's trade or
business) for a Plan Year for which the Employer is required to furnish the
Participant a written statement under Code Sections 6041(d), 6051(a)(3) and
6052. Compensation must be determined without regard to any rules under Code
Section 3401(a) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such as the
exception for agricultural labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall be
made by:
(a) excluding per diem allowances.
(b) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in
the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in
Code Section 414(h)(2) that are treated as Employer contributions.
For a Participant's initial year of participation, Compensation shall be
recognized for the entire Plan Year.
Compensation in excess of $200,000 shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d), except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or within
such calendar year and the first adjustment to the $200,000 limitation shall
be effective on January 1, 1990. For any short Plan Year the Compensation
limit shall be an amount equal to the Compensation limit for the calendar year
in which the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12) . In applying
this limitation, the family group of a Highly Compensated Participant who is
subject to the Family Member aggregation rules of Code Section 414(q)(6)
because such Participant is either a "five percent owner" of the Employer or
one of the ten (10) Highly Compensated Employees paid the greatest "415
Compensation" during the year, shall be treated as a single Participant,
except that for this purpose Family Members shall include only the affected
Participant's spouse and any lineal descendants who have not attained age
nineteen (19) before the close of the year. If, as a result of the
application of such rules the adjusted $200,000 limitation is exceeded, then
the limitation shall be prorated among the affected Family Members in
proportion to each such Family Member's Compensation prior to the application
of this limitation, or the limitation shall be adjusted in accordance with any
other method permitted by Regulation.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of living
in accordance with Code Section 401(a)(17)(B). The cost of living adjustment
in effect far a calendar year applies to any period, not exceeding 12 months,
over which Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months,
the OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
If, as a result of such rules, the maximum "annual addition" limit of
Section 4.4(a) would be exceeded for one or more of the affected Family
Members, the prorated Compensation of all affected Family Members shall be
adjusted to avoid or reduce any excess. The prorated Compensation of any
affected Family Member whose allocation would exceed the limit shall be
adjusted downward to the level needed to provide an allocation equal to such
limit. The prorated Compensation of affected Family Members not affected by
such limit shall then be adjusted upward on a pro rata basis not to exceed
each such affected Family Member's Compensation as determined prior to
application of the Family Member rule The resulting allocation shall not
exceed such individual's maximum "annual addition" limit. If, after these
adjustments, an "excess amount" still results, such "excess amount" shall be
disposed of in the manner described in Section 4.5(a) pro rata among all
affected Family Members.
If, in connection with the adoption of this amendment and restatement,
the definition of Compensation has been modified, then, for Plan Years prior
to the Plan Year which includes the adoption date of this amendment and
restatement, Compensation means compensation determined pursuant to the Plan
then in effect
1.11 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
1.12 "Current Obligations" means Trust obligations arising from
extension of credit to the Trust and payable in cash within (1) year from the
date an Employer contribution is due.
1.13 "Early Retirement Date." This Plan does not provide for a
retirement date prior to Normal Retirement Date.
1.14 "Eligible Employee" means any Employee.
Employees who are Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall not be eligible to participate in this Plan.
Additionally, Co-op Students shall not be eligible to participate in the Plan.
Employees of Affiliated Employers shall not be eligible to participate
in this Plan unless such Affiliated Employers have specifically adopted this
Plan in writing.
1.15 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not
constitute more than 20% of the recipient's non-highly compensated work force.
1.16 "Employer" means Atlantic Coast Airlines, Inc. and any successor
which shall maintain this Plan; and any predecessor which has maintained this
Plan The Employer is a corporation with principal offices in the Commonwealth
of Virginia.
1.17 "ESOP" means an employee stock ownership plan that meets the
requirements of Code Section 4975(e)(7) and Regulation 54.4975-11.
1.18 "Exempt Loan" means a loan made to the Plan by a disqualified
person or a loan to the Plan which is guaranteed by a disqualified person and
which satisfies the requirements of Section 2550.408b-3 of the Department of
Labor Regulations, Section 54.4975-7(b) of the Treasury Regulations and
Section 5.3 hereof.
1.19 "Family Member" means, with respect to an affected Participant,
such Participant's spouse and such Participant's lineal descendants and
ascendants and their spouses, all as described in Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct
or indirect, with respect to any monies or other property of the Plan or has
any authority or responsibility to do so, or (c) has any discretionary
authority or discretionary responsibility in the administration of the Plan,
including, but not limited to, the Trustee, the Employer and its
representative body, and the Administrator.
1.21 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on January 1st of each year and ending the following December 31st.
1.22 "Forfeiture" means that portion of a Participant's Account that is
not Vested, and occurs an the last day of the Plan Year in which the
Participant incurs five (5) consecutive 1-Year Breaks in Service. In
addition, the term Forfeiture shall also include amounts deemed to be
Forfeitures pursuant to any other provision of this Plan.
1.23 "Former Participant" means a person who has been a Participant,
but who has ceased to be a Participant for any reason.
1.24 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments
of compensation by the Employer (in the course of the Employer's trade or
business) for a Plan Year for which the employer is required to furnish the
Participant a written statement under Code Sections 6041(d), 6051(a)(3) and
6052. "415 Compensation" must be determined without regard to any rules under
Code Section 3401(a) that limit the remuneration included in wages based on
the nature or location of the employment or the services performed (such as
the exception for agricultural labor in Code Section 3401(a)(2)).
If, in connection with the adoption of this amendment and restatement,
the definition of "415 Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "415 Compensation" means compensation determined pursuant to the
Plan then in effect.
1.25 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section
1.30(c).
(b) Employees who received "415 Compensation" during the "look-
back year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the "look-
back year" from the Employer in excess of $50,000 and were in the Top
Paid Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of
the Employer (as that term is defined within the meaning of the
Regulations under Code Section 416) and received "415 Compensation"
during the "look-back year" from the Employer greater than 50 percent of
the limit in effect under Code Section 415(b)(1)(A) for any such Plan
Year. The number of officers shall be limited to the lesser of (i) 50
employees; or (ii) the greater of 3 employees or 10 percent of all
employees. For the purpose of determining the number of officers,
Employees described in Section l.50(a), (b), (c) and (d) shall be
excluded, but such Employees shall still be considered for the purpose
of identifying the particular Employees who are officers. If the
Employer does not have at least one officer whose annual "415
Compensation" is in excess of 50 percent of the Code Section
415(b)(1)(A) limit, then the highest paid officer of the Employer will
be treated as a Highly Compensated Employee.
(e) Employees who are in the Group consisting of the 100
Employees paid the greatest "415 Compensation" during the "determination
year" and are also described in (b), (c) or (d) above when these
paragraphs are modified to substitute "determination year" for "look-
back year."
The "look-back year" shall be the calendar year ending with or within
the Plan Year for which testing is being performed, and the "determination
year" (if applicable) shall be the period of time, if any, which extends
beyond the "look-back year" and ends on the last day of the Plan Year for
which testing is being performed (the "lag period"). If the "lag period" is
less than twelve months long, the dollar threshold amounts specified in (b),
(c) and (d) above shall be prorated based upon the number of months in the
"lag period."
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
Additionally, the dollar threshold amounts specified in (b) and (c)
above shall be adjusted at such time and in such manner as is provided in
Regulations. In the case of such an adjustment, the dollar limits which shall
be applied are those for the calendar year in which the "determination year"
or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additional, all Affiliated Employers shall be taken into account
as a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are
not covered in any qualified plan maintained by the Employer. The exclusion
of Leased Employees for this purpose shall be applied on a uniform and
consistent basis for all of the Employer's retirement plans Highly Compensated
Former Employees shall be treated a.5 Highly Compensated Employees without
regard to whether they performed services during the "determination year."
1.26 "Highly Compensated Former Employee" means a former Employee who
had a separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
"determination year" after attaining age 55. Notwithstanding the foregoing,
an Employee who separated from service prior to 1987 will be treated as a
Highly Compensated Former Employee only if during the separation year (or year
preceding the separation year) or any year after the Employee attains age 55
(or the last year ending before the Employee's 55th birthday), the Employee
either received "415 Compensation" in excess of $50,000 or was a "five percent
owner." For purposes of this Section, "determination year," "415 Compensation"
and "five percent owner" shall be determined in accordance with Section 1.25.
Highly Compensated Former Employees shall be treated as Highly Compensated
Employees. The method set forth in this Section for determining who is a
"Highly Compensated Former Employee" shall be applied on a uniform and
consistent basis for all purposes for which the Code Section 414(q) definition
is applicable.
1.27 "Highly Compensated Participant" means any Highly Compensated
Employee who is eligible to participate in the Plan.
1.28 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2)
each hour for which an Employee is directly or indirectly compensated or
entitled to compensation by the Employer (irrespective of whether the
employment relationship has terminated) for reasons other than performance of
duties (such as vacation, holidays, sickness, jury duty, disability, lay-off,
military duty or leave of absence) during the applicable computation period;
(3) each hour for which back pay is awarded or agreed to by the Employer
without regard to mitigation of damages. These hours will be credited to the
Employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award, agreement or
payment is made. The same Hours of Service shall not be credited both under
(1) or (2), as the case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such
period occurs in a single computation period); (ii) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, on account of
a period during which no duties are performed is not required to be credited
to the Employee if such payment is made or due under a plan maintained solely
for the purpose of complying with applicable worker's compensation, or
unemployment compensation or disability insurance laws; and (iii) Hours of
Service are not required to be credited for a payment which solely reimburses
an Employee for medical or medically related expenses incurred by the
Employee.
For purposes of this Section, a payment shall be deemed to be made by or
due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or indirectly through, among others, a trust fund,
or insurer, to which the Employer contributes or pays premiums and regardless
of whether contributions made or due to the trust fund, insurer, or other
entity are for the benefit of particular Employees or are on behalf of a group
of Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a Year
of Service, a year of participation for purposes of accrued benefits, a 1-Year
Break in Service, and employment commencement date (or reemployment
commencement date). In addition, Hours of Service will be credited for
employment with other Affiliated Employers. The provisions of Department of
Labor regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
1.29 "Investment Manager" means an entity that (a) has the power to
manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.30 "Key Employee" means an Employee as defined in Code Section 416(i)
and the Regulations thereunder. Generally, any Employee or former Employee
(as well as each of his Beneficiaries) is considered a Key Employee if he, at
any time during the Plan Year that contains the "Determination Date" or any of
the preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) having annual
"415 Compensation" greater than 50 percent of the amount in effect under
Code Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation"
from the Employer for a Plan Year greater than the dollar limitation in
effect under Code Section 415(c)(1)(A) for the calendar year in which
such Plan Year ends and owning (or considered as owning within the
meaning of Code Section 318) both more than one-half percent interest
and the largest interests in the Employer.
(c) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the meaning
of Code Section 318) more than five percent (5%) of the outstanding
stock of the Employer or stock possessing more than five percent (5%) of
the total combined voting power of all stock of the Employer or, in the
case of an unincorporated business, any person who owns more than five
percent (5%) of the capital or profits interest in the Employer. In
determining percentage ownership hereunder, employers that would
otherwise be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be treated as separate employers.
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent
owner" means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than one percent (1%) of the
outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414 (b), (c), (m)
and (o) shall be treated as separate employers. However, in determining
whether an individual has "415 Compensation" of more than $150,000, "415
Compensation" from each employer required to be aggregated under Code
Sections 414(b), (c), (m) and (o) shall be taken into account. For
purposes of this Section, the determination of "415 Compensation" shall
be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includable in
the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in
Code Section 414(h)(2) that are treated as Employer contributions.
1.31 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.32 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or
for the recipient and related persons determined in accordance with Code
Section 414(n)(6)) on a substantially full time basis for a period of at least
one year, and such services are of a type historically performed by employees
in the business field of the recipient employer. Contributions or benefits
provided a Leased Employee by the leasing organization which are attributable
to services performed for the recipient employer shall be treated as provided
by the recipient employer. A Leased Employee shall not be considered an
Employee of the recipient:
(a) if such employee is covered by a money purchase pension plan
providing:
(1) a non-integrated employer contribution rate of at
least 10% of compensation, as defined in Code Section 415(c)(3),
but including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457, and Employee
contributions described in Code Section 414(h)(2) that are
treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force:
1.33 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.34 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.35 "Normal Retirement Age" means the Participant's 65th birthday. A
Participant shall become fully vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.36 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's Normal Retirement Age.
1.37 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and 1-Year Breaks in Service shall be
measured on the same computation period.
"Authorized leave of absence" means an unpaid, temporary cessation
from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, an absence from work for any period by
reason of the Employee's pregnancy, birth of the Employee's child, placement
of a child with the Employee in connection with the adoption of such child, or
any absence for the purpose of caring for such child for a period immediately
following such birth or placement. For this purpose, Hours of Service shall
be credited for the computation period in which the absence from work begins,
only if credit therefore is necessary to prevent the Employee from incurring a
1-Year Break in Service, or, in any other case, in the immediately following
computation period. The Hours of Service credited for a "maternity or
paternity leave of absence" shall be those which would normally have been
credited but for such absence, or, in any case in which the Administrator is
unable to determine such hours normally credited, eight (8) Hours of Service
per day. The total Hours of Service required to be credited for a "maternity
or paternity leave of absence" shall not exceed 501.
1.38 "Other Investments Account" means the account of a Participant
which is credited with his share of the net gain (or loss) of the Plan,
Forfeitures and Employer contributions in other than Company Stock and which
is debited with payments made to pay for Company Stock.
1.39 "Participant" means any Eligible Employee who participates in the
Plan as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.40 "Participant's Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's contributions.
1.41 "Plan" means this instrument, including all amendments thereto.
1.42 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
1.43 "Regulation" means the Income Tax Regulations as promulgated by
the Secretary of the Treasury or his delegate, and as amended from time to
time.
1.44 "Retired Participant" means a person who has been a Participant,
but who has become entitled to retirement benefits under the Plan.
1.45 "Retirement Date" means the date as of which a Participant retires
for reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date or Late Retirement Date (see
Section 7.1).
1.46 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.47 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than by death,
Total and Permanent Disability or retirement.
1.48 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.49 "Top Heavy Plan Year" means a Plan Year during which the Plan is a
Top Heavy Plan.
1.50 "Top Paid Group" means the top 20 percent of Employees who
performed services for the Employer during the applicable year, ranked
according to the amount of "415 Compensation" (determined for this purpose in
accordance with Section 1.25) received from the Employer during such year.
All Affiliated Employers shall be taken into account as a single employer, and
Leased Employees within the meaning of Code Sections 414(n)(2) and 414(o)(2)
shall be considered Employees unless such Leased Employees are covered by a
plan described in Code Section 414(n)(5) and are not covered in any qualified
plan maintained by the Employer. Employees who are non-resident aliens and
who received no earned income (within the meaning of Code Section 911(d)(2))
from the Employer constituting United States source income within the meaning
of Code Section 861(a)(3) shall not be treated as Employees. Additionally,
for the purpose of determining the number of active Employees in any year, the
following additional Employees shall also be excluded; however, such Employees
shall still be considered for the purpose of identifying the particular
Employees in the Top Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours per week;
(c) Employees who normally work less than six (6) months during a
year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer are
covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and
the Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on a
uniform and consistent basis for all purposes for which the Code Section 414
(q) definition is applicable.
1.51 "Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing any painful occupation and
which condition constitutes total disability under the federal Social Security
Acts.
1.52 "Trustee" means the person or entity named as trustee herein or in
any separate trust forming a part of this Plan, and any successors.
1.53 "Trust Fund" means the assets of the Plan and Trust as the same
shall exist from time to time.
1.54 "Unallocated Company Stock Suspense Account" means an account
containing Company Stock acquired with the proceeds of an Exempt Loan and
which has not been released from such account and allocated to the
Participants' Company Stock Accounts.
1.55 "Vested" means the nonforfeitable portion of any account
maintained on behalf of a Participant.
1.56 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least
1000 Hours of Service. Regardless of the above, effective for the 1992 Plan
Year, Flight Crew must have at least 900 Hours of Service to be credited with
a "Year of Service". Effective for the 1993 Plan Year, Flight Crew must have
at least 750 Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour
of Service. The participation computation period beginning after a 1-Year
Break in Service shall be measured from the date on which an Employee again
performs an Hour of Service. The participation computation period shall shift
to the Plan Year which includes the anniversary of the date on which the
Employee first performed an Hour of Service. An Employee who is credited with
the required Hours of Service in both the initial computation period (or the
computation period beginning after a 1-Year Break in Service) and the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service, shall be credited with two (2) Years of Service
for purposes of eligibility to participate.
For vesting purposes, the computation period shall be the Plan Year,
including periods prior to the Effective Date of the Plan.
For all other purposes, the computation period shall be the Plan Year.
Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c).
However, in determining whether an Employee has completed a Year of Service
for benefit accrual purposes in the short Plan Year, the number of the Hours
of Service required shall be proportionately reduced based on the number of
full months in the short Plan Year.
A maximum of two (2) Years of Service with WestAir Holding, Inc. shall
be recognized.
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 7.4 of the Plan and
the special minimum allocation requirements of Code Section 416(c) pursuant to
Section 4.3 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued
Benefits of Key Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an Aggregation Group,
exceeds sixty percent (60%) of the Present Value of Accrued Benefits and
the Aggregate Accounts of all Key and Non-Key Employees under this Plan
and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year,
but such Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate Account
balance shall not be taken into account for purposes of determining
whether this Plan is a Top Heavy or Super Top Heavy Plan (or whether any
Aggregation Group which includes this Plan is a Top Heavy Group). In
addition, if a Participant or Former Participant has not performed any
services for any Employer maintaining the Plan at any time during the
five year period ending on the Determination Date, any accrued benefit
for such Participant or Former Participant shall not be taken into
account for the purposes of determining whether this Plan is a Top Heavy
or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year
in which, as of the Determination Date, (1) the Present value of Accrued
Benefits of Key Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an Aggregation Group,
exceeds ninety percent (90%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of
the Determination Date is the sum of:
(1) his Participant's Account balance as of the most recent
valuation occurring within a twelve (12) month period ending
on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of
any contributions actually made after the valuation date but
due on or before the Determination Date, except for the
first Plan Year when such adjustment shall also reflect the
amount of any contributions made after the Determination
Date that are allocated as of a date in that first Plan
Year.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distributions
made after the valuation date and prior to the Determination
Date, such distributions are not included as distributions
for top heavy purposes to the extent that such distributions
are already included in the Participant's Aggregate Account
balance as of the valuation date. Notwithstanding anything
herein to the contrary, all distributions, including
distributions made prior to January 1, 1984, and
distributions under a terminated plan which if it had not
been terminated would have been required to be included in
an Aggregation Group, will be counted. Further,
distributions from the Plan (including the cash value of
life insurance policies) of a Participant's account balance
because of death shall be treated as a distribution for the
purposes of this paragraph.
(4) any Employee contributions, whether voluntary or mandatory.
However, amounts attributable to tax deductible qualified
voluntary employee contributions shall not be considered to
be a part of the Participant's Aggregate Account balance.
(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and
made from a plan maintained by one employer to a plan
maintained by another employer), if this Plan provides the
rollovers or plan-to-plan transfers, it shall always
consider such rollovers or plan-to-plan transfers as a
distribution for the purposes of this Section. If this Plan
is the plan accepting such rollovers or plan-to-plan
transfers, it shall not consider such rollovers or plan-to-
plan transfers as part of the Participant's Aggregate
Account balance.
(6) with respect to related rollovers and plan-to-plan transfers
(ones either not initiated by the Employee or made to a plan
maintained by the same employer), if this Plan provides the
rollover or plan-to-plan transfer, it shall not be counted
as a distribution for purposes of this Section. If this
Plan is the plan accepting such rollover or plan-to-plan
transfer, it shall consider such rollover or plan-to-plan
transfer as part of the Participant's Aggregate Account
balance, irrespective of the date on which such rollover or
plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers are to
be treated as the same employer in (5) and (6) above, all
employers aggregated under Code Section 414(b), (c), (m) and
(o) are treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation Group
or a Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each plan of the Employer in
which a Key Employee is a participant in the Plan Year
containing the Determination Date or any of the four
preceding Plan Years, and each other plan of the Employer
which enables any plan in which a Key Employee participates
to meet the requirements of Code Sections 401(a) (4) or 410,
will be required to be aggregated. Such group shall be
known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in
the group will be considered a Top Heavy Plan if the
Required Aggregation Group is a Top Heavy Group. No plan in
the Required Aggregation Group will be considered a Top
Heavy Plan if the Required Aggregation Group is not a Top
Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include
any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a
whole, would continue to satisfy the provisions of Code
Sections 401(a)(4) and 410. Such group shall be known as a
Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan
that is part of the Required Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the Permissive
Aggregation Croup will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated
in order to determine whether such plans are Top Heavy
Plans.
(4) An Aggregation Group shall include any terminated plan of
the Employer if it was maintained within the last five (5)
years ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the preceding
Plan Year, or (b) in the case of the first Plan Year, the last day of
such Plan Year.
(f) Present Value of Accrued Benefit: In the case of a defined
benefit plan, the Present Value of Accrued Benefit for a Participant
other than a Key Employee, shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C). The determination of
the Present Value of Accrued Benefit shall be determined as of the most
recent valuation date that falls within or ends with the 12-month period
ending on the Determination Date except as provided in Code Section 416
and the Regulations thereunder for the first and second plan years of a
defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which, as of
the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under
all defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group, exceeds sixty
percent (60%) of a similar sum determined for all
Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the
Trustee and the Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and
the Act.
(b) The Employer shall establish a "funding policy and method,"
i.e., it shall determine whether the Plan has a short run need for
liquidity (e.g., to pay benefits) or whether liquidity is a long run
goal and investment growth (and stability of same) is a more current
need, or shall appoint a qualified person to do so. The Employer or its
delegate shall communicate such needs and goals to the Trustee, who
shall coordinate such Plan needs with its investment policy. The
communication of such a "funding policy and method" shall not, however,
constitute a directive to the Trustee as to investment of the Trust
Funds. Such "funding policy and method" shall be consistent with the
objectives of this Plan and with the requirements of Title I of the Act.
(c) The Employer shall periodically review the performance of any
fiduciary or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied by
formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct and
evaluation, or through other appropriate ways.
(d) The Employer will furnish Plan Fiduciaries and Participants
with notices and information statements when voting rights must be
exercised pursuant to Section 8.4.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be
eligible to serve as an Administrator. Any person so appointed shall signify
his acceptance by filing written acceptance with the Employer. An
Administrator may resign by delivering his written resignation to the Employer
or be removed by the Employer by delivery of written notice of removal, to
take effect at a date specified therein, or upon delivery to the Administrator
if no date is specified.
The Employer, upon the resignation or removal of an Administrator, shall
promptly designate in writing a successor to this position. If the Employer
does not appoint an Administrator, the Employer will function as the
Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such
delegation is made by the Employer, the Administrators may allocate the
responsibilities among themselves, in which event the Administrators shall
notify the Employer and the Trustee in writing of such action and specify the
responsibilities of each Administrator. The Trustee thereafter shall accept
and rely upon any documents executed by the appropriate Administrator until
such time as the Employer or the Administrators file with the Trustee a
written revocation of such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall administer
the Plan in accordance with its terms and shall have the power and discretion
to construe the terms of the Plan and to determine all questions arising in
connection with the administration, interpretation, and application of the
Plan. Any such determination by the Administrator shall be conclusive and
binding upon all persons. The Administrator may establish procedures, correct
any defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry
out the purpose of the Plan; provided, however, that any procedure,
discretionary act, interpretation or construction shall be done in a
nondiscriminatory manner based upon uniform principles consistently applied
and shall be consistent with the intent that the Plan shall continue to be
deemed a qualified plan under the terms of Code Section 401(a), and shall
comply with the terms of the Act and all regulations issued pursuant thereto.
The Administrator shall have all powers necessary or appropriate to accomplish
his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant
hereunder and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to
the amount and the kind of benefits to which any Participant shall be
entitled hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the administration of
the Plan;
(e) to interpret the provisions of the Plan and to make and
publish such rules for regulation of the Plan as are consistent with the
terms hereof;
(f) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from which such
Contract shall be purchased;
(g) to compute and certify to the Employer and to the Trustee
from time to time the sums of money necessary or desirable to be
contributed to the Plan;
(h) to consult with the Employer and the Trustee regarding the
short and long-term liquidity needs of the Plan in order that the
Trustee can exercise any investment discretion in a manner designed to
accomplish specific objectives;
(i) to establish and communicate to Participants a procedure for
allowing each Participant to direct the Trustee as to the distribution
of his Company Stock Account pursuant to Section 4.6;
(j) to establish and communicate to Participants a procedure and
method to insure that each Participant will vote Company Stock allocated
to such Participant's Company Stock Account pursuant to Section 8.4;
(k) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, and other data that may be necessary
for proper administration of the Plan and shall be responsible for supplying
all information and reports to the Internal Revenue Service, Department of
Labor, Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the Administrator,
may appoint counsel, specialists, advisers, and other persons as the
Administrator or the Trustee deems necessary or desirable in connection with
the administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters
relating to the Compensation of all Participants, their Hours of Service,
their Years of Service, their retirement, death, disability, or termination of
employment, and such other pertinent facts as the administrator may require;
and the Administrator shall advise the Trustee of such of the foregoing facts
as may be pertinent to the Trustee's duties under the Plan. The Administrator
may rely upon such information as is supplied by the Employer and shall have
no duty or responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless
paid by the Employer. Such expenses shall include any expenses incident to
the functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs
of administering the Plan. Until paid, the expenses shall constitute a
liability of the Trust Fund.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be
furnished to the claimant within 90 days after the application is filed. In
the event the claim is denied, the reasons for the denial shall be
specifically set forth in the notice in language calculated to be understood
by the claimant, pertinent provisions of the Plan shall be cited, and, where
appropriate, an explanation as to how the claimant can perfect the claim will
be provided. In addition, the claimant shall be furnished with an explanation
of the Plan's claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who had been
denied a benefit by a decision of the Administrator pursuant to Section 2.12
shall be entitled to request the Administrator to give further consideration
to his claim by filing with the Administrator (on a form which may be obtained
from the Administrator) a request for a hearing. Such request, together with
a written statement of the reasons why the claimant believes his claim should
be allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60 days, at which
the claimant may be represented by an attorney or any other representative of
his choosing and at which the claimant shall have an opportunity to submit
written and oral evidence and arguments in support of his claim. At the
hearing (or prior thereto upon 5 business days written notice to the
Administrator) the claimant or his representative shall have an opportunity to
review all documents in the possession of the Administrator which are
pertinent to the claim at issue and its disallowance Either the claimant or
the Administrator may cause a court reporter to attend the hearing and record
the proceedings. In such event, a complete written transcript of the
proceedings shall be furnished to both parties by the court reporter The full
expense of any such court reporter and such transcripts shall be borne by the
party causing the court reporter to attend the hearing. A final decision as
to the allowance of the claim shall be made by the Administrator within 60
days of receipt of the appeal (unless there has been an extension of 60 days
due to special circumstances, provided the delay and the special circumstances
occasioning it are communicated to the claimant within the 60 day period).
Such communication shall be written in a manner calculated to be understood by
the claimant and shall include specific reasons for the decision and specific
references to the pertinent Plan provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITION OF ELIGIBILITY
Any Eligible Employee who was employed on the last day of the first Plan
Year or employed within 60 days of October 11, 1991 shall be eligible to
participate and shall enter the Plan as of the first day of such Plan Year.
Any other Eligible Employee who has completed one (1) Year of Service shall be
eligible to participate hereunder as of the date he has satisfied such
requirements. However, any Employee who was a Participant in the Plan prior
to the effective date of this amendment and restatement shall continue to
participate in the Plan. The Employer shall give each prospective Eligible
Employee written notice of his eligibility to participate in the Plan prior to
the close of the Plan Year in which he first becomes an Eligible Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible Employee shall
make application to the Employer for participation in the Plan and agree to
the terms hereof. Upon the acceptance of any benefits under this Plan, such
Employee shall automatically be deemed to have made application and shall be
bound by the terms and conditions of the Plan and all amendments hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the
earlier of the first day of the Plan Year or the first day of the seventh
month of such Plan Year coinciding with or next following the date such
Employee met the eligibility requirements of Section 3.1, provided said
Employee was still employed as of such date (or if not employed on such date,
as of the date of rehire if a 1-Year Break in Service has not occurred).
In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee will
participate immediately if such Employee has satisfied the minimum age and
service requirements and would have otherwise previously become a Participant
.
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer.
Such determination shall be conclusive and binding upon all persons, as long
as the same is made pursuant to the Plan and the Act. Such determination
shall be subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification of
an Eligible Employee to an ineligible Employee, such Former Participant
shall continue to vest in his interest in the Plan for each Year of
Service completed while a noneligible Employee, until such time as his
Participant's Account shall be forfeited or distributed pursuant to the
terms of the Plan. Additionally, his interest in the Plan shall
continue to share in the earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an
eligible class of Employees and becomes ineligible to participate but
has not incurred a 1-Year Break in Service, such Employee will
participate immediately upon returning to an eligible class of
Employees. If such Participant incurs a 1-Year Break in Service,
eligibility will be determined under the break in service rules of the
Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission
is not made until after a contribution by his Employer for the year has been
made, the Employer shall make a subsequent contribution with respect to the
omitted Employee in the amount which the said Employer would have contributed
with respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any
taxable year under applicable provisions of the Code.
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such
incorrect inclusion is not made until after a contribution for the year has
been made, the Employer shall not be entitled to recover the contribution made
with respect to the ineligible person regardless of whether or not a deduction
is allowable with respect to such contribution. In such event, the amount
contributed with respect to the ineligible person shall constitute a
Forfeiture for the Plan Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate
must be communicated to the Employer, in writing, at least thirty (30) days
before the beginning of a Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
(a) For each Plan Year, the Employer shall contribute to the Plan
such amount as shall be determined by the Employer.
(b) Notwithstanding the foregoing, however, the Employer's
contributions for any Plan Year shall not exceed the maximum amount
allowable as a deduction to the Employer under the provisions of Code
Section 404. All contributions by the Employer shall be made in cash,
Company Stock or in such property as is acceptable to the Trustee.
(c) Except, however, to the extent necessary to provide the top
heavy minimum allocations, the Employer shall make a contribution even
if it exceeds the amount which is deductible under Code Section 404.
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
Employer contributions will be paid in cash, Company Stock or other
property as the Employer may from time to time determine. Company Stock and
other property will be valued at their then fair market value. The Employer
shall pay to the Trustee its contribution to the Plan for each Plan Year
within the time prescribed by law, including extensions of time, for the
filing of the Employer's federal income tax return for the Fiscal Year.
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in
the name of each Participant to which the Administrator shall credit as
of each Anniversary Date all amounts allocated to each such Participant
as set forth herein.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation of
the Employer's contributions for each Plan Year. Within a reasonable
period of time after the date of receipt by the Administrator of such
information, the Administrator shall allocate such contribution to each
Participant's Account in the same proportion that each such
Participant's Compensation for the year bears to the total Compensation
of all Participants for such year.
Only Participants who have completed a Year of Service
during the Plan Year shall be eligible to share in the discretionary
contribution for the year.
(c) The Company Stock Account of each Participant shall be
credited as of each Anniversary Date with Forfeitures of Company Stock
and his allocable share of Company Stock (including fractional shares)
purchased and paid for by the Plan or contributed in kind by the
Employer. Stock dividends on Company Stock held in his Company Stock
Account shall be credited to his Company Stock Account when paid. Cash
dividends on Company Stock held in his Company Stock Account shall, in
the sole discretion of the Administrator, either be credited to his
Other Investments Account when paid or be used to repay an Exempt Loan;
provided, however, that when cash dividends are used to repay an Exempt
Loan, Company Stock shall be released from the Unallocated Company Stock
Suspense Account and allocated to the Participant's Company Stock
Account pursuant to Section 4.3(e) and, provided further, that Company
Stock allocated to the Participant's Company Stock Account shall have a
fair market value not less than the amount of cash dividends which would
have been allocated to such Participant's Other Investments Account for
the year.
Company Stock acquired by the Plan with the proceeds of an
Exempt Loan shall only be allocated to each Participant's Company Stock
Account upon release from the Unallocated Company Stock Suspense Account
as provided in Section 4.3(e) herein. Company Stock acquired with the
proceeds of an Exempt Loan shall be an asset of the Trust Fund and
maintained in the Unallocated Company Stock Suspense Account.
(d) As of each Anniversary Date or other valuation date, before
the current valuation period allocation of Employer contributions and
Forfeitures, any earnings or losses (net appreciation or net
depreciation) of the Trust Fund shall be allocated in the same
proportion that each Participant's and Former Participant's
nonsegregated accounts (other than each Participant's Company Stock
Account) bear to the total of all Participants' and Former Participants'
nonsegregated accounts (other than Participants' Company Stock Accounts)
as of such date.
Earnings or losses do not include the interest paid under
any installment contract for the purchase of Company Stock by the Trust
Fund or on any loan used by the Trust Fund to purchase Company Stock,
nor does it include income received by the Trust Fund with respect to
Company Stock acquired with the proceeds of an Exempt Loan; all income
received by the Trust Fund from Company Stock acquired with the proceeds
of an Exempt Loan may, at the discretion of the Administrator, be used
to repay such loan.
(e) All Company Stock acquired by the Plan with the proceeds of
an Exempt Loan must be added to and maintained in the Unallocated
Company Stock Suspense Account. Such Company Stock shall be released
and withdrawn from that account as if all Company Stock in that account
were encumbered. For each Plan Year during the duration of the loan,
the number of shares of Company Stock released shall equal the number of
encumbered shares held immediately before release for the current Plan
Year multiplied by a fraction, the numerator of which is the amount of
principal paid for the Plan Year and the denominator of which is the sum
of the numerator plus the principal to be paid for all future Plan
Years. As of each Anniversary Date, the Plan must consistently allocate
to each Participant's Account, in the same manner as Employer
discretionary contributions pursuant to Section 4.1(a) are allocated,
non-monetary units (shares and fractional shares of Company Stock)
representing each Participant's interest in Company Stock withdrawn from
the Unallocated Company Stock Suspense Account. However, Company Stock
released from the Unallocated Company Stock Suspense Account with cash
dividends pursuant to Section 4.3(c) shall be allocated to each
Participant's Company Stock Account in the same proportion that each
such Participant's number of shares of Company Stock sharing in such
cash dividends bears to the total number of shares of all Participants'
Company Stock sharing in such cash dividends. Income earned with
respect to Company Stock in the Unallocated Company Stock Suspense
Account shall be used, at the discretion of the Administrator, to repay
the Exempt Loan used to purchase such Company Stock. Company Stock
released from the Unallocated Company Stock Suspense Account with such
income, and any income which is not so used, shall be allocated as of
each Anniversary Date or other valuation date in the same proportion
that each Participant's and Former Participant's nonsegregated accounts
after the allocation of any earnings or losses pursuant to Section
4.3(d) hear to the total of all Participants' and Former Participants'
nonsegregated accounts after the allocation of any earnings or losses
pursuant to Section 4.3(d).
(f) As of each Anniversary Date any amounts which became
Forfeitures since the last Anniversary Date shall be allocated among the
Participants' Accounts of Participants otherwise eligible to share in
the allocation of discretionary contributions in the same proportion
that each such Participant's Compensation for the year bears to the
total Compensation of all such Participants for the year.
Provided, however, that in the event the allocation of
Forfeitures provided herein shall cause the "annual addition" (as
defined in Section 4.4) to any Participant's Account to exceed the
amount allowable by the Code, the excess shall be reallocated in
accordance with Section 4.5.
(g) For any Top Heavy Plan Year, Non-Key Employees not otherwise
eligible to share in the allocation of contributions and Forfeitures as
provided above, shall receive the minimum allocation provided for in
Section 4.3(i) if eligible pursuant to the provisions of Section 4.3(k).
(h) Notwithstanding the foregoing, Participants who are not
actively employed on the last day of the Plan Year due to Retirement
(Normal or Late), Total and Permanent Disability or death shall share in
the allocation of contributions and Forfeitures for that Plan Year.
(i) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of
the Employer's contributions and Forfeitures allocated to the
Participant's Account of each Non-Rey Employee shall be equal to at
least three percent (3%) of such Non-Key Employee's "415 Compensation"
(reduced by contributions and forfeitures, if any, allocated to each
Non-Key Employee in any defined contribution plan included with this
plan in a Required Aggregation Group). However, if (1) the sum of the
Employer's contributions and Forfeitures allocated to the Participant's
Account of each Key Employee for such Top Heavy Plan Year is less than
three percent (3%) of each Key Employee's "415 Compensation" and
(2) this Plan is not required to be included in an Aggregation Group to
enable a defined benefit plan to meet the requirements of Code Section
401(a)(4) or 410, the sum of the Employer's contributions and
Forfeitures allocated to the Participant's Account of each Non-Key
Employee shall be equal to the largest percentage allocated to the
Participant's Account of any Key Employee.
However, no such minimum allocation shall be required in
this Plan for any Non-Key Employee who participates in another defined
contribution plan subject to Code Section 412 providing such benefits
included with this Plan in a Required Aggregation Group.
(j) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Account of any Key Employee
shall be equal to the ratio of the sum of the Employer's contributions
and Forfeitures allocated on behalf of such Key Employee divided by the
"415 Compensation" for such Key Employee.
(k) For any Top Heavy Plan Year, the minimum allocations set
forth above shall be allocated to the Participant's Account of all Non-
Key Employees who are Participants and who are employed by the Employer
on the last day of the Plan Year, including Non-Key Employees who have
(1) failed to complete a Year of Service; and (2) declined to make
mandatory contributions (if required) to the Plan.
(l) For the purposes of this Section, "415 Compensation" shall be
limited to $200,000. Such amount shall be adjusted at the same time and
in the same manner as permitted under Code Section 415(d), except that
the dollar increase in effect on January 1 of any calendar year shall be
effective for the Plan Year beginning with or within such calendar year
and the first adjustment to the $200,000 limitation shall be effective
on January 1, 1990. For any short Plan Year the "415 Compensation"
limit shall be an amount equal to the "415 Compensation" limit for the
calendar year in which the Plan Year begins multiplied by the ratio
obtained by dividing the number of full months in the short Plan Year by
twelve (12).
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994, the
annual Compensation of each Employee taken into account under the Plan
shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with Code Section
401(a)(17)(B). The cost of living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Code Section 401(a)(17)
shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken
into account in determining an Employee's benefits accruing in the
current Plan Year, the Compensation for that prior determination period
is subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose, for determination periods
beginning before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA '93 annual compensation limit is
$150,000.
(m) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate accounts shall be
maintained as follows:
(1) one account for nonforfeitable benefits attributable to pre-
break service; and
(2) one account representing his status in the Plan attributable
to post-break service.
(n) INTENTIONALLY DELETED
(o) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements of the Employer or an Affiliated Employer, all such cash or
deferred arrangements shall be treated as one cash or deferred
arrangement for the purpose of determining the actual deferral ratio
with respect to such Highly Compensated Participant. However, no such
aggregation of cash or deferred arrangements is required.
4.4 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall
equal the lesser of: (1) $30,000 (or, if Greater, one-fourth of the
dollar limitation in effect under Code Section 415(b)(1)(A)) or
(2) twenty-five percent (25%) of the Participant's "415 Compensation"
for such "limitation year." For any short "limitation year," the dollar
limitation in (1) above shall be reduced by a fraction, the numerator of
which is the number of full months in the short "limitation year" and
the denominator of which is twelve (12).
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts
for any "limitation year" of (1) Employer contributions, (2) Employee
contributions, (3) forfeitures, (4) amounts allocated, after March 31,
1984, to an individual medical account, as defined in Code Section
415(1)(2) which is part of a pension or annuity plan maintained by the
Employer and (5) amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such date, which
are attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in paragraph (a)(2)
above shall not apply to: (1) any contribution for medical benefits
(within the meaning of Code Section 419A(f)(2)) after separation from
service which is otherwise treated as an "annual addition," or (2) any
amount otherwise treated as an "annual addition" under Code Section
415(l)(1).
(c) For purposes of applying the limitations of Code Section 415,
the following are not "annual additions": (1) the transfer of funds from
one qualified plan to another and (2) provided no more than one-third of
the Employer contributions for the year are allocated to Highly
Compensated Participants, Forfeitures of Company Stock purchased with
the proceeds of an Exempt Loan and Employer contributions applied to the
payment of interest on an Exempt Loan. In addition, the following are
not Employee contributions for the purposes of Section 4.4(b)(2): (1)
rollover contributions (as defined in Code Sections 402(a)(5),
403(a)(4), 403(b)(8) and 408(d)(3)); (2) repayments of loans made to a
Participant from the Plan; (3) repayments of distributions received by
an Employee pursuant to Code Section 411(a)(7)(B) (cash-outs); (4)
repayments of distributions received by an Employee pursuant to Code
Section 411(a)(3)(D) (mandatory contributions); and (5) Employee
contributions to a simplified employee pension excludable from gross
income under Code Section 408(k)(6).
(d) For purposes of applying the limitations of Code Sectional
415, the "limitation year" shall be the Plan Year.
(e) The dollar limitation under Code Section 415(b)(1)(A) stated
in paragraph (a)(1) above shall be adjusted annually as provided in Code
Section 415(d) pursuant to the Regulations. The adjusted limitation is
effective as of January 1st of each calendar year and is applicable to
"limitation years" ending with or within that calendar year.
(f) For the purpose of this Section, all qualified defined
benefit plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined benefit plan, and all qualified
defined contribution plans (whether terminated or not) ever maintained
by the Employer shall be treated as one defined contribution plan.
(g) For the purpose of this Section, if the Employer is a member
of a controlled group of corporations, trades or businesses under common
control (as defined by Code Section 1563(a) or Code Section 416(b) and
(c) as modified by Code Section 415(h)), is a member of an affiliated
service group (as defined by Code Section 414(m)), or is a member of a
group of entities required to be aggregated pursuant to Regulations
under Code Section 414(o), all Employees of such Employers shall be
considered to be employed by a single Employer.
(h) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, all Employers of a Participant who maintain this
Plan will be considered to be a single Employer.
(i) (1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have
different Anniversary Dates, the maximum "annual additions"
under this Plan shall equal the maximum "annual additions"
for the "limitation year" minus any "annual additions"
previously credited to such Participant's accounts during
the "limitation year."
(2) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution
plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, "annual
additions" will be credited to the Participant's accounts
under the defined contribution plan subject to Code Section
412 prior to crediting "annual additions" to the
Participant's accounts under the defined contribution plan
not subject to Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained
by the Employer which have the same anniversary Date, the
maximum "annual additions" under this Plan shall equal the
product of (A) the maximum "annual additions" far the
"limitation year" minus any "annual additions" previously
credited under subparagraphs (1) or (2) above, multiplied by
(B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's
accounts under this Plan without regard to the limitations
of Code Section 415 and (ii) the denominator of which is
such "annual additions" for all plans described in this
subparagraph.
(j) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan fraction
and the defined contribution plan fraction for any "limitation year" may
not exceed 1.0.
(k) The defined benefit plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all the defined benefit plans (whether
or not terminated) maintained by the Employer, and the denominator of
which is the lesser of 125 percent of the dollar limitation determined
for the "limitation year" under Code Sections 415(b) and (d) or 140
percent of the highest average compensation, including any adjustments
under Code Section 415(b).
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first "limitation year" beginning
after December 31, 1986, in one or more defined benefit plans maintained
by the Employer which were in existence on May 6, 1986, the denominator
of this fraction will not be less than 125 percent of the sum of the
annual benefits under such plans which the Participant had accrued as of
the close of the last "limitation year" beginning before January 1,
1987, disregarding any changes in the terms and conditions of the plan
after May 5, 1986. The preceding sentence applies only if the defined
benefit plans individually and in the aggregate satisfied the
requirements of Code Section 415 for all "limitation years" beginning
before January 1, 1987.
(l) The defined contribution plan fraction for any "limitation
year" is a fraction, the numerator of which is the sum of the annual
additions to the Participant's Account under all the defined
contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior "limitation years" (including the
annual additions attributable to the Participant's nondeductible
Employee contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Code Section
419(e), and individual medical accounts, as defined in Code Section
415(1)(2), maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and all prior
"limitation years" of service with the Employer (regardless of whether a
defined contribution plan was maintained by the Employer). The maximum
aggregate amount in any "limitation year" is the lesser of 125 percent
of the dollar limitation determined under Code Sections 415(b) and (d)
in effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first
day of the first "limitation year" beginning after December 31, 1986, in
one or more defined contribution plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of this fraction will be
adjusted if the sum of this fraction and the defined benefit fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (1) the excess of the sum
of the fractions over 1.0 times (2) the denominator of this fraction,
will be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed
as of the end of the last "limitation year" beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Code Section 415 limitation
applicable to the first "limitation year" beginning on or after January
1, 1987. The annual addition for any "limitation year" beginning before
January 1, 1987 shall not be recomputed to treat all Employee
contributions as annual additions.
(m) Notwithstanding the foregoing, for any "limitation year" in
which the Plan is a Top Heavy Plan, 100 percent shall be substituted for
125 percent in Sections 4.4(k) and 4.4(l) unless the extra minimum
allocation is being provided pursuant to Section 4.3. However, for any
"limitation year" in which the Plan is a Super Top Heavy Plan, 100
percent shall be substituted for 125 percent in any event.
(n) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed
in this Section shall at all times comply with the provisions of Code
Section 415 and the Regulations thereunder, the terms of which are
specifically incorporated herein by reference.
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Compensation, a
reasonable error in determining the amount of elective deferrals (within
the meaning of Code Section 402(g)(3)) that may be made with respect to
any Participant under the limits of Section 4.4 or other facts and
circumstances to which Regulation 1.415-6(b)(6) shall be applicable, the
"annual additions" under this Plan would cause the maximum "annual
additions" to be exceeded for any Participant, the Administrator shall
(1) distribute any elective deferrals (within the meaning of Code
Section 402(g)(3)) or return any voluntary Employee contributions
credited for the "limitation year" to the extent that the return would
reduce the "excess amount" in the Participant's accounts (2) hold any
"excess amount" remaining after the return of any elective deferrals or
voluntary Employee contributions in a "Section 415 suspense account" (3)
allocate and reallocate the "Section 415 suspense account" in the next
"limitation year" (and succeeding "limitation years" if necessary) to
all Participants in the Plan before any Employer or Employee
contributions which would constitute "annual additions" are made to the
Plan for such "limitation year" (4) reduce Employer contributions to the
Plan for such "limitation year" by the amount of the "Section 415
suspense account" allocated and reallocated during such "limitation
year."
(b) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any, of
(1) the "annual additions" which would be credited to his account under
the terms of the Plan without regard to the limitations of Code Section
415 over (2) the maximum "annual additions" determined pursuant to
Section 4.4.
(c) For purposes of this Section, "Section 415 suspense account"
shall mean an unallocated account equal to the sum of "excess amount"
for all Participants in the Plan during the "limitation year." The
"Section 415 suspense account" shall not share in any earnings or losses
of the Trust Fund.
(d) The Plan may not distribute "excess amounts," other than
voluntary Employee contributions, to Participants or Former
Participants.
4.6 DIRECTED INVESTMENT ACCOUNT
(a) Each "Qualified Participant" may elect within ninety (90)
days after the close of each Plan Year during the "Qualified Election
Period" to direct the Trustee in writing as to the distribution in cash
and/or Company Stock of 25 percent of the total number of shares of
Company Stock acquired by or contributed to the Plan that have ever been
allocated to such "Qualified Participant's" Company Stock Account
(reduced by the number of shares of Company Stock previously distributed
in cash and/or Company Stock pursuant to a prior election). In the case
of the election year in which the Participant can make his last
election, the preceding sentence shall be applied by substituting "50
percent" for "25 percent". If the "Qualified Participant" elects to
direct the Trustee as to the distribution of his Company Stock Account,
such direction shall be effective no later than 180 days after the close
of the Plan Year to which such direction applies. Any such distribution
of Company Stock shall be subject to Section 7.11.
Notwithstanding the above, if the fair market value
(determined pursuant to Section 6.1 at the Plan valuation date
immediately preceding the first day on which a "Qualified Participant"
is eligible to make an election) of Company Stock acquired by or
contributed to the Plan and allocated to a "Qualified Participant's"
Company Stock Account is $500 or less, then such Company Stock shall not
be subject to this paragraph. For purposes of determining whether the
fair market value exceeds $500, Company Stock held in accounts of all
employee stock ownership plans (as defined in Code Section 4975(e)(7))
and tax credit employee stock ownership plans (as defined in Code
Section 409(a)) maintained by the Employer or any Affiliated Employer
shall be considered as held by the Plan.
(b) For the purposes of this Section the following definitions
shall apply:
(1) "Qualified Participant" means any Participant or Former
Participant who has completed ten (10) Plan Years of Service
as a Participant and has attained age 55.
(2) "Qualified Election Period" means the six (6) Plan Year
period beginning with the later of (i) the first Plan Year
in which the Participant first became a "Qualified
Participant", or (ii) the first Plan Year beginning after
December 31, 1986.
5.1 INVESTMENT POLICY
(a) The Plan is designed to invest primarily in Company Stock.
(b) With due regard to subparagraph (a) above, the Administrator
may also direct the Trustee to invest funds under the Plan in other
property described in the Trust or in life insurance policies to the
extent permitted by subparagraph (c) below, or the Trustee may hold such
funds in cash or cash equivalents.
(c) With due regard to subparagraph (a) above, the Administrator
may also direct the Trustee to invest funds under the Plan in insurance
policies on the life of any "keyman" Employee. The proceeds of a
"keyman" insurance policy may not be used for the repayment of any
indebtedness owed by the Plan which is secured by Company Stock. In the
event any "keyman" insurance is purchased by the Trustee, the premiums
paid thereon during any Plan Year, net of any policy dividends and
increases in cash surrender values, shall be treated as the cost of Plan
investment and any death benefit or cash surrender value received shall
be treated as proceeds from an investment of the Plan.
(d) The Plan may not obligate itself to acquire Company Stock
from a particular holder thereof at an indefinite time determined upon
the happening of an event such as the death of the holder.
(e) The Plan may not obligate itself to acquire Company Stock
under a put option binding upon the Plan. However, at the time a put
option is exercised, the Plan may be given an option to assume the
rights and obligations of the Employer under a put option binding upon
the Employer.
(f) All purchases of Company Stock shall be made at a price
which, in the judgment of the Administrator, does not exceed the fair
market value thereof. All sales of Company Stock shall be made at a
price which, in the judgment of the Administrator, is not less than the
fair market value thereof. The valuation rules set forth in Article VI
shall be applicable.
5.2 APPLICATION OF CASH
Employer contributions in cash and other cash received by the Trust Fund
shall first be applied to pay any Current Obligations of the Trust Fund.
5.3 LOANS TO THE TRUST
(a) The Plan may borrow money for any lawful purpose, provided
the proceeds of an Exempt Loan are used within a reasonable time after
receipt only for any or all of the following purposes:
(1) To acquire Company Stock.
(2) To repay such loan
(3) To repay a prior Exempt Loan.
(b) All loans to the Trust which are made or guaranteed by a
disqualified person must satisfy all requirements applicable to Exempt
Loans including but not limited to the following:
(1) The loan must be at a reasonable rate of interest;
(2) The amount of interest paid shall not exceed the amount of
each payment which would be treated as interest under
standard loan amortization tables;
(3) Any collateral pledged to the creditor by the Plan shall
consist only of the Company Stock purchased with the
borrowed funds;
(4) Under the terms of the loan, any pledge of Company Stock
shall provide for the release of shares so pledged on a pro-
rata basis pursuant to Section 4.3 (e);
(5) Under the terms of the loan, the creditor shall have no
recourse against the Plan except with respect to such
collateral, earnings attributable to such collateral,
Employer contributions (other than contributions of Company
Stock) that are made to meet Current Obligations and
earnings attributable to such contributions;
(6) The loan must be for a specific term and may not be payable
at the demand of any person, except in the case of default;
(7) The term of the loan (including the sum of the expired
duration of the loan, any renewal period, any extension
period, and the duration of any new loan) shall not exceed
ten (10) years;
(8) The loan must provide for annual payments of principal and
interest at a cumulative rate that is not less rapid at any
time than level annual payments of such amounts for ten (10)
years;
(9) In the event of default upon an Exempt Loan, the value of
the Trust Fund transferred in satisfaction of the Exempt
Loan shall not exceed the amount of default. If the lender
is a disqualified person, an Exempt Loan shall provide for a
transfer of Trust Funds upon default only upon and to the
extent of the failure of the Plan to meet the payment
schedule of the Exempt Loan;
(10) Exempt Loan payments during a Plan Year must not exceed an
amount equal to: (A) the sum, over all Plan Years, of all
contributions and cash dividends paid by the Employer to the
Plan with respect to such Exempt Loan and earnings on such
Employer contributions and cash dividends, less (B) the sum
of the Exempt Loan payments in all preceding Plan Years. A
separate accounting shall be maintained for such Employer
contributions, cash dividends and earnings until the Exempt
Loan is repaid.
(c) For purposes of this Section, the term "disqualified person" means
a person who is a Fiduciary, a person providing services to the Plan, an
Employer any of whose Employees are covered by the Plan, an employee
organization any of whose members are covered by the Plan, an owner, direct or
indirect, of 50% or more of the total combined voting power of all classes of
voting stock or of the total value of all classes of the stock, or an officer,
director, 10% or more shareholder, or a highly compensated Employee.
ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary
Date, and at such other date or dates deemed necessary by the Administrator,
herein called "valuation date," to determine the net worth of the assets
comprising the Trust Fund as it exists on the "valuation date." In
determining such net worth, the Trustee shall value the assets comprising the
Trust Fund at their fair market value as of the "valuation date" and shall
deduct all expenses for which the Trustee has not yet obtained reimbursement
from the Employer or the Trust Fund.
6.2 METHOD OF VALUATION
Valuations must be made in good faith and based on all relevant factors
for determining the fair market value of securities. In the case of a
transaction between a Plan and a disqualified person, value must be determined
as of the date of the transaction. For all other Plan purposes, value must be
determined as of the most recent "valuation date" under the Plan. An
independent appraisal will not in itself be a good faith determination of
value in the case of a transaction between the Plan and a disqualified person.
However, in other cases, a determination of fair market value based on at
least an annual appraisal independently arrived at by a person who customarily
makes such appraisals and who is independent of any party to the transaction
will be deemed to be a good faith determination of value. Company Stock not
readily tradeable on an established securities market shall be valued by an
independent appraiser meeting requirements similar to the requirements of the
Regulations prescribed under Code Section 170(a)(1).
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal Retirement Date. However, a
Participant may postpone the termination of his employment with the Employer
to a later date, in which event the participation of such Participant in the
Plan, including the right to receive allocations pursuant to Section 4.3,
shall continue until his Late Retirement Date. Upon a Participant's
Retirement Date or attainment of his Normal Retirement Date without
termination of employment with the Employer, or as soon thereafter as is
practicable, the Trustee shall distribute all amounts credited to such
Participant's Account in accordance with Sections 7.5 and 7 6.
7.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or
other termination of his employment, all amounts credited to such
Participant's Account shall become fully vested. If elected,
distribution of the Participant's Account shall commence not later than
one (1) year after the close of the Plan Year in which such
Participant's death occurs. The Administrator shall direct the Trustee,
in accordance with the provisions of Sections 7.5 and 7.6, to distribute
the value of the deceased Participant's accounts to the Participant's
Beneficiary.
(b) Upon the death of a Former Participant, the Administrator
shall direct the Trustee, in accordance with the provisions of Sections
7.5 and 7.6, to distribute any remaining Vested amounts credited to the
accounts of a deceased Former Participant to such Former Participant's
Beneficiary.
(c) The Administrator may require such proper proof of death and
such evidence of the right of any person to receive payment of the value
of the account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
(d) The Beneficiary of the death benefit payable pursuant to this
Section shall be the Participant's spouse. Except, however, the
Participant may designate a Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the Participant's
Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a
court order to such effect (and there is no "qualified
domestic relations order" as defined in Code Section 414(p)
which provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be
made on a form satisfactory to the Administrator. A Participant may at
any time revoke his designation of a Beneficiary or change his
Beneficiary by filing written notice of such revocation or change with
the Administrator. However, the Participant's spouse must again consent
in writing to any change in Beneficiary unless the original consent
acknowledged that the spouse had the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elected to
relinquish such right. In the event no valid designation of Beneficiary
exists at the time of the Participant's death, the death benefit shall
be payable to his estate.
(e) Any consent by the Participant's spouse to waive any rights
to the death benefit must be in writing, must acknowledge the effect of
such waiver, and be witnessed by a Plan representative or a notary
public. Further, the spouse's consent must be irrevocable and must
acknowledge the specific nonspouse Beneficiary.
7.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to
his Retirement Date or other termination of his employment, all amounts
credited to such Participant's Account shall become fully Vested. In the
event of a Participant's Total and Permanent Disability, the Trustee, in
accordance with the provisions of Sections 7.5 and 7.6, shall distribute to
such Participant all amounts credited to such Participant's Account as though
he had retired. If such Participant elects, distribution shall commence not
later than one (1) year after the close of the Plan Year in which Total and
Permanent Disability occurs.
7.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any
reason other than death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate the amount of the
Vested portion of such Terminated Participant's Account and invest the
aggregate amount thereof in a separate, federally insured savings
account, certificate of deposit, common or collective trust fund of a
bank or a deferred annuity. In the event the Vested portion of a
Participant's Account is not segregated, the amount shall remain in a
separate account for the Terminated Participant and share in allocations
pursuant to Section 4.3 until such time as a distribution is made to the
Terminated Participant.
If a portion of a Participant's Account is forfeited, Company
Stock allocated to the Participant's Company Stock Account must be
forfeited only after the Participant's Other Investments Account has
been depleted. If interest in more than one class of Company Stock has
been allocated to a Participant's Account, the Participant must be
treated as forfeiting the same proportion of each such class.
Distribution of the funds due to a Terminated Participant shall be
made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and Permanent
Disability or Normal Retirement). However, at the election of the
Participant, the Administrator shall direct the Trustee to cause the
entire Vested portion of the Terminated Participant's Account to be
payable to such Terminated Participant on or after the Anniversary Date
coinciding with or next following termination of employment.
Distribution to a Participant shall not include any Company Stock
acquired with the proceeds of an Exempt Loan until the close of the Plan
Year in which such loan is repaid in full. Any distribution under this
paragraph shall be made in a manner which is consistent with and
satisfies the provisions of Sections 7.5 and 7.6, including, but not
limited to, all notice and consent requirements of Code Section
411(a)(11) and the Regulations thereunder.
If the value of a Terminated Participant's Vested benefit derived
from Employer and Employee contributions does not exceed $3,500 and has
never exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the Trustee to cause the entire Vested
benefit to be paid to such Participant in a single lump sum.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of Service
according to the following schedule:
Vesting Schedule
Years of Service
Percentage
1
0%
2
20%
3
40%
4
65%
5
100%
(c) Notwithstanding the vesting schedule above, the Vested
percentage of a Participant's Account shall not be less than the Vested
percentage attained as of the later of the effective date or adoption
date of this amendment and restatement.
(d) Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer's contributions to the Plan or upon any
full or partial termination of the Plan, all amounts credited to the
account of any affected Participant shall become 100% Vested and shall
not thereafter be subject to Forfeiture.
(e) The computation of a Participant's nonforfeitable percentage
of his interest in the Plan shall not be reduced as the result of any
direct or indirect amendment to this Plan. For this purpose, the Plan
shall be treated as having been amended if the Plan provides for an
automatic change in vesting due to a change in top heavy status. In the
event that the Plan is amended to change or modify any vesting schedule,
a Participant with at least three (3) Years of Service as of the
expiration date of the election period may elect to have his
nonforfeitable percentage computed under the Plan without regard to such
amendment. If a Participant fails to make such election, then such
Participant shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption date of the
amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(f) (1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall
continue to participate in the Plan in the same manner as if
such termination had not occurred.
(2) If any Former Participant is reemployed after a 1-Year Break
in Service has occurred, Years of Service shall include
Years of Service prior to his 1-Year Break in Service
subject to the following rules:
(i) If a Former Participant has a 1-Year Break in Service,
his pre-break and post-break service shall be used for
computing Years of Service for eligibility and for vesting
purposes only after he has been employed for one (1) Year of
Service following the date of his reemployment with the
Employer;
(ii) Any Former Participant who under the Plan does not
have a nonforfeitable right to any interest in the Plan
resulting from Employer contributions shall lose credits
otherwise allowable under (i) above if his consecutive 1-
Year Breaks in Service equal or exceed the greater of
(A) five (5) or (B) the aggregate number of his pre-break
Years of Service;
(iii) After five (5) consecutive 1-Year Breaks in Service,
a Former Participant's Vested Account balance attributable
to pre-break service shall not be increased as a result of
post-break service;
(iv) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes one (1) Year of Service for
eligibility purposes following his reemployment with the
Employer, he shall participate in the Plan retroactively
from his date of reemployment;
(v) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes a Year of Service (a 1-Year
Break in Service previously occurred, but employment had not
terminated), he shall participate in the Plan retroactively
from the first day of the Plan Year during which he
completes one (1) Year of Service.
7.5 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election of the
Participant (or if no election has been made prior to the Participant's
death, by his Beneficiary), shall direct the Trustee to distribute to a
Participant or his Beneficiary any amount to which he is entitled under
the Plan in one or more of the following methods:
(1) One lump-sum payment;
(2) Payments over a period certain in monthly, quarterly,
semiannual, or annual installments. The period over which
such payment is to be made shall not extend beyond the
earlier of the Participant's life expectancy (or the life
expectancy of the Participant and his designated
Beneficiary) or the limited distribution period provided for
in Section 7.5(b).
(b) Unless the Participant elects in writing a longer
distribution period, distributions to a Participant or his Beneficiary
attributable to Company Stock shall be in substantially equal monthly,
quarterly, semiannual, or annual installments over a period not longer
than five (5) years. In the case of a Participant with an account
balance attributable to Company Stock in excess of $500,000, the five
(5) year period shall be extended one (1) additional year (but not more
than five (5) additional years) for each $100,000 or fraction thereof by
which such balance exceeds $500,000. The dollar limits shall be
adjusted at the same time and in the same manner as provided in Code
Section 415(d).
(c) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution shall require such Participant's consent if such
distribution commences prior to the later of his Normal Retirement Age
or age 62. With regard to this required consent:
(1) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to
consent, it shall be deemed an election to defer the
commencement of payment of any benefit. However, any
election to defer the receipt of benefits shall not apply
with respect to distributions which are required under
Section 7.5(f).
(2) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days
before the first day on which all events have occurred which
entitle the Participant to such benefit.
(3) Written consent of the Participant to the distribution must
not be made before the Participant receives the notice and
must not be made more than 90 days before the first day on
which all events have occurred which entitle the Participant
to such benefit.
(4) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not
consent to the distribution.
If a distribution is one to which Code Sections 401(a)(11) and 417
do not apply, such distribution may commence less than 30 days after the
notice required under Regulation 1.411(a)-11(c) is given, provided that:
(1) the Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option), and
(2) the Participant, after receiving the notice, affirmatively elects a
distribution.
(d) Notwithstanding anything herein to the contrary, the
Administrator, in his sole discretion, may direct that cash dividends on
shares of Company Stock allocable to Participants' or Former
Participants' Company Stock Accounts be distributed to such Participants
or Former Participants within 90 days after the close of the Plan Year
in which the dividends are paid.
(e) Any part of a Participant's benefit which is retained in the
Plan after the Anniversary Date on which his participation ends will
continue to be treated as a Company Stock Account or as an Other
Investments Account (subject to Section 7.4(a)) as provided in Article
IV. However, neither account will be credited with any further Employer
contributions or Forfeitures.
(f) Notwithstanding any provision in the Plan to the contrary,
the distribution of a Participant's benefits shall be made in accordance
with the following requirements and shall otherwise comply with Code
Section 401(a)(9) and the Regulations thereunder (including Regulation
1.401(a)(9)-2), the provisions of which are incorporated herein by
reference:
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the
later of (i) the calendar year in which the Participant
attains age 70 1/2 or (ii) the calendar year in which the
Participant retires, provided, however, that this clause
(ii) shall not apply in the case of a Participant who is a
"five (5) percent owner" at any time during the five (5)
Plan Year period ending in the calendar year in which he
attains age 70 1/2 or, in the case of a Participant who
becomes a "five (5) percent owner" during any subsequent
Plan Year, clause (ii) shall no longer apply and the
required beginning date shall be the April 1st of the
calendar year following the calendar year in which such
subsequent Plan Year ends. Alternatively, distributions to
a Participant must begin no later than the applicable April
1st as determined under the preceding sentence and must be
made over a period certain measured by the life expectancy
of the Participant (or the life expectancies of the
Participant and his designated Beneficiary) in accordance
with Regulations. Notwithstanding the foregoing, clause
(ii) above shall not apply to any Participant unless the
Participant had attained age 70 1/2 before January 1, 1988
and was not a "five (5) percent owner" at any time during
the Plan Year ending with or within the calendar year in
which the Participant attained age 66 1/2 or any subsequent
Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the
Regulations thereunder.
(g) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder. If it is
determined pursuant to Regulations that the distribution of a
Participant's interest has begun and the Participant dies before his
entire interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as under the
method of distribution selected pursuant to Section 7.5 as of his date
of death. If a Participant dies before he has begun to receive any
distributions of his interest under the Plan or before distributions are
deemed to have begun pursuant to Regulations, then his death benefit
shall be distributed to his Beneficiaries by December 31st of the
calendar year in which the fifth anniversary of his date of death
occurs.
However, the 5-year distribution requirement of the preceding
paragraph shall not apply to any portion of the deceased Participant's
interest which is payable to or for the benefit of a designated
Beneficiary. In such event, such portion shall be distributed over a
period not extending beyond the life expectancy of such designated
Beneficiary provided such distribution begins not later than December
31st of the calendar year immediately following the calendar year in
which the Participant died. However, in the event the Participant's
spouse (determined as of the date of the Participant's death) is his
Beneficiary, the requirement that distributions commence within one year
of a Participant's death shall not apply. In lieu thereof,
distributions must commence on or before the later of: (1) December 31st
of the calendar year immediately following the calendar year in which
the Participant died; or (2) December 31st of the calendar year in which
the Participant would have attained age 70 1/2. If the surviving spouse
dies before distributions to such spouse begin, then the 5-year
distribution requirement of this Section shall apply as if the spouse
was the Participant.
(h) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse shall be redetermined annually in
accordance with Regulations. Life expectancy and joint and last
survivor expectancy shall be computed using the return multiples in
Tables V and VI of Regulation 1.72-9.
(i) Except as limited by Sections 7.5 and 7.6, whenever the
Trustee is to make a distribution or to commence a series of payments on
or as of an Anniversary Date, the distribution or series of payments may
be made or begun on such date or as soon thereafter as is practicable.
However, unless a Former Participant elects in writing to defer the
receipt of benefits (such election may not result in a death benefit
that is more than incidental), the payment of benefits shall begin not
later than the 60th day after the close of the Plan Year in which the
latest of the following events occurs:
(1) the date on which the Participant attains the earlier of age
65 or the Normal Retirement Age specified herein;
(2) the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or
(3) the date the Participant terminates his service with the
Employer.
(j) If a distribution is made at a time when a Participant is not
fully Vested in his Participant's Account and the Participant may
increase the Vested percentage in such account:
(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
(2) at any relevant time, the Participant's Vested portion of
the separate account shall be equal to an amount ("X")
determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested
percentage at the relevant time, AB is the account balance
at the relevant time, D is the amount of distribution, and R
is the ratio of the account balance at the relevant time to
the account balance after distribution.
7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED
(a) Distribution of a Participant's benefit may be made in cash
or Company Stock or both, provided, however, that if a Participant or
Beneficiary so demands, such benefit shall be distributed only in the
form of Company Stock. Prior to making a distribution of benefits, the
Administrator shall advise the Participant or his Beneficiary, in
writing, of the right to demand that benefits be distributed solely in
Company Stock.
(b) If a Participant or Beneficiary demands that benefits be
distributed solely in Company Stock, distribution of a Participant's
benefit will be made entirely in whole shares or other units of Company
Stock. Any balance in a Participant's Other Investments Account will be
applied to acquire for distribution the maximum number of whole shares
or other units of Company Stock at the then fair market value. Any
fractional unit value unexpended will be distributed in cash. If
Company Stock is not available for purchase by the Trustee, then the
Trustee shall hold such balance until Company Stock is acquired and then
make such distribution, subject to Sections 7.5(i) and 7.5(f).
(c) The Trustee will make distribution from the Trust only on
instructions from the Administrator.
(d) Notwithstanding anything contained herein to the contrary, if
the Employer's charter or by-laws restrict ownership of substantially
all shares of Company Stock to Employees and the Trust Fund, as
described in Code Section 409(h)(2), the Administrator shall distribute
a Participant's Account entirely in cash without granting the
Participant the right to demand distribution in shares of Company Stock.
(e) Except as otherwise provided herein, Company Stock
distributed by the Trustee may be restricted as to sale or transfer by
the by-laws or articles of incorporation of the Employer, provided
restrictions are applicable to all Company Stock of the same class. If
a Participant is required to offer the sale of his Company Stock to the
Employer before offering to sell his Company Stock to a third party, in
no event may the Employer pay a price less than that offered to the
distributee by another potential buyer making a bona fide offer and in
no event shall the Trustee pay a price less than the fair market value
of the Company Stock.
(f) If Company Stock acquired with the proceeds of an Exempt Loan
(described in Section 5.3 hereof) is available for distribution and
consists of more than one class, a Participant or his Beneficiary must
receive substantially the same proportion of each such class.
7.7 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom
the Beneficiary maintains his residence, or to the custodian for such
Beneficiary under the Uniform Gift to Minors Act or Gift to Minors Act, if
such is permitted by the laws of the state in which said Beneficiary resides.
Such a payment to the legal guardian, custodian or parent of a minor
Beneficiary shall fully discharge the Trustee, Employer, and Plan from further
liability on account thereof.
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such
Participant or his Beneficiary, the amount so distributable shall be treated
as a Forfeiture pursuant to the Plan. In the event a Participant or
Beneficiary is located subsequent to his benefit being reallocated, such
benefit shall be restored.
7.9 RIGHT OF FIRST REFUSALS
(a) If any Participant, his Beneficiary or any other person to
whom shares of Company Stock are distributed from the Plan (the "Selling
Participant") shall, at any time, desire to sell some or all of such
shares (the "Offered Shares") to a third party (the "Third Party"), the
Selling Participant shall give written notice of such desire to the
Employer and the Administrator, which notice shall contain the number of
shares offered for sale, the proposed terms of the sale and the names
and addresses of both the Selling Participant and Third Party. Both the
Trust Fund and the Employer shall each have the right of first refusal
for a period of fourteen (14) days from the date the Selling Participant
gives such written notice to the Employer and the Administrator (such
fourteen (14) day period to run concurrently against the Trust Fund and
the Employer) to acquire the Offered Shares. As between the Trust Fund
and the Employer, the Trust Fund shall have priority to acquire the
shares pursuant to the right of first refusal. The selling price and
terms shall be the same as offered by the Third Party.
(b) If the Trust Fund and the Employer do not exercise their
right of first refusal within the required fourteen (14) day period
provided above, the Selling Participant shall have the right, at any
time following the expiration of such fourteen (14) day period, to
dispose of the Offered Shares to the Third Party; provided, however,
that (i) no disposition shall be made to the Third Party on terms more
favorable to the Third Party than those set forth in the written notice
delivered by the Selling Participant above, and (ii) if such disposition
shall not be made to a third party on the terms offered to the Employer
and the Trust Fund, the offered Shares shall again be subject to the
right of first refusal set forth above.
(c) The closing pursuant to the exercise of the right of first
refusal under Section 7.9(a) above shall take place at such place agreed
upon between the Administrator and the Selling Participant, but not
later than ten (10) days after the Employer or the Trust Fund shall have
notified the Selling Participant of the exercise of the right of first
refusal. At such closing, the Selling Participant shall deliver
certificates representing the Offered Shares duly endorsed in blank for
transfer, or with stock powers attached duly executed in blank with all
required transfer tax stamps attached or provided for, and the Employer
or the Trust Fund shall deliver the purchase price, or an appropriate
portion thereof, to the Selling Participant.
(d) Except as provided in this paragraph (d), no Company Stock
acquired with the proceeds of an Exempt Loan complying with the
requirements of Section 5.3 hereof shall be subject to a right of first
refusal. Company Stock acquired with the proceeds of an Exempt Loan,
which is distributed to a Participant or Beneficiary, shall be subject
to the right of first refusal provided for in paragraph (a) of this
Section only so long as the Company Stock is not publicly traded. The
term "publicly traded" refers to a securities exchange registered under
Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) or that
is quoted on a system sponsored by a national securities association
registered under Section 15A(b) of the Securities Exchange Act (15
U.S.C. 780). In addition, in the case of Company Stock which was
acquired with the proceeds of a loan described in Section 5.3, the
selling price and other terms under the right must not be less favorable
to the seller than the greater of the value of the security determined
under Section 6.2, or the purchase price and other terms offered by a
buyer (other than the Employer or the Trust Fund), making a good faith
offer to purchase the security. The right of first refusal must lapse
no later than fourteen (14) days after the security holder gives notice
to the holder of the right that an offer by a third party to purchase
the security has been made. The right of first refusal shall comply
with the provisions of paragraphs (a), (b) and (c) of this Section,
except to the extent those provisions may conflict with the provisions
of this paragraph.
7.10 STOCK CERTIFICATE LEGEND
Certificates for shares distributed pursuant to the Plan shall contain
the following legend:
"The shares represented by this certificate are transferable only upon
compliance with the terms of ATLANTIC COAST AIRLINES, INC. EMPLOYEE STOCK
OWNERSHIP PLAN effective as of October 11, 1991, which grants to Atlantic
Coast Airlines, Inc. a right of first refusal, a copy of said Plan being on
file in the office of the Company."
7.11 PUT OPTION
(a) If Company Stock which was not acquired with the proceeds of
an Exempt Loan is distributed to a Participant and such Company Stock is
not readily tradeable on an established securities market, a Participant
has a right to require the Employer to repurchase the Company Stock
distributed to such Participant under a fair valuation formula. Such
Stock shall be subject to the provisions of Section 7.11(c).
(b) Company Stock which is acquired with the proceeds of an
Exempt Loan and which is not publicly traded when distributed, or if it
is subject to a trading limitation when distributed, must be subject to
a put option. For purposes of this paragraph, a "trading limitation" on
a Company Stock is a restriction under any Federal or State securities
law or any regulation thereunder, or an agreement (not prohibited by
Section 7.12) affecting the Company Stock which would make the Company
Stock not as freely tradeable as stock not subject to such restriction.
(c) The put option must be exercisable only by a Participant, by
the Participant's donees, or by a person (including an estate or its
distributee) to whom the Company Stock passes by reason of a
Participant's death. (Under this paragraph Participant or Former
Participant means a Participant or Former Participant and the
beneficiaries of the Participant or Former Participant under the Plan.)
The put option must permit a Participant to put the Company Stock to the
Employer. Under no circumstances may the put option bind the Plan.
However, it shall grant the Plan an option to assume the rights and
obligations of the Employer at the time that the put option is
exercised. If it is known at the time a loan is made that Federal or
State law will be violated by the Employer's honoring such put option,
the put option must permit the Company Stock to be put, in a manner
consistent with such law, to a third party (e.g., an affiliate of the
Employer or a shareholder other than the Plan) that has substantial net
worth at the time the loan is made and whose net worth is reasonably
expected to remain substantial.
The put option shall commence as of the day following the date the
Company Stock is distributed to the Former Participant and end 60 days
thereafter and if not exercised within such 60-day period, an additional
60-day option shall commence on the first day of the fifth month of the
Plan Year next following the date the stock was distributed to the
Former Participant (or such other 60-day period as provided in
regulations promulgated by the Secretary of the Treasury). However, in
the case of Company Stock that is publicly traded without restrictions
when distributed but ceases to be so traded within either of the 60-day
periods described herein after distribution, the Employer must notify
each holder of such Company Stock in writing on or before the tenth day
after the date the Company Stock ceases to be so traded that for the
remainder of the applicable 60-day period the Company Stock is subject
to the put option. The number of days between the tenth day and the
date on which notice is actually given, if later than the tenth day,
must be added to the duration of the put option. The notice must inform
distributees of the term of the put options that they are to hold. The
terms must satisfy the requirements of this paragraph.
The put option is exercised by the holder notifying the Employer
in writing that the put option is being exercised; the notice shall
state the name and address of the holder and the number of shares to be
sold. The period during which a put option is exercisable does not
include any time when a distributee is unable to exercise it because the
party bound by the put option is prohibited from honoring it by
applicable Federal or State law. The price at which a put option must
be exercisable is the value of the Company Stock determined in
accordance with Section 6.2. Payment under the put option involving a
"Total Distribution" shall be paid in substantially equal monthly,
quarterly, semiannual or annual installments over a period certain
beginning not later than thirty (30) days after the exercise of the put
option and not extending beyond (5) years. The deferral of payment is
reasonable if adequate security and a reasonable interest rate on the
unpaid amounts are provided. The amount to be paid under the put option
involving installment distributions must be paid not later than thirty
(30) days after the exercise of the put option. Payment under a put
option must not be restricted by the provisions of a loan or any other
arrangement, including the terms of the Employer's articles of
incorporation, unless so required by applicable state law.
For purposes of this Section, "Total Distribution" means a
distribution to a Participant or his Beneficiary within one taxable year
of the entire Vested Participant's Account.
(d) An arrangement involving the Plan that creates a put option
must not provide for the issuance of put options other than as provided
under this Section. The Plan (and the Trust Fund) must not otherwise
obligate itself to acquire Company Stock from a particular holder
thereof at an indefinite time determined upon the happening of an event
such as the death of the holder.
7.12 NONTERMINABLE PROTECTIONS AND RIGHTS
No Company Stock, except as provided in Section 4.3(n) and Section
7.11(b), acquired with the proceeds of a loan described in Section 5.3 hereof
may be subject to a put, call, or other option, or buy-sell or similar
arrangement when held by and when distributed from the Trust Fund, whether or
not the Plan is then an ESOP. The protections and rights granted in this
Section are nonterminable, and such protections and rights shall continue to
exist under the terms of this Plan so long as any Company Stock acquired with
the proceeds of a loan described in Section 5.3 hereof is held by the Trust
Fund or by any Participant or other person for whose benefit such protections
and rights have been created, and neither the repayment of such loan nor the
failure of the Plan to be an ESOP, nor an amendment of the Plan shall cause a
termination of said protections and rights.
7.13 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant
in this Plan shall be subject to the rights afforded to any "alternate payee"
under a "qualified domestic relations order." Furthermore, a distribution to
an "alternate payee" shall be permitted if such distribution is authorized by
a "qualified domestic relations order," even if the affected Participant has
not separated from service and has not reached the "earliest retirement age"
under the Plan. For the purposes of this Section, "alternate payee,"
"qualified domestic relations order" and "earliest retirement age" shall have
the meaning set forth under Code Section 414(p) .
ARTICLE VIII
TRUSTEE
8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined by
the Employer, to invest, manage, and control the Plan assets subject,
however, to the direction of an Investment Manager if the Trustee should
appoint such manager as to all or a portion of the assets of the Plan;
(b) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the event of
their death, to their Beneficiaries;
(c) To maintain records of receipts and disbursements and furnish
to the Employer and/or Administrator for each Plan Year a written annual
report per Section 8.7; and
(d) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
8.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep
the Trust Fund invested without distinction between principal and income
and in such securities or property, real or personal, wherever situated,
as the Trustee shall deem advisable, including, but not limited to,
stocks, common or preferred, bonds and other evidences of indebtedness
or ownership, and real estate or any interest therein. The Trustee
shall at all times in making investments of the Trust Fund consider,
among other factors, the short and long-term financial needs of the Plan
on the basis of information furnished by the Employer. In making such
investments, the Trustee shall not be restricted to securities or other
property of the character expressly authorized by the applicable law for
trust investments; however, the Trustee shall give due regard to any
limitations imposed by the Code or the Act so that at all times the Plan
may qualify as an Employee Stock Ownership Plan and Trust.
(b) The Trustee may employ a bank or trust company pursuant to
the terms of its usual and customary bank agency agreement, under which
the duties of such bank or trust company shall be of a custodial,
clerical and record-keeping nature.
(c) The Trustee may from time to time with the consent of the
Employer transfer to a common, collective, or pooled trust fund
maintained by any corporate Trustee hereunder, all or such part of the
Trust Fund as the Trustee may deem advisable, and such part or all of
the Trust Fund so transferred shall be subject to all the terms and
provisions of the common, collective, or pooled trust fund which
contemplate the commingling for investment purposes of such trust assets
with trust assets of other trusts. The Trustee may, from time to time
with the consent of the Employer, withdraw from such common, collective,
or pooled trust fund all or such part of the Trust Fund as the Trustee
may deem advisable.
(d) In the event the Trustee invests any part of the Trust Fund,
pursuant to the directions of the Administrator, in any shares of stock
issued by the Employer, and the Administrator thereafter directs the
Trustee to dispose of such investment, or any part thereof, under
circumstances which, in the opinion of counsel for the Trustee, require
registration of the securities under the Securities Act of 1933 and/or
qualification of the securities under the Blue Sky laws of any state or
states, then the Employer at its own expense, will take or cause to be
taken any and all such action as may be necessary or appropriate to
effect such registration and/or qualification.
8.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of the Plan,
shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase of
securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to
purchase, or otherwise dispose of any securities or other property held
by the Trustee, by private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the application of the
purchase money or to inquire into the validity, expediency, or propriety
of any such sale or other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power
of substitution; to exercise any conversion privileges, subscription
rights or other options, and to make any payments incidental thereto; to
oppose, or to consent to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate securities, and to
delegate discretionary powers, and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities, or other property;
(d) To cause any securities or other property to be registered in
the Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form, but the books and
records of the Trustee shall at all times show that all such investments
are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any
part, of the Trust Fund; and no person lending money to the Trustee
shall be bound to see to the application of the money lent or to inquire
into the validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
(i) To settle, compromise, or submit to arbitration any claims,
debts, or damages due or owing to or from the Plan, to commence or
defend suits or legal or administrative proceedings, and to represent
the Plan in all suits and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation, and such agent or counsel may or
may not be agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance
companies, to be selected by the Administrator, as an investment of the
Trust Fund such annuity, or other Contracts (on the life of any
Participant) as the Administrator shall deem proper; to exercise, at any
time or from time to time, whatever rights and privileges may be granted
under such annuity, or other Contracts; to collect, receive, and settle
for the proceeds of all such annuity or other Contracts as and when
entitled to do so under the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To invest in shares of investment companies registered under
the Investment Company Act of 1940;
(o) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(p) To vote Company Stock as provided in Section 8.4;
(q) To consent to or otherwise participate in reorganizations,
recapitalizations, consolidations, mergers and similar transactions with
respect to Company Stock or any other securities and to pay any
assessments or charges in connection therewith;
(r) To deposit such Company Stock (but only if such deposit does
not violate the provisions of Section 8.4 hereof) or other securities in
any voting trust, or with any protective or like committee, or with a
trustee or with depositories designated thereby;
(s) To sell or exercise any options, subscription rights and
conversion privileges and to make any payments incidental thereto;
(t) To exercise any of the powers of an owner, with respect to
such Company Stock and other securities or other property comprising the
Trust Fund. The Administrator, with the Trustee's approval, may
authorize the Trustee to act on any administrative matter or class of
matters with respect to which direction or instruction to the Trustee by
the Administrator is called for hereunder without specific direction or
other instruction from the Administrator;
(u) To sell, purchase and acquire put or call options if the
options are traded on and purchased through a national securities
exchange registered under the Securities Exchange Act of 1933, as
amended, or, if the options are not traded on a national securities
exchange, are guaranteed by a member firm of the New York Stock
Exchange;
(v) To do all such acts and exercise all such rights and
privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.
8.4 VOTING COMPANY STOCK
The Trustee shall vote all Company Stock held by it as part of the Plan
assets. Provided, however, that if any agreement entered into by the Trust
provides for voting of any shares of Company Stock pledged as security for any
obligation of the Plan, then such shares of Company Stock shall be voted in
accordance with such agreement. The Trustee shall not vote Company Stock
which a Participant or Beneficiary fails to exercise pursuant to this Section.
Notwithstanding the foregoing, if the Employer has a registration-type
class of securities or, with respect to Company Stock acquired by, or
transferred to, the Plan in connection with a securities acquisition loan (as
defined in Code Section 133(b)) after July 10, 1989, each Participant or
Beneficiary shall be entitled to direct the Trustee as to the manner in which
the Company Stock which is entitled to vote and which is allocated to the
Company Stock Account of such Participant or Beneficiary is to be voted. If
the Employer does not have a registration-type class of securities, with
respect to Company Stock other than Company Stock acquired by, or transferred
to, the Plan in connection with a securities acquisition loan (as defined in
Code Section 133(b)) after July 10, 1989, each Participant or Beneficiary in
the Plan shall be entitled to direct the Trustee as to the manner in which
voting rights on shares of Company Stock which are allocated to the Company
Stock Account of such Participant or Beneficiary are to be exercised with
respect to any corporate matter which involves the voting of such shares with
respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such similar
transaction as prescribed in Regulations. For purposes of this Section the
term "registration-type class of securities" means: (A) a class of securities
required to be registered under Section 12 of the Securities Exchange Act of
1934; and (B) a class of securities which would be required to be so
registered except for the exemption from registration provided in subsection
(g)(2)(H) of such Section 12.
If the Employer does not have a registration-type class of securities
and the by-laws of the Employer require the Plan to vote an issue in a manner
that reflects a one-man, one-vote philosophy, each Participant or Beneficiary
shall be entitled to cast one vote on an issue and the Trustee shall vote the
shares held by the Plan in proportion to the results of the votes cast on the
issue by the Participants and Beneficiaries.
8.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
(a) The Trustee shall make distributions from the Trust Fund at
such times and in such numbers of shares or other units of Company Stock
and amounts of cash to or for the benefit of the person entitled thereto
under the Plan as the Administrator directs in writing. Any
undistributed part of a Participant's interest in his accounts shall be
retained in the Trust Fund until the Administrator directs its
distribution. Where distribution is directed in Company Stock, the
Trustee shall cause an appropriate certificate to be issued to the
person entitled thereto and mailed to the address furnished it by the
Administrator. Any portion of a Participant's Account to be distributed
in cash shall be paid by the Trustee mailing its check to the same
person at the same address. If a dispute arises as to who is entitled
to or should receive any benefit or payment, the Trustee may withhold or
cause to be withheld such payment until the dispute has been resolved.
(b) As directed by the Administrator, the Trustee shall make
payments out of the Trust Fund. Such directions or instructions need
not specify the purpose of the payments so directed and the Trustee
shall not be responsible in any way respecting the purpose or propriety
of such payments except as mandated by the Act.
(c) In the event that any distribution or payment directed by the
Administrator shall be mailed by the Trustee to the person specified in
such direction at the latest address of such person filed with the
Administrator, and shall be returned to the Trustee because such person
cannot be located at such address, the Trustee shall promptly notify the
Administrator of such return. Upon the expiration of sixty (60) days
after such notification, such direction shall become void and unless and
until a further direction by the Administrator is received by the
Trustee with respect to such distribution or payment, the Trustee shall
thereafter continue to administer the Trust as if such direction had not
been made by the Administrator. The Trustee shall not be obligated to
search for or ascertain the whereabouts of any such person.
8.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from
time to time be agreed upon in writing by the Employer and the Trustee. An
individual serving as Trustee who already receives full-time pay from the
Employer shall not receive compensation from the Plan. In addition, the
Trustee shall be reimbursed for any reasonable expenses, including reasonable
counsel fees incurred by it as Trustee. Such compensation and expenses shall
be paid from the Trust Fund unless paid or advanced by the Employer. All
taxes of any kind and all kinds whatsoever that may be levied or assessed
under existing or future laws upon, or in respect of, the Trust Fund or the
income thereof, shall be paid from the Trust Fund.
8.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary
Date or receipt of the Employer's contribution for each Plan Year, the Trustee
shall furnish to the Employer and Administrator a written statement of account
with respect to the Plan Year for which such contribution was made setting
forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales
or other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator
deems appropriate. The Employer, forthwith upon its receipt of each
such statement of account, shall acknowledge receipt thereof in writing
and advise the Trustee and/or Administrator of its approval or
disapproval thereof. Failure by the Employer to disapprove any such
statement of account within thirty (30) days after its receipt thereof
shall be deemed an approval thereof. The approval by the Employer of
any statement of account shall be binding as to all matters embraced
therein as between the Employer and the Trustee to the same extent as if
the account of the Trustee had been settled by judgment or decree in an
action for a judicial settlement of its account in a court of competent
jurisdiction in which the Trustee, the Employer and all persons having
or claiming an interest in the Plan were parties; provided, however,
that nothing herein contained shall deprive the Trustee of its right to
have its accounts judicially settled if the Trustee so desires.
8.8 AUDIT
(a) If an audit of the Plan's records shall be required by the
Act and the regulations thereunder for any Plan Year, the administrator
shall direct the Trustee to engage on behalf of all Participants an
independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan in
accordance with generally accepted auditing standards, within a
reasonable period after the close of the Plan Year, furnish to the
Administrator and the Trustee a report of his audit setting forth his
opinion as to whether any statements, schedules or lists that are
required by Act Section 103 or the Secretary of Labor to be filed with
the Plan's annual report, are presented fairly in conformity with
generally accepted accounting principles applied consistently. All
auditing and accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or by such other date
as may be prescribed under regulations of the Secretary of Labor.
8.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a written
notice of his resignation.
(b) The Employer may remove the Trustee by mailing by registered
or certified mail, addressed to such Trustee at his last known address,
at least thirty (30) days before its effective date, a written notice of
his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering
same to the employer, shall, without further act, became vested with all
the estate, rights, powers, discretions, and duties of his predecessor
with like respect as if he were originally named as a Trustee herein.
Until such a successor is appointed, the remaining Trustee or Trustees
shall have full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to
the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of his
predecessor with the like effect as if he were originally named as
Trustee herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either (i) included as part
of the annual statement of account for the Plan Year required under
Section 8.7 or (ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no later than
the due date of the annual statement of account for the Plan Year. The
procedures set forth in Section 8.7 for the approval by the Employer of
annual statements of account shall apply to any special statement of
account rendered hereunder and approval by the Employer of any such
special statement in the manner provided in Section 8.7 shall have the
same effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have any duty
or responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by
Section 8.7 and this subparagraph.
8.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee
at the direction of the Administrator shall transfer the Vested interest, if
any, of such Participant in his account to another trust forming part of a
pension, profit sharing or stock bonus plan maintained by such Participant's
new employer and represented by said employer in writing as meeting the
requirements of Code Section 401(a), provided that the trust to which such
transfers are made permits the transfer to be made.
8.11 DIRECT ROLLOVER
(a) This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(b) For purposes of this Section the following definitions shall
apply:
(1) An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution
does not include: any distribution that is one of a series
of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint
life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9); and
the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities) .
(2) An eligible retirement plan is an individual retirement
account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an
annuity plan described in Code Section 403(a), or a
qualified trust described in Code Section 401(a), that
accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Code Section 414(p),
are distributees with regard to the interest of the spouse
or former spouse.
(4) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
ARTICLE IX
AMENDMENT, TERMINATION AND MERGERS
9.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the
Plan, subject to the limitations of this Section. Any such amendment
shall be adopted by formal action of the Employer's board of directors
and executed by an officer authorized to act on behalf of the Employer.
However, any amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may only be made with
the Trustee's and Administrator's written consent. Any such amendment
shall become effective as provided therein upon its execution. The
Trustee shall not be required to execute any such amendment unless the
Trust provisions contained herein are a part of the Plan and the
amendment affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it authorizes
or permits any part of the Trust Fund (other than such part as is
required to pay taxes and administration expenses) to be used for or
diverted to any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or causes any reduction
in the amount credited to the account of any Participant; or causes or
permits any portion of the Trust Fund to revert to or become property of
the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be effective to the extent
it eliminates or reduces any "Section 411(d)(6) protected benefit" or
adds or modifies conditions relating to "Section 411(d) (6) protected
benefits" the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d)(6) protected benefits" are benefits
described in Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.
In addition, no such amendment shall have the effect of
terminating the protections and rights set forth in Section 7.12, unless
such termination shall then be permitted under the applicable provisions
of the Code and Regulations; such a termination is currently expressly
prohibited by Regulation 54.4975 - 11(a) (3)(ii).
9.2 TERMINATION
(a) The Employer shall have the right at any time to terminate
the Plan by delivering to the Trustee and Administrator written notice
of such termination. Upon any full or partial termination, all amounts
credited to the affected Participants' Accounts shall become 100% Vested
as provided in Section 7.4 and shall not thereafter be subject to
forfeiture, and all unallocated amounts shall be allocated to the
accounts of all Participants in accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer shall
direct the distribution of the assets of the Trust Fund to Participants
in a manner which is consistent with and satisfies the provisions of
Sections 7.5 and 7.6. Except as permitted by Regulations, the
termination of the Plan shall not result in the reduction of "Section
411(d)(6) protected benefits" in accordance with Section 9.1(c).
9.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event
of a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 9.1(c).
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for
the employment of any Participant or Employee. Nothing contained in this Plan
shall be deemed to give any Participant or Employee the right to be retained
in the service of the Employer or to interfere with the right of the Employer
to discharge any Participant or Employee at any time regardless of the effect
which such discharge shall have upon him as a Participant of this Plan.
10.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which
shall be payable out of the Trust Fund to any person (including a
Participant or his Beneficiary) shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be void;
and no such benefit shall in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by the
Trustee, except to such extent as may be required by law.
(b) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act of 1984.
The Administrator shall establish a written procedure to determine the
qualified status of domestic relations orders and to administer
distributions under such qualified orders. Further, to the extent
provided under a "qualified domestic relations order," a former spouse
of a Participant shall be treated as the spouse or surviving spouse for
all purposes under the Plan.
10.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the Act
and the laws of the Commonwealth of Virginia, other than its laws respecting
choice of law, to the extent not preempted by the Act.
10.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply.
10.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee or the
Administrator may be a party, and such claim, suit, or proceeding is resolved
in favor of the Trustee or Administrator, they shall be entitled to be
reimbursed from the Trust Fund for any and all costs, attorney's fees, and
other expenses pertaining thereto incurred by them for which they shall have
become liable.
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted
by law, it shall be impossible by operation of the Plan or of the Trust,
by termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund maintained
pursuant to the Plan or any funds contributed thereto to be used for,
are diverted to, purposes other than the exclusive benefit of
Participants, Retired Participants, or their Beneficiaries .
(b) In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the time of
payment and the Trustees shall return such amount to the Employer within
the one (1) year period. Earnings of the Plan attributable to the
excess contributions may not be returned to the Employer but any losses
attributable thereto must reduce the amount so returned.
10.7 BONDING
Every fiduciary, except a bank or an insurance company, unless exempted
by the Act and regulations thereunder, shall be bonded in an amount not less
than 10% of the amount of the funds such fiduciary handles; provided, however,
that the minimum bond shall be $1,000 and the maximum bond, $500,000. The
amount of funds handled shall be determined at the beginning of each Plan Year
by the amount of funds handled by such person, group, or class to be covered
and their predecessors, if any, during the preceding Plan Year, or if there is
no preceding Plan Year, then by the amount of the funds to be handled during
the then current year. The bond shall provide protection to the Plan against
any loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as
such term is used in Act Section 412(a)(2)), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to
the contrary, the cost of such bonds shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund or by the Employer.
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the
failure on the part of the insurer to make payments provided by any such
Contract, or for the action of any person which may delay payment or render a
Contract null and void or unenforceable in whole or in part.
10.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects
of this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty
to see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
10.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary,
or to any guardian or committee appointed for such Participant or Beneficiary
in accordance with the provisions of the Plan, shall, to the extent thereof,
be in full satisfaction of all claims hereunder against the Trustee and the
Employer, either of whom may require such Participant, legal representative,
Beneficiary, guardian or committee, as a condition precedent to such payment,
to execute a receipt and release thereof in such form as shall be determined
by the Trustee or Employer.
10.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only
those specific powers, duties, responsibilities, and obligations as are
specifically given them under the Plan. In general, the Employer shall have
the sole responsibility for making the contributions provided for under
Section 4.1; and shall have the sole authority to appoint and remove the
Trustee and the Administrator; to formulate the Plan's "funding policy and
method"; and to amend or terminate, in whole or in part, the Plan. The
Administrator shall have the sole responsibility for the administration of the
Plan, which responsibility is specifically described in the Plan. The Trustee
shall have the sole responsibility of management of the assets held under the
Trust, except those assets, the management of which has been assigned to an
Investment Manager, who shall be solely responsible for the management of the
assets assigned to it, all as specifically provided in the Plan. Each named
Fiduciary warrants that any directions given, information furnished, or action
taken by it shall be in accordance with the provisions of the Plan,
authorizing or providing for such direction, information or action.
Furthermore, each named Fiduciary may rely upon any such direction,
information or action of another named Fiduciary as being proper under the
Plan, and is not required under the Plan to inquire into the propriety of any
such direction, information or action. It is intended under the Plan that
each named Fiduciary shall be responsible for the proper exercise of its own
powers, duties, responsibilities and obligations under the Plan. No named
Fiduciary shall guarantee the Trust Fund in any manner against investment loss
or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity. In the furtherance of their responsibilities
hereunder, the "named Fiduciaries" shall be empowered to interpret the Plan
and Trust and to resolve ambiguities, inconsistencies and omissions, which
findings shall be binding, final and conclusive.
10.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
10.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan receives
an adverse determination with respect to its initial qualification, then
the Plan may return such contributions to the Employer within one year
after such determination, provided the application for the determination
is made by the time prescribed by law for filing the Employer's return
for the taxable year in which the Plan was adopted, or such later date
as the Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except
Sections 3.6, 3.7, and 4.1(c), any contribution by the Employer to the
Trust Fund is conditioned upon the deductibility of the contribution by
the Employer under the Code and, to the extent any such deduction is
disallowed, the Employer may, within one (1) year following the
disallowance of the deduction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one
(1) year following the disallowance. Earnings of the Plan attributable
to the excess contribution may not be returned to the Employer, but any
losses attributable thereto must reduce the amount so returned.
10.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
10.16 SECURITIES AND EXCHANGE COMMISSION APPROVAL
The Employer may request an interpretative letter from the Securities
and Exchange Commission stating that the transfers of Company Stock
contemplated hereunder do not involve transactions requiring a registration of
such Company Stock under the Securities Act of 1933. In the event that a
favorable interpretative letter is not obtained, the Employer reserves the
right to amend the Plan and Trust retroactively to their Effective Dates in
order to obtain a favorable interpretative letter or to terminate the Plan.
IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
[Footnote continued from previous page]
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61
Exhibit 10.4
ATLANTIC COAST AIRLINES, INC.
QUALIFIED RETIREMENT PLAN AND TRUST
RESTATED AS AMENDED THROUGH DECEMBER 31, 1996
ARTICLE I: DEFINITIONS
As used in this Plan, the following words and phrases shall have the meanings
set
forth herein unless a different meaning is clearly required by the context:
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as it may
be amended from time to time.
1.2 "Administrator" means the person(s) or entity designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "Adoption Agreement" means the separate Agreement which is executed by the
Employer and accepted by the Trustee which sets forth the elective
provisions of this Plan and Trust as specified by the Employer.
1.4 "Affiliated Employer" means the Employer and any corporation which is a
member of a controlled group of corporations (as defined in Code Section
414(b)) which includes the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section
414(c)) with the Employer; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in Code Section
414(m)) which includes the Employer; and any other entity required to be
aggregated with the Employer pursuant to Regulations under Code Section
414(o).
1.5 "Aggregate Account" means, with respect to each Participant, the value of
all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the provisions of Section
2.2.
1.6 "Anniversary Date" means the anniversary date specified in C3 of the
Adoption Agreement.
1.7 "Beneficiary" means the person to whom a share of a deceased Participant's
interest in the Plan is payable, subject to the restrictions of Sections 6.2
and 6.6.
1.8 "Code" means the Internal Revenue Code of 1986, as amended or replaced from
time to time.
1.9 "Compensation" with respect to any Participant means one of the following
as
elected in the Adoption Agreement. However, compensation for any Self-
Employed Individual shall be equal to his Earned Income.
A. Information required to be reported under Sections 6041, 6051, and 6052
(Wages, Tips, and Other Compensation Box on Form W-2). Compensation is
defined as wages, as defined in Section 3401(a), and all other payments
of compensation to an employee by the employer (in the course of the
employer's trade or business) for which the employer is required to
furnish the employee a written statement under Sections 6041(d) and
6051(a)(3) of the Internal Revenue Code (hereafter referred to as "the
Code"). Compensation must be determined without regard to any rules
under Section 3401(a) that limit the renumeration included in wages based
on the nature or location of the employment or the services performed
(such as the exception for agricultural labor in Section 3401(a)(2)).
In addition, if specified in the Adoption Agreement, Compensation for all
Plan purposes also shall include compensation which is not currently
includible in the Participant's gross income by reason of the application
of Code Sections 125, 402(e)(3), 402(h)(1)(B), or 403(b).
B. Section 3401(a) wages. Compensation is defined as wages within the
meaning of Section 3401(a) for the purposes of income tax withholding at
the source but determined without regard to any rules that limit the
renumeration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2)).
In addition, if specified in the Adoption Agreement, Compensation for all
Plan purposes also shall include compensation which is not currently
includible in the Participant's gross income by reason of the application
of Code Sections 125, 402(e)(3), 402(h)(1)(B), or 403(b).
C. 415 Safe-Harbor Compensation. Compensation is defined as wages,
salaries, and fees for professional services and other amounts received
(without regard to whether or not an amount is paid in cash) for personal
service actually rendered in the course of employment with the employer
maintaining the plan to the extent that the amounts are includible in
gross income (including, but not limited to, commissions paid to
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe
benefits and reimbursements or other expense allowances under a non-
accountable plan (as described in Regulation 1.62-2(c)), and excluding
the following:
1. Employer contributions to a plan of deferred compensation which are
not includible in the employee's gross income for the taxable year in
which contributed, or employer contributions under a simplified
employee pension plan to the extent such contributions are deductible
by the employee, or any distributions from a plan of deferred
compensation;
2. Amounts realized from the exercise of a non-qualified stock option, or
when restricted stock (or property) held by the employee either
becomes freely transferable or is no longer subject to a substantial
risk of forfeiture;
3. Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and,
4. Other amounts which received special tax benefits, or contributions
made by the employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity contract described in
Section 403(b) of the Code (whether or not the contributions are
actually excludable from the gross income of the employee).
If, in connection with the adoption of this or any other amendment, the
definition of Compensation has been modified, then, for Plan Years prior to
the Plan Year which includes the adoption date of such amendment,
Compensation means compensation determined pursuant to the Plan then in
effect.
Notwithstanding the above, Compensation in excess of $200,000 shall be
disregarded. Such amount shall be adjusted at the same time and in such
manner as permitted under Code Section 415(d). In applying this limitation,
the family group of a Highly Compensated Participant who is subject to the
Family Member aggregation rules of Code Section 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or one of the
ten (10) Highly Compensated Employees paid the greatest "415 Compensation"
during the year, shall be treated as a single Participant, except that for
this purpose Family Members shall include only the affected Participant's
spouse and any lineal descendants who have not attained age nineteen (19)
before the close of the year. If, as a result of the application of such
rules, the adjusted $200,000 limitation is exceeded, then (except for the
purposes of determining the portion of Compensation up to the integration
level if this plan is integrated), the limitation shall be prorated among
the affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application of
this limitation. The limitation shall also apply to the definition of
414(s) Compensation.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit
(without regard to Family Member aggregation) shall apply only for Top Heavy
Plan Years and shall not be adjusted.
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan
years beginning on or after January 1, 1994, the annual compensation of each
employee taken into account under the plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies to
any period, not exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual compensation
limit will be multiplied by a fraction, the numerator of which is the number
of months in the is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into account in
determining an employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period.
For this purpose, for determination periods beginning before the first day
of first plan year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
1.10 "Contract" or "Policy" means any life insurance policy, retirement income
policy, or annuity contract (group or individual) issued by the Insurer. In
the event of any conflict between the terms of this Plan and the terms of
any insurance contract purchased hereunder, the Plan provisions shall
control.
1.11 "Deferred Compensation" means that portion of a Participant's total
Compensation that such Participant has elected to defer for a Plan Year
pursuant to Section 4.2.
1.12 "Determination Date" means (1) the last day of the preceding Plan Year, or
(2) in the case of the first Plan Year, the last day of such Plan Year.
1.13 "Early Retirement Date" means the date specified in the Adoption Agreement
on which a Participant or Former Participant has satisfied the age and
service requirements specified in the Adoption Agreement (Early Retirement
Age). A Participant shall become fully Vested upon satisfying this
requirement if still employed at his Early Retirement Age.
A Former Participant who terminates employment after satisfying the service
requirement for Early Retirement and who thereafter reaches the age
requirement contained herein shall be entitled to receive his benefits under
this Plan.
1.14 "Earned Income" means, with respect to a Self-Employed Individual, the net
earnings from self-employment in the trade or business with respect to which
the Plan is established, for which the personal services of the individual
are a material income-producing factor. Net earnings will be determined
without regard to items not included in gross income and the deductions
allocable to such items. Net earnings are reduced by contributions by the
Employer to a qualified Plan to the extent deductible under Code Section
404. In addition, for Plan Years beginning after December 31, 1989, net
earnings shall be determined with regard to the deduction allowed to the
Employer by Code Section 164(f).
1.15 "Elective Contribution" means the Employer's contributions to the Plan
that
are made pursuant to the Participant's deferral election pursuant to Section
4.2, excluding any such amounts distributed as "excess annual additions"
pursuant to Section 4.9. In addition, if selected in E3 of the Adoption
Agreement, the Employer's Matching Contribution shall or shall not be
considered an Elective Contribution for purposes of the Plan, as provided in
Section 4.1B. Elective Contributions shall be subject to the requirements
of Sections 4.2B and 4.2C and shall further be required to satisfy the
discrimination requirements of Regulation 1.401(k)-1(b)(3), the provisions
of which are specifically incorporated herein by reference.
1.16 "Eligible Employee" means any Employee specified in D1 of the Adoption
Agreement. Eligible employees shall mean all Employees who have satisfied
the eligibility requirements except Pilots shall be excluded from the
Discretionary Employer Contribution, unless they are employed on the last
day of the Plan Year, and are on the System Seniority List.
1.17 "Employee" means any person who is employed by the Employer, but excludes
any person who is employed as an independent contractor. The term Employee
also shall include Leased Employees as provided in Code Section 414(n) or
(o).
Except as provided in the Adoption Agreement, all Employees of all entities
which are an Affiliated Employer will be treated as employed by a single
employer. Employees of Affiliated Employers shall be treated as Employees
of the Employer adopting the Plan.
1.18 "Employer" means the entity specified in the Adoption Agreement, any
Participating Employer (as Defined in Section 10.1) which shall adopt this
Plan, any successor which shall maintain this Plan and any predecessor which
has maintained this Plan.
1.19 "Excess Compensation" means, with respect to a Plan that is integrated
with
Social Security, a Participant's Compensation which is in excess of the
amount set forth in the Adoption Agreement.
1.20 "Excess Contributions" means, with respect to a Plan Year, the excess of
Elective Contributions and Qualified Non-Elective Contributions made on
behalf of Highly Compensated Participants for the Plan Year over the maximum
amount of such contributions permitted under Section 4.5A.
1.21 "Excess Deferred Compensation" means, with respect to any taxable year of
a
Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2F
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an
"annual addition" pursuant to Section 4.9 when contributed to the Plan
unless distributed to the affected Participant not later than the first
April 15th following the close of the Participant's taxable year.
1.22 "Family Member" means, with respect to an affected Participant, such
Participant's spouse, and such Participant's lineal descendants and
ascendants and their spouses, all as described in Code Section 414(q)(6)(B).
1.23 "Fiduciary" means any person who (a) exercises any discretionary authority
or discretionary control respecting management of the Plan or exercises any
authority or control respecting management or disposition of its assets, (b)
renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has
any authority or responsibility to do so, or (c) has the administration of
the Plan, including, but not limited to, the Trustee, the Employer and its
representative body, and the Administrator.
1.24 "Fiscal Year" means the Employer's accounting year as specified in the
Adoption Agreement.
1.25 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
A. the distribution of the entire Vested portion of a Participant's Account,
or
B. the last day of the Plan Year in which the Participant incurs five (5)
consecutive 1-Year Breaks in Service.
Furthermore, for purposes of A. above, in the case of a Terminated
Participant whose Vested benefit is zero, such Terminated Participant shall
be deemed to have received a distribution of his Vested benefit upon his
termination of employment. In addition, the term Forfeiture also shall
include amounts deemed to be Forfeitures pursuant to any other provision of
this Plan.
1.26 "Former Participant" means a person who has been a Participant, but who
has
ceased to be a Participant for any reason.
1.27 "414(s) Compensation" with respect to any Employee means his Compensation
as
defined in Section 1.9, including the $200,000 limit on compensation as
described in Code Section 415(d) and proration of Compensation of family
members as described in Code Section 414(q)(6). However, for purposes of
this Section, Compensation shall be Compensation paid and may be determined
by including all items that are excluded from compensation pursuant to the
Adoption Agreement and may only be recognized as of an Employee's effective
date of participation pursuant to the election in E1 of the Adoption
Agreement. If, in connection with the adoption of this or any other
amendment, the definition of "414(s) Compensation" has been modified, then,
for Plan Years prior to the Plan Year which includes the adoption date of
such amendment, "414(s) Compensation" means compensation determined pursuant
to the Plan then in effect.
In addition, if specified in the Adoption Agreement, "414(s) Compensation"
also shall include compensation which is not currently includible in the
Participant's gross income by reason of the application of Code Sections
125, 402(e)(3), 402(h)(1)(B), or 403(b), plus Elective Contributions
attributable to Deferred Compensation recharacterized as voluntary Employee
contributions pursuant to Section 4.6A.
1.28 "415 Compensation" means compensation as defined in Section 4.9F.2. If,
in
connection with the adoption of this or any other amendment, the definition
of "415 Compensation" has been modified, then for Plan Years prior to the
Plan Year which includes the adoption date of such amendment, "415
Compensation" means compensation determined pursuant to the Plan then in
effect.
1.29 "Highly Compensated Employee" means an Employee described in Code Section
414(q) and the Regulations thereunder and generally means an Employee who
performed services for the Employer during the "determination year" and is
in one or more of the following groups:
A. Employees who at any time during the "determination year" or "look-back
year" were "five percent owners" as defined in Section 1.36C.
B. Employees who received "415 Compensation" during the "look-back" year
from the Employer in excess of $75,000.
C. Employees who received "415 Compensation" during the "look-back year"
from the Employer in excess of $50,000 and were in the Top Paid Group of
Employees for the Plan Year.
D. Employees who during the "look-back year" were officers of the Employer
(as that term is defined within the meaning of the Regulations under Code
Section 416) and received "415 Compensation" during the "look-back year"
from the Employer greater than 50 percent of the limit in effect under
Code Section 415(b)(1)(A) for any such Plan Year. The number of officers
shall be limited to the lesser of (1) 50 employees; or (2) the greater of
3 employees or 10 percent of all employees. If the Employer does not
have at least one officer whose annual "415 Compensation" is in excess of
50 percent of the Code Section 415(b)(1)(A) limit, then the highest paid
officer of the Employer will be treated as a Highly Compensated Employee.
E. Employees who are in the group consisting of the 100 Employees paid the
greatest "415 Compensation" during the "determination year" and are also
described in B., C. or D. above when these paragraphs are modified to
substitute "determination year" for "look-back year."
The "determination year" shall be the Plan Year for which testing is being
performed, and the "look-back year" shall be the immediately preceding
twelve-month period. However, if the Plan Year is a calendar year, or if
another Plan of the Employer so provides, then the "look-back year" shall be
the calendar year ending with or within the Plan Year for which testing is
being performed, and the "determination year" (if applicable) shall be the
period of time, if any, which extends beyond the "look-back year" and ends
on the last day of the Plan Year for which testing is being performed (the
"lag period"). With respect to this election, it shall be applied on a
uniform and consistent basis to all plans, entities, and arrangements of the
Employer.
For purposes of this Section, the determination of "415 Compensation" shall
be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections
125, 402(e)(3), 402(h)(1)(B) and in the case of Employer contributions made
pursuant to a salary reduction agreement, Code Section 403(b).
Additionally, the dollar threshold amounts specified in B. and C. above
shall be adjusted at such time and in such manner as is provided in
Regulations. In the case of such an adjustment, the dollar limits which
shall be applied are those for the calendar year in which the "determination
year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are non-
resident aliens and who received no earned income (within the meaning of
Code Section 911(d)) from the Employer constituting United States' source
income (within the meaning of Code Section 861(a)(3)), shall not be treated
as Employees. Additionally, all Affiliated Employers shall be taken into
account as a single employer and Leased Employees within the meaning of Code
Sections 414(n)(2) and 414(o)(2) shall be considered Employees unless such
Leased Employees are covered by a plan described in Code Section 414(n)(5)
and are not covered in any qualified plan maintained by the Employer. The
exclusion of Leased Employees for this purpose shall be applied on a uniform
and consistent basis for all of the Employer's retirement plans. In
addition, Highly Compensated Former Employees shall be treated as Highly
Compensated Employees without regard to whether they performed services
during the "determination year."
1.30 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
"determination year" after attaining age 55. Notwithstanding the foregoing,
an Employee who separated from service prior to 1987 will be treated as a
Highly Compensated Former Employee only if during the separation year (or
year preceding the separation year) or any year after the Employee attains
age 55 (or the last year ending before the Employee's 55th birthday), the
Employee either received "415 Compensation" in excess of $50,000 or was a
"five percent owner." For purposes of this Section, "determination year,"
"415 Compensation" and "five percent owner" shall be determined in
accordance with Section 1.29. Highly Compensated Former Employees shall be
treated as Highly Compensated Employees. The method set forth in this
Section for determining who is a "Highly Compensated Former Employee" shall
be applied on a uniform and consistent basis for all purposes for which the
Code Section 414(q) definition is applicable.
1.31 "Highly Compensated Participant" means any Highly Compensated Employee who
is eligible to participate in the Plan.
1.32 "Hour of Service" means:
A. Each hour for which an Employee is directly or indirectly compensated or
entitled to compensation by the Employer for the performance of duties
during the applicable computation period;
B. Each hour for which an Employee is directly or indirectly compensated or
entitled to compensation by the Employer (irrespective of whether the
employment relationship has terminated) for reasons other than
performance of duties (such as vacation, holidays, sickness, jury duty,
disability, lay-off, military duty or leave of absence) during the
applicable computation period;
C. Each hour for which back pay is awarded or agreed to by the Employer
without regard to mitigation of damages. The same Hours of Service shall
not be credited both under A. or B., as the case may be, and under C.
D. Notwithstanding the above,
1. No more than 501 Hours of Service are required to be credited to an
Employee on account of any single continuous period during which the
Employee performs no duties (whether or not such period occurs in a
single computation period);
2. An hour for which an Employee is directly or indirectly paid, or
entitled to payment, on account of a period during which no duties are
performed is not required to be credited to the Employee if such
payment is made or due under a plan maintained solely for the purpose
of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and
3. Hours of Service are not required to be credited for a payment which
solely reimburses an Employee for medical or medically related
expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by or due
from the Employer regardless of whether such payment is made by or due from
the Employer directly, or indirectly through, among others, a trust fund, or
insurer, to which the Employer contributes or pays premiums and regardless
of whether contributions made or due to the trust fund, insurer, or other
entity are for the benefit of particular Employees or are on behalf of a
group of Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a Year of
Service, a year of participation for purposes of accrued benefits, a 1-Year
Break in Service, and employment commencement date (or reemployment
commencement date). The provisions of Department of Labor regulations
2530.200b-2(b) and (c) are incorporated herein by reference.
Hours of Service will be credited for employment with all Affiliated
Employers and for any individual considered to be a Leased Employee pursuant
to Code Sections 414(n) or 414(o) and the Regulations thereunder.
Hours of Service will be determined on the basis of the method selected in
the Adoption Agreement.
1.33 "Insurer" means any legal reserve insurance company which shall issue one
or
more policies under the Plan.
1.34 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm,
or corporation registered as investment adviser under the Investment
Advisers Act of 1940, a bank, or an insurance company.
1.35 "Joint and Survivor Annuity" means an annuity for the life of a
Participant
with a survivor annuity for the life of the Participant's spouse which is
not less than 1/2, nor greater than the amount of the annuity payable during
the joint lives of the Participant and the Participant's spouse. The Joint
and Survivor Annuity will be the amount of benefit which can be purchased
with the Participant's Vested interest in the Plan.
1.36 "Key Employee" means an Employee as defined in Code Section 416(i) and the
Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any
time during the Plan Year that contains the "Determination Date" or any of
the preceding four (4) Plan Years, has been included in one of the following
categories:
A. An officer of the Employer (as that term is defined within the meaning of
the Regulations under Code Section 416) having annual "415 Compensation"
greater than 50 percent of the amount in effect under Code Section
415(b)(1)(A) for any such Plan Year.
B. One of the ten employees having annual "415 Compensation" from the
Employer for a Plan Year greater than the dollar limitation in effect
under Code Section 415(c)(1)(A) for the calendar year in which such Plan
Year ends and owning (or considered as owning within the meaning of Code
Section 318) both more than one-half percent interest and the largest
interests in the Employer;
C. A "five percent owner" of the Employer. "Five percent owner" means any
person who owns (or is considered as owning within the meaning of Code
Section 318) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent (5%) of the total
combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than five percent (5%)
of the capital or profits interest in the Employer. In determining
percentage ownership hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o) shall be treated
as separate employers;
D. A "one percent owner" of the Employer having an annual "415 Compensation"
from the Employer of more than $150,000. "One percent owner" means any
person who owns (or is considered as owning within the meaning of Code
Section 318) more than one percent (1%) of the outstanding stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in the
Employer. In determining percentage ownership hereunder, employers that
would otherwise be aggregated under Code Sections 414(b), (c), (m) and
(o) shall be treated as separate employers. However, in determining
whether an individual has "415 Compensation" of more than $150,000, "415
Compensation" from each employer required to be aggregated under Code
Sections 414(b), (c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415 Compensation" shall
be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections
125, 402(e)(3), 402(h)(1)(B) and, in the case of Employer Contributions made
pursuant to a salary reduction agreement, Code Section 403(b).
1.37 "Late Retirement Date" means the date of a Participant's actual retirement
after having reached his Normal Retirement Date.
1.38 "Leased Employee" means any person (other than an Employee of the
recipient)
who pursuant to an agreement between the recipient and any other person
("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full-time basis for a period of at least one
year, and such services are of a type historically performed by employees in
the business field of the recipient employer. Contributions or benefits
provided a leased employee by the leasing organization which are
attributable to services performed for the recipient employer shall be
treated as provided by the recipient employer.
A leased employee shall not be considered an Employee of the recipient if:
A. Such employee is covered by a money purchase pension plan providing:
1. A non-integrated employer contribution rate of at least 10 percent of
compensation, as defined in Code Section 415(c)(3), but including
amounts contributed pursuant to a salary reduction agreement which are
excludable from the employee's gross income under Code Sections 125,
402(e)(3), 402(h) or 403(b);
2. Immediate participation; and
3. Full and immediate Vesting; and
B. Leased employees do not constitute more than 20 percent of the
recipient's non-highly compensated work force.
1.39 "Net Profit" means, with respect to any Fiscal Year, the Employer's net
income or profit for such Fiscal Year determined upon the basis of the
Employer's books of account in accordance with generally accepted accounting
principles, without any reduction for taxes based upon income, or for
contributions made by the Employer to this Plan and any other qualified
plan.
1.40 "Non-Elective Contribution" means the Employer's contributions to the Plan
other than those made pursuant to Section 4.2 and any Qualified Non-Elective
Contribution. In addition, if selected in E3 of the Adoption Agreement, the
Employer's Matching Contribution made pursuant to Section 4.1B shall be
considered a Non-Elective Contribution for purposes of the Plan.
1.41 "Non-Highly Compensated Participant" means any Participant who is neither
a
Highly Compensated Employee nor a Family Member.
1.42 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.43 "Normal Retirement Age" means the age specified in the Adoption Agreement
at
which time a Participant shall become fully Vested in his Participant's
Account.
1.44 "Normal Retirement Date" means the date specified in the Adoption
Agreement
on which a Participant shall become eligible to have his benefits
distributed to him.
1.45 "1-Year Break in Service" means the applicable computation period during
which an Employee has not completed more than 500 Hours of Service with the
Employer. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall
be recognized for "authorized leaves of absence" and "maternity and
paternity leaves of absence."
"Authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service,
or any other reason.
A "maternity or paternity leave of absence" means, for Plan Years beginning
after December 31, 1984, an absence from work for any period by reason of
the Employee's pregnancy, birth of the Employee's child, placement of a
child with the Employee in connection with the adoption of such child, or
any absence for the purpose of caring for such child for a period
immediately following such birth or placement. For this purpose, Hours of
Service shall be credited for the computation period in which the absence
from work begins, only if credit therefore is necessary to prevent the
Employee from incurring a 1-Year Break in Service, or, in any other case, in
the immediately following computation period. The Hours of Service credited
for a "maternity or paternity leave of absence" shall be those which would
normally have been credited but for such absence, or, in any case in which
the Administrator is unable to determine such hours normally credited, eight
(8) Hours of Service per day. The total Hours of Service required to be
credited for a "maternity or paternity leave of absence" shall not exceed
501.
1.46 "Owner-Employee" means a sole proprietor who owns the entire interest in
the
Employer or a partner who owns more than 10% of either the capital interest
or the profits interest in the Employer and who receives income for personal
services from the Employer.
1.47 "Participant" means any Eligible Employee who participates in the Plan as
provided in Section 3.2 and has not for any reason become ineligible to
participate further in the Plan.
1.48 "Participant's Account" means the account established and maintained by
the
Administrator for each Participant with respect to his total interest under
the Plan resulting from the Employer's Non-Elective Contributions. A
separate accounting shall be maintained for Matching Contributions if they
are deemed to be Non-Elective Contributions.
1.49 "Participant's Combined Account" means the total aggregate amount of each
Participant's Elective Account, Qualified Non-Elective Account, and
Participant's Account.
1.50 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his
total interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to
that portion of the Participant's Elective Account attributable to Elective
Contributions made pursuant to Section 4.2, Employer Matching Contributions
if they are deemed to be Elective Contributions, and any Qualified Non-
Elective Contributions.
1.51 "Participant's Rollover Account" means the account established and
maintained by the Administrator for an Employee with respect to his total
interest in the Plan resulting from amounts transferred from another
qualified plan or "conduit" Individual Retirement Account in accordance with
Section 4.11.
1.52 "Plan" means this instrument (referred to as the Pension Specialists, Inc.
Qualified Retirement Plan and Trust Basic Plan Document) including all
amendments thereto, and the Adoption Agreement as adopted by the Employer.
1.53 "Plan Year" means the Plan's accounting year as specified in C2 of the
Adoption Agreement.
1.54 "Pre-Retirement Survivor Annuity" means an immediate annuity for the life
of
the Participant's spouse, the payments under which must be at least equal to
the actuarial equivalent of 50% of the Participant's Vested interest in the
Plan as of the date of death.
1.55 "Qualified Non-Elective Account" means the account established hereunder
to
which Qualified Non-Elective Contributions are allocated.
1.56 "Qualified Non-Elective Contribution" means the Employer's contributions
to
the Plan that are made pursuant to Section 4.1D. and Section 4.6B. which are
used to satisfy the "Actual Deferral Percentage" tests. Qualified Non-
Elective Contributions are nonforfeitable when made and are distributable
only as specified in Sections 4.2C. and 6.11. In addition, the Employer's
contributions to the Plan that are made pursuant to Section 4.8H. and which
are used to satisfy the "Actual Contribution Percentage" tests shall be
considered Qualified Non-Elective Contributions.
1.57 "Qualified Voluntary Employee Contribution Account" means the account
established and maintained by the Administrator for each Participant with
respect to his total interest under the Plan resulting from the
Participant's tax-deductible qualified voluntary employee contributions made
pursuant to Section 4.14.
1.58 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.59 "Retired Participant" means a person who has been a Participant, but who
has
become entitled to retirement benefits under the Plan.
1.60 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early or Late Retirement
Date (see Section 6.1).
1.61 "Self-Employed Individual" means an individual who has earned income for
the
taxable year from the trade or business for which the Plan is established,
and, also, an individual who would have earned income but for the fact that
the trade or business had no net profits for the taxable year. A Self-
Employed Individual shall be treated as an Employee.
1.62 "Shareholder-Employee" means a Participant who owns more than five percent
(5%) of the Employer's outstanding capital stock during any year in which
the Employer elected to be taxed as a Small Business Corporation under the
applicable Code Section.
1.63 "Short Plan Year" means, if specified in the Adoption Agreement, that the
Plan Year shall be less than a 12-month period. If chosen, the following
rules shall apply in the administration of this Plan. In determining
whether an Employee has completed a Year of Service for benefit accrual
purposes in the Short Plan Year, the number of the Hours of Service required
shall be proportionately reduced based on the number of days in the Short
Plan Year. The determination of whether an Employee has completed a Year of
Service for vesting and eligibility purposes shall be made in accordance
with Department of Labor Regulation 2530.203(c). In addition, if this Plan
is integrated with Social Security, the integration level also shall be
proportionately reduced based on the number of days in the Short Plan Year.
1.64 "Super Top Heavy Plan" means a plan described in Section 2.2B.
1.65 "Taxable Wage Base" means, with respect to any year, the maximum amount of
earnings which may be considered wages for such year under Code Section
3121(a)(1) in effect as of the beginning of the plan year.
1.66 "Terminated Participant" means a person who has been a Participant, but
whose employment has been terminated by reasons other than death, Total and
Permanent Disability, or retirement.
1.67 "Top Heavy Plan" means a plan described in Section 2.2A.
1.68 "Top Heavy Plan Year" means a Plan Year commencing after December 31, 1983
during which the Plan is a Top Heavy Plan.
1.69 "Top Paid Group" shall be determined pursuant to Code Section 414(q) and
the
Regulations thereunder and generally means the top 20 percent of Employees
who performed services for the Employer during the applicable year, ranked
according to the amount of "415 Compensation" (as determined pursuant to
Section 1.28) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased
Employees shall be treated as Employees pursuant to Code Section 414(n) or
(o). Employees who are non-resident aliens who received no earned income
(within the meaning of Code Section 911(d)(2)) from the Employer
constituting United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, for the purpose
of determining the number of active Employees in any year, the following
additional Employees also shall be excluded, however, such Employees shall
still be considered for the purpose of identifying the particular Employees
in the Top Paid Group:
A. Employees with less than (6) months of service;
B. Employees who normally work less than 17 1/2 hours per week;
C. Employees who normally work less than six (6) months during a year; and
D. Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer are
covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and
the Plan covers only Employees who are not covered under such agreements,
then Employees covered by such agreements shall be excluded from both the
total number of active Employees as well as from the identification of
particular Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on a
uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
1.70 "Total and Permanent Disability" means the inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than 12 months. The disability of a Participant shall be determined by
a licensed physician chosen by the Administrator. However, if the condition
constitutes total disability under the Federal Social Security Acts, the
Administrator may rely upon such determination that the Participant is
Totally and Permanently Disabled for the purposes of this Plan. The
determination shall be applied uniformly to all Participants.
1.71 "Trustee" means the person or entity named in B7 of the Adoption Agreement
and any successors.
1.72 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.73 "Vested" means the nonforfeitable portion of any account maintained on
behalf of a participant.
1.74 "Voluntary Contribution Account" means the account established and
maintained by the Administrator for each Participant with respect to his
total interest in the Plan resulting from the Participant's nondeductible
voluntary contributions made pursuant to Section 4.12.
Amounts recharacterized as voluntary Employee contributions pursuant to
Section 4.6A. shall remain subject to the limitations of Sections 4.2B. and
4.2C. Therefore, a separate accounting shall be maintained with respect to
that portion of the Voluntary Contribution Account attributable to voluntary
Employee contributions made pursuant to Section 4.12.
1.75 "Year of Service" means the computation period of twelve (12) consecutive
months, herein set forth, and during which an Employee has completed at
least 1,000 Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an
Hour of Service (employment commencement date). The computation period
beginning after a 1-Year Break in Service shall be measured from the date on
which an Employee again performs an Hour of Service. The succeeding
computation periods shall begin with the first anniversary of the Employee's
employment commencement date. However, if one (1) Year of Service or less
is required as a condition of eligibility, then after the initial
eligibility computation period, the eligibility computation period shall
shift to the current Plan Year which includes the anniversary of the date on
which the Employee first performed an Hour of Service. An Employee who is
credited with 1,000 Hours of Service in both the initial eligibility
computation period and the first Plan Year which commences prior to the
first anniversary of the Employee's initial eligibility computation period
will be credited with two Years of Service for purposes of eligibility to
participate.
For vesting purposes, and all other purposes not specifically addressed in
this Section, the computation period shall be the Plan Year, including
periods prior to the Effective Date of the Plan unless specifically excluded
pursuant to the Adoption Agreement.
Years of Service and breaks in service will be measured on the same
computation period.
Years of Service with any predecessor Employer which maintained this Plan
shall be recognized. Years of Service with any other predecessor Employer
shall be recognized as specified in the Adoption Agreement. Years of
Service with any Affiliated Employer shall be recognized.
ARTICLE II: TOP HEAVY PROVISIONS AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan and
the special minimum allocation requirements of Code Section 416(c) pursuant
to Sections 4.4F. and 4.4I. of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
A. This Plan shall be a Top Heavy Plan for any Plan Year beginning after
December 31, 1983, in which, as of the Determination Date, (1) the
Present Value of Accrued Benefits of Key Employees and (2) the sum of the
Aggregate Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds sixty percent (60%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but such
Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate Account
balance shall not be taken into account for purposes of determining
whether this Plan is a Top Heavy or Super Top Heavy Plan (or whether any
Aggregation Group which includes this Plan is a Top Heavy Group). In
addition, if a Participant or Former Participant has not performed any
services for any Employer maintaining the Plan at any time during the
five year period ending on the Determination Date, any accrued benefit
for such Participant or Former Participant shall not be taken into
account for the purposes of determining whether this Plan is a Top Heavy
or Super Top Heavy Plan.
B. This Plan shall be a Super Top Heavy Plan for any Plan Year beginning
after December 31, 1983, in which, as of the Determination Date, (1) the
Present Value of Accrued Benefits of Key Employees and (2) the sum of the
Aggregate accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds ninety percent (90%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an Aggregation Group.
C. Aggregate Account: A Participant's Aggregate Account as of the
Determination Date is the sum of:
1. His Participant's Combined Account balance as of the most recent
valuation occurring within a twelve (12) month period ending on the
Determination Date;
2. An adjustment for any contributions due as of the Determination Date.
Such adjustment shall be the amount of any contributions actually
made after the valuation date but on or before the Determination Date,
except for the first Plan Year when such adjustment also shall reflect
the amount of any contributions made after the Determination Date that
are allocated as of a date in that first Plan Year;
3. Any Plan distributions made within the Plan Year that includes the
Determination Date or within the four (4) preceding Plan Years.
However, in the case of distributions made after the Valuation Date
but prior to the Determination Date, such distributions are not
included as distributions for Top Heavy purposes to the extent that
such distributions are already included in the Participant's Aggregate
Account balance as of the Valuation Date. Notwithstanding anything
herein to the contrary, all distributions, including distributions
made prior to January 1, 1984, and distributions under a terminated
plan which if it had not been terminated would have been required to
be included in an Aggregation Group, will be counted. Further,
distributions from the Plan (including the cash value of life
insurance policies) of a Participant's account balance because of
death shall be treated as a distribution for the purposes of this
paragraph.
4. Any Employee contributions, whether voluntary or mandatory. However,
amounts attributable to tax deductible qualified voluntary employee
contributions shall not be considered to be a part of the
Participant's Aggregate Account balance.
5. With respect to unrelated rollovers and plan-to-plan transfers (ones
which are both initiated by the Employee and made from a plan
maintained by one employer to a plan maintained by another employer),
if this Plan provides the rollovers or plan-to-plan transfers, it
shall always consider such rollovers or plan-to-plan transfers as a
distribution for the purposes of this Section. If this Plan is the
plan accepting such rollovers or plan-to-plan transfers, it shall not
consider such rollovers or plan-to-plan transfers accepted after
December 31, 1983 as part of the Participant's Aggregate Account
balance. However, rollovers or plan-to-plan transfers accepted prior
to January 1, 1984 shall be considered as part of the Participant's
Aggregate Account balance.
6. With respect to related rollovers and plan-to-plan transfers (ones
either not initiated by the Employee or made to a plan maintained by
the same employer), if this Plan provides the rollover or plan-to-plan
transfer, it shall not be counted as a distribution for purposes of
this Section. If this Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such rollover or plan-to-plan
transfer as part of the Participant's Aggregate Account balance,
irrespective of the date on which such rollover or plan-to-plan
transfer is accepted.
7. For the purposes of determining whether two employers are to be
treated as the same employer in 2.2C.5. and 2.2C.6. above, all
employers aggregated under Code Section 414(b), (c), (m) and (o) are
treated as the same employer.
D. "Aggregation Group" means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
1. Required Aggregation Group: In determining a Required Aggregation
Group hereunder, each qualified plan of the Employer, including any
Simplified Employee Pension Plan, in which a Key Employee is a
participant in the Plan Year containing the Determination Date or any
of the four preceding Plan Years, and each other qualified plan of the
Employer which enables any qualified plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or
410, will be required to be aggregated. Such group shall be known as
a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the group
will be considered a Top Heavy Plan if the Required Aggregation Group
is a Top Heavy Group. No plan in the Required Aggregation Group will
be considered a Top Heavy Plan if the Required Aggregation Group is
not a Top Heavy Group.
2. Permissive Aggregation Group: The Employer also may include any other
plan of the Employer, including any Simplified Employee Pension Plan,
not required to be included in the Required Aggregation Group,
provided the resulting group, taken as a whole, would continue to
satisfy the provisions of Code Sections 401(a)(4) and 410. Such group
shall be known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that is
part of the Required Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is a Top Heavy Group. No
plan in the Permissive Aggregation Group will be considered a Top
Heavy Plan if the Permissive Aggregation Group is not a Top Heavy
Group.
3. Only those plans of the Employer in which the Determination Dates fall
within the same calendar year shall be aggregated in order to
determine whether such plans are Top Heavy Plans.
4. When aggregating plans, the value of Aggregate Accounts and Accrued
Benefits will be calculated with reference to the Determination Dates
that fall within the same calendar year.
5. An Aggregation Group shall include any terminated plan of the Employer
if it was maintained within the last five (5) years ending on the
Determination Date.
E. "Determination Date" means (1) the last day of the preceding Plan Year,
or (2) in the case of the first Plan Year, the last day of such Plan
Year.
F. Present Value of Accrued Benefit: In the case of a defined benefit plan,
the Present Value of Accrued Benefit for a Participant other than a Key
Employee shall be as determined using the single accrual method used for
all plans of the Employer and Affiliated Employers, or if no such single
method exists, using a method which results in benefits accruing not more
rapidly than the slowest accrual rate permitted under Code Section
411(b)(1)(C). The determination of the Present Value of Accrued Benefit
shall be determined as of the most recent Valuation Date that falls
within or ends with the 12-month period ending on the Determination Date,
except as provided in Code Section 416 and the Regulations thereunder for
the first and second plan years of a defined benefit plan.
However, any such determination must include present value of accrued
benefit attributable to any Plan distributions referred to in Section
2.2C.3. above, any Employee contributions referred to in Section 2.2C.4.
above or any related or unrelated rollovers referred to in Sections
2.2C.5. and 2.2C.6. above.
G. "Top Heavy Group" means an Aggregation Group in which, as of the
Determination Date, the sum of:
1. the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group, and
2. the Aggregate Accounts of Key Employees under all defined contribution
plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for all
Participants.
H. The Administrator shall determine whether this Plan is a Top Heavy Plan
on the Anniversary Date specified in the Adoption Agreement. Such
determination of the Top Heavy ratio shall be in accordance with Code
Section 416 and the Regulations thereunder.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
A. The Employer shall be empowered to appoint and remove the Trustee and the
Administrator from time to time as it deems necessary for the proper
administration of the Plan to assure that the Plan is being operated for
the exclusive benefit of the Participants and their Beneficiaries in
accordance with the terms of the Plan, the Code, and the Act.
B. The Employer shall establish a "funding policy and method," '-' i.e., it
shall determine whether the Plan has a short run need for liquidity
(e.g., to pay benefits) or whether liquidity is a long run goal and
investment growth (and stability of same) is a more current need, or
shall appoint a qualified person to do so. The Employer or its delegate
shall communicate such needs and goals to the Trustee, who shall
coordinate such Plan needs with its investment policy. The communication
of such a "funding policy and method" shall not, however, constitute a
directive to the Trustee as to investment of the Trust Funds. Such
"funding policy and method" shall be consistent with the objectives of
the Plan and with the requirements of Title I of the Act.
C. The Employer may, in its discretion, appoint an Investment Manager to
manage all or a designated portion of the assets of the Plan. In such
event, the Trustee shall follow the directive of the Investment Manager
in investing the assets of the Plan managed by the Investment Manager.
D. The Employer shall periodically review the performance of any Fiduciary
or other person to whom duties have been delegated or allocated by it
under the provisions of the Plan or pursuant to procedures established
hereunder. This requirement may be satisfied by formal periodic review
by the Employer or by a qualified person specifically designated by the
Employer, through day-to-day conduct and evaluation, or through other
appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be
eligible to serve as an Administrator. Any person so appointed shall
signify his acceptance by filing written acceptance with the Employer. An
Administrator may resign by delivering his written resignation to the
Employer or be removed by the Employer by delivery of written notice of
removal, to take effect at a date specified therein, or upon delivery to the
Administrator if no date is specified.
The Employer, upon the resignation or removal of an Administrator, shall
promptly designate in writing a successor to this position. If the Employer
does not appoint an Administrator, the Employer will function as the
Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the responsibilities
of each Administrator may be specified by the Employer and accepted in
writing by each Administrator. In the event that no such delegation is made
by the Employer, the Administrators may allocate the responsibilities among
themselves, in which event the Administrators shall notify the Employer and
the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the Plan
for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall
administer the Plan in accordance with its terms and shall have the power
and discretion to construe the terms of the Plan and determine all questions
arising in connection with the administration, interpretation, and
application of the Plan. Any such determination by the Administrator shall
be conclusive and binding upon all persons. The Administrator may establish
procedures, correct and defect, supply any information, or reconcile any
inconsistency in such manner and to such extent as shall be deemed necessary
or advisable to carry out the purpose of the Plan; provided, however, that
any procedure, discretionary act, interpretation, or construction shall be
done in a nondiscriminatory manner based upon uniform principles
consistently applied and shall be consistent with the intent that the Plan
shall continue to be deemed a qualified plan under the terms of Code Section
401(a), and shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all powers necessary
or appropriate to accomplish his duties under the Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
A. The discretion to determine all questions relating to the eligibility of
Employees to participate or remain a Participant hereunder and to receive
benefits under the Plan;
B. To compute, certify, and direct the Trustee with respect to the amount
and the kind of benefits to which any Participant shall be entitled
hereunder;
C. To authorize and direct the Trustee with respect to all non-discretionary
or otherwise directed disbursements from the Trust Fund;
D. To maintain all necessary records for the administration of the Plan;
E. To interpret the provisions of the Plan and to make and publish such
rules for regulation of the Plan as are consistent with the terms hereof;
F. To determine the size and type of any Contract to be purchased from the
Insurer from which such Contract shall be purchased;
G. To compute and certify to the Employer and the Trustee from time to time
the sums of money necessary or desirable to be contributed to the Trust
Fund;
H. To consult with the Employer and the Trustee regarding the short and
long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish
specific objectives;
I. To prepare and distribute to Employees a procedure for notifying
Participants and Beneficiaries of their rights to elect Joint and
Survivor Annuities and Pre-Retirement Survivor Annuities if required by
the Code and Regulations thereunder and if provided by this Plan;
J. To prepare and implement a procedure to notify Eligible Employees that
they may elect to have a portion of their Compensation deferred or paid
to them in cash;
K. To assist any Participant regarding his rights, benefits, or elections
available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall keep
all other books of account, records, and other data that may be necessary
for proper administration of the Plan and shall be responsible for supplying
all information and reports to the Internal Revenue Service, Department of
Labor, Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the Administrator, may
appoint counsel, specialists, advisers, and other persons as the
Administrator or the Trustee deems necessary or desirable in connection with
the administration of the Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters
relating to the Compensation of all Employees, their Hours of Service, their
Years of Service, their retirement, death, disability, or termination of
employment, and such other pertinent facts as the Administrator may require;
and the Administrator shall advise the Trustee of such of the foregoing
facts as may be pertinent to the Trustee's duties under the Plan. The
Administrator may rely upon such information as is supplied by the Employer
and shall have no duty or responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless paid
by the Employer. Such expenses shall include any expenses incident to the
functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other
costs of administering the Plan. Until paid, the expenses shall constitute
a liability of the Trust Fund. However, the Employer may reimburse the
Trust Fund for any administration expense incurred. Any administration
expense paid to the Trust Fund as a reimbursement shall not be considered an
Employer contribution.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of administrative
authority pursuant to Section 2.5, if there shall be more than one
Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be
furnished to the claimant within 90 days after the application is filed. In
the event the claim is denied, the reasons for the denial shall be
specifically set forth in the notice in language calculated to be understood
by the claimant, pertinent provisions of the Plan shall be cited, and, where
appropriate, an explanation as to how the claimant can perfect the claim
will be provided. In addition, the claimant shall be furnished with an
explanation of the Plan's claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been denied
a benefit by a decision of the Administrator pursuant to Section 2.12 shall
be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator a written request for a hearing.
Such request, together with a written statement of reasons why the claimant
believes his claim should be allowed, shall be filed with the Administrator
no later than 60 days after receipt of the written notification provided for
in Section 2.12. The Administrator shall then conduct a hearing within the
next 60 days, at which the claimant may be represented by an attorney or any
other representative of his choosing, and expense and at which the claimant
shall have an opportunity to submit written and oral evidence and arguments
in support of his claim. At the hearing (or prior thereto upon 5 business
days' written notice to the Administrator) the claimant or his
representative shall have an opportunity to review all documents in the
possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a
court reporter to attend the hearing and record the proceedings. In such
event, a complete written transcript of the proceedings shall be furnished
to both parties by the court reporter. The full expense of any such court
reporter and such transcripts shall be borne by the party causing the court
reporter to attend the hearing. A final decision as to the allowance of the
claim shall be made by the Administrator within 60 days of receipt of the
appeal (unless there has been an extension of 60 days due to special
circumstances, provided the delay and the special circumstances occasioning
it are communicated to the claimant within the 60-day period). Such
communication shall be written in a manner calculated to be understood by
the claimant and shall include specific reasons for the decision and
specific references to the pertinent Plan provisions on which the decision
is based.
ARTICLE III: ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee shall be eligible to participate hereunder on the
date he has satisfied the requirements specified in the Adoption Agreement.
Any Eligible Employee will be eligible to participate in the Plan if such
Eligible Employee has satisfied the service and age requirements, below:
The Employee must be 18 years of age (cannot exceed 21).
The Employee must complete 1 year of service.
For flight crew members a Year of Service shall be defined as the
computation period of twelve (12) consecutive months during which an
Employee has completed 750 Hours of Service. The computation period is
defined under Article I, Section 1.75 of the Plan Document. A Year of
Service for all other Employees shall be defined under Section 1.75 of the
Plan Document.
3.2 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee who has become eligible to be a Participant shall
become a Participant effective as of the day specified in the Adoption
Agreement.
In the event an Employee who has satisfied the Plan's eligibility
requirements and would otherwise have become a Participant shall go from a
classification of a noneligible Employee to an Eligible Employee, such
Employee shall become a Participant as of the date he becomes an Eligible
Employee.
In the event an Employee who has satisfied the Plan's eligibility
requirements and would otherwise become a Participant shall go from a
classification of an Eligible Employee to a noneligible Employee and becomes
ineligible to participate and has not incurred a 1-Year Break in Service,
such Employee shall participate in the Plan as of the date he returns to an
eligible class of Employees. If such Employee does incur a 1-Year Break in
Service, eligibility will be determined under the Break in Service rules of
the Plan.
3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer.
Such determination shall be conclusive and binding upon all persons, as
long as the same is made pursuant to the Plan and the Act. Such
determination shall be subject to review per Section 2.13.
3.4 TERMINATION OF ELIGIBILITY
In the event a Participant shall go from a classification of an Eligible
Employee to an ineligible Employee, such Former Participant shall continue
to Vest in his interest in the Plan for each Year of Service completed while
a noneligible Employee, until such time as his Participant's Account shall
be forfeited or distributed pursuant to the terms of the Plan.
Additionally, his interest in the Plan shall continue to share in the
earnings of the Trust Fund.
3.5 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a Participant
in the Plan is erroneously omitted and discovery of such omission is not
made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution, if necessary, after the
application of Section 4.4E., so that the omitted Employee receives a total
amount which the said Employee would have received had he not been omitted.
Such contribution shall be made regardless of whether or not it is
deductible in whole or in part in any taxable year under applicable
provisions of the Code.
3.6 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such
incorrect inclusion is not made until after a contribution for the year has
been made, the Employer shall not be entitled to recover the contribution
made with respect to the ineligible person regardless of whether or not a
deduction is allowable with respect to such contribution. In such event,
the amount contributed with respect to the ineligible person shall
constitute a Forfeiture for the Plan Year in which the discovery is made.
3.7 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect voluntarily
not to participate in the Plan. The election not to participate must be
communicated to the Employer, in writing, at least thirty (30) days before
the beginning of a Plan Year. Furthermore, the foregoing election not to
participate shall not be available with respect to partners in a
partnership.
3.8 CONTROL OF ENTITIES BY OWNER-EMPLOYEE
A. If this Plan provides contributions or benefits for one or more Owner-
Employees who control both the business for which this Plan is
established and one or more other entities, this Plan and the plan
established for other trades or businesses must, when looked at as a
single Plan, satisfy Code Sections 401(a) and (d) for the Employees of
this and all other entities.
B. If the Plan provides contributions or benefits for one or more other
trades or businesses, the employees of the other trades or businesses
must be included in a plan which satisfies Code Sections 401(a) and (d)
and which provides contributions and benefits not less favorable than
provided for Owner-Employees under this Plan.
C. If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which are not controlled and the individual
controls a trade or business, then the benefits or contributions of the
employees under the plan of the trades or businesses which are controlled
must be as favorable as those provided for him under the most favorable
plan of the trade or business which is not controlled.
D. For purposes of the preceding paragraphs, an Owner-Employee, or two or
more Owner-Employees, will be considered to control an entity if the
Owner-Employee, or two or more Owner-Employees together:
1. own the entire interest in an unincorporated entity, or
2. in the case of a partnership, own more than 50 percent of either the
capital interest or the profits interest in the partnership.
E. For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees shall be treated as owning any interest in a partnership
which is owned, directly or indirectly, by a partnership which such
Owner-Employee, or such two or more Owner-Employees, is considered to
control within the meaning of the preceding sentence.
ARTICLE IV: CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
A. The amount of the total salary deduction elections of all Participants
made pursuant to Section 4.2A., which amount shall be deemed an
Employer's Elective Contribution, plus
B. If specified in E3 of the Adoption Agreement, a matching contribution
equal to the percentage specified in the Adoption Agreement of the
Deferred Compensation of each Participant eligible to share in the
allocations of the matching contribution (which amount shall be deemed an
Employer's Non-Elective Contribution or, if the matching contribution is
to be used in satisfying the Actual Deferral Percentage test as specified
in the Adoption Agreement, then it shall be deemed an Elective
Contribution), plus
C. If specified in E4 of the Adoption Agreement, a discretionary amount, if
any, which amount shall be deemed an Employer's Non-Elective
Contribution, plus
D. If specified in E5 of the Adoption Agreement, a Qualified Non-Elective
Contribution.
E. Effective October 1, 1994, the Employer shall make a contribution to the
Plan for each participant who is a pilot. This contribution shall be
equal to 3% of the first $15,000 of compensation plus 2% of compensation
in excess of $15,000 compensation for each said participant. For the
period of October 1, 1994 to December 31, 1994, the preceding sentence
shall be modified by replacing $15,000 with $3,750. This contribution
shall be 100% vested. This contribution shall be limited to each
participant by the limits of IRC Section 415.
However, regardless of the above, the Employer's contributions for this
section 4.1E., without considering the contributions made pursuant to all
other sections, shall not exceed 15% (3.75% for the 1994 Plan Year) of
the Employer's Adjusted Net Income Before Extraordinary Items for such
Plan Year. Furthermore contributions made pursuant to this section 4.1E.
shall not exceed $2,500,000 for the Plan Year.
Adjusted Net Income Before Extraordinary items shall mean the Income
Before Extraordinary Items(s) reported in the Employer's Consolidated
Statements of Operations filed with the Securities and Exchange
Commission on Form 10-K, adjusted such that interest expense shall not
exceed 2.5% of total revenues.
For purposes of this section 4.1E. compensation shall only include
compensation paid during the period for which this section applies.
Compensation for this section 4.1E. shall include any salary deferrals
made to a 401(k) plan and any elective contributions made to a IRC
Section 125 Plan.
Contributions made pursuant to this section 4.1E. shall be due and
payable to the trust by the April 1 following the Plan Year end. A
participant may withdraw this contribution on and after the date which is
two years after the date such contributions were made to the trust.
Notwithstanding the foregoing, however, the Employer's contributions for any
Fiscal Year shall not exceed the maximum amount allowable as a deduction to
the Employer under the provisions of Code Section 404. All contributions by
the Employer shall be made in cash or in such property as is acceptable to
the Trustee. Any Property contributed to the Plan will be valued, at its
fair market value, at the time it is contributed to the Plan.
Except, however, to the extent necessary to provide the Top Heavy minimum
allocations, the Employer shall make a contribution even if it exceeds
current or accumulated Net Profit or the amount which is deductible under
Code Section 404.
Regardless of Section 3.1 above, for purposes of Section 4.1E. of the Plan
only, any employee who is a pilot shall become a participant on the later of
October 1, 1994 or on the date they first perform an hour of service for the
employer.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
A. Each Participant may elect to defer a portion of his gross Compensation,
subject to the limitations of this Section and the Adoption Agreement. A
deferral election (or modification of an earlier election) may not be
made with respect to Compensation which is currently available on or
before the date the Participant executed such election, or if later, the
latest of the date the Employer adopts this cash or deferred arrangement,
or the date such arrangement first became effective. Any elections made
pursuant to this Section shall become effective as soon as is
Administratively feasible.
Additionally, if elected in the Adoption Agreement, each Participant may
elect to defer and have allocated for a Plan Year all or a portion of any
cash bonus attributable to services performed by the Participant for the
Employer during such Plan Year and which would have been received by the
Participant on or before two and one-half months following the end of the
Plan Year, if not for the deferral. A deferral election may not be made
with respect to cash bonuses which are currently available on or before
the date the Participant executed such election. Notwithstanding the
foregoing, cash bonuses attributable to services performed by the
Participant during a Plan Year but which are to be paid to the
Participant later than two and one-half months after the close of such
Plan Year will be subjected to whatever deferral election is in effect at
the time such cash bonus would have otherwise been received.
The amount by which Compensation and/or cash bonuses are reduced shall be
that Participant's Deferred Compensation and be treated as an Employer
Elective Contribution and allocated to that Participant's Elective
Account.
Once made, a Participant's election to reduce Compensation shall remain
in effect until modified or terminated. Modifications may be made as
specified in the Adoption Agreement, and terminations may be made at any
time. Any modification or termination of an election will become
effective as soon as is administratively feasible.
B. The balance in each Participant's Elective Account shall be fully Vested
at all times and shall not be subject to Forfeiture for any reason.
C. Amounts held in the Participant's Elective Account and Qualified Non-
Elective Account may be distributable as permitted under the Plan, but in
no event prior to the earlier of:
1. A Participant's termination of employment, Total and Permanent
Disability, or death;
2. A Participant's attainment of age 59 1/2;
3. The proven financial hardship of a Participant, subject to the
limitations of Section 6.11;
4. The termination of the Plan without the existence at the time of Plan
termination, or the twelve months immediately preceding the Plan
termination, of another defined contribution plan (other than an
employee stock ownership plan as defined in Code Section 4975(e)(7))
or the establishment of a successor defined contribution plan (other
than an employee stock ownership plan as defined in Code Section
4975(e)(7)) by the Employer or an Affiliated Employer within the
period ending twelve months after distribution of all assets from the
Plan maintained by the Employer;
5. The date of the sale by the Employer to an entity that is not an
Affiliated Employer of substantially all of the assets (within the
meaning of Code Section 409(d)(2)) with respect to a Participant who
continues employment with the corporation acquiring such assets; or
6. The date of the sale by the Employer or an Affiliated Employer of its
interest in a subsidiary (within the meaning of Code Section
409(d)(3)) to an entity that is not an Affiliated Employer with
respect to a Participant who continues employment with such
subsidiary.
D. In any Plan Year beginning after December 31, 1986, a Participant's
Deferred Compensation made under this Plan and all other plans, contracts
or arrangements of the Employer maintaining this Plan shall not exceed
the limitations imposed by Code Section 402(g), as in effect for the
calendar year in which such Plan Year began. If such dollar limitation
is exceeded solely from elective deferrals made under this Plan or any
other Plan maintained by the Employer, a Participant will be deemed to
have notified the Administrator of such excess amount which shall be
distributed in a manner consistent with Section 4.2F. This dollar
limitation shall be adjusted annually pursuant to the method provided in
Code Section 415(d) in accordance with Regulations.
Each Employee may elect to have his Compensation reduced up to 17 % not
to exceed the limits of Code Sections 401(k), 404 and 415. The above
percentage may be reduced by the Plan Administrator, on a
nondiscriminatory basis, to allow the Employer to make Discretionary
Contributions, Non-Elective Contributions, or Matching Contributions
without exceeding the limits of Code Sections 401(k), 401(m), 404, and
415, regardless of whether the contributions are actually made to the
Plan. A Participant may elect to commence salary reductions as of the
participants entry date, and as of any other dates established by the
plan administrator. A Participant may modify the amount of salary
reductions as of the beginning of each plan year, and as of any other
dates the Plan Administrator may establish on a non-discriminatory basis.
E. In the event a Participant has received a hardship distribution pursuant
to Regulation 1.401(k)-1(d)(2)(iii)(B) from any other plan maintained by
the Employer or from his Participant's Elective Account pursuant to
Section 6.11C., then such Participant shall not be permitted to elect to
have Deferred Compensation contributed to the Plan on his behalf for a
period of twelve (12) months following the receipt of the distribution.
Furthermore, the dollar limitation under Code Section 402(g) shall be
reduced, with respect to the Participant's taxable year following the
taxable year in which the hardship distribution was made, by the amount
of such Participant's Deferred Compensation, if any, made pursuant to
this Plan (and any other plan maintained by the Employer) for the taxable
year of the hardship distribution.
F. If a Participant's Deferred Compensation under this Plan together with
any elective deferrals (as defined in Regulation 1.402(g)-1(b)) under
another qualified cash or deferred arrangement (as defined in Code
Section 401(k)), a simplified employee pension (as defined in Code
Section 408(k)), a salary reduction arrangement (within the meaning of
Code Section 3121(a)(5)(D)), a deferred compensation plan under Code
Section 457, or a trust described in Code Section 501(c)(18) cumulatively
exceed the limitation imposed by Code Section 402(g) (as adjusted
annually in accordance with the method provided in Code Section 415(d)
pursuant to Regulations) for such Participant's taxable year, the
Participant may, not later than March 1st following the close of his
taxable year, notify the Administrator in writing of such excess and
request that his Deferred Compensation under this Plan be reduced by an
amount specified by the Participant. In such event, the Administrator
shall direct the Trustee to distribute such excess amount (and any Income
allocable to such excess amount) to the Participant not later than the
first April 15 following the close of the Participant's taxable year.
Distributions in accordance with this paragraph may be made for any
taxable year of the Participant which begins after December 31, 1986.
Any distribution of less than the entire amount of Excess Deferred
Compensation and Income shall be treated as a pro rata distribution of
Excess Deferred Compensation and Income. The amount distributed shall
not exceed the Participant's Deferred Compensation under the Plan for the
taxable year. Any distribution on or before the last day of the
Participant's taxable year must satisfy each of the following conditions:
1. The Participant shall designate the distribution as Excess Deferred
Compensation;
2. The distribution must be made after the date on which the Plan
received the Excess Deferred Compensation; and
3. The Plan must designate the distribution as a distribution of Excess
Deferred Compensation.
Any distribution under this Section shall be made first from unmatched
Deferred Compensation and, thereafter, simultaneously from Deferred
Compensation which is matched and matching contributions which relate to
such Deferred Compensation. However, any such matching contributions
which are not Vested shall be forfeited in lieu of being distributed.
For the purpose of this Section, "Income" means the amount of income or
loss allocable to a Participant's Excess Deferred Compensation and shall
be equal to the sum of the allocable gain or loss for the taxable year of
the Participant and the allocable gain or loss for the period between the
end of the taxable year of the Participant and the date of distribution
("gap period"). The income or loss allocable to each such period is
calculated separately and is determined by multiplying the income or loss
allocable to the Participant's Deferred Compensation for the respective
period by a fraction. The numerator of the fraction is the Participant's
Excess Deferred Compensation for the taxable year of the Participant.
The denominator is the balance, as of the last day of the respective
period, of the Participant's Elective Account that is attributable to the
Participant's Deferred Compensation reduced by the gain allocable to such
total amount for the respective period and increased by the loss
allocable to such total amount for the respective period.
In lieu of the "fractional method" described above, a "safe harbor
method" may be used to calculate the allocable income or loss for the
"gap period." Under such "safe harbor method," allocable income or loss
for the "gap period" shall be deemed to equal ten percent (10%) of the
income or loss allocable to the Participant's Excess Deferred
Compensation for the taxable year of the Participant multiplied by the
number of calendar months in the "gap period." For purposes of
determining the number of calendar months in the "gap period," a
distribution occurring on or before the fifteenth day of the month shall
be treated as having been made on the last day of the preceding month and
a distribution occurring after such fifteenth day shall be treated as
having been made on the first day of the next subsequent month.
Income or loss allocable to any distribution of Excess Deferred
Compensation on or before the last day of the taxable year of the
Participant shall be calculated from the first day of the taxable year of
the Participant to the date on which the distribution is made pursuant to
either the "fractional method" or the "safe harbor method."
Notwithstanding the above, for any distribution under this Section which
is made after August 15, 1991, such distribution shall not include any
income for the "gap period." Further provided, for any distribution under
this Section which is made after August 15, 1991, the amount of Income
may be computed using a reasonable method that is consistent with Section
4.4C provided such method is used consistently for all Participants and
for all such distributions for the Plan Year.
Notwithstanding the above, for the 1987 calendar year, Income during the
"gap period" shall not be taken into account.
G. Notwithstanding Section 4.2F. above, a Participant's Excess Deferred
Compensation shall be reduced, but not below zero, by any distribution
and/or recharacterization of Excess Contributions pursuant to Section
4.6A. for the Plan Year beginning with or within the taxable year of the
Participant.
H. At Normal Retirement Date, or such other date when the Participant shall
be entitled to receive benefits, the fair market value of the
Participant's Elective Account shall be used to provide benefits to the
Participant or his Beneficiary.
I. Employer Elective Contributions made pursuant to this Section may be
segregated into a separate account for each Participant in a federally
insured savings account, certificate of deposit in a bank or savings and
loan association, money market certificate, or other short-term debt
security acceptable to the Trustee until such time as the allocations
pursuant to Section 4.4 have been made.
J. The Employer and the Administrator shall adopt a procedure necessary to
implement the salary reduction elections provided for herein.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to the Plan
for each Plan Year within the time prescribed by law, including extensions
of time, for the filing of the Employer's federal income tax return for the
Fiscal Year.
However, Employer Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee as of the earliest date on which
such contributions can reasonably be segregated from the Employer's general
assets, but in any event within ninety (90) days from the date on which such
amounts would otherwise have been payable to the Participant in cash. The
provisions of Department of Labor regulations 2510.3-102 are incorporated
herein by reference. Furthermore, any additional Employer contributions
which are allocable to the Participant's Elective Account for a Plan Year
shall be paid to the Plan no later than the twelve-month period immediately
following the close of such Plan Year.
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
A. The Administrator shall establish and maintain an account in the name of
each Participant to which the Administrator shall credit as of each
Anniversary Date, or other valuation dates, all amounts allocated to each
such Participant as set forth herein.
B. The Employer shall provide the Administrator with all information
required by the Administrator to make a proper allocation of the
Employer's contributions for each Plan Year. Within a reasonable period
of time after the date of receipt by the Administrator of such
information, the Administrator shall allocate such contribution as
follows:
1. With respect to the Employer's Elective Contribution made pursuant to
Section 4.1A., to each Participant's Elective Account in an amount
equal to each such Participant's Deferred Compensation for the year.
2. With respect to the Employer's Matching Contribution, if any, made
pursuant to Section 4.1B., to each Participant's Account, or
Participant's Elective Account as selected in E3 of the Adoption
Agreement, in accordance with Section 4.1B.
Except, however, a Participant who is not credited with a Year of
Service during any Plan Year shall or shall not share in the
Employer's Matching Contribution for that year as provided in E3 of
the Adoption Agreement.
3. With respect to the Employer's Non-Elective Contribution, made
pursuant to Section 4.1C., to each Participant's Account in accordance
with the provisions of E4 of the Adoption Agreement.
However, if an integrated allocation formula is selected at E4 of the
Adoption Agreement, then such contribution shall be allocated with the
forfeitures from such accounts, to each Participant's Combined Account
in a dollar amount equal to 5.7% of the sum of each Participant's
total Compensation plus Excess Compensation. If the Employer does not
contribute such amount for all Participants, each Participant will be
allocated a share of the contribution and forfeitures in the same
proportion that his total Compensation plus his total Excess
Compensation for the Plan Years bears to the total Compensation plus
the total Excess Compensation of all Participants for that year. The
balance of the contribution and forfeitures, if any, will be allocated
in the same proportion that his total Compensation bears to the total
Compensation of all Participants eligible to share the allocation.
Regardless of the preceding, 4.3% shall be substituted for 5.7% above
if Excess Compensation is based on more than 20% and less than or
equal to 80% of the Taxable Wage Base. If Excess Compensation is
based on less than 100% and more than 80% of the Taxable Wage Base,
then 5.4% shall be substituted for 5.7% above.
4. With respect to the Employer's Qualified Non-Elective Contribution
made pursuant to Section 4.1D., to each Participant's Qualified Non-
Elective Contribution Account in the same proportion that each such
Participant's Compensation for the year bears to the total
Compensation of all Participants for such year.
5. Regardless of the preceding, a Participant who is not credited with a
Year of Service during a Plan Year shall not share in the allocation
of the Employer's Non-Elective Contribution made pursuant to Section
4.1C. and the Employer's Qualified Non-Elective Contribution made
pursuant to Section 4.1D., unless required pursuant to Section 4.4H.
However, for Plan Years beginning after 1989, and if elected in the
Adoption Agreement, a Participant shall share in the allocation of
such contributions regardless of whether a Year of Service was
completed during the Plan Year.
6. With respect to the Employer's Contribution made pursuant to Section
4.1E., each pilot shall have allocated to their account an amount
equal to 3% of the first $15,000 of Plan Year compensation paid and 2%
of the Plan Year Compensation exceeding $15,000. Said allocation to
each participant shall be limited by IRC Section 415.
If the amount of the Employer's Contribution is not sufficient to make
the above allocation, then the percentage used for the allocation of
compensation in excess of $15,000 (2%) shall be reduced equally for
each participant until the allocation does not exceed the amount
contributed pursuant to section 4.1E. If the above mentioned percent
is reduced to 0% and the allocation exceeds the contribution made in
section 4.1E., then the percentage used for the allocation of the
first $15,000 of compensation (3%) shall be reduced equally for each
participant until the allocation does not exceed the amount
contributed pursuant to section 4.1E.
For the 1994 Plan Year the above paragraphs shall be modified to
replace $15,000 with $3,750.
C. As of each Anniversary Date or other valuation date, before allocation of
Employer contributions and Forfeitures, any earnings or losses (net
appreciation or net depreciation) of the Trust Fund shall be allocated in
the same proportion that each Participant's and Former Participant's
nonsegregated accounts bear to the total of all Participants' and Former
Participants' nonsegregated accounts as of such date. If any
nonsegregated account of a Participant has been distributed prior to the
Anniversary Date or other valuation date subsequent to a Participant's
termination of employment, no earnings or losses shall be credited to
such account.
D. Participants' Accounts shall be debited for any insurance or annuity
premiums paid, if any, and credited with any dividends or interest
received on insurance contracts.
E. As of each Anniversary Date any amounts which became Forfeitures since
the last Anniversary Date shall first be made available to reinstate
previously forfeited account balances of Former Participants, if any, in
accordance with Section 6.4H. or be used to satisfy any contribution that
may be required pursuant to Section 3.5 and/or 6.9. The remaining
Forfeitures, if any, shall be treated in accordance with the Adoption
Agreement. Provided, however, that in the event the allocation of
Forfeitures provided herein shall cause the "annual addition" (as defined
in Section 4.9) to any Participant's Account to exceed the amount
allowable by the Code, the excess shall be reallocated in accordance with
Section 4.10. Except, however, for any Plan Year beginning prior to
January 1, 1990, and if elected in the Adoption Agreement for any Plan
Year beginning on or after January 1, 1990, a Participant who performs
less than a Year of Service during any Plan Year shall not share in the
Plan Forfeitures for that year, unless there is a Short Plan Year or a
contribution required pursuant to Section 4.4H.
F. Minimum Allocations Required for Top Heavy Plan Years: Notwithstanding
the foregoing, for any Top Heavy Plan Year, the sum of the Employer's
contributions and Forfeitures allocated to the Participant's Combined
Account of each Non-Key Employee shall be equal to at least three percent
(3%) of such Non-Key Employee's "415 Compensation" (reduced by
contributions and forfeitures, if any, allocated to each Non-Key Employee
in any defined contribution plan included with this plan in a Required
Aggregation Group). However, if (1) the sum of the Employer's
contributions and Forfeitures allocated to the Participant's Combined
Account of each Key Employee for such Top Heavy Plan Year is less than
three percent (3%) of each Key Employee's "415 Compensation" and (2) this
Plan is not required to be included in an Aggregation Group to enable a
defined benefit plan to meet the requirements of Code Section 401(a)(4)
or 410, the sum of the Employer's contributions and Forfeitures allocated
to the Participant's Combined Account of each Non-Key Employee shall be
equal to the largest percentage allocated to the Participant's Combined
Account of any Key Employee. However, for Plan Years beginning after
December 31, 1988, in determining whether a Non-Key Employee has received
the required minimum allocation, such Non-Key Employee's Deferred
Compensation and matching contributions used to satisfy the "Actual
Deferral Percentage" test pursuant to Section 4.5A. or the "Actual
Contribution Percentage" test of Section 4.7A. shall not be taken into
account. Any amounts contributed by the Employer in accordance with
4.1D. shall be taken into account.
If this is an integrated Plan, then for any Top Heavy Plan Year, the
Employer's contribution, and any forfeitures from accounts of Employer
Contributions, shall be allocated as contributions in the following
method:
1. An amount equal to 3% multiplied by each Participant's Compensation
for the Plan Year shall be allocated to each Participant's Account.
If the Employer does not contribute such amount for all Participants,
the amount shall be allocated to each Participant's Account in the
same proportion that his total Compensation for the Plan Year bears to
the total Compensation of all Participants for such year.
2. The balance of the Employer's contribution over the amount allocated
under subparagraph 1. hereof shall be allocated to each Participant's
Account in a dollar amount equal to 3% multiplied by a Participant's
Excess Compensation. If the Employer does not contribute such amount
for all Participants, each Participant will be allocated a share of
the contribution in the same proportion that his Excess Compensation
bears to the total Excess Compensation of all Participants for that
year.
3. The balance of the Employer's contribution over the amount allocated
under subparagraph 2. hereof shall be allocated to each Participant's
Account in the dollar amount equal to 2.7% multiplied by the sum of
each Participant's total Compensation plus Excess Compensation. If
the Employer does not contribute such amount for all Participants,
each Participant will be allocated a share of the contribution in the
same proportion that his total Compensation plus his total Excess
Compensation for the Plan Year bears to the total Compensation plus
the total Excess Compensation of all Participants for that year.
Regardless of the preceding, 1.3% shall be substituted for 2.7% above
if Excess Compensation is based on more than 20% and less than or
equal to 80% of the Taxable Wage Base. If Excess Compensation is
based on less than 100% and more than 80% of the Taxable Wage Base,
then 2.4% Shall be substituted for 2.7% above.
Regardless of the preceding, 1.3% shall be substituted for 2.7% above
if Excess Compensation is based on more than 20% and less than or
equal to 80% of the Taxable Wage Base. If Excess Compensation is
based on less than 100% and more than 80% of the Taxable Wage Base,
then 2.4% Shall be substituted for 2.7% above.
4. The balance of the Employer's contributions over the amount allocated
above, if any, shall be allocated to each Participant's Account in the
same proportion that his total Compensation for the Plan Year bears to
the total Compensation of all Participants for such year
For each Non-Key Employee who is a Participant in this Plan and another
defined contribution plan maintained by the Employer, the minimum 3%
allocation specified above shall be provided as specified in F3 of the
Adoption Agreement.
G. For purposes of the minimum allocations set forth above, the percentage
allocated to the Participant's Combined Account of any Key Employee shall
be equal to the ratio of the sum of the Employer's contributions,
Participant's Salary Deferral contributions and Forfeitures allocated on
behalf of such Key Employee divided by the "415 Compensation" for such
Key Employee.
H. For any Top Heavy Plan Year, the minimum allocations set forth above
shall be allocated to the Participant's Combined Account of all Non-Key
Employees who are Participants and who are employed by the Employer on
the last day of the Plan Year, including Non-Key Employees who have (1)
failed to complete a Year of Service; (2) declined to make mandatory
contributions (if required); (3) salary reduction contributions to the
Plan; or, (4) failed to earn a minimum amount of compensation.
I. Notwithstanding anything herein to the contrary, in any Plan Year in
which the Employer maintains both this Plan and a defined benefit pension
plan included in a Required Aggregation Group which is top heavy, the
Employer shall not be required to provide a Non-Key Employee with both
the full separate minimum defined benefit plan benefit and the full
separate defined contribution plan allocations. Therefore, if the
Employer maintains both a Defined Benefit and a Defined Contribution Plan
that are included in a Top Heavy Group, the top heavy minimum benefits
shall be provided as follows:
If a minimum, non-integrated contribution of 5.0% of each Non-Key
Employee's total Compensation shall be provided under this Plan is
specified in F1 of the Adoption Agreement, then the following shall
apply:
1. The requirements of Section 2.1 shall apply except that each Non-Key
Employee who is a Participant in this Plan or another Defined
Contribution and who is also a Participant in the Defined Benefit Plan
shall receive a minimum allocation of five percent (5%) of such
Participant's "415 Compensation" from the applicable Defined
Contribution Plan(s).
2. For each Non-Key Employee who is a Participant only in the Defined
Benefit Plan, the Employer will provide a minimum non-integrated
benefit in the Defined Benefit Plan equal to 2% of his highest five
consecutive year average "415 Compensation" for each Year of Service
while a Participant in the Plan, in which the Plan is top heavy, not
to exceed ten.
3. For each Non-Key Employee who is a Participant only in this Defined
Contribution Plan, the Employer will provide a contribution equal to
3% of his "415 Compensation."
If a minimum, non-integrated contribution of 7.5% of each Non-Key
Employee's total Compensation shall be provided in this Plan is specified
in F1 of the Adoption Agreement, then the following shall apply:
4. The minimum allocation specified in Section 4.4I.1. shall be 7 1/2%
for years in which the Plan is Top Heavy, but not Super Top Heavy.
5. The minimum benefit specified in Section 4.4I.2. shall be 3% for years
in which the plan is Top Heavy, but not Super Top Heavy.
6. The minimum allocation specified in Section 4.4I.3. shall be 4% for
years in which the Plan is Top Heavy, but not Super Top Heavy.
J. For the purposes of this Section, "415 Compensation" shall be limited to
$200,000 (unless adjusted in such manner as permitted under Code Section
415(d)). However, for Plan Years beginning prior to January 1, 1989, the
$200,000 limit shall apply only for Top Heavy Plan Years and shall not be
adjusted.
K. Notwithstanding anything herein to the contrary, Participants who
terminated employment during the Plan Year shall share in the salary
reduction contributions made by the Employer for the year of termination
without regard to the Hours of Service credited.
L. Notwithstanding anything herein to the contrary (other than Sections
4.4K. and 6.6H.1.), or any election in the Adoption Agreement, any
Participant who terminated employment during the Plan Year for reasons
other than death, Total and Permanent Disability, or retirement shall
share in the allocations of the Employer's Matching Contribution made
pursuant to Section 4.1B., the Employer's Non-Elective Contribution made
pursuant to Section 4.1D., and Forfeitures as provided in the Adoption
Agreement.
M. Notwithstanding anything herein to the contrary, Participants terminating
for reasons of death, Total and Permanent Disability, or retirement shall
share in the allocation of the Employer's Matching Contribution made
pursuant to Section 4.1B., the Employer's Non-Elective Contributions made
pursuant to Section 4.1C, the Employer's Qualified Non-Elective
Contribution made pursuant to Section 4.1D., and Forfeitures as provided
in this Section regardless of whether they completed a Year of Service
during the Plan Year.
N. If a Former Participant is reemployed after five (5) consecutive 1-Year
Breaks in Service, then separate accounts shall be maintained as follows:
1. one account for nonforfeitable benefits attributable to pre-break
service, and
2. one account representing his status in the Plan attributable to post-
break service.
O. Notwithstanding any election in the Adoption Agreement to the contrary,
if this Plan would otherwise fail to meet the requirements of Code
Sections 401(a)(26), 410(b)(1), or 410(b)(2)(A)(i) and the Regulations
thereunder because Employer Matching Contributions made pursuant to
Section 4.1B., Employer Non-Elective Contributions made pursuant to
Section 4.1C or Employer Qualified Non-Elective Contributions made
pursuant to Section 4.1D. have not been allocated to a sufficient number
or percentage of Participants for a Plan Year, then the following rules
shall apply:
1. The group of Participants eligible to share in the Employer's
contribution and Forfeitures for the Plan Year shall be expanded to
include the minimum number of Participants who would not otherwise be
eligible as are necessary to satisfy the applicable test specified
above. The specific participants who shall become eligible under the
terms of this paragraph shall be those who are actively employed on
the last day of the Plan Year and, when compared to similarly situated
Participants, have completed the greatest number of Hours of Service
in the Plan Year.
2. If after application of paragraph 1. above, the applicable test is
still not satisfied, then the group of Participants eligible to share
in the Employer's contribution and Forfeitures for the Plan Year shall
be further expanded to include the minimum number of Participants who
are not actively employed on the last day of the Plan Year as are
necessary to satisfy the applicable test. The specific Participants
who shall become eligible to share shall be those Participants, when
compared to similarly situated Participants, who have completed the
greatest number of Hours of Service in the Plan Year before
terminating employment.
Nothing in this Section shall permit the reduction of a Participant's
accrued benefit. Therefore, any amounts that have previously been
allocated to Participants may not be reallocated to satisfy these
requirements. In such event, the Employer shall make an additional
contribution equal to the amount such affected Participants would have
received had they been included in the allocations, even if it exceeds
the amount which would be deductible under Code Section 404. Any
adjustment to the allocations pursuant to this paragraph shall be
considered a retroactive amendment adopted by the last day of the Plan
Year for the applicable Plan Year only.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
A. Maximum Annual Allocation: For each Plan Year beginning after December
31, 1986, the annual allocation derived from Employer Elective
Contributions and Qualified Non-Elective Contributions to a Participant's
Elective Account and Qualified Non-Elective Account shall satisfy one of
the following tests:
1. The "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group multiplied
by 1.25, or
2. The excess of the "Actual Deferral Percentage" for the Highly
Compensated Participant group over the "Actual Deferral Percentage"
for the Non-Highly Compensated Participant group shall not be more
than two percentage points. Additionally, the "Actual Deferral
Percentage" for the Highly Compensated Participant group shall not
exceed the "Actual Deferral Percentage" for the Non-Highly Compensated
Participant group multiplied by 2. The provisions of Code Section
401(k)(3) and Regulation 1.401(k)-1(b) are incorporated herein by
reference.
However, for Plan Years beginning after December 31, 1988, to prevent the
multiple use of the alternative method described in 2. above and Code
Section 401(m)(9)(A), any Highly Compensated Participant eligible to make
elective deferrals pursuant to Section 4.2 and to make Employee
contributions or to receive matching contributions under this Plan or
under any other plan maintained by the Employer or an Affiliated Employer
shall have his actual contribution ratio reduced pursuant to Regulation
1.401(m)-2, the provisions of which are incorporated herein by reference.
B. For the purpose of this Section, "Actual Deferral Percentage" means, with
respect to the Highly Compensated Participant group and Non-Highly
Compensated Participant group for a Plan Year, the average of the ratios,
calculated separately for each Participant in such group, of the amount
of Employer Elective Contributions and Qualified Non-Elective
Contributions allocated to each Participant's Elective Account and
Qualified Non-Elective Account for such Plan Year, to such Participant's
"414(s) Compensation" for such Plan Year. The actual deferral ratio for
each Participant and the "Actual Deferral Percentage" for each group, for
Plan Years beginning after December 31, 1988, shall be calculated to the
nearest one-hundredth of one percent of the Participant's "414(s)
Compensation." Employer Elective Contributions allocated to each Non-
Highly Compensated Participant's Elective Account shall be reduced by
Excess Deferred Compensation to the extent such excess amounts are made
under this Plan or any other plan maintained by the Employer.
C. For the purpose of determining the actual deferral ratio of a Highly
Compensated Participant who is subject to the Family Member aggregation
rules of Code Section 414(q)(6) because such Participant is either a
"five percent owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation" during the
year, the following shall apply:
1. The combined actual deferral ratio for the family group (which shall
be treated as one Highly Compensated Participant) shall be the greater
of: (a) the ratio determined by aggregating Employer Elective
Contributions and "414(s) Compensation" of all eligible Family Members
who are Highly Compensated Participants without regard to family
aggregation; and (b) the ratio determined by aggregating Employer
Elective Contributions and "414(s) Compensation" of all eligible
Family Members (including Highly Compensated Participants). However,
in applying the $200,000 limit to "414(s) Compensation" for Plan Years
beginning after December 31, 1988, Family Members shall include only
the affected Employee's spouse and any lineal descendants who have not
attained age 19 before the close of the Plan year.
2. The Employer Elective Contributions and "414(s) Compensation" of all
Family Members shall be disregarded for purposes of determining the
"Actual Deferral Percentage" of the Non-Highly Compensated Participant
group except to the extent taken into account in paragraph 1. above.
3. If a Participant is required to be aggregated as a member of more than
one family group in a plan, all Participants who are members of those
family groups that include the Participant are aggregated as one
family group in accordance with paragraphs 1. and 2. above.
D. For the purposes of Sections 4.5A and 4.6, a Highly Compensated
Participant and a Non-Highly Compensated Participant shall include any
Employee eligible to make a deferral election pursuant to Section 4.2,
whether or not such deferral election was made or suspended pursuant to
Section 4.2.
E. For the purposes of this Section and Code Sections 401(a)(4), 410(b) and
401(k), if two or more plans which include cash or deferred arrangements
are considered one plan for the purposes of Code Section 401(a)(4) or
410(b) (other than Code Section 401(b)(2)(A)(ii) as in effect for Plan
Years beginning after December 31, 1988), the cash or deferred
arrangements included in such plans shall be treated as one arrangement.
In addition, two or more cash or deferred arrangements may be considered
as a single arrangement for purposes of determining whether or not such
arrangements satisfy Code Sections 401(a)(4), 410(b) and 401(k). In such
a case, the cash or deferred arrangements included in such plans and the
plans including such arrangements shall be treated as one arrangement and
as one plan for purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k). For Plan years beginning after December 31, 1989,
plans may be aggregated under this paragraph E. only if they have the
same plan year.
Notwithstanding the above, for Plan Years beginning after December 31,
1988, an employee stock ownership plan described in Code Section
4975(e)(7) may not be combined with this Plan for purposes of determining
whether the employee stock ownership plan or this Plan satisfies this
Section and Code Sections 401(a)(4), 410(b) and 401(k).
F. For the purposes of this Section, if a Highly Compensated Participant is
a Participant under two (2) or more cash or deferred arrangements (other
than a cash or deferred arrangement which is part of an employee stock
ownership plan as defined in Code Section 4975(e)(7) for Plan Years
beginning after December 31, 1988) of the Employer or an Affiliated
Employer, all such cash or deferred arrangements shall be treated as one
cash or deferred arrangement for the purpose of determining the actual
deferral ratio with respect to such Highly Compensated Participant.
However, for Plan Years beginning after December 31, 1988, if the cash or
deferred arrangements have different Plan Years, this paragraph shall be
applied by treating all cash or deferred arrangements ending with or
within the same calendar year as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's Elective
Contributions and Qualified Non-Elective Contributions made pursuant to
Section 4.4 do not satisfy one of the tests set forth in Section 4.5, for
Plan Years beginning after December 31, 1986, the Administrator shall adjust
Excess Contributions pursuant to the options set forth below:
A. On or before the fifteenth day of the third month following the end of
each Plan Year (but in no event later than the close of the following
Plan Year), the Highly Compensated Participant with the highest actual
deferral ratio shall have his portion of Excess Contributions distributed
to him and/or, at his election, recharacterized as a voluntary Employee
contribution pursuant to Section 4.12 until one of the tests set forth in
Section 4.5 is satisfied, or until his actual deferral ratio equals the
actual deferral ratio of the Highly Compensated Participant having the
second highest actual deferral ratio. This process shall continue until
one of the tests set forth in Section 4.5 is satisfied. For each Highly
Compensated Participant, the amount of Excess Contributions is equal to
the Elective Contributions and Qualified Non-Elective Contributions made
on behalf of such Highly Compensated Participant (determined prior to the
application of this paragraph) minus the amount determined by multiplying
the Highly Compensated Participant's actual deferral ratio (determined
after application of this paragraph) by his "414(s) Compensation."
However, in determining the amount of Excess Contributions to be
distributed and/or recharacterized with respect to an affected Highly
Compensated Participant as determined herein, such amount shall be
reduced by any Excess Deferred Compensation previously distributed to
such affected Highly Compensated Participant for his taxable year ending
with or within such Plan Year. Any distribution and/or
recharacterization of Excess Contributions shall be made in accordance
with the following:
1. With respect to the distribution of Excess Contributions pursuant to
A. above, such distribution:
a. May be postponed but not later than the close of the Plan Year
following the Plan Year in which the Actual Deferral Percentage
test failed;
b. Shall be made first from unmatched Deferred Compensation and,
thereafter, simultaneously from Deferred Compensation which is
matched and matching contributions which relate to such Deferred
Compensation, provided they are included in the Actual Deferral
Percentage test pursuant to E3 of the Adoption Agreement.
c. Shall be made from Qualified Non-Elective Contributions only to the
extent that Excess Contributions exceed the balance in the
Participant's Elective Account attributable to Deferred
Compensation and Employer Matching Contributions;
d. Shall be adjusted for Income; and
e. Shall be designated by the Employer as a distribution of Excess
Contributions (and Income).
2. With respect to the recharacterization of Excess Contributions
pursuant to A. above, such recharacterized amounts:
a. Shall be deemed to have occurred on the date on which the last of
those Highly Compensated Participants with Excess Contributions to
be recharacterized is notified of the recharacterization and the
tax consequences of such recharacterization;
b. For Plan Years ending on or before August 8, 1988, may be postponed
but not later than October 24, 1988;
c. Shall not exceed the amount of Deferred Compensation on behalf of
any Highly Compensated Participant for any Plan Year;
d. Shall be treated as voluntary Employee contributions for purposes
of Code Section 401(a)(4) and Regulation 1.401(k)-1(b). However,
for purposes of Sections 2.2 and 4.4F., recharacterized Excess
Contributions continue to be treated as Employer contributions that
are Deferred Compensation. For Plan Years beginning after December
31, 1988, Excess Contributions recharacterized as voluntary
Employee contributions shall continue to be nonforfeitable and
subject to the same distribution rules provided for in Section
4.9F.;
e. Which relate to Plan Years ending on or before October 24, 1988,
may be treated as either Employer contributions or voluntary
Employee contributions and therefore shall not be subject to the
restrictions of Section 4.2C.;
f. Are not permitted if the amount recharacterized plus voluntary
Employee contributions actually made by such Highly Compensated
Participant, exceed the maximum amount of voluntary Employee
contributions (determined prior to application of Section 4.7A.)
that such Highly Compensated Participant is permitted to make under
the Plan in the absence of recharacterization;
g. Shall be adjusted for Income.
3. Any distribution and/or recharacterization of less than the entire
amount of Excess Contributions shall be treated as a pro rata
distribution and/or recharacterization of Excess Contributions and
Income.
4. Any matching contributions relating to a distribution and/or
recharacterization of Excess Contributions shall be forfeited, and
such forfeiture shall reduce the Employer's Contributions.
5. The determination and correction of Excess Contributions of a Highly
Compensated Participant whose actual deferral ratio is determined
under the family aggregation rules shall be accomplished as follows:
a. If the actual deferral ratio for the Highly Compensated Participant
is determined in accordance with Section 4.5C.1.b., then the actual
deferral ratio shall be reduced as required herein and the Excess
Contributions for the family unit shall be allocated among the
Family Members in proportion to the Elective Contributions of each
Family Member that were combined to determine the group actual
deferral ratio.
b. If the actual deferral ratio for the Highly Compensated Participant
is determined under Section 4.5C.1.a., then the actual deferral
ratio shall first be reduced as required herein, but not below the
actual deferral ratio of the group of Family Members who are not
Highly Compensated Participants without regard to family
aggregation. The Excess Contributions resulting from this initial
reduction shall be allocated (in proportion to Elective
Contributions) among the Highly Compensated Participants whose
Elective Contributions were combined to determine the actual
deferral ratio. If further reduction is still required, the Excess
Contributions resulting from this further reduction shall be
determined by taking into account the contributions of all Family
Members and shall be allocated among them in proportion to their
respective Elective Contributions.
B. Within twelve (12) months after the end of the Plan Year, the Employer
shall make a special Qualified Non-Elective Contribution on behalf of
Non-Highly Compensated Participants in an amount sufficient to satisfy
one of the tests set forth in Section 4.5A. Such contribution shall be
allocated to the Participant's Qualified Non-Elective Account of each
Non-Highly Compensated Participant in the same proportion that each Non-
Highly Compensated Participant's Compensation for the year bears to the
total Compensation of all Non-Highly Compensated Participants.
C. For purposes of this Section, "Income" means the income or loss allocable
to Excess Contributions which shall equal the sum of the allocable gain
or loss for the Plan Year and the allocable gain or loss for the period
between the end of the Plan Year and the date of distribution ("gap
period"). The income or loss allocable to Excess Contributions for the
Plan Year and the "gap period" is calculated separately and is determined
by multiplying the income or loss for the Plan Year or the "gap period"
by a fraction. The numerator of the fraction is the Excess Contributions
for the Plan Year. The denominator of the fraction is the total of the
Participant's Elective Account attributable to Elective Contributions and
the Participant's Qualified Non-Elective Account as of the end of the
Plan Year or the "gap period," reduced by the gain allocable to such
total amount for the Plan Year or the "gap period" and increased by the
loss allocable to such total amount for the Plan Year or the "gap
period."
In lieu of the "fractional method" described above, a "safe harbor
method" may be used to calculate the allocable Income for the "gap
period." Under such "safe harbor method," allocable Income for the "gap
period" shall be deemed to equal ten percent (10%) of the Income
allocable to Excess Contributions for the Plan Year of the Participant
multiplied by the number of calendar months in the "gap period," a
distribution occurring on or before the fifteenth day of the month shall
be treated as having been made on the last day of the preceding month and
a distribution occurring after such fifteenth day shall be treated as
having been made on the first day of the next subsequent month.
Notwithstanding the above, for any distribution under this Section which
is made after March 15, 1992, such distribution shall not include any
income for the "gap period." Further provided, for any distribution
under this Section which is made after March 15, 1992, the amount of
Income may be computed using a reasonable method that is consistent with
Section 4.4C, provided such method is used consistently for all
Participants and for all such distributions for the Plan Year.
Notwithstanding the above, for Plan Years which began in 1987, Income
during the "gap period" shall not be taken into account.
D. Any amounts not distributed or recharacterized within 2 1/2 months after
the end of the Plan Year shall be subject to the 10% Employer excise tax
imposed by Code Section 4979. Distributions made pursuant to 4.6A. and
4.6C. must be made by the close of the Plan Year following the Plan Year
being tested.
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
A. The "Actual Contribution Percentage," for Plan Years beginning after the
later of the Effective Date of this Plan or December 31, 1986, for the
Highly Compensated Participant group shall not exceed the greater of:
1. 125 percent of such percentage for the Non-Highly Compensated
Participant group; or
2. the lesser of 200 percent of such percentage for the Non-Highly
Compensated Participant group, or such percentage for the Non-Highly
Compensated group plus 2 percentage points. However, for Plan Years
beginning after December 31, 1988, to prevent the multiple use of the
alternative method described in this paragraph and Code Section
401(m)(9)(A), any Highly Compensated Participant eligible to make:
a. Elective deferrals pursuant to Section 4.2 or any other cash or
deferred arrangement maintained by the Employer or an Affiliated
Employer, and
b. Employee contributions or to receive matching contributions under
any plan maintained by the Employer or an Affiliated Employer
shall have his actual contribution ratio reduced pursuant to
Regulation 1.401(m)-2. The provisions of Code Section 401(m) and
Regulations 1.401(m)-1(b) and 1.401(m)-2 are incorporated herein by
reference.
B. For the purposes of this Section and Section 4.8, "Actual Contribution
Percentage" for a Plan Year means, with respect to the Highly Compensated
Participant group and Non-Highly Compensated group, the average of the
ratios (calculated separately for each Participant in each group) of:
1. the sum of Employer Matching Contributions pursuant to Section 4.1B.
(to the extent such matching contributions are not used to satisfy the
tests set forth in Section 4.5), voluntary Employee contributions made
pursuant to Section 4.12 and Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 4.6A. contributed
under the Plan on behalf of each such Participant for such Plan Year;
to
2. the Participant's "414(s) Compensation" for such Plan Year.
C. For purposes of determining the "Actual Contribution Percentage" and the
amount of Excess Aggregate Contributions pursuant to Section 4.8D, only
Employer Matching Contributions (excluding matching contributions
forfeited of distributed pursuant to Section 4.2F, 4.6A, or 4.8A)
contributed to the Plan prior to the end of the succeeding Plan Year
shall be considered. In addition, the Administrator may elect to take
into account, with respect to Employees eligible to have Employer
Matching Contributions made pursuant to Section 4.1B or voluntary
Employee contributions made pursuant to Section 4.12 allocated to their
accounts, elective deferrals (as defined in Regulation 1.402(g)-1(b)) and
qualified non-elective contributions (as defined in Code Section
401(m)(4)(C)) contributed to any plan maintained by the Employer. Such
elective deferrals and qualified non-elective contribution subject to
Regulation 1.401(m)-1(b)(2) which is incorporated herein by reference.
However, for Plan Years beginning after December 31, 1988, the Plan Year
must be the same as the Plan Year of the plan to which the elective
deferrals and the qualified non-elective contributions are made.
D. For the purpose of determining the actual contribution ratio of a Highly
Compensated Employee who is subject to the Family Member aggregation
rules of Code Section 414(q)(6) because such Employee is either a "five
percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, the
following shall apply:
1. The combined actual contribution ratio for the family group (which
shall be treated as one Highly Compensated Participant) shall be the
greater of: (a) the ratio determined by aggregating Employer Matching
Contributions made pursuant to Section 4.1B. (to the extent such
matching contributions are not used to satisfy the tests set forth in
Section 4.5), voluntary Employee contributions made pursuant to
Section 4.12, Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section 4.6A. and "414(s)
Compensation" of all eligible Family Members who are Highly
Compensated Participants without regard to family aggregation; and (b)
the ratio determined by aggregating Employer Matching Contributions
made pursuant to Section 4.1B. (to the extent such matching
contributions are not used to satisfy the tests set forth in Section
4.5), voluntary Employee contributions made pursuant to Section 4.12,
Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) and "414(s) Compensation" of
all eligible Family Members (including Highly Compensated
Participants). However, in applying the $200,000 limit to "414(s)
Compensation" for Plan Years beginning after December 31, 1988, Family
Members shall include only the affected Employee's spouse and any
lineal descendants who have not attained age 19 before the close of
the Plan Year.
2. The Employer Matching Contributions made pursuant to Section 4.1B. (to
the extent such matching contributions are not used to satisfy the
tests set forth in Section 4.5), voluntary Employee contributions made
pursuant to Section 4.12, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 4.6A. and "414
Compensation" of all Family Members shall be disregarded for purposes
of determining the "Actual Contribution Percentage" of the Non-Highly
Compensated Participant group except to the extent taken into account
in paragraph 1. above.
3. If a Participant is required to be aggregated as a member of more than
one family group in a plan, all Participants who are members of those
family groups that include the Participant are aggregated as one
family group in accordance with paragraphs 1. and 2. above.
E. For purposes of this Section and Code Sections 401(a)(4), 410(b) and
401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as
one plan for purposes of Code Sections 401(a)(4) or 410(b) (other than
the average benefits test under Code Section 410(b)(2)(A)(ii) as in
effect for Plan Years beginning after December 31, 1988), such plans
shall be treated as one plan. In addition, two or more plans of the
Employer to which matching contributions, Employee contributions, or
both, are made may be considered as a single plan for purposes of
determining whether or not such plans satisfy Code Sections 401(a)(4),
410(b) and 401(m). In such a case, the aggregated plans must satisfy
Code Sections 401(a)(4), 410(b) and 401(m) as though such aggregated
plans were a single plan. For plan years beginning after December 31,
1989, plans may be aggregated under this paragraph only if they have the
same plan year.
Notwithstanding the above, for Plan Years beginning after December 31,
1988, an employee stock ownership plan described in Code Section
4975(e)(7) may not be aggregated with this Plan for purposes of
determining whether the employee stock ownership plan or this Plan
satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(m).
F. If a Highly Compensated Participant is a Participant under two or more
plans (other than an employee stock ownership plan as defined in Code
Section 4975(e)(7) for Plan Years beginning after December 31, 1988)
which are maintained by the Employer or an Affiliated Employer to which
matching contributions, Employee contributions, or both, are made, all
such contributions on behalf of such Highly Compensated Participant shall
be aggregated for purposes of determining such Highly Compensated
Participant's actual contribution ratio. However, for Plan Years
beginning after December 31, 1988, if the plans have different plan
years, this paragraph shall be applied by treating all plans ending with
or within the same calendar year as a single plan.
G. For purposes of Section 4.7A. and 4.8, a Highly Compensated Participant
and a Non-Highly Compensated Participant shall include any Employee
eligible to have matching contributions made pursuant to Section 4.1B.
(whether or not a deferred election was made or suspended pursuant to
Section 4.2E.) allocated to his account for the Plan Year or to make
salary deferrals pursuant to Section 4.2 (if the Employer uses salary
deferrals to satisfy the provisions of this Section) or voluntary
Employee contributions pursuant to Section 4.12 (whether or not voluntary
Employee contributions are made) allocated to his account for the Plan
Year.
H. For purposes of this Section, "Matching Contribution" shall mean an
Employer contribution made to the Plan, or to a contract described in
Code Section 403(b), on behalf of a Participant on account of an Employee
contribution made by such Participant, or on account of a participant's
deferred compensation, under a plan maintained by the Employer.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
A. In the event that for Plan Years beginning after December 31, 1986, the
"Actual Contribution Percentage" for the Highly Compensated Participant
group exceeds the "Actual Contribution Percentage" for the Non-Highly
Compensated Participant group pursuant to Section 4.7A., the
Administrator (on or before the fifteenth day of the third month
following the end of the Plan Year, but in no event later than the close
of the following Plan Year) shall direct the Trustee to distribute to the
Highly Compensated Participant having the highest actual contribution
ratio, his portion of Excess Aggregate Contributions (and income
allocable to such Contributions) or, if forfeitable, forfeit such non-
Vested Excess Aggregate Contributions attributable to Employer Matching
Contributions (and Income allocable to such Excess Aggregate
Contributions) until either one of the tests set forth in Section 4.7A.
is satisfied, or until his actual contribution ratio equals the actual
contribution ratio of the Highly Compensated Participant having the
second highest actual contribution ratio. This process shall continue
until one of the tests set forth in Section 4.7A. is satisfied. The
distribution and/or Forfeiture of Excess Aggregate Contributions shall be
made in the following order:
1. Employer Matching Contributions distributed and/or recharacterized
pursuant to Section 4.6A.1.;
2. Voluntary Employee contributions including Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 4.6A.2.;
3. Remaining Employer Matching Contributions.
B. Any distribution or Forfeiture of less than the entire amount of Excess
Aggregate Contributions (and Income) shall be treated as a pro rata
distribution of Excess Aggregate Contributions and Income. Distribution
of Excess Aggregate Contributions shall be designated by the Employer as
a distribution of Excess Aggregate Contributions (and Income).
Forfeitures of Excess Aggregate Contributions shall occur at the same
time as distributions for Excess Aggregate Contributions or, at the same
time such distribution would have occurred if there was not a forfeiture.
Forfeitures shall be treated in accordance with Section 4.4. However,
no such Forfeiture may be allocated to a Highly Compensated Participant
whose contributions are reduced pursuant to this Section.
C. Excess Aggregate Contributions attributable to amounts other than
voluntary Employee contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes of
Code Sections 404 and 415 even if distributed from the Plan.
D. For the purposes of this Section and Section 4.7, "Excess Aggregate
Contributions" means, with respect to any Plan Year, the excess of:
1. the aggregate amount of Employer Matching Contributions made pursuant
to Section 4.1B. (to the extent such contributions are taken into
account pursuant to Section 4.7B.), voluntary Employee contributions
made pursuant to Section 4.6A. and any Qualified Non-Elective
Contributions or elective deferrals taken into account pursuant to
Section 4.7C. actually made on behalf of the Highly Compensated
Participant group for such Plan Year, over
2. the maximum amount of such contributions permitted under the
limitations of Section 4.7A.
E. For each Highly Compensated Participant, the amount of Excess Aggregate
Contributions is equal to the total Employer Matching Contributions made
pursuant to Section 4.1B. (to the extent taken into account pursuant to
Section 4.7B.), voluntary Employee contributions made pursuant to Section
4.12, Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6A. and any Qualified Non-Elective
Contributions or elective deferrals taken into account pursuant to
Section 4.7C. on behalf of the Highly Compensated Participant (determined
after application of this paragraph) by his "414(s) Compensation." The
actual contribution ratio must be rounded to the nearest one-hundredth of
one percent for Plan Years beginning after December 31, 1988. In no case
shall the amount of Excess Aggregate Contribution with respect to any
Highly Compensated Participant exceed the amount of Employer Matching
Contributions made pursuant to Section 4.1B. (to the extent taken into
account pursuant to Section 4.7B.), voluntary Employee contributions made
pursuant to Section 4.12, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 4.6A. and any
Qualified Non-Elective Contributions or elective deferrals taken into
account pursuant to Section 4.7C. on behalf of such Highly Compensated
Participant for such Plan Year.
F. The determination of the amount of Excess Aggregate Contributions with
respect to any Plan Year shall be made after first determining the Excess
Contributions, if any, to be treated as voluntary Employee contributions
due to recharacterization for the plan year of any other qualified cash
or deferred arrangement (as defined in Code Section 401(k)) maintained by
the Employer that ends with or within the Plan Year or which are treated
as voluntary Employee contributions due to recharacterization pursuant to
Section 4.6A.
G. The determination and correction of Excess Aggregate Contributions of a
Highly Compensated Participant whose actual contribution ratio is
determined under the family aggregation rules shall be accomplished as
follows:
1. If the actual contribution ratio for the Highly Compensated
Participant is determined in accordance with Section 4.7D.1.(a), then
the actual contribution ratio shall be reduced and the Excess
Aggregate Contributions for the family unit shall be allocated among
the Family Members in proportion to the sum of Employer Matching
Contributions made pursuant to Section 4.1B. (to the extent taken into
account pursuant to Section 4.7B.), voluntary Employee contributions
made pursuant to Section 4.12, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 4.6A. and any
Qualified Non-Elective Contributions or elective deferrals taken into
account pursuant to Section 4.7C. of each Family Member that were
combined to determine the group actual contribution ratio.
2. If the actual contribution ratio for the Highly Compensated
Participant is determined under Section 4.7D.1.a., then the actual
contribution ratio shall first be reduced, as required herein, but not
below the actual contribution ratio of the group of Family Members who
are not Highly Compensated Participants without regard to family
aggregation. The Excess Aggregate Contributions resulting from this
initial reduction shall be allocated among the Highly Compensated
Participants whose Employer Matching Contributions made pursuant to
Section 4.1B. (to the extent taken into account pursuant to Section
4.7B.), voluntary Employee contributions made pursuant to Section
4.12, Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6A. and any Qualified Non-Elective
Contributions or elective deferrals taken into account pursuant to
Section 4.7C. were combined to determine the actual contribution
ratio. If further reduction is still required, the Excess Aggregate
Contributions resulting from this further reduction shall be
determined by taking into account the contributions of all Family
Members and shall be allocated among them in proportion to their
respective Employer Matching Contributions made pursuant to Section
4.1B. (to the extent taken into account pursuant to Section 4.7B.),
voluntary Employee contributions made pursuant to Section 4.12, Excess
Contributions recharacterized as voluntary Employee contributions
pursuant to Section 4.6A., and any Qualified Non-Elective
Contributions or elective deferrals taken into account pursuant to
Section 4.7C.
H. Notwithstanding the above, within twelve (12) months after the end of the
Plan Year, the Employer may make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated Participants in an
amount sufficient to satisfy one of the tests set forth in Section 4.7A.
Such contribution shall be allocated to the Participant's Qualified Non-
Elective Account of each Non-Highly Compensated Participant in the same
proportion that each Non-Highly Compensated Participant's Compensation
for the year bears to the total Compensation of all Non-Highly
Compensated Participants. A separate accounting shall be maintained for
the purpose of excluding such contributions from the "Actual Deferral
Percentage" tests pursuant to Section 4.5A.
I. For purposes of this Section, "Income" means the income or loss allocable
to Excess Aggregate Contributions which shall equal the sum of the
allocable gain or loss for the Plan Year and the allocable gain or loss
for the period between the end of the Plan Year and the date of
distribution ("gap period"). The Income or loss allocable to Excess
Aggregate Contributions for the Plan Year and the "gap period" is
calculated separately and is determined by multiplying the income or loss
for the Plan Year or the "gap period" by a fraction. The numerator of
the fraction is the Excess Aggregate Contributions for the Plan Year.
The denominator of the fraction is the total Participant's Account and
Voluntary Contribution Account attributable to Employer Matching
Contributions subject to Section 4.7, voluntary Employee contributions
made pursuant to Section 4.12, and any Qualified Non-Elective
Contributions and elective deferrals taken into account pursuant to
Section 4.7C. as of the end of the Plan Year or the "gap period," reduced
by the gain allocable to such total amount for the Plan Year or the "gap
period" and increased by the loss allocable to such total amount for the
Plan Year or the "gap period."
In lieu of the "fractional method" described above, a "safe harbor
method" may be used to calculate the allocable Income for the "gap
period." Under such "safe harbor method," allocable Income for the "gap
period" shall be deemed to equal ten percent (10%) of the Income
allocable to Excess Aggregate Contributions for the Plan Year of the
Participant multiplied by the number of calendar months in the "gap
period." For purposes of determining the number of calendar months in
the "gap period," a distribution occurring on or before the fifteenth day
of the month shall be treated as having been made on the last day of the
preceding month and a distribution occurring after such fifteenth day
shall be treated as having been made on the first day of the next
subsequent month.
The Income allocable to Excess Aggregate Contributions resulting from
recharacterization of Elective Contributions shall be determined and
distributed as if such recharacterized Elective Contributions had been
distributed as Excess Contributions.
Notwithstanding the above, for any distribution under this Section which
is made after March 15, 1992, such distribution shall not include any
Income for the "gap period." Further provided, for any distribution
under this Section which is made after March 15, 1992, the amount of
Income may be computed using a reasonable method that is consistent with
Section 4.4C, provided such method is used consistently for all
Participants and for all such distributions for the Plan Year.
Notwithstanding the above, for Plan Years which began in 1987, Income
during the "gap period" shall not be taken into account.
4.9 MAXIMUM ANNUAL ADDITIONS
A. If the Participant does not participate in, and has never participated in
(1) another qualified plan, (2) a welfare benefit fund (as defined in
Code Section 419(e)), or (3) an individual medical account (as defined in
Code Section 415(l)(2)), or (4) a Simplified Employee Pension (SEP) plan,
which is maintained by the Employer and which provides Annual Additions,
then the amount of Annual Additions which may be credited to the
Participant's accounts for any Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other limitation
contained in this Plan. If the Employer contribution that would
otherwise be contributed or allocated to the Participant's accounts would
cause the Annual Additions for the Limitation Year to exceed the Maximum
Permissible Amount, then the amount contributed or allocated will be
reduced so that the Annual Additions for the Limitation Year will equal
the Maximum Permissible Amount.
1. Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible
Amount for a Participant on the basis of a reasonable estimation of
the Participant's Compensation for the Limitation Year, uniformly
determined for all Participants similarly situated.
2. As soon as it is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation
Year shall be determined on the basis of the Participant's actual
compensation for such Limitation Year.
3. If there is an excess amount pursuant to Section A2 or Section 4.10,
the excess will be disposed of in one of the following manners, as
uniformly determined by the Plan Administrator for all Participants
similarly situated:
a. Any Deferred Compensation or non-deductible Voluntary Employee
Contributions, to the extent they would reduce the Excess Amount
will be distributed to the Participant;
b. If, after the application of subparagraph a., an Excess Amount
still exists, and the Participant is covered by the Plan at the end
of the Limitation Year, the Excess Amount in the Participant's
account will be used to reduce Employer contributions (including
any allocation of Forfeitures) for such Participant in the next
Limitation Year, and each succeeding Limitation Year if necessary;
c. If, after the application of subparagraph a., an Excess Amount
still exists, and the Participant is not covered by the Plan at the
end of a Limitation Year, the Excess Amount will be held
unallocated in a suspense account. The suspense account will be
applied to reduce future Employer contributions (including
allocation of any Forfeitures) for all remaining Participants in
the next Limitation Year, and each succeeding Limitation Year if
necessary;
d. If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section, it will not participate
in the allocation of investment gains and losses. If such a
suspense account is in existence at any time during a particular
limitation year, all amounts in the suspense account must be
allocated and reallocated to participants' accounts before any
employer contributions or any employee contributions may be made to
the plan for that limitation year. Excess amounts may not be
distributed to participants or former participants.
B. If, in addition to this Plan, the Participant is covered under (1)
another qualified defined contribution plan maintained by the Employer,
(2) a welfare benefit fund (as defined in Code Section 419(e)), or (3) an
individual medical account (as defined in Code Section 415(1)(2)), or (4)
a Simplified Employee Pension (SEP) plan, which is maintained by the
Employer and which provides Annual Additions during any Limitation Year,
then the Annual Additions which may be credited to a Participant's
accounts under this Plan for any such Limitation Year shall not exceed
the Maximum Permissible Amount reduced by the Annual Additions credited
to a Participant's accounts under the other plans and welfare benefit
funds for the same Limitation Year. If the Annual Additions with respect
to the Participant under other defined contribution plans and welfare
benefit funds maintained by the Employer are less than the Maximum
Permissible Amount and the Employer contribution that would otherwise be
contributed or allocated to the Participant's accounts under this Plan
would cause the Annual Additions for the Limitation Year to exceed this
limitation, then the amount contributed or allocated will be reduced so
that the Annual Additions under all such plans and welfare benefit funds
for the Limitation Year will equal the Maximum Permissible Amount. If
the Annual Additions with respect to the Participant under such other
defined contribution plans and welfare benefit funds in the aggregate are
equal to or greater than the Maximum Permissible Amount, no amount will
be contributed or allocated to the Participant's account under this Plan
for the Limitation Year.
1. Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible
Amount for a Participant in the manner described in Section 4.9A.1.
2. As soon as it is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
3. If, pursuant to Section 4.9B.1. or as a result of the allocation of
Forfeitures, a Participant's Annual Additions under this Plan and such
other plans would result in an Excess Amount for a Limitation Year,
the Excess Amount will be deemed to consist of the Annual Additions
attributable to a welfare benefit fund or individual medical account
will be deemed to have been allocated first regardless of the actual
allocation date.
4. If an Excess Amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation date of another
plan, the Excess Amount attributed to this Plan will be the product
of:
a. the total Excess Amount allocated as of such date, times
b. the ratio of (1) the Annual Additions allocated to the Participant
for the Limitation Year as of such date under this Plan to (2) the
total Annual Additions allocated to the Participant for the
Limitation Year as of such date under this and all the other
qualified defined contribution plans.
5. Any Excess Amount attributed to this Plan will be disposed of in the
manner described in Section 4.9A.3.
C. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, Annual Additions which may
be credited to the Participant's account under this Plan for any
Limitation Year will be limited in accordance with Section 4.9B., unless
the Employer provides other limitations in the Adoption Agreement.
D. If the Employer maintains, or at any time maintained, a qualified defined
benefit plan covering any Participant in this Plan the sum of the
Participant's Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction will not exceed 1.0 in any Limitation Year. The Annual
Additions which may be credited to the Participant's account under this
Plan for any Limitation Year will be limited in accordance with the
Limitation on Allocations Section of the Adoption Agreement.
E. For purposes of applying the limitations of Code Section 415, the
transfer of funds from one qualified plan to another is not an "annual
addition." In addition, the following are not Employee contributions for
the purposes of Section 4.9F.1.b.:
1. Rollover contributions (as defined in Code Sections 402(a)(5),
403(a)(4), 403(b)(8) and 408(d)(3));
2. Repayments of loans made to a Participant from the Plan;
3. Repayments of distributions received by an Employee pursuant to Code
Section 411(a)(7)(B) (cash-outs);
4. Repayments of distributions received by an Employee pursuant to Code
Section 411(a)(3)(D) (mandatory contributions); and
5. Employee contributions to a simplified employee pension excludable
from gross income under Code Section 408(k)(6).
F. For purposes of this Section, the following terms shall be defined as
follows:
1. Annual Additions means the sum credited to a Participant's accounts
for any Limitation Year of:
a. Employer contributions,
b. Effective with respect to "limitation years" beginning after
December 31, 1986, Employee contributions,
c. Forfeitures,
d. Amounts allocated, after March 31, 1984, to an individual medical
account, as defined in Code Section 415(1)(2), which is part of a
pension or annuity plan maintained by the Employer, and
e. Amount allocated to a participant in a Simplified
Employee Pension (SEP) Plan which is not excludable
from gross income under Code Section 408(k)(6).
f. Amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit fund (as defined in Code
Section 419(e)) maintained by the Employer. Except, however, the
"415 Compensation" percentage limitation referred to in paragraph
A.1. above shall not apply to: (1) any contribution for medical
benefits (within the meaning of Code Section 419A(f)(2)) after
separation from service which is otherwise treated as an "annual
addition," or (2) any amount otherwise treated as an "annual
addition" under Code Section 415(1)(1). Notwithstanding the
foregoing, for "limitation years" beginning prior to January 1,
1987, only that portion of Employee contributions equal to the
lesser of Employee contributions in excess of six percent (6%) of
"415 Compensation" or one-half of Employee contributions shall be
considered an "annual addition."
For this purpose, any Excess Amount applied under Sections 4.9A.3.
and 4.9B.5. in the Limitation Year to reduce Employer contributions
shall be considered Annual Additions for such Limitation Year.
2. Compensation means a Participant's Compensation as elected in the
Adoption Agreement. However, regardless of any selection made in
the Adoption Agreement, "415 Compensation" shall exclude
compensation which is not currently includible in the Participant's
gross income by reason of the application of Code Sections 125,
402(e)(3), 402(1)(B), or 403(b).
For limitation years beginning after December 31, 1991, for
purposes of applying the limitations of this article, compensation
for a limitation year is the compensation actually paid or made
available during such limitation year.
Notwithstanding the preceding sentence, compensation for a
participant in a defined contribution plan who is permanently and
totally disabled (as defined in Section 22(e)(3) of the Code) is
the compensation such participant would have received for the
limitation year if the participant had been paid at the rate of
compensation paid immediately before becoming permanently and
totally disabled; such imputed compensation for the disabled
participant may be taken into account only if the participant is
not a Highly Compensated Employee and contributions made on behalf
of such participant are non-forfeitable when made.
a. Employer contributions to a plan of deferred compensation which are
not includible in the Employee's gross income for the taxable year
in which contributed, or Employer contributions under a simplified
employee pension plan to the extent such contributions are
excludable from the Employee's gross income, or any distributions
from a plan of deferred compensation;
b. Contributions made by the Employer to a plan of deferred
compensation to the extent that all or a portion of such
contributions are recharacterized as a voluntary Employee
contribution;
c. Amounts realized from the exercise of a non-qualified stock option,
or when restricted stock (or property) held by an Employee becomes
freely transferable or is no longer subject to a substantial risk
of forfeiture;
d. Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
e. Other amounts which received special tax benefits, or contributions
made by an Employer (whether or not under a salary reduction
agreement) toward the purchase of an annuity contract described in
Code Section 403(b) (whether or not the contributions are
excludable from the gross income of the Employee).
For purposes of applying the limitations of this Section 4.9,
Compensation for any Limitation Year is the Compensation actually paid
or includible in gross income during such year. Notwithstanding the
preceding sentence, Compensation for a Participant in a profit-sharing
plan who is permanently and totally disabled (as defined in Code
Section 22(e)(3)) is the Compensation such Participant would have
received for the Limitation Year if the Participant had been paid at
the rate of Compensation paid immediately before becoming permanently
and totally disabled; such imputed Compensation for the disabled
Participant may be taken into account only if the Participant is not a
Highly Compensated Employee and contributions made on behalf of such
Participant are nonforfeitable when made.
3. Defined Benefit Fraction means a fraction, the numerator of which is
the sum of the Participant's Projected Annual Benefits under all the
defined benefit plans (whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser of 125 percent of
the dollar limitation determined for the Limitation Year under Code
Sections 415(b) and (d) or 140 percent of his Highest Average
Compensation including any adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of
the first day of the first Limitation Year beginning after December
31, 1986, in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the denominator of
this fraction will not be less than 125 percent of the sum of the
annual benefits under such plans which the Participant had accrued as
of the end of the close of the last Limitation Year beginning before
January 1, 1987, disregarding any changes in the terms and conditions
of the plan after May 5, 1986. The preceding sentence applies only if
the defined benefit plans individually and the aggregate satisfied the
requirements of Code Section 415 for all Limitation Years beginning
before January 1, 1987.
Notwithstanding the foregoing, for any Top Heavy Plan Year, 100 shall
be substituted for 125 unless a minimum, non-integrated contribution
of 7.5% of each Non-Key Employee's Compensation has been selected in
F1 of the Adoption Agreement. However, for any Plan Year in which
this Plan is a Super Top Heavy Plan, 100 shall be substituted for 125
in any event.
4. Defined Contribution Dollar Limitation means $30,000, or, if greater,
one-fourth of the defined benefit dollar limitation set forth in Code
Section 415(b)(1) as in effect for the Limitation Year.
5. Defined Contribution Fraction means a fraction, the numerator of which
is the sum of the Annual Additions to the Participant's account under
all the defined contribution plans (whether or not terminated)
maintained by the Employer for the current and all prior Limitation
Years, (including the Annual Additions attributable to the
Participant's nondeductible voluntary employee contributions to any
defined benefit plans, whether or not terminated, maintained by the
Employer and the annual additions attributable to all welfare benefit
funds, as defined in Code Section 419(e), a Simplified Employee
Pension (SEP) plan, and the individual medical accounts, as defined in
Code Section 415(1)(2), maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts for
the current and all prior Limitation Years of Service with the
Employer (regardless of whether a defined contribution plan was
maintained by the Employer). The maximum aggregate amount in any
Limitation Year is the lesser of 125 percent of the Defined
Contribution Dollar Limitation or 35 percent of the Participant's
Compensation for such year. For Limitation Years beginning prior to
January 1, 1987, the "annual addition" shall not be recomputed to
treat all Employee contributions as an Annual Addition.
If the Employee was a Participant as of the end of the first day of
the first Limitation Year beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were
in existence on May 5, 1986, the numerator of this fraction will be
adjusted in the sum of this fraction and the Defined Benefit Fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (a) the excess of the
sum of the fractions over 1.0 times (b) the denominator of this
fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they
would be computed as of the end of the last Limitation Year beginning
before January 1, 1987, and disregarding any changes in the terms and
conditions of the plan made after May 5, 1986, but using the Code
Section 415 limitation applicable to the first Limitation Year
beginning on or after January 1, 1987.
Notwithstanding the foregoing, for any Top Heavy Plan Year, 100 shall
be substituted for 125 unless a minimum, non-integrated contribution
of 7.5% of each Non-Key Employee's Compensation has been selected in
F1 of the Adoption Agreement. However, for any Plan Year in which
this Plan is a Super Top Heavy Plan, 100 shall be substituted for 125
in any event.
6. Employer means the Employer that adopts this Plan and all Affiliated
Employers, except that for purposes of this Section, Affiliated
Employers shall be determined pursuant to the modification made by
Code Section 415(h).
7. Excess Amount means the excess of the Participant's Annual Additions
for the Limitation Year over the Maximum Permissible Amount.
8. Highest Average Compensation means the average Compensation for the
three consecutive Years of Service with the Employer that produces the
highest average. A Year of Service with the Employer is the 12-
consecutive-month period defined in E1 of the Adoption Agreement which
is used to determine Compensation under the Plan.
9. Limitation Year means the Compensation Year (a 12-consecutive-month
period) as elected by the Employer in the Adoption Agreement. All
qualified plans maintained by the Employer must use the same
Limitation Year. If the Limitation Year is amended to a different 12-
consecutive-month period, the new Limitation Year must begin on a date
within the Limitation Year in which the amendment is made.
10. Maximum Permissible Amount means the maximum Annual Addition that
may be contributed or allocated to a Participant's account under the
plan for any Limitation Year, which shall not exceed the lesser of:
a. the Defined Contribution Dollar Limitation, or
b. 25 percent of the Participant's Compensation for the Limitation
Year.
The Compensation Limitation referred to in b. shall not apply to any
contribution for medical benefits (within the meaning of Code Sections
401(h) or 419A(f)(2)) which is otherwise treated as an annual addition
under Code Sections 415(l)(1) or 419A(d)(2).
If a short Limitation Year is created because of an amendment changing
the Limitation Year to a different 12-consecutive-month period, or
because a newly adopted plan's first Limitation Year is a short
Limitation Year as stated in section C2 of the Adoption Agreement, the
Maximum Permissible Amount will not exceed the Defined Contribution
Dollar Contribution multiplied by the following fraction:
number of months in the short Limitation Year
12
11. Projected Annual Benefit means the annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if such
benefit is expressed in a form other than a straight or qualified
Joint and Survivor Annuity) to which the Participant would be entitled
under the terms of the plan assuming:
a. the Participant will continue employment until Normal Retirement
Age (or current age, if later), and
b. the Participant's Compensation for the current Limitation Year and
all other relevant factors used to determine benefits under the
Plan will remain constant for all future Limitation Years.
G. Notwithstanding anything contained in this Section to the contrary, the
limitations, adjustments and other requirements prescribed in this
Section shall at all times comply with the provisions of Code Section 415
and the Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
If as a result of the allocation of Forfeitures, a reasonable error in
estimating a Participant's annual Compensation, a reasonable error in
determining the amount of elective deferrals (within the meaning of Code
Section 402(g)(3)) that may be made with respect to any Participant under
the limits of Section 4.9, or other facts and circumstances to which
Regulation 1.415-6(b)(6) shall be applicable, the "annual additions"
under this Plan would cause the maximum provided in Section 4.9 to be
exceeded, the Administrator shall treat the excess in accordance with
Section 4.9A3.
4.11 TRANSFERS FROM QUALIFIED PLANS
A. If specified in the Adoption Agreement and with the consent of the
Administrator, amounts may be transferred from other qualified plans,
provided that the trust from which such funds are transferred permits the
transfer to be made and the transfer will not jeopardize the tax exempt
status of the Plan or create adverse tax consequences for the Employer.
The amounts transferred shall be set up in a separate account herein
referred to as a "Participant's Rollover Account." Such account shall be
fully Vested at all times and shall not be subject to forfeiture for any
reason.
B. Amounts in a Participant's Rollover Account shall be held by the Trustee
pursuant to the provisions of this Plan and may not be withdrawn by, or
distributed to the Participant, in whole or in part, except as provided
in Paragraphs C. and D. of this Section.
C. Amounts attributable to elective contributions (as defined in Regulation
1.401(k)-1(g)(4)), including amounts treated as elective contributions,
which are transferred from another qualified plan in a plan-to-plan
transfer shall be subject to the distribution limitations provided for in
Regulation 1.401(k)-1(d).
D. At Normal Retirement Date, or such other date when the Participant or his
Beneficiary shall be entitled to receive benefits, the fair market value
of the Participant's Rollover Account shall be used to provide additional
benefits to the Participant or his Beneficiary. Any distributions of
amounts held in a Participant's Rollover Account shall be made in a
manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements
of Code Sections 411(a)(11) and 417 and the Regulations thereunder.
Furthermore, such amounts shall be considered as part of a Participant's
benefit in determining whether an involuntary cash-out of benefits
without Participant consent may be made.
E. The Administrator may direct that employee transfers made after a
valuation date be segregated into a separate account for each Participant
until such time as the allocations pursuant to this Plan have been made,
at which time they may remain segregated or be invested as part of the
general Trust Fund, to be determined by the Administrator.
F. For purposes of this Section, the term "qualified plan" shall mean any
tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean:
1. Amounts transferred to this Plan directly from another qualified plan;
2. Lump-sum distributions received by an Employee from another qualified
plan which are eligible for tax free rollover to a qualified plan and
which are transferred by the Employee to this Plan within sixty (60)
days following his receipt thereof;
3. Amounts transferred to this Plan from a conduit individual retirement
account provided that the conduit individual retirement account has no
assets other than assets which (a) were previously distributed to the
Employee by another qualified plan as a lump-sum distribution (b) were
eligible for tax-free rollover to a qualified plan and (c) were
deposited in such conduit individual retirement account within sixty
(60) days of receipt thereof other than earnings on said assets; and
4. Amounts distributed to the Employee from a conduit individual
retirement account meeting the requirements of clause 3. above, and
transferred by the Employee to this Plan within sixty (60) days of his
receipt thereof from such conduit individual retirement account.
G. Prior to accepting any transfers to which this Section applies, the
Administrator may require the Employee to establish that the amounts to
be transferred to this Plan meet the requirements of this Section and
also may require the Employee to provide an opinion of counsel
satisfactory to the Employer that the amounts to be transferred meet the
requirements of this Section.
H. Notwithstanding anything herein to the contrary, a transfer directly to
this Plan from another qualified plan (or a transaction having the affect
of such a transfer) shall only be permitted if it will not result in the
elimination or reduction of any "Section 411(d)(6) protected benefit" as
described in Section 8.1.
I. For purposes of this Section only, "Participant" shall mean any Employee
of the Employer as specified in D1 of the Adoption Agreement. An
Employee shall not be required to be a Participant to establish a
Participant's Rollover Account.
4.12 VOLUNTARY CONTRIBUTIONS
A. If elected in the Adoption Agreement, each Participant may, at the
discretion of the Administrator acting in a nondiscriminatory manner,
elect voluntarily to contribute a portion of his compensation earned,
while a Participant under this Plan. Such contributions shall be limited
to 10% of the participant's compensation and shall be paid to the Trustee
within a reasonable period of time but in no event later than 90 days
after the receipt of the contribution.
B. The balance in each Participant's Voluntary Contribution Account shall
not be subject to Forfeiture for any reason.
C. A Participant may elect to withdraw his voluntary contributions from his
Voluntary Contributions Account and the actual earnings thereon in a
manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements
of Code Sections 411(a)(11) and 417 and the Regulations thereunder. If
the Administrator maintains sub-accounts with respect to voluntary
contributions (and earnings thereon) which were made on or before a
specified date, a Participant shall be permitted to designate which sub-
account shall be the source for his withdrawal. No Forfeitures shall
occur solely as a result of an Employee's withdrawal of Employee
contributions.
In the event such a withdrawal is made, or in the event a Participant has
received a hardship distribution pursuant to Regulation 1.401(k)-
1(d)(2)(iii)(B) from any other plan maintained by the Employer or from
his Participant's Elective Account pursuant to Section 6.11, then such
Participant shall be barred from making any voluntary contributions to
the Trust Fund for a period of twelve (12) months after receipt of the
withdrawal or distribution.
D. At Normal Retirement Date, or such other date when the Participant or his
Beneficiary shall be entitled to receive benefits, the fair market value
of the Voluntary Contribution Account shall be used to provide additional
benefits to the Participant or his Beneficiary.
E. The Administrator may direct that voluntary contributions made after a
valuation date be segregated into a separate account until such time as
the allocations pursuant to this Plan have been made, at which time the
Administrator shall direct the amount attributable to the voluntary
contribution to remain segregated or be invested as part of the general
Trust Fund.
4.13 DIRECTED INVESTMENT ACCOUNT
A. If elected in the Adoption Agreement, all Participants may direct the
Trustee as to the investment of all or a portion of any one or more of
their individual account balances. Participants may direct the Trustee
in writing to invest their account in specific assets as permitted by the
Administrator provided such investments are in accordance with the
Department of Labor regulations and are permitted by the Plan. The
portion of an account a Participant directs as to the investment shall be
considered a Directed Investment Account.
B. A separate Directed Investment Account shall be established for each
Participant who has directed an investment. Transfers between the
Participant's regular account and their Directed Investment Account shall
be charged and credited as the case may be to each account. The Directed
Investment Account shall not share in Trust Fund Earnings, but it shall
be charged or credited as appropriate with the net earnings, gains,
losses and expenses as well as any appreciation or depreciation in market
value during each Plan Year attributable to such account.
C. The Administrator shall establish a procedure, to be applied in a uniform
and nondiscriminatory manner, setting forth the permissible investment
options under this Section, how often changes between investments may be
made, and any other limitations that the Administrator shall impose on a
Participant's right to direct investments.
4.14 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS
A. If this is an amendment to a Plan that previously permitted deductible
voluntary contributions, then each Participant who made a "Qualified
Voluntary Employee Contribution" within the meaning of Code Section
219(e)(2) as it existed prior to the enactment of the Tax Reform Act of
1986, shall have his contribution held in a separate Qualified Voluntary
Employee Contribution Account which shall be fully Vested at all times.
Such contributions, however, shall not be permitted if they are
attributable to taxable years beginning after December 31, 1986.
B. A Participant may, upon written request delivered to the Administrator,
make withdrawals from his Qualified Voluntary Employee Contribution
Account. Any distribution shall be made in a manner which is consistent
with and satisfies the provisions of Section 6.5, including, but not
limited to, all notice and consent requirements of Code Sections
411(a)(11) and 417 and the Regulations thereunder.
C. At Normal Retirement Date, or such other date when the Participant or his
Beneficiary shall be entitled to receive benefits, the fair market value
of the Qualified Voluntary Employee Contribution Account shall be used to
provide additional benefits to the Participant or his Beneficiary.
D. Unless the Administrator directs Qualified Voluntary Employee
Contributions made pursuant to this Section be segregated into a separate
account for each Participant, they shall be invested as part of the
general Trust Fund and share in earnings and losses.
ARTICLE V: VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary Date, and
at such other date or dates deemed necessary by the Administrator, herein
called "Valuation Date," to determine the net worth of the assets comprising
the Trust Fund as it exists on the "Valuation Date." In determining such
net worth, the Trustee shall value the assets comprising the Trust Fund at
their fair market value as of the "Valuation Date" and shall deduct all
expenses for which the Trustee has not yet obtained reimbursement from the
Employer or the Trust Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust Fund
which are listed on a registered stock exchange, the Administrator shall
direct the Trustee to value the same at the prices they were last traded on
such exchange preceding the close of business on the "Valuation Date." If
such securities were not traded on the "Valuation Date," or if the exchange
on which they are traded was not open for business on the "Valuation Date,"
then the securities shall be valued at the prices at which they were last
traded prior to the "Valuation Date." Any unlisted security held in the
Trust Fund shall be valued at its bid price next preceding the close of
business on the "Valuation Date," which bid price shall be obtained from a
registered broker or an investment banker. In determining the fair market
value of assets (other than securities for which trading or bid prices can
be obtained), the Trustee may appraise such assets itself, or in its
discretion, employ one or more appraisers for that purpose and rely on the
values established by such appraisers.
ARTICLE VI: DETERMINATION OF BENEFITS UPON RETIREMENT
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and retire
for the purposes hereof on or after his Normal Retirement Date or Early
Retirement Date. Upon such Normal Retirement Date or Early Retirement Date,
all amounts credited to such Participant's Combined Account shall become
distributable. However, a Participant may postpone the termination of his
employment with the Employer to a later date, in which event the
participation of such Participant in the Plan, including the right to
receive allocations pursuant to Section 4.4, shall continue until his Late
Retirement Date. Upon a Participant's Retirement Date, or as soon
thereafter as is practicable, the Administrator shall direct the
distribution of all amounts credited to such Participant's Combined Account
in accordance with Section 6.13, or, if this Plan permits annuities pursuant
to E14 of the Adoption Agreement, Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
A. Upon the death of a Participant before his Retirement Date or other
termination of his employment, all amounts credited to such Participant's
Combined Account shall become fully Vested. The Administrator shall
direct the distribution of the deceased Participant's accounts to the
Participant's Beneficiary, in accordance with the provisions of Section
6.13, or, if this Plan permits annuities pursuant to E14 of the Adoption
Agreement, Sections 6.6 and 6.7.
B. Upon the death of a Former Participant, the Administrator shall direct
the distribution of any remaining amounts credited to the accounts of
such deceased Former Participant to such Former Participant's
Beneficiary, in accordance with the provisions of Section 6.13, or, if
this Plan permits annuities pursuant to E14 of the Adoption Agreement,
Sections 6.6 and 6.7.
C. The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the value of
the account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
D. Unless otherwise elected in the manner prescribed in Section 6.6, the
Beneficiary of the Participant's benefits shall be the Participant's
spouse. Except, however, the Participant may designate a Beneficiary
other than his spouse if:
1. the Plan permits annuities, and the Participant and his spouse have
validly waived the Pre-Retirement Survivor Annuity in the manner
prescribed in Section 6.6, and the spouse has waived his or her right
to be the Participant's Beneficiary, or
2. the Plan does not permit annuities, and the spouse has waived his
right to be the Participant's Beneficiary in accordance with Section
6.5B, or
3. the Participant is legally separated or has been abandoned (within the
meaning of local law) and the Participant has a court order to such
effect (and there is no "qualified domestic relations order" as
defined in Code Section 414(p) which provides otherwise), or
4. the Participant has no spouse, or
5. the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made by the
Participant on a form satisfactory to the Administrator. A Participant
may at any time revoke his designation of a Beneficiary or change his
Beneficiary by filing written notice of such revocation or change with
the Administrator. However, the Participant's spouse must again consent
in writing to any change in Beneficiary unless the original consent
acknowledged that the spouse had the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elected to
relinquish such right. The Participant may, at any time, designate a
Beneficiary for death benefits payable under the Plan that are in excess
of the Pre-Retirement Survivor Annuity. In the event no valid
designation of Beneficiary exists at the time of the Participant's death,
the death benefit shall be payable to his estate.
E. If the Plan provides an insured death benefit and a Participant dies
before any insurance coverage to which he is entitled under the Plan is
effected, his death benefit from such insurance coverage shall be limited
to the standard rate premium which was or should have been used for such
purpose.
F. In the event of any conflict between the terms of this Plan and the terms
of any Contract issued hereunder, the Plan provisions shall control.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to his
Retirement Date or other termination of his employment, all amounts credited
to such Participant's Combined Account shall become fully Vested. In the
event of a Participant's Total and Permanent Disability, the Administrator
shall direct the distribution to such Participant of all amounts credited to
such Participant's Combined Account as though he had retired, in accordance
with the provisions of Section 6.13 or, if this Plan permits annuities
pursuant to E14 of the Adoption Agreement, then Sections 6.5 and 6.7.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
A. On or before the Anniversary Date coinciding with or subsequent to the
termination of a Participant's employment for any reason other than
retirement, death, or Total and Permanent Disability, the Administrator
may direct the Trustee to segregate the amount of the Vested portion of
such Terminated Participant's Combined Account and invest the aggregate
amount thereof in a separate, federally insured savings account,
certificate of deposit, common or collective trust fund of a bank or a
deferred annuity. In the event the Vested portion of a Participant's
Combined Account is not segregated, the amount shall remain in a separate
account for the Terminated Participant and share in allocations pursuant
to Section 4.4 until such time as a distribution is made to the
Terminated Participant. The amount of the portion of the Participant's
Combined Account which is not Vested may be credited to a separate
account (which will always share in gains and losses of the Trust) and at
such time as the amount becomes a Forfeiture shall be treated in
accordance with the provisions of the Plan regarding Forfeitures.
Regardless of whether distributions in kind are permitted, in the event
that the amount of the Vested portion of the Terminated Participant's
Combined account equals or exceeds the fair market value of any insurance
Contracts, the Trustee, when so directed by the Administrator and agreed
to by the Terminated Participant, shall assign, transfer, and set over to
such Terminated Participant all Contracts on his life in such form or
with such endorsements, so that the settlement options and forms of
payment are consistent with the provisions of Section 6.13 or, if this
Plan permits annuities, Section 6.5. In the event that the Terminated
Participant's Vested portion does not at least equal the fair market
value of the Contracts, if any, the Terminated Participant may pay over
to the Trustee the sum needed to make the distribution equal to the value
of the Contracts being assigned or transferred, or the Trustee, pursuant
to the Participant's election, may borrow the cash value of the Contracts
from the Insurer so that the value of the Contracts is equal to the
Vested portion of the Terminated Participant's Combined Account and then
assign the Contracts to the Terminated Participant.
Distribution of the funds due to a Terminated Participant shall be made
on the occurrence of an event which would result in the distribution had
the Terminated Participant remained employed by the Employer (upon the
Participant's death, Total and Permanent Disability, Early or Normal
Retirement). However, at the election of the Participant, the
Administrator shall direct that the entire Vested portion of the
Terminated Participant's Combined Account be distributed to such
Terminated Participant provided the conditions, if any, set forth in the
Adoption Agreement have been satisfied. Any distribution under this
paragraph shall be made in a manner which is consistent with and
satisfies the provisions of Section 6.13 or, if this Plan permits
annuities, then Section 6.5, including but not limited to, all notice and
consent requirements of Code Sections 411(a)(11) and 417 and the
Regulations thereunder.
Notwithstanding the above, if the value of a Terminated Participant's
Vested benefit derived from Employer and Employee contributions does not
exceed, and has never exceeded $3,500 at any time, the Administrator
shall direct the entire Vested benefit be paid to such Participant in a
single lump-sum without regard to the consent of the Participant or the
Participant's spouse. A Participant's Vested benefit shall not include
Qualified Voluntary Employee Contributions within the meaning of Code
Section 72(o)(5)(B) for Plan Years beginning prior to January 1, 1989.
B. The Vested portion of any Participant's Account shall be a percentage of
such Participant's Account determined on the basis of the Participant's
number of Years of Service according to the vesting schedule specified in
the Adoption Agreement.
C. For any Top Heavy Plan Year, one of the minimum Top Heavy vesting
schedules as elected by the Employer in the Adoption Agreement will
automatically apply to the Plan. The minimum Top Heavy vesting schedule
applies to all benefits within the meaning of Code Section 411(a)(7)
except those attributable to Employee Contributions, including benefits
accrued before the effective date of Code Section 416 and benefits
accrued before the Plan became Top Heavy. Further, no decrease in a
Participant's Vested percentage may occur in the event the Plan's status
as Top Heavy changes for any Plan Year. However, this Section does not
apply to the account balances of any Employee who does not have an Hour
of Service after the Plan has initially become Top Heavy and the Vested
percentage of such Employee's Participant's Account shall be determined
without regard to this Section 6.4C.
If any subsequent Plan Year, the Plan ceases to be a Top Heavy Plan, the
Administrator shall continue to use the vesting schedule in effect while
the Plan was a Top Heavy Plan for each Employee who had an Hour of
Service during a Plan Year when the Plan was Top Heavy.
D. Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer's contributions to the Plan or upon any
full or partial termination of the Plan, all amounts credited to the
account of any affected Participant shall become 100% Vested and shall
not thereafter be subject to Forfeiture.
E. If this is an amended or restated Plan, then notwithstanding the vesting
schedule specified in the Adoption Agreement, the Vested percentage of a
Participant's Account shall not be less than the Vested percentage
attained as of the later of the effective date or adoption date of this
amendment and restatement. The computation of a Participant's
nonforfeitable percentage of his interest in the Plan shall not be
reduced as the result of any direct or indirect amendment to this
Article, or due to changes in the Plan's status as a Top Heavy Plan.
F. If the Plan's vesting schedule is amended, or if the Plan is amended in
any way that directly or indirectly affects the computation of the
Participant's nonforfeitable percentage or if the Plan is deemed amended
by an automatic change to a Top Heavy vesting schedule, then each
Participant with at least 3 Years of Service as of the expiration date of
the election period may elect to have his nonforfeitable percentage
computed under the Plan without regard to such amendment or change.
Notwithstanding the foregoing, for Plan Years beginning before January 1,
1989, or with respect to Employees who fail to complete at least one (1)
Hour of Service in a Plan Year beginning after December 31, 1988, five
(5) shall be substituted for three (3) in the preceding sentence. If a
Participant fails to make such election, then such Participant shall be
subject to the new vesting schedule. The Participant's election period
shall commence on the adoption date of the amendment and shall end 60
days after the latest of:
1. the adoption date of the amendment,
2. the effective date of the amendment, or
3. the date the Participant receives written notice of the amendment from
the Employer or Administrator.
G. If any Former Participant shall be reemployed by the Employer before a 1-
Year Break in Service occurs, he shall continue to participate in the
Plan in the same manner as if such termination had not occurred.
H. If any Former Participant shall be reemployed by the Employer before five
(5) consecutive 1-Year Breaks in Service, and such Former Participant had
received a distribution of his entire Vested interest prior to his
reemployment, his forfeited account shall be reinstated only if he repays
the full amount distributed to him before the earlier of five (5) years
after the first date on which the Participant is subsequently reemployed
by the Employer or the close of the first period of 5 consecutive 1-Year
Breaks in Service commencing after the distribution. In the event the
Employee does repay the full amount distributed to him, the undistributed
portion of the Participant's Account, which was previously forfeited,
must be restored in full, unadjusted by any gains or losses occurring
subsequent to the Anniversary Date or any other Valuation Date subsequent
to his termination. If a non-Vested Former Participant was deemed to
have received a distribution and such Former Participant is reemployed by
the Employer before five (5) consecutive 1-Year Breaks in Service, then
such Participant will be deemed to have repaid the deemed distribution as
of the date of reemployment.
I. If any Former Participant is reemployed after a 1-Year Break in Service
has occurred, Years of Service shall include Years of Service prior to
his 1-Year Break in Service subject to the following rules:
1. Any Former Participant who under the Plan does not have a
nonforfeitable right to any interest in the Plan resulting from
Employer contributions shall lose credits if his consecutive 1-Year
Breaks in Service equal or exceed the greater of (a) five (5) or (b)
the aggregate number of his pre-break Years of Service;
2. After five (5) consecutive 1-Year Breaks in Service, a Former
Participant's Vested Account balance attributable to pre-break service
shall not be increased as a result of post-break service;
3. A Former Participant who is reemployed and who has not had his Years
of Service before a 1-Year Break in Service disregarded pursuant to 1.
above, shall participate in the Plan as of his date of reemployment;
4. If a Former Participant completes a Year of Service (a 1-Year Break in
Service previously occurred, but employment had not terminated), he
shall participate in the Plan retroactively from the first day of the
Plan Year during which he completes one (1) Year of Service.
J. In determining Years of Service for purposes of Vesting under the Plan,
Years of Service shall be excluded as specified in the Adoption
Agreement.
6.5 DISTRIBUTION OF BENEFITS
A. If annuities are not permitted pursuant to E14 of the Adoption Agreement,
then distributions shall be made in accordance with Section 6.13. If
annuities are permitted, then unless otherwise elected as provided below,
a Participant who is married on the "annuity starting date" and who does
not die before the "annuity starting date" shall receive the value of all
of his benefits in the form of a Joint and Survivor Annuity. The Joint
and Survivor Annuity is an annuity that commences immediately and shall
be equal in value to a single life annuity. Such joint and survivor
benefits following the Participant's death shall continue to the spouse
during the spouse's lifetime at a rate equal to 50% of the rate at which
such benefits were payable to the Participant. This Joint and Survivor
Annuity shall be considered the designated qualified Joint and Survivor
Annuity and automatic form of payment for the purposes of this plan.
However, the Participant may elect to receive a smaller annuity benefit
with continuation of payments to the spouse at a rate of seventy-five
percent (75%) or one hundred percent (100%) of the rate payable to a
Participant during his lifetime which alternative Joint and Survivor
Annuity shall be equal in value to the automatic Joint and 50% Survivor
Annuity. An unmarried Participant shall receive the value of his benefit
in the form of a life annuity. Such unmarried Participant, however, may
elect in writing to waive the life annuity. The election must comply
with the provisions of this Section as if it were an election to waive
the Joint and Survivor Annuity by a married Participant, but without the
spousal consent requirement. The Participant may elect to have any
annuity provided for in this Section distributed upon the attainment of
the "earliest retirement age" under the Plan. The "earliest retirement
age" is the earliest date on which, under the Plan, the Participant could
elect to receive retirement benefits.
B. Any election to waive the Joint and Survivor Annuity, Pre-Retirement
Survivor Annuity (Section 6.6), or to change the Beneficiary must be made
by the Participant in writing during the election period and, if the
Participant is married, then it must be consented to by the Participant's
spouse. If the spouse is legally incompetent to give consent, the
spouse's legal guardian, even if such guardian is the Participant, may
give consent as follows:
1. A waiver of Joint and Survivor Annuity or Pre-Retirement Survivor
Annuity shall designate a specific form of benefits in accordance with
Section 6.5E, that may not be changed without spousal consent (unless
the consent of the spouse expressly permits designations by the
Participant without the requirement of further consent by the spouse).
2. A designation of a married Participant's Beneficiary other then his
spouse shall designate a specific non-spouse Beneficiary.
Notwithstanding the preceding sentence, the non-spouse Beneficiary
need not be acknowledged, provided the consent of the spouse
acknowledges that the spouse has the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elects to
relinquish such right.
Such spouse's consent shall be irrevocable and must acknowledge the
effect of such election and be witnessed by a Plan representative or a
notary public. The above consent shall not be required if it is
established to the satisfaction of the Administrator that the required
consent cannot be obtained because there is no spouse, the spouse cannot
be located, or other circumstances that may be prescribed by Regulations.
The election made by the Participant and consented to by his spouse may
be revoked by the Participant in writing without the consent of the
spouse at any time during the election period. The number of revocations
shall not be limited. Any new election must comply with the requirements
of this paragraph. A former spouse's waiver shall not be binding on a
new spouse.
C. The election period to waive the Joint and Survivor Annuity shall be the
90-day period ending on the "annuity starting date." For purposes of
this Section and Section 6.6, the "annuity starting date" means the first
day of the first period for which an amount is payable as an annuity, or,
in the case of a benefit not payable in the form of an annuity, the first
day on which all events have occurred which entitles the Participant to
such benefit.
D. With regard to the election, the Administrator shall provide to the
Participant no less than 30 days and no more than 90 days before the
"annuity starting date" a written explanation of:
1. the terms and conditions of the Joint and Survivor Annuity, and
2. the Participant's right to make and the effect of an election to waive
the Joint and Survivor Annuity, and
3. the right of the Participant's spouse to consent to any election to
waive the Joint and Survivor Annuity, and
4. the right of the Participant to revoke such election, and the effect
of such revocation.
E. In the event this Plan does not permit annuities pursuant to E14 of the
Adoption Agreement, or a Participant duly elects pursuant to paragraph
6.5B. above not to receive his benefit in the form of a Joint and
Survivor Annuity if the participant is married, or in the form of a life
annuity if the participant is unmarried, the Administrator, pursuant to
the election of the Participant, shall direct the distribution to a
Participant or his Beneficiary any amount to which he is entitled under
the Plan in one or more of the following methods subject to the rules
specified in Section 6.5I., J., K., and L., and the selections made in
E14 of the Adoption Agreement.
1. One lump-sum payment in cash or in property;
2. Payments over a period certain in monthly, quarterly, semiannual, or
annual cash installments. In order to provide such installment
payments, the Administrator may direct that the Participant's interest
in the Plan be segregated and invested separately, and that the funds
in the segregated account be used for the payment of the installments.
The period over which such payment is to be made shall not extend
beyond the Participant's life expectancy (or the life expectancy of
the Participant and his designated Beneficiary);
3. Purchase of or providing an annuity. However, such annuity may not be
in any form that will provide for payments over a period extending
beyond either the life of the Participant (or the lives of the
Participant and his designated Beneficiary) or the life expectancy of
the Participant (or the life expectancy of the Participant and his
designated Beneficiary).
F. The present value of a Participant's Joint and Survivor Annuity derived
from Employer and Employee contributions may not be paid without his
written consent if the value exceeds, or has ever exceeded at any time,
$3,500. Further, if the participant's consent is required, the spouse of
a Participant also must consent in writing to any immediate distribution.
If the value of the Participant's benefit derived from Employer and
Employee contributions does not exceed, and has never exceeded $3,500,
the Administrator may immediately distribute such benefit without such
Participant's consent. No distribution may be made under the preceding
sentence after the "annuity starting date" unless the Participant and his
spouse consent in writing to such distribution. Any written consent
required under this paragraph must be obtained not more than 90 days
before commencement of the distribution and shall be made in a manner
consistent with Section 6.5B.
G. Any distribution to a Participant who has a benefit which exceeds, or has
ever exceeded at any time, $3,500, shall require such Participant's
consent if such distribution commences prior to the later of his Normal
Retirement Age or age 62. With regard to this required consent:
1. No consent shall be valid unless the Participant has received a
general description of the material features and an explanation of the
relative values of the optional forms of benefit available under the
Plan that would satisfy the notice requirements of Code Section 417.
2. The Participant must be informed of his right to defer receipt of the
distribution. If a Participant fails to consent, it shall be deemed
an election to defer the commencement of payment of any benefit.
However, any election to defer the receipt of benefits shall not apply
with respect to distributions which are required under Section 6.5H.
3. Notice of the rights specified under this paragraph shall be provided
no less than 30 days and no more than 90 days before the "annuity
starting date."
4. Written consent of the Participant to the distribution must not be
made before the Participant receives the notice and must not be made
more than 90 days before the "annuity starting date."
5. No consent shall be valid if a significant detriment is imposed under
the Plan on any Participant who does not consent to the distribution.
H. Notwithstanding any provision in the Plan to the contrary, the
distribution of a Participant's benefits, made on or after January 1,
1985, whether under the Plan or through the purchase of an annuity
Contract, shall be made in accordance with the following requirements and
shall otherwise comply with Code Section 401(a)(9) and the Regulations
thereunder (including Regulation Section 1.401(a)(9)-2), the provisions
of which are incorporated herein by reference:
A Participant's shall begin to have benefits distributed to him not later
than April 1st of the calendar year following the calendar year in which
the Participant attains age 70 1/2.
However, if a Participant had attained age 70 1/2 before January 1, 1988,
then benefits shall begin as determined below:
1. If the Participant is not a 5 percent owner, then benefits shall be
distributed beginning the first day of April of the calendar year in
which the later of retirement, or attainment of age 70 1/2 occurs.
2. If the Participant is a 5 percent owner, then benefits shall be
distributed beginning the first day of April following the later of;
a. the calendar year in which the participant attains age 70 1/2, or
b. the earlier of the calendar year within which, ends the plan year,
in which the participant becomes a 5 percent owner, or the calendar
year in which the participant retires.
However, if a Participant who is not a 5 percent owner attained age 70
1/2 during 1988, and is not retired, then the Participant's benefits
shall begin April 1, 1990.
For purposes of this section, a 5 percent owner shall be any participant
who is considered a 5 percent owner as defined in Code Section 416(i) at
any time during the plan year ending with or within the calendar year in
which such owner attains age 66 1/2 or any subsequent plan year. Once
distributions have begun under this section, they must continue to be
distributed, even if the participant ceases to be a 5 percent owner in a
subsequent year.
Distributions to a Participant must begin no later than the applicable
April 1st as determined under the preceding paragraphs and must be made
over the life of the Participant (or the lives of the Participant and the
Participant's designated Beneficiary) or, if benefits are paid in the
form of a Joint and Survivor Annuity, the life expectancy of the
Participant (or the life expectancies of the Participant and his
designated Beneficiary) in accordance with Regulations.
Distributions to a Participant and his Beneficiaries shall only be
made in accordance with the incidental death benefit requirements of
Code Section 401(a)(9)(G) and the Regulations thereunder.
Additionally, for calendar years beginning before 1989, distributions
also may be made under an alternative method which provides that the
then present value of the payments to be made over the period of the
Participant's life expectancy exceeds fifty percent (50%) of the then
present value of the total payments to be made to the Participant and
his Beneficiaries.
I. For purposes of this Section, the life expectancy of a Participant and a
Participant's spouse (other than in the case of a life annuity) shall be
redetermined annually in accordance with Regulations if permitted
pursuant to the Adoption Agreement. If the Participant or the
Participant's spouse may elect whether recalculations will be made, then
the election, once made, shall be irrevocable. If no election is made by
the time distributions must commence, then the life expectancy of the
Participant and the Participant's spouse shall not be subject to
recalculation. Life expectancy and joint and last survivor expectancy
shall be computed using the return multiples in Tables V and VI of
Regulation 1.72-9.
J. All annuity Contracts under this Plan shall be non-transferable when
distributed. Furthermore, the terms of any annuity Contract purchased
and distributed to a Participant or spouse shall comply with all of the
requirements of this Plan.
K. Subject to the spouse's right of consent afforded under the Plan, the
restrictions imposed by this Section shall not apply if a Participant
has, prior to January 1, 1984, made a written designation to have his
retirement benefit paid in an alternative method acceptable under Code
Section 401(a)(9) as in effect prior to the enactment of the Tax Equity
and Fiscal Responsibility Act of 1982. Such written designation must
comply with Section 242(b) of the Tax Equity and Fiscal Responsibility
Act of 1982, which is hereby incorporated by reference;
1. The distribution by the trust is one which would not have disqualified
such trust under Code Section 401(a)(9) of the Internal Revenue Code
as in effect prior to amendment by the Deficit Reduction Act of 1984.
2. The distribution is in accordance with a method of distribution
designated by the employee whose interest in the trust is being
distributed or, if the employee is deceased, by a beneficiary of such
employee.
3. Such designation was in writing, and was signed by the employee or the
beneficiary, and was made before January 1, 1984.
4. The employee must have accrued a benefit under the plan as of December
31, 1983.
5. The method of distribution designated by the employee or the
beneficiary specifies the time at which distribution will commence,
the period over which distributions will be made, and in the case of
any distribution upon the employee's death, the beneficiaries of the
employee listed in order of priority.
L. If a distribution is made when a Participant who has not terminated
employment is not fully Vested in his Participant's Account, and the
Participant may increase the Vested percentage in such account, then:
1. A separate account shall be established for the Participant's interest
in the Plan as of the time of the distribution, and
2. The Participant's Vested portion of the separate account shall be
equal to an amount ("X") determined by the formula:
X equals P(AB plus (RxD) ) - (R x D)
For purposes of applying the formula: P is the Vested percentage, AB
is the account balance, D is the amount of distribution, and R is the
ratio of the account balance to the account balance after
distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
A. If annuities are not permitted pursuant to E14 of the Adoption Agreement,
then Sections 6.13 and 6.2 shall apply. If annuities are permitted
pursuant to E14 of the Adoption Agreement, then unless otherwise elected
as provided below, then a Vested Participant who dies before the annuity
starting date and who has a surviving spouse shall have the Pre-
Retirement Survivor Annuity paid to his surviving spouse. The
Participant's spouse may direct that payment of the Pre-Retirement
Survivor Annuity commence within a reasonable period after the
Participant's death. If the spouse does not so direct, payment of such
benefit will commence at the time the Participant would have attained the
later of his Normal Retirement Age or age 62. However, the spouse may
elect a later commencement date. Any distribution to the Participant's
spouse shall be subject to the rules specified in Section 6.6H.
B. Any election to waive the Pre-Retirement Survivor Annuity or designate a
non-spouse Beneficiary before the Participant's death must be made by the
Participant in writing during the election period and shall require the
spouse's irrevocable consent in the same manner provided for in Section
6.5B. However, the Participant may, at any time, designate a Beneficiary
for death benefits under the Plan that are in excess of the Pre-
Retirement Survivor Annuity.
C. The election period to waive the Pre-Retirement Survivor Annuity shall
begin on the first day of the Plan Year in which the Participant attains
age 35 and end on the date of the Participant's death. An earlier waiver
(with spousal consent) may be made provided a written explanation of the
Pre-Retirement Survivor annuity is given to the Participant and such
waiver becomes invalid at the beginning of the Plan Year in which the
Participant turns age 35. In the event a Vested Participant separates
from service prior to the beginning of the election period, the election
period shall begin on the date of such separation from service.
D. With regard to the election, the Administrator shall provide each
Participant within the applicable period, with respect to such
Participant (and consistent with Regulations), a written explanation of
the Pre-Retirement Survivor Annuity containing comparable information to
that required pursuant to Section 6.5D. For the purposes of this
paragraph, the term "applicable period" means, with respect to a
Participant, whichever of the following periods ends last:
1. The period beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35;
2. A reasonable period after the individual becomes a Participant. For
this purpose, in the case of an individual who becomes a Participant
after age 32, the explanation must be provided by the end of the
three-year period beginning with the first day of the first Plan Year
in which the individual becomes a Participant;
3. A reasonable period ending after the Plan no longer fully subsidizes
the cost of the Pre-Retirement Survivor Annuity with respect to the
Participant;
4. A reasonable period ending after Code Section 401(a)(11) applies to
the Participant; or
5. A reasonable period after separation from service in the case of a
Participant who separates before attaining age 35. For this purpose,
the Administrator must provide the explanation during the period
beginning one year before the separation from service and ending one
year after separation.
E. The Pre-Retirement Survivor Annuity provided for in this Section shall
apply only to Participants who are credited with an Hour of Service on or
after August 23, 1984. Former Participants who are not credited with an
Hour of Service on or after August 23, 1984 shall be provided with rights
to the Pre-Retirement Survivor Annuity in accordance with Section
303(e)(2) of the Retirement Equity Act of 1984.
F. If the value of the Pre-Retirement Survivor Annuity derived from Employer
and Employee contributions does not exceed $3,500 at any time prior to
any distribution, then the Administrator shall direct the immediate
distribution of such amount to the Participant's spouse. No distribution
may be made under the preceding sentence after the annuity starting date
unless the spouse consents in writing. If the value exceeds, or has ever
exceeded at any time, $3,500, then an immediate distribution of the
entire amount may be made to the surviving spouse, provided such
surviving spouse consents in writing to such distribution. Any written
consent required under this paragraph must be obtained not more than 90
days before commencement of the distribution and shall be made in a
manner consistent with Section 6.5B.
G. In the event that this Plan does not permit annuities pursuant to E14 of
the Adoption Agreement, or there is an election to waive the Pre-
Retirement Survivor Annuity, and for death benefits in excess of the Pre-
Retirement Survivor Annuity, such death benefits shall be paid to the
Participant's Beneficiary by either of the following methods, as elected
by the Participant (or if no election has been made prior to the
Participant's death, by his Beneficiary) subject to the rules specified
in Sections 6.6H., I., J., K., L., and M., and the selections made in the
Adoption Agreement:
1. One lump-sum payment in cash or in property;
2. Payment in monthly, quarterly, semi-annual, or annual cash
installments over a period to be determined by the Participant or his
Beneficiary. After periodic installments commence, the Beneficiary
shall have the right to reduce the period over which such periodic
installments shall be made, and the cash amount of such periodic
installments shall be adjusted accordingly.
3. If death benefits in excess of the Pre-Retirement Survivor Annuity are
to be paid to the surviving spouse, such benefits may be paid pursuant
to 1. or 2. above, or used to purchase an annuity in order to increase
the payments made pursuant to the Pre-Retirement Survivor Annuity;
H. In the event the death benefit payable pursuant to Section 6.2 is payable
in installments, then, upon the death of the Participant, the
Administrator may direct that the death benefit be segregated and
invested separately, and that the funds accumulated in the segregated
account be used for the payment of the installments.
I. Notwithstanding any provision in the Plan to the contrary, distributions
upon the death of a Participant made on or after January 1, 1985, shall
be made in accordance with the following requirements and shall otherwise
comply with Code Section 401(a)(9) and the Regulations thereunder.
1. If it is determined, pursuant to Regulations, that the distribution of
a Participant's interest has begun and the Participant dies before his
entire interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as under the
method of distribution selected pursuant to Section 6.5 as of his date
of death.
2. If a Participant dies before he has begun to receive any distributions
of his interest in the Plan or before distributions are deemed to have
begun pursuant to Regulations, then his death benefit shall be
distributed to his Beneficiaries in accordance with the following
rules subject to the selections made in the Adoption Agreement and
Subsections 6.6I.3. and 6.6J. below:
a. The entire death benefit shall be distributed to the Participant's
Beneficiaries by December 31 of the calendar year in which the
fifth anniversary of the Participant's death occurs;
b. The 5-year distribution requirement of a. above shall not apply to
any portion of the deceased Participant's interest which is payable
to or for the benefit of a designated Beneficiary. In such event,
such portion shall be distributed over the life of such designated
Beneficiary (or over a period not extending beyond the life
expectancy of such designated Beneficiary) provided such
distribution begins not later than December 31 of the calendar year
immediately following the calendar year in which the Participant
died;
c. However, in the event the Participant's spouse (determined as of
the date of the Participant's death) is his designated Beneficiary,
the provisions of b. above shall apply except that the requirement
that distributions commence within one year of the Participant's
death shall not apply. In lieu thereof, distributions must
commence on or before the later of: (1) December 31 of the calendar
year immediately following the calendar year in which the
Participant died; or (2) December 31 of the calendar year in which
the Participant would have attained age 70 1/2. If the surviving
spouse dies before distributions to such spouse begin, then the 5-
year distribution requirement of this Section shall apply as if the
spouse was the Participant.
3. Notwithstanding subparagraph 2. above, or any selections made in the
Adoption Agreement, if a Participant's death benefits are to be paid
in the form of a Pre-Retirement Survivor Annuity, then distributions
to the Participant's surviving spouse must commence on or before the
later of: (a) December 31 of the calendar year immediately following
the calendar year in which the Participant died; or (b) December 31 of
the calendar year in which the Participant would have attained age 70
1/2.
J. For purposes of Section 6.6I.2., the election by a designated Beneficiary
to be excepted from the 5-year distribution requirement (if permitted in
the Adoption Agreement) must be made no later than December 31 of the
calendar year following the calendar year of the Participant's death.
Except, however, with respect to a designated Beneficiary who is the
Participant's surviving spouse, the election must be made by the earlier
of: (1) December 31 of the calendar year immediately following the
calendar year in which the Participant died or, if later, the calendar
year in which the Participant would have attained age 70 1/2; or (2)
December 31 of the calendar year which contains the fifth anniversary of
the date of the Participant's death. An election by a designated
Beneficiary must be in writing and shall be irrevocable as of the last
day of the election period stated herein. In the absence of an election
by the Participant or a designated Beneficiary, the 5-year distribution
requirement shall apply.
K. For purposes of this Section, the life expectancy of a Participant and a
Participant's spouse (other than in the case of a life annuity) shall or
shall not be redetermined annually as provided in the Adoption Agreement
and in accordance with Regulations. If the Participant or the
Participant's spouse may elect, pursuant to the Adoption Agreement, to
have life expectancies recalculated, then the election, once made shall
be irrevocable. If no election is made by the time distributions must
commence, then the life expectancy of the Participant and the
Participant's spouse shall not be subject to recalculation. Life
expectancy and joint and last survivor expectancy shall be computed using
the return multiples in Tables V and VI of Regulation Section 1.72-9.
L. In the event that less than 100% of a Participant's interest in the Plan
is distributed to such Participant's spouse, the portion of the
distribution attributable to the Participant's Voluntary Contribution
Account shall be in the same proportion that the Participant's Voluntary
Contribution Account bears to the Participant's total interest in the
Plan.
M. Subject to the spouse's right of consent afforded under the Plan, the
restrictions imposed by this Section shall not apply if a Participant
has, prior to January 1, 1984, made a written designation to have his
death benefits paid in an alternative method acceptable under Code
Section 401(a) as in effect prior to the enactment of the Tax Equity and
Fiscal Responsibility Act of 1982.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever a distribution is to be
made, or a series of payments are to commence, on or as of an Anniversary
Date, the distribution or series of payments may be made or begun on such
date or as soon thereafter as is practicable, but in no event later than 180
days after the Anniversary Date. However, unless a Former Participant
elects in writing to defer the receipt of benefits (such election may not
result in a death benefit that is more than incidental), the payment of
benefits shall begin not later than the 60th day after the close of the Plan
Year in which the latest of the following events occurs: (a) the date on
which the Participant attains the earlier of age 65 or the Normal Retirement
Age specified herein; (b) the 10th anniversary of the year in which the
Participant commenced participation in the Plan; or (c) the date the
Participant terminates his service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and, if
applicable, the Participant's spouse, to consent to a distribution pursuant
to Section 6.5G., shall be deemed to be an election to defer the
commencement of payment of any benefit and shall satisfy this Section.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the Administrator
may direct that such distribution be paid to the legal guardian, or if none,
to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such
Beneficiary under the Uniform Gift to Minors Act or Gift to Minors Act, if
such is permitted by the laws of the state in which said Beneficiary
resides. Such a payment to the legal guardian, custodian or parent of a
minor Beneficiary shall fully discharge the Trustee, Employer, and Plan from
further liability on account thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain
unpaid solely by reason of the inability of the Administrator, after sending
a registered letter, return receipt requested, to the last known address,
and after further diligent effort, to ascertain the whereabouts of such
Participant or his Beneficiary, the amount so distributable shall be subject
to State escheat laws. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored,
first from Forfeitures, if any, and then from an additional Employer
contribution if necessary.
6.10 PRE-RETIREMENT DISTRIBUTION
If elected in the Adoption agreement, at such time as a Participant shall
have attained the age specified in the Adoption Agreement, the
Administrator, at the election of the Participant, shall direct the Trustee
to distribute up to the entire amount then credited to the accounts
maintained on behalf of the Participant. However, no such distribution may
be made to any Participant unless his Participant's Account has become fully
Vested. In the event that the Administrator makes such a distribution, the
Participant shall continue to be eligible to participate in the Plan on the
same basis as any other Employee. Any distribution made pursuant to this
Section shall be made in a manner consistent with Section 6.13, or, if
annuities are permitted pursuant to E14 of the Adoption Agreement, Section
6.5, including, but not limited to, all notice and consent requirements
required by Code Sections 411(a)(11) and 417 and the Regulations thereunder.
Notwithstanding the above, pre-retirement distributions from a Participant's
Elective Account and Qualified Non-Elective Account shall not be permitted
prior to the Participant's attaining 59 1/2 except as otherwise permitted
under the terms of the Plan.
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
A. If allowed in the Adoption Agreement, the Administrator, at the election
of the Participant, shall direct the Trustee to distribute to any
Participant in any one Plan Year up to the lesser of (1) 100% of his
accounts as specified in the Adoption Agreement valued as of the last
Anniversary Date or other valuation date or (2) the amount necessary to
satisfy the immediate and heavy financial need of the Participant. Any
distribution made pursuant to this Section shall be deemed to be made as
of the first day of the Plan Year or, if later, the valuation date
immediately preceding the date of distribution, and the account from
which the distribution is made shall be reduced accordingly. Withdrawal
under this Section shall be authorized only if the distribution is on
account of one of the following or any other items permitted by the
Internal Revenue Service:
1. Medical expenses described in Code Section 213(d) incurred by the
Participant, his spouse, or any of his dependents (as defined in Code
Section 152) or expenses necessary for these persons to obtain medical
care;
2. The purchase (excluding mortgage payments) of a principal residence
for the Participant;
3. Funeral expenses for a member of the Participant's family;
4. Payment of tuition and related educational fees for the next 12 months
of post-secondary eduction for the Participant, their spouse,
children, or dependents; or
5. The need to prevent the eviction of the Participant from his principal
residence or foreclosure on the mortgage of the Participant's
principal residence.
6. The Commissioner may expand the list of deemed immediate and
heavy financial needs and may prescribe additional methods
for distributions to be deemed necessary to satisfy an
immediate and heavy financial need only in revenue rulings,
notices and other documents of general applicability.
B. No such distribution shall be made from the Participant's Account until
such Account has become fully Vested.
C. No distribution shall be made pursuant to this Section unless the
Administrator, based upon the Participant's representation and such other
facts as are known to the Administrator, determines that all of the
following conditions are satisfied:
1. The distribution is not in excess of the amount of the immediate and
heavy financial need of the Participant. The amount of the immediate
and heavy financial need may include any amounts necessary to pay any
federal, state or local income taxes or penalties reasonably
anticipated to result from the distribution;
2. The Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans currently available under all
plans maintained by the Employer;
3. The Plan, and all other plans maintained by the Employer, provide that
the Participant's elective deferrals and voluntary Employee
contributions will be suspended for at least twelve (12) months after
receipt of the hardship distribution; and
4. The Plan, and all other plans maintained by the Employer, provide that
the Participant may not make elective deferrals for the Participant's
taxable year immediately following the taxable year of the hardship
distribution in excess of the applicable limit under Code Section
402(g) for such next taxable year less the amount of such
Participant's elective deferrals for the taxable year of the hardship
distribution.
D. Notwithstanding the above, distributions from the Participant's Elective
Account and Qualified Non-Elective Account pursuant to this Section shall
be limited solely to the Participant's Deferred Compensation.
Notwithstanding the foregoing, any income attributable to the
Participant's Elective Account and credited to such account as of
December 31, 1988 may be distributed.
E. Any distribution made pursuant to this Section shall be made in a manner
which is consistent with and satisfies the provisions of Section 6.5,
including, but not limited to, all notice and consent requirements of
Code Sections 411(a)(11) and 417 and the Regulations thereunder.
6.12 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
All rights and benefits, including elections, provided to a Participant in
this Plan shall be subject to the rights afforded to any "alternate payee"
under a "qualified domestic relations order." Furthermore, a distribution
to an "alternate payee" shall be permitted if such distribution is
authorized by a "qualified domestic relations order," even if the affected
Participant has not reached the "earliest retirement age" under the Plan.
For the purposes of this Section, "alternate payee," "qualified domestic
relations order" and "earliest retirement age" shall have the meaning set
forth under Code Section 414(p).
6.13 SPECIAL RULE FOR NON-ANNUITY PLANS
If elected in the Adoption Agreement, the following shall apply to a
Participant in a Profit Sharing Plan and to any distribution, made on or
after the first day of the first plan year beginning after December 31,
1988, from or under a separate account attributable solely to accumulated
deductible employee contributions, as defined in Code Section 72(o)(5)(B),
and maintained on behalf of a participant in a money purchase pension plan,
(including a target benefit plan):
A. The Participant shall be prohibited from electing benefits in the form of
a life annuity;
B. Upon the death of the Participant, the Participant's entire Vested
account balances will be paid in accordance with Sections 6.2 and 6.6G,
and
C. Upon termination, retirement, or disability, the Participant's Vested
account balance will be paid in accordance with Sections 6.5E. and 6.7.
D. Except to the extent otherwise provided in this Section and Section
6.5H., then the other provisions of Sections 6.5 and 6.6 shall be
inoperative with respect to this Plan.
This Section shall not apply to any Participant if it is determined that
this Plan is a direct or indirect transferee of a defined benefit plan or
money purchase pension plan, or a target benefit plan, stock bonus or profit
sharing plan which would otherwise provide for a life annuity form of
payment to the Participant.
6.14 DIRECT ROLLOVER DISTRIBUTIONS
This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the plan to the contrary that would
otherwise limit a Distributee's election under this Section, a Distributee
may elect, at the time and in the manner prescribed by the plan
administrator, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover.
1. Eligible Rollover Distribution: An Eligible Rollover Distribution is any
distribution of all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution does not
include: (a) any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the Distributee or the joint lives (or joint
life expectancies) of the Distributee and the Distributee's designated
beneficiary, or for a specified period of ten years or more; (b) any
distribution to the extent such distribution is required under section
401(a)(9) of the Coder; and (c) the portion of any distribution that is
not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect the employer
securities).
2. Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an annuity
plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an Eligible
Rollover Distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual retirement
annuity.
3. Distributee: A Distributee includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse, the
employee's or former employee's spouse or former spouse who is the
alternate payee under a Qualified Domestic Relations Order, as defined in
section 414(p) of the Code, are Distributees with regard to the interest
of the spouse or former spouse.
4. Direct Rollover: A Direct Rollover is a payment by the plan to the
eligible retirement plan specified by the Distributee.
Notwithstanding the above, if a distribution is one to which sections 401(a)
and 417 of the Code do not apply, such distribution may commence less than
30 days after the notice required under Section 1.411(a)-11(c) of the Income
Tax Regulations is given, provided that:
1. the Plan Administrator clearly informs the participant that the
participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a
distribution (and if applicable, a particular distribution option), and
2. the participant, after receiving the notice, affirmatively elects a
distribution.
ARTICLE VII: TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
A. Consistent with the "funding policy and method" determined by the
Employer to invest, manage, and control the Plan assets subject, however,
to the direction of an Investment Manager if the Employer should appoint
such manager as to all or a portion of assets of the Plan;
B. At the direction of the Administrator, to pay benefits required under the
Plan to be paid to Participants, or, in the event of their death, to
their Beneficiaries;
C. To maintain records of receipts and disbursements and furnish to the
Employer and/or Administrator for each Plan Year a written annual report
per Section 7.7; and
D. If there shall be more than one Trustee, they shall act by a majority of
their number, but may authorize one or more of them to sign papers on
their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
A. The Trustee shall invest and reinvest the Trust Fund without distinction
between principal and income and in such securities or property, real or
personal, wherever situated, as the Trustee shall deem advisable,
including, but not limited to, stocks, common or preferred, bonds and
other evidences of indebtedness or ownership, and real estate or any
interest therein. The Trustee shall at all times in making investments
of the Trust Fund consider, among other factors, the short and long-term
financial needs of the Plan on the basis of information furnished by the
Employer. In making such investments, the Trustee shall not be
restricted to securities or other property of the character expressly
authorized by the applicable law for trust investments; however, the
Trustee shall give due regard to any limitations imposed by the Code or
the act so that at all times this Plan may qualify as a qualified Plan
and Trust.
B. The Trustee may employ a bank, insurance company, or trust company
pursuant to the terms of its usual and customary bank or insurance agency
agreement, under which the duties of such bank, insurance company or
trust company shall be of a custodial, clerical and record-keeping
nature.
C. The Trustee may from time to time transfer to a common, collective, or
pooled trust fund maintained by any corporate Trustee hereunder pursuant
to Revenue Ruling 81-100, all or such part of the Trust Fund as the
Trustee may deem advisable, and such part or all or the Trust Fund so
transferred shall be subject to all the terms and provisions of the
common, collective, or pooled trust fund which contemplate the
commingling for investment purposes of such trust assets with trust
assets of other trusts. The Trustee may withdraw from such common,
collective, or pooled trust fund all or such part of the Trust Fund as
the Trustee may deem advisable.
D. The Trustee, at the direction of the Administrator and pursuant to
instructions from the individual designated in the Adoption Agreement for
such purpose and subject to the conditions set forth in the Adoption
Agreement, shall ratably apply for, own, and pay all premiums on
Contracts on the lives of the Participants. Any initial or additional
Contract purchased on behalf of a Participant shall have a face amount of
not less than $1,000, the amount set forth in the Adoption Agreement, or
the limitation of the Insurer, whichever is greater. If a life insurance
Contract is to be purchased for a Participant, the aggregate premium for
ordinary life insurance for each Participant must be less than 50% of the
aggregate Contributions and Forfeitures allocated to a Participant's
Combined Account. For purposes of this limitation, ordinary life
insurance Contracts are Contracts with both non-decreasing death benefits
and non-increasing premiums. If term insurance or universal life
insurance is purchased with such Contributions, the aggregate premium
must be 25% or less of the aggregate Contributions and Forfeitures
allocated to a Participant's Combined account. If both term insurance
and ordinary life insurance are purchased with such contributions, then
the amount expended for term insurance plus one-half of the premium for
the ordinary life insurance may not, in the aggregate, exceed 25% of the
aggregate Employer contributions and Forfeitures allocated to a
Participant's Combined Account. The Trustee must distribute the
Contracts to the Participant or convert the entire value of the Contracts
at or before retirement into cash or provide for a periodic income so
that no portion of such value may be used to continue life insurance
protection beyond retirement. Notwithstanding the above, the limitations
imposed herein with respect to the purchase of life insurance shall not
apply, in the case of a Profit Sharing plan, to the portion of a
Participant's Account that has accumulated for at least two (2) Plan
Years.
Notwithstanding anything herein above to the contrary, amounts credited
to a Participant's Qualified Voluntary Employee Contribution Account
pursuant to Section 4.14, shall not be applied to the purchase of life
insurance contracts.
E. The Trustee will be the owner of any life insurance Contract purchased
under the terms of this Plan. The Contract must provide that the
proceeds will be payable to the Trustee; however, the Trustee shall be
required to pay over all proceeds of the Contract to the Participant's
designated Beneficiary in accordance with the distribution provisions of
Article VI. A Participant's spouse will be the designated Beneficiary
pursuant to Section 6.2, unless a qualified election has been made in
accordance with Sections 6.5 and 6.6 of the Plan, if applicable. Under
no circumstances shall the Trust retain any part of the proceeds.
However, the Trustee shall not pay the proceeds in a method that would
violate the requirements of the Retirement Equity Act, as stated in
Article VI of the Plan, or Code Section 401(a)(9) and the Regulations
thereunder.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of this Plan,
shall have the following powers and authorities to be exercised in the
Trustee's sole discretion:
A. To purchase, or subscribe for, any securities or other property and to
retain the same. In conjunction with the purchase of securities, margin
accounts may be opened and maintained;
B. To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the
Trustee, by private contract or at public auction. No person dealing
with the Trustee shall be bound to see to the application of the purchase
money or to inquire into the validity, expediency, or propriety of any
such sale or other disposition, with or without advertisement;
C. To vote upon any stocks, bonds, or other securities; to give general or
special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription rights
or other options, and to make any payments incidental thereto; to oppose,
or to consent to, or otherwise participate in, corporate reorganizations
or other changes affecting corporate securities, and to delegate
discretionary powers, and to pay any assessments or charges in connection
therewith; and generally to exercise any of the powers of an owner with
respect to stocks, bonds, securities, or other property;
D. To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form, but the books and
records of the Trustee shall at all times show that all such investments
are part of the Trust Fund;
E. To borrow or raise money for the purposes of the Plan in such amount, and
upon such terms and conditions, as the Trustee shall deem advisable; and
for any sum so borrowed, to issue a promissory note as Trustee, and to
secure the repayment thereof by pledging all, or any part, of the Trust
Fund; and no person lending money to the Trustee shall be bound to see
the application of the money lent or to inquire into the validity,
expediency, or propriety of any borrowing;
F. To keep such portion of the Trust Fund in cash or cash balances as the
Trustee may, from time to time, deem to be in the best interests of the
Plan, without liability for interest thereon;
G. To accept and retain for such time as the Trustee may deem advisable any
securities or other property received or acquired as Trustee hereunder,
whether or not such securities or other property would normally be
purchased as investments hereunder;
H. To make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
I. To settle, compromise, or submit to arbitration any claims, debts, or
damages due or owing to or from the Plan, to commence or defend suits or
legal or administrative proceedings, and to represent the Plan in all
suits and legal and administrative proceedings;
J. To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be
agent or counsel for the Employer;
K. To apply for and procure from the Insurer as an investment of the Trust
Fund such annuity, or other Contracts (on the life of any Participant) as
the Administrator shall deem proper; to exercise, at any time or from
time to time, whatever rights and privileges may be granted under such
annuity, or other Contracts; to collect, receive, and settle for the
proceeds of all such annuity, or other Contracts as and when entitled to
do so under the provisions thereof;
L. To invest funds of the Trust in time deposits or savings accounts bearing
a reasonable rate of interest in the Trustee's bank;
M. To invest in Treasury Bills and other forms of United States' government
obligations;
N. To sell, purchase and acquire put or call options if the options are
traded on and purchased through a national securities exchange registered
under the Securities Exchange Act of 1934, as amended, or, if the options
are not traded on a national securities exchange, are guaranteed by a
member firm of the New York Stock Exchange;
O. To deposit monies in federally insured savings accounts or certificates
of deposit in banks or savings and loan associations;
P. To pool all or any of the Trust Fund, from time to time, with assets
belonging to any other qualified employee pension benefit trust created
by the Employer or any Affiliated Employer, and to commingle such assets
and make joint or common investments and carry joint accounts on behalf
of this Plan and such other trust or trusts, allocating undivided shares
or interests in such investments or accounts or any pooled assets of the
two or more trusts in accordance with their respective interests;
Q. To do all such acts and exercise all such rights and privileges, although
not specifically mentioned herein, as the Trustee may deem necessary to
carry out the purposes of the Plan.
R. Directed Investment Account: The powers granted to the Trustee shall be
exercised in the sole fiduciary discretion of the Trustee. However, if
elected in the Adoption Agreement, each Participant may direct the
Trustee to separate and keep separate all or a portion of his interest in
the Plan; and furthermore, each Participant is authorized and empowered,
in his sole and absolute discretion, to give directions to the Trustee in
such form as the Trustee may require concerning the investment of the
Participant's Directed Investment Account, which directions must be
followed by the Trustee subject, however, to restrictions on payment of
life insurance premiums. Neither the Trustee nor any other persons
including the Administrator or otherwise shall be under any duty to
question any such direction of the Participant or to review any
securities or other property, real or personal, or to make any
suggestions to the Participant in connection therewith, and the Trustee
shall comply as promptly as practicable with directions given by the
Participant hereunder. Any such direction may be of a continuing nature
or otherwise and may be revoked by the Participant at any time in such
form as the Trustee may require. The Trustee may refuse to comply with
any direction from the Participant in the event the Trustee, in its sole
and absolute discretion, deems such directions improper by virtue of
applicable law, and in such event, the Trustee shall not be responsible
or liable for any loss or expense which may result. Any costs and
expenses related to compliance with the Participant's directions shall be
borne by the Participant's Directed Investment Account.
Notwithstanding anything hereinabove to the contrary, the Trustee shall
not, at any time after December 31, 1981, invest any portion of a
Directed Investment Account in "collectibles" within the meaning of that
term as employed in Code Section 408(m).
7.4 LOANS TO PARTICIPANTS
A. If specified in the Adoption Agreement, the Trustee (or, if loans are
treated as Directed Investment pursuant to the Adoption Agreement, the
Administrator) may, in the Trustee's (or, if applicable, the
Administrator's) sole discretion, make loans to Participants or
Beneficiaries under the following circumstances:
1. Loans shall be made available to all Participants and Beneficiaries on
a reasonably equivalent basis;
2. Loans shall not be made available to Highly Compensated Employees in
an amount greater than the amount made available to other
Participants;
3. Loans shall bear a reasonable rate of interest;
4. Loans shall be adequately secured; and
5. Shall provide for periodic repayment over a reasonable period of time.
B. Loans shall not be made to any Shareholder-Employee or Owner-Employee
unless an exemption for such loan is obtained pursuant to Act Section 408
and further provided that such loan would not be subject to tax pursuant
to Code Section 4975.
C. Loans shall not be granted to any Participant that provide for a
repayment period extending beyond such Participant's Normal Retirement
Date.
D. Loans made pursuant to this Section (when added to the outstanding
balance of all other loans made by the Plan to the Participant) shall be
limited to the lesser of:
1. $50,000 reduced by the excess (if any) of the highest outstanding
balance of loans from the Plan to the Participant during the one year
period ending on the day before the date on which such loan is made,
over the outstanding balance of loans from the Plan to the Participant
on the date on which such loan was made, or
2. the greater of (a) one-half (1/2) of the present value of the non-
forfeitable accrued benefit of the Employee under the Plan, or (b), if
permitted pursuant to the Adoption Agreement, $10,000.
For purposes of this limit, all plans of the Employer shall be considered
one plan. Additionally, with respect to any loan made prior to January
1, 1987, the $50,000 limit specified in 1. above shall not be reduced.
E. No Participant loan shall take into account the present value of such
Participant's Qualified Voluntary Employee Contribution Account.
F. Loans shall provide for level amortization with payments to be made not
less frequently than quarterly over a period not to exceed five (5)
years. However, loans used to acquire any dwelling unit which, within a
reasonable time, is to be used (determined at the time the loan is made)
as a principal residence of the Participant shall provide for periodic
repayment over a reasonable period of time that may exceed five (5)
years. Notwithstanding the foregoing, loans made prior to January 1,
1987 which are used to acquire, construct, reconstruct or substantially
rehabilitate any dwelling unit which, within a reasonable period of time
is to be used (determined at the time of the loan is made) as a principal
residence of the Participant or a member of his family (within the
meaning of Code section 267(c)(4)) may provide for periodic repayment
over a reasonable period of time that may exceed five (5) years.
Additionally, loans made prior to January 1, 1987, may provide for
periodic payments which are made less frequently than quarterly and which
do not necessarily result in level amortization.
G. An assignment or pledge of any portion of a Participant's interest in the
Plan and a loan, pledge, or assignment with respect to any insurance
Contract purchased under the Plan, shall be treated as a loan under this
Section.
H. If this Plan permits annuities pursuant to E14 of the Adoption Agreement,
then any loan made pursuant to this Section after August 18, 1985 where
the Vested interest of the Participant is used to secure such loan shall
require the written consent of the Participant's spouse in a manner
consistent with Section 6.5A., provided the spousal consent requirements
of such Section apply to the Plan. Such written consent must be obtained
within the 90-day period prior to the date the loan is made. Any
security interest held by the Plan by reason of an outstanding loan to
the Participant shall be taken into account in determining the amount of
the death benefit or Pre-Retirement Survivor Annuity. However, no
spousal consent shall be required under this paragraph if the total
accrued benefit subject to the security is not in excess of $3,500.
I. With regard to any loans granted or renewed on or after the last day of
the first Plan Year beginning after December 31, 1988, a Participant loan
program shall be established which must include, but need not be limited
to, the following:
1. The identity of the person or positions authorized to administer the
Participant loan program;
2. A procedure for applying for loans;
3. The basis on which loans will be approved or denied;
4. Limitations, if any, on the types and amounts of loans offered,
including what constitutes a hardship or financial need if selected in
the Adoption Agreement;
5. The procedure under the program for determining a reasonable rate of
interest;
6. The types of collateral which may secure a Participant loan; and
7. The events constituting default and the steps that will be taken to
preserve plan assets. Upon default of a loan, the plan administrator
shall not seek to obtain the collateral of the note until the
participant has a distributable event.
Such Participant loan program shall be contained in a separate written
document which, when properly executed, is hereby incorporated by
reference and made a part of this plan. Furthermore, such Participant
loan program may be modified or amended in writing from time to time
without the necessity of amending this Section of the Plan.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to time,
in accordance with the terms of the Plan, make payments out of the Trust
Fund. The Trustee shall not be responsible in any way for the application
of such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as set forth in the
Trustee's fee schedule (if the Trustee has such a schedule) or as agreed
upon in writing by the Employer and the Trustee. An individual serving as
Trustee who already receives full-time pay from the Employer shall not
receive compensation from this Plan. In addition, the Trustee shall be
reimbursed for any reasonable expenses, including reasonable counsel fees
incurred by it as Trustee. Such compensation and expenses shall be paid
from the Trust Fund unless paid or advanced by the Employer. All taxes of
any kind and all kinds whatsoever that may be levied or assessed under
existing or future laws upon, or in respect of, the Trust Fund or the income
thereof, shall be paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary Date
or receipt of the Employer's contribution for each Plan Year, the Trustee,
or its agent, shall furnish to the Employer and Administrator a written
statement of account with respect to the Plan Year for which such
contribution was made setting forth:
A. The net income, or loss, of the Trust Fund;
B. The gains, or losses, realized by the Trust Fund upon sales or other
disposition of the assets;
C. The increase, or decrease, in the value of the Trust Fund;
D. All payments and distributions made from the Trust Fund; and
E. Such further information as the Trustee and/or Administrator deems
appropriate. The Employer, forthwith upon its receipt of each such
statement of account, shall acknowledge receipt thereof in writing and
advise the Trustee and/or Administrator of its approval or disapproval
thereof. Failure by the Employer to disapprove any such statement of
account within thirty (30) days after its receipt thereof shall be deemed
an approval thereof. The approval by the Employer of any statement of
account shall be binding as to all matters embraced therein as between
the Employer and the Trustee to the same extent as if the account of the
Trustee had been settled by judgment or decree in an action for a
judicial settlement of its account in a court of competent jurisdiction
in which the Trustee, the Employer and all persons having or claiming an
interest in the Plan were parties; provided, however, that nothing herein
contained shall deprive the Trustee of its right to have its accounts
judicially settled if the Trustee so desires.
7.8 AUDIT
A. If an audit of the Plan's records shall be required by the Act and the
regulations thereunder for any Plan Year, the administrator shall direct
the Trustee to engage on behalf of all Participants an independent
qualified public accountant for that purpose. Such accountant shall,
after an audit of the books and records of the Plan, in accordance with
generally accepted auditing standards, within a reasonable period after
the close of the Plan Year, furnish to the Administrator and the Trustee
a report of his audit setting forth his opinion as to whether any
statements, schedules or lists, that are required by Act Section 103 or
the Secretary of Labor to be filed with the Plan's annual report, are
presented fairly, in conformity with generally accepted accounting
principles applied consistently.
B. All auditing and accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund.
C. If some or all of the information necessary to enable the administrator
to comply with Act Section 103 is maintained by a bank, insurance
company, or similar institution, regulated and supervised and subject to
periodic examination by a state or federal agency, it shall transmit and
certify the accuracy of that information to the Administrator as provided
in Act Section 103(b) within one hundred twenty (120) days after the end
of the Plan Year or such other date as may be prescribed under
regulations of the Secretary of Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
A. The Trustee may resign at any time by delivering to the Employer, at
least thirty (30) days before its effective date, a written notice of his
resignation.
B. The Employer may remove the Trustee by mailing by registered or certified
mail, addressed to such Trustee at his last known address, at least
thirty (30) days before its effective date, a written notice of his
removal.
C. Upon the death, resignation, incapacity, or removal of any Trustee, a
successor may be appointed by the Employer; and such successor, upon
accepting such appointment in writing and delivering same to the
Employer, shall, without further act, become Vested with all the estate,
rights, powers, discretions, and duties of his predecessor with like
respect as if he were originally named as a Trustee herein. Until such a
successor is appointed, the remaining Trustee or Trustees shall have full
authority to act under the terms of the Plan.
D. The Employer may designate one or more successors prior to the death,
resignation, incapacity, or removal of a Trustee. In the event a
successor is so designated by the Employer and accepts such designation,
the successor shall, without further act, become Vested with all the
estate, rights, powers, discretions, and duties of his predecessor with
the like effect as if he were originally named as Trustee herein
immediately upon the death, resignation, incapacity, or removal of his
predecessor.
E. Whenever any Trustee hereunder ceases to serve as such, he shall furnish
to the Employer and Administrator a written statement of account with
respect to the portion of the Plan Year during which he served as
Trustee. This statement shall be either (1) included as part of the
annual statement of account for the Plan Year required under Section 7.7
or (2) set forth in a special statement. Any such special statement of
account should be rendered to the Employer no later than the due date of
the annual statement of account for the Plan Year. The procedures set
forth in Section 7.7 for the approval by the Employer of annual
statements of account shall apply to any special statement of account
rendered hereunder and approval by the Employer of any such special
statement in the manner provided in Section 7.7 shall have the same
effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have any duty or
responsibility to investigate the acts or transactions of any predecessor
who has rendered all statements of account required by Section 7.7 and
this subparagraph.
7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee, at
the direction of the Administrator, shall transfer the Vested interest, if
any, of such Participant in his account to another trust forming part of a
pension, profit sharing, or stock bonus plan maintained by such
Participant's new employer and represented by said employer in writing as
meeting the requirements of Code Section 401(a), provided that the trust to
which such transfers are made permits the transfer to be made.
If the distribution is made after December 31, 1992, and it has also been
paid in accordance with section 6.14, then the distribution shall be made in
the form of a direct trustee-to-trustee transfer and shall be limited to the
amount of the distribution that would be includible in gross income if not
transferred in accordance with the preceding (determined without regard to
Code Sections 402(c) and 403(a)(4)).
7.11 TRUSTEE INDEMNIFICATION
The Employer agrees to indemnify and hold harmless the Trustee against any
and all claims, losses, damages, expenses and liabilities the Trustee may
incur in the exercise and performance of the Trustee's powers and duties
hereunder, unless the same are determined to be due to gross negligence or
willful misconduct.
7.12 EMPLOYER SECURITIES AND REAL PROPERTY
The Trustee shall be empowered to acquire and hold "qualifying Employer
securities" and "qualifying Employer real property," as those terms are
defined in the Act. However, no more than 100% of the fair market value of
all the assets in the Trust Fund may be invested in "qualifying Employer
securities" and "qualifying Employer real property."
ARTICLE VIII: AMENDMENT, TERMINATION, AND MERGERS
8.1 AMENDMENT
A. The Employer shall have the right at any time to amend this Plan subject
to the limitations of this Section. However, any amendment which affects
the rights, duties or responsibilities of the Trustee and Administrator
may only be made with the Trustee and Administrator's written consent.
Any such amendment shall become effective as provided therein upon its
execution. The Trustee shall not be required to execute any such
amendment unless the amendment affects the duties of the Trustee
hereunder.
B. No amendment to the Plan shall be effective if it authorizes or permits
any part of the Trust Fund (other than such part as is required to pay
taxes and administration expenses) to be used for or diverted to any
purpose other than for the exclusive benefit of the Participants or their
Beneficiaries or estates; or causes any reduction in the amount credited
to the account of any Participant; or causes or permits any portion of
the Trust Fund to revert to or become property of the Employer.
C. Except as permitted by Regulations (including Regulation 1.411(d)-4), no
Plan amendment or transaction having the effect of a Plan amendment (such
as a merger, plan transfer or similar transaction) shall be effective if
it eliminates or reduces any "Section 411(d)(6) protected benefit" or
adds or modifies conditions relating to "Section 411(d)(6) protected
benefits" the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d)(6) protected benefits" are benefits described
in Code Section 411(d)(6)(A), early retirement benefits and retirement-
type subsidies, and optional forms of benefit.
8.2 TERMINATION
A. The Employer shall have the right at any time to terminate the Plan by
delivering to the Trustee and Administrator written notice of such
termination. Additionally, full termination of the plan will occur upon
complete discontinuance of contributions. Upon any full or partial
termination all amounts credited to the affected Participants' Combined
Accounts shall become 100% Vested and shall not thereafter be subject to
forfeiture, and all unallocated amounts shall be allocated to the
accounts of all Participants in accordance with the provisions hereof.
B. Upon the full termination of the Plan, the Employer shall direct the
distribution of the assets to Participants in a manner which is
consistent with and satisfies the provisions of Section 6.5.
Distributions to a Participant shall be made in cash (or in property if
permitted in the Adoption Agreement) or through the purchase of
irrevocable nontransferable deferred commitments from the Insurer.
Except as permitted by Regulations, the termination of the Plan shall not
result in the reduction of "Section 411(d)(6) protected benefits" as
described in Section 8.1.
8.3 MERGER OR CONSOLIDATION
This Plan may be merged or consolidated with, or its assets and/or
liabilities may be transferred to any other plan only if the benefits which
would be received by a Participant of this Plan, in the event of a
termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger
or consolidation and such merger or consolidation does not otherwise result
in the elimination or reduction of any "Section 411(d)(6) protected
benefits" as described in Section 8.1C.
ARTICLE IX: MISCELLANEOUS
9.1 EMPLOYER ADOPTIONS
A. Any organization may become the Employer hereunder by executing the
Adoption Agreement in a form satisfactory to the Trustee, and it shall
provide such additional information as the Trustee may require. The
consent of the Trustee to act as such shall be signified by its execution
of the Adoption Agreement.
B. Except as otherwise provided in this Plan, the affiliation of the
Employer and the participation of its Participants shall be separate and
apart from that of any other employer and its participants hereunder.
9.2 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the Employer
and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan
shall be deemed to give any Participant or Employee the right to be retained
in the service of the Employer or to interfere with the right of the
Employer to discharge any Participant or Employee at any time regardless of
the effect which such discharge shall have upon him as a Participant of this
Plan.
9.3 ALIENATION
A. Subject to the exceptions provided below, no benefit which shall be
payable to any person (including a Participant or his Beneficiary) shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge
the same shall be void; and no such benefit shall in any manner be liable
for, or subject to, the debts, contracts, liabilities, engagements, or
torts of any such person, nor shall it be subject to attachment or legal
process for or against such person, and the same shall not be recognized
except to such extent as may be required by law.
B. This provision shall not apply to the extent a Participant or Beneficiary
is indebted to the Plan, for any reason, under any provision of this
Plan. At the time a distribution is to be made to or for a Participant's
or Beneficiary's benefit, such proportion of the amount to be distributed
as shall equal such indebtedness shall be paid to the Plan, to apply
against or discharge such indebtedness. Prior to making a payment,
however, the Participant or Beneficiary must be given written notice by
the Administrator that such indebtedness is to be so paid in whole or
part from his Participant's Combined Account. If the Participant or
Beneficiary does not agree that the indebtedness is a valid claim against
his Vested Participant's Combined Account, he shall be entitled to a
review of the validity of the claim in accordance with procedures
provided in Sections 2.12 and 2.13.
C. This provision shall not apply to a "qualified domestic relations order"
defined in Code Section 414(p), and those other domestic relations orders
permitted to be so treated by the Administrator under the provisions of
the Retirement Equity Act of 1984. The Administrator shall establish a
written procedure to determine the qualified status of domestic relations
orders and to administer distributions under such qualified orders.
Further, to the extent provided under a "qualified domestic relations
order," a former spouse of a Participant shall be treated as the spouse
or surviving spouse for all purposes under the Plan.
9.4 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the Act and
the laws of the State or Commonwealth in which the Employer's principal
office is located, other than its laws respecting choice of law, to the
extent not pre-empted by the Act.
9.5 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are
used herein in the singular or plural form, they shall be construed as
though they were also used in the other form in all cases where they would
apply.
9.6 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the Trust
and/or Plan established hereunder to which the Trustee or the Administrator
may be a party, and such claim, suit, or proceeding is resolved in favor of
the Trustee or Administrator, they shall be entitled to be reimbursed from
the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.
9.7 PROHIBITION AGAINST DIVERSION OF FUNDS
A. Except as provided below and otherwise specifically permitted by law, it
shall be impossible by operation of the Plan or of the Trust, by
termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any Trust Fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or
diverted to, purposes other than the exclusive benefit of Participants,
Retired Participants, or their Beneficiaries.
B. In the event the Employer shall make a contribution under a mistake of
fact pursuant to Section 403(c)(2)(A) of the Act, the Employer may demand
repayment of such contribution at any time within one (1) year following
the time of payment and the Trustees shall return such amount to the
Employer within the one (1) year period. Earnings of the Plan
attributable to the contributions may not be returned to the Employer but
any losses attributable thereto must reduce the amount so returned.
9.8 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted by
the Act and regulations thereunder, shall be bonded in an amount not less
than 10% of the amount of the funds such Fiduciary handles; provided,
however, that the minimum bond shall be $1,000 and the maximum bond,
$500,000. The amount of funds handled shall be determined at the beginning
of each Plan Year by the amount of funds handled by such person, group, or
class to be covered and their predecessors, if any, during the preceding
Plan Year, or if there is no preceding Plan Year, then by the amount of the
funds to be handled during the then current year. The bond shall provide
protection to the Plan against any loss by reason of acts of fraud or
dishonesty by the Fiduciary alone or in connivance with others. The surety
shall be a corporate surety company (as such term is used in Act Section
412(a)(2)), and the bond shall be in a form approved by the Secretary of
Labor. Notwithstanding anything in the Plan to the Contrary, the cost of
such bonds shall be an expense of and may, at the election of the
Administrator, be paid from the Trust Fund or by the Employer.
9.9 EMPLOYER AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the
failure on the part of the Insurer to make payments provided by any such
Contract, or for the action of any person which may delay payment or render
a Contract null and void or unenforceable in whole or in part.
9.10 INSURER'S PROTECTIVE CLAUSE
The Insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects
of this Plan. The Insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty
to see to the application of any funds paid to the Trustee, nor be required
to question any actions directed by the Trustee. Regardless of any
provision of this Plan, the Insurer shall not be required to take or permit
any action or allow any benefit or privilege contrary to the terms of any
Contract which it issues hereunder, or the rules of the Insurer.
9.11 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary, or to
any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of this Plan, shall, to the extent thereof,
be in full satisfaction of all claims hereunder against the Trustee and the
Employer.
9.12 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed
by a person duly authorized by its legally constituted authority.
9.13 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (a) the Employer, (b) the
Administrator, (c) the Trustee, and (d) any Investment Manager appointed
hereunder. The named Fiduciaries shall have only those specific powers,
duties, responsibilities, and obligations as are specifically given them
under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under Section 4.1;
and shall have the sole authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to
amend the elective provisions of the Adoption Agreement or terminate, in
whole or in part, the Plan. The Administrator shall have the sole
responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets held under the Trust, except
those assets, the management of which has been assigned to an Investment
Manager, who shall be solely responsible for the management of the assets
assigned to it, all as specifically provided in the Plan. Each named
Fiduciary warrants that any directions given, information furnished, or
action taken by it shall be in accordance with the provisions of the Plan,
authorizing or providing for such direction, information or action.
Furthermore, each named Fiduciary may rely upon any such direction,
information or action of another named Fiduciary as being proper under the
Plan, and is not required under the Plan to inquire into the propriety of
any such direction, information or action. It is intended under the Plan
that each named Fiduciary shall be responsible for the proper exercise of
its own powers, duties, responsibilities and obligations under the Plan. No
named Fiduciary shall guarantee the Trust Fund in any manner against
investment loss or depreciation in asset value. Any person or group may
serve in more than one Fiduciary capacity.
9.14 HEADINGS
The headings and subheadings of this Plan have been inserted for convenience
of reference and are to be ignored in any construction of the provisions
hereof.
9.15 APPROVAL BY INTERNAL REVENUE SERVICE
A. Notwithstanding anything herein to the contrary, if, pursuant to a timely
application filed by or on behalf of the Plan, the Commissioner of
Internal Revenue Service or his delegate should determine that the Plan
does not initially qualify as a tax-exempt plan under Code Sections 401
and 501, and such determination is not contested, or if contested, is
finally upheld, then if the Plan is a new plan, it shall be void ab
initio and all amounts contributed to the Plan, by the Employer, less
expenses paid, shall be returned within one year and the Plan shall
terminate, and the Trustee shall be discharged from all further
obligations. An application to the Commissioner of Internal Revenue
Service shall be considered timely, if filed by the due date of the
Employer's tax return for the taxable year in which the plan is written
and signed by the Employer.
B. Except as specifically stated in the Plan, any contribution by the
Employer to the Trust Fund is conditioned upon the deductibility of the
contribution by the Employer under the Code and, to the extent any such
deduction is disallowed, the Employer may within one (1) year following
the disallowance of the deduction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one
(1) year following the disallowance. Earnings of the Plan attributable
to the excess contribution may not be returned to the Employer, but any
losses attributable thereto must reduce the amount so returned.
9.16 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner.
9.17 PAYMENT OF BENEFITS
Benefits under this Plan shall be paid, subject to Section 6.10 and
Section 6.11 only upon death, Total and Permanent Disability, normal or
early retirement, termination of employment, or upon Plan Termination.
ARTICLE X: PARTICIPATING EMPLOYERS
10.1 ELECTION TO BECOME A PARTICIPATING EMPLOYER
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any Affiliated Employer may adopt this Plan and all of
the provisions hereof, and participate herein and be known as a
Participating Employer, by a properly executed document evidencing said
intent and will of such Participating Employer.
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
A. Each Participating Employer shall be required to select the same Adoption
Agreement provisions as those selected by the Employer other than the
Plan Year, the Fiscal Year, and such other items that must, by necessity,
vary among employers.
B. Each such Participating Employer shall be required to use the same
Trustee as provided in this Plan.
C. The Trustee may, but shall not be required to, commingle, hold and invest
as one Trust Fund all contributions made by Participating Employers, as
well as all increments thereof.
D. The transfer of any Participant from or to an Employer participating in
this Plan, whether he be an Employee of the Employer or a Participating
Employer, shall not affect such Participant's rights under the Plan, and
all amounts credited to such Participant's Combined Account as well as
his accumulated service time with the transferor or predecessor, and his
length of participation in the Plan, shall continue to his credit.
E. Any expenses of the Plan which are to be paid by the Employer or borne by
the Trust Fund shall be paid by each Participating Employer in the same
proportion that the total amount standing to the credit of all
Participants employed by such Employer bears to the total standing to the
credit of all Participants.
10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a part of this Plan;
provided, however, that with respect to all of its relations with the
Trustee and Administrator for the purpose of this Plan, each Participating
Employer shall be deemed to have designated irrevocably the Employer as its
agent. Unless the context of the Plan clearly indicates the contrary, the
word "Employer" shall be deemed to include each Participating Employer as
related to its adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between Participating
Employers, and in the event of any such transfer, the Employee involved
shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such Employee in the same manner
as was the Participating Employer from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION AND FORFEITURES
Any contribution or Forfeiture subject to allocation during each Plan Year
shall be allocated among all Participants of all Participating Employers in
accordance with the provisions of this Plan. On the basis of the
information furnished by the Administrator, the Trustee shall keep separate
books and records concerning the affairs of each Participating Employer
hereunder and as to the accounts and credits of the Employees of each
Participating Employer. The Trustee may, but need not, register Contracts
so as to evidence that a particular Participating Employer is the interested
Employer hereunder, but in the event of an Employee transfer from one
Participating Employer to another, the employing Employer shall immediately
notify the Trustee thereof.
10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each
and every Participating Employer and with the consent of the Trustee where
such consent is necessary in accordance with the terms of this Plan.
10.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan at any time. At the time of any such
discontinuance or revocation, satisfactory evidence thereof and of any
applicable conditions imposed shall be delivered to the Trustee. The
Trustee shall thereafter transfer, deliver and assign Contracts and other
Trust Fund assets allocable to the Participants of such Participating
Employer to such new Trustee as shall have been designated by such
Participating Employer, in the event that it has established a separate
pension plan for its Employees provided, however, that no such transfer
shall be made if the result is the elimination or reduction of any "Section
411(d)(6) protected benefits" in accordance with Section 8.1E. If no
successor is designated, the Trustee shall retain such assets for the
Employees of said Participating Employer pursuant to the provisions of
Article VII hereof. In no such event shall any part of the corpus or income
of the Trust Fund as it relates to such Participating Employer be used for
or diverted for purposes other than for the exclusive benefit of the
Employees of such Participating Employer.
10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary rules
or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article.
10.9 PARTICIPATING EMPLOYER CONTRIBUTION FOR AFFILIATE
If any Participating Employer is prevented in whole or in part from making a
contribution which it would otherwise have made under the Plan by reason of
having no current or accumulated earnings or profits, or because such
earnings or profits are less than the contribution which it would otherwise
have made, then, pursuant to Code Section 404(a)(3)(B), the amount of the
contribution which such Participating Employer was so prevented from making
may be made, for the benefit of the participating employees of such
Participating Employer, by other Participating Employers who are members of
the same affiliated group within the meaning of Code Section 1504 to the
extent of their current or accumulated earnings or profits, except that such
contribution by each such other Participating Employer shall be limited to
the proportion of its total current and accumulated earnings or profits
remaining after adjustment for its contribution to the Plan made without
regard to this paragraph which the total prevented contribution bears to the
total current and accumulated earnings or profits of all the Participating
Employers remaining after adjustment for all contributions made to the Plan
without regard to this paragraph.
A Participating Employer on behalf of whose employees a contribution is made
under this paragraph shall not be required to reimburse the contributing
Participating Employers.
Pension Specialists, Inc. 401(k) V.S. Revised 1/94
Atlantic Coast Airlines
EXHIBIT 10.12(c)
FIRST AMENDMENT TO SEVERANCE AGREEMENT
FOR
KERRY B. SKEEN
THIS FIRST AMENDMENT TO THE SEVERANCE AGREEMENT dated October 18, 1995
by and between ATLANTIC COAST AIRLINES, INC., a Delaware corporation (the
"Company") and KERRY B. SKEEN ("Skeen") (the "Agreement") is made and entered
into as of this 16th day of October, 1996, effective as of October 16, 1996
(the "Effective Date"), by and between the Company and Skeen.
1. Item 5A of the Agreement is hereby amended to replace the words
"Two Hundred Fifty Thousand Dollars ($250,000)" with "Two Hundred Seventy
Thousand Dollars ($270,000)."
2. Item 5D (ii) is hereby deleted in its entirety and replaced with
the following:
"(ii) The Company shall, except as provided in paragraph
5D(iii) below, each year as required under the Split Dollar Agreement and the
related policy, pay, on or before the due date(s) under the terms of the
policy, the entire amount of the annual premium due on the policy acquired
pursuant to the terms of the Split Dollar Agreement. Effective October 16,
1996, the annual premium due on the policy will be determined by multiplying
Skeen's annual base salary for the then current year by a percentage equal to
thirty percent (30%) of said salary. The face amount of the policy will not be
less than one million seven hundred thousand dollars ($1,700,000)."
3. Item 5D (vi) is hereby deleted in its entirety and replaced with
the following:
"(vi) In the event that Skeen's employment with the Company
is terminated by the Company for other than "for cause" (as hereinafter
defined) or should Skeen elect to resign his employment with the Company for
any reason or no reason, the Company shall pay to Skeen a "Deferred
Compensation" amount equal to the applicable vested percentage of the total
policy premiums paid by the Company pursuant to the Split Dollar Agreement.
The applicable vested percentage shall be determined as follows:
Years of Service Percentage Vested
1-4 0%
5 25%
6 35%
7 50%
8 65%
9 80%
10 100%
For purposes of determining Years of Service, Skeen will be credited
with a "Year of Service" for completion of each twelve (12) consecutive month
period of employment with the Company, beginning January 1, 1996. Said
Deferred Compensation amount shall be paid in a single lump sum payment within
fifteen (15) days after the termination date as specified in this Paragraph D.
Notwithstanding the foregoing, in the event of a change in control
(as defined in Item 8 of this Agreement) of the Company, Skeen shall become
immediately 100% vested in his Deferred Compensation amount.
The Company shall release its interest in the policy, or a portion
thereof, on Skeen's life acquired pursuant to the terms of the Split Dollar
Agreement, or any or all of the paid up additions standing to the credit of
such policy, if any, such that such released interest equals the Deferred
Compensation amount paid to Skeen pursuant to this Paragraph D. The Company
agrees that the amount of any such release of interest by the Company shall
reduce the amount of "Liabilities" (as such term is defined in the Agreement
of Assignment of Life Insurance Death Benefit As Collateral entered into
between Skeen and the Company in connection with the Split Dollar Agreement)
owed to the Company in connection with the Split Dollar Agreement and related
Collateral Assignment Agreement. Accordingly, the Company also agrees to
reduce its collateral assignment of the policy pursuant to the Split Dollar
Agreement and related Collateral Assignment Agreement."
IN WITNESS WHEREOF, the Company has hereunto caused this Amendment to
be executed by a duly authorized officer and Skeen has hereunto set his hand
as of the day and year first above written.
KERRY B. SKEEN
COMPANY:
ATLANTIC COAST AIRLINES, INC.
By:
Date:
Attest/Date
D-2
DOCS_NY #15119 v7 /BNZ07!.DOC
EXHIBIT 10.12(h)
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") is made and entered into as
of this ____ day of _________, 199__ (the "Effective Date"), by and between
ATLANTIC COAST AIRLINES, INC., a Delaware corporation (the "Company") and
____________________ ("Employee").
W I T N E S S E T H T H A T:
WHEREAS, Employee is currently employed by the Company and the Company
desires to continue to employ Employee; and Employee desires to continue to be
employed by the Company, upon the terms and conditions hereinafter set forth;
and
WHEREAS, the Company and Employee desire to expressly set forth in this
Agreement the terms of Employee's employment with the Company; and
WHEREAS, the Company has determined that the best interests of the
Company would be served by entering into this Agreement with Employee; and
WHEREAS, the Company and Employee are both legally able, and not
restricted by prior agreements with other parties, to enter into this
Agreement; and
NOW, THEREFORE, the parties, for and in consideration of the mutual and
reciprocal covenants and agreements hereinafter contained, and intending to be
legally bound hereby, do contract and agree as follows:
1. Employment: The Company hereby employs Employee and Employee
hereby accepts employment by the Company and agrees to perform his duties and
responsibilities hereunder upon all of the terms and conditions as are
hereinafter set forth.
2. Duties: Employee shall serve the Company in the capacities of
Senior Vice President-______________. Employee shall be responsible for
supervising and directing all operations of the Company. Employee shall
otherwise be responsible for carrying out such other duties and services for
the Company commensurate with Employee's position, as may be designated from
time to time by the Chief Executive Officer of the Company ( the "CEO").
3. Term of Employment: Employee's term of employment under this
Agreement shall commence on the Effective Date and shall terminate on the last
day of the calendar month which is twelve (12) calendar months after the
Effective Date, unless further extended as hereinafter set forth. Commencing
on each successive anniversary of the Effective Date, the Agreement shall
automatically be extended for an additional twelve (12) months without further
action by either party unless one party provides the other fifteen (15) days'
written notice that such party does not wish to extend the term of this
Agreement. The fifteenth (15th) day following the date of such notice shall be
deemed to be a "Termination Date" for purposes of this Agreement.
4. Extent of Service: Employee shall devote such time and attention
as is required to perform his obligations under this Agreement and will at all
times faithfully and industriously, consistent with his ability, experience
and talent, perform his duties hereunder under the direction of the CEO.
5. Compensation: During the term of this Agreement, the Company
agrees to pay to Employee, and Employee agrees to accept from the Company, in
full payment for services rendered by Employee and work to be performed by him
under the terms of this Agreement, the following:
A. During the first year under this Agreement, an annual base
salary of _____________________________ Dollars ($__________). Thereafter,
the amount of Employee's base salary shall be adjusted as determined by the
Compensation Committee of the Board of Directors of the Company. Employee's
base salary for each year shall be payable to him in accordance with the
reasonable payroll practices of the Company, as from time to time, in effect
for executive personnel (but in no event less often than monthly).
B. Employee shall participate in the Company's Senior
Management Incentive Plan, or any successor bonus plan or program for key
executives.
C. The Company has entered into a Split Dollar Agreement with
Employee effective __________, 199__, which provides for a split dollar plan
for a policy of insurance upon the life of Employee in a face amount of
__________________ dollars ($____________).
(i) Employee is the owner of the policy under the Split
Dollar Agreement and has the right to designate his beneficiary with respect
to proceeds of the policy payable upon his death; provided, however, that
notwithstanding the foregoing, the Company has a collateral assignment of the
policy as security for the repayment of the amounts contributed by the Company
toward the payment of premiums for the policy.
(ii) The Company shall, each year as required under the
Split Dollar Agreement and the related policy, pay, on or before the due
date(s) under the terms of the policy, the entire amount of the annual premium
due on the policy acquired pursuant to the terms of the Split Dollar
Agreement. Effective ____________, 199__, the annual premium due on the policy
will be determined by multiplying Employee's annual base salary for the then
current year by a percentage equal to twenty percent (20%) of said base
salary. The initial face amount of the policy will be not less than
_______________________ dollars ($___________).
(iii) Effective January 1, 1997, in the event that
Employee's employment with the Company is terminated by the Company for other
than "for cause" (as hereinafter defined) or should Employee elect to resign
his employment with the Company for any reason or no reason, the Company shall
pay to Employee a "Deferred Compensation" amount equal to the applicable
vested percentage of the total policy premiums paid by the Company pursuant to
the Split Dollar Agreement. The applicable vested percentage shall be
determined as follows:
Years of Service Percentage Vested
1-4 0%
5 25%
6 35%
7 50%
8 65%
9 80%
10 100%
For purposes of determining Years of Service, Employee will be
credited with a "Year of Service" for completion of each twelve (12)
consecutive month period of employment with the Company, beginning January 1,
1997. Said Deferred Compensation amount shall be paid in a single lump sum
payment within fifteen (15) days after the termination date as specified in
this Paragraph D.
Notwithstanding the foregoing, in the event of a change in control
(as defined in Item 8 of this Agreement) of the Company, Employee shall become
immediately 100% vested in his Deferred Compensation amount.
The Company shall release its interest in the policy, or a portion
thereof, on Employee's life acquired pursuant to the terms of the Split Dollar
Agreement, or any or all of the paid up additions standing to the credit of
such policy, if any, such that such released interest equals the Deferred
Compensation amount paid to Employee pursuant to this Paragraph D. The
Company agrees that the amount of any such release of interest by the Company
shall reduce the amount of "Liabilities" (as such term is defined in the
Agreement of Assignment of Life Insurance Death Benefit As Collateral entered
into between Employee and the Company in connection with the Split Dollar
Agreement) owed to the Company in connection with the Split Dollar Agreement
and related Collateral Assignment Agreement. Accordingly, the Company also
agrees to reduce its collateral assignment of the policy pursuant to the Split
Dollar Agreement and related Collateral Assignment Agreement.
D. Discretionary compensation, bonuses and benefits in addition to
those provided for herein in such amounts and at such times as the
Compensation Committee of the Board of Directors of the Company shall
determine.
6. Benefits: The Company shall pay for or provide Employee such vacation
time and benefits, including but not limited to coverage under the Company's
major medical, accident, health, dental, disability and life insurance plans
available to other employees of the Company (and, to the extent provided by
such policies, Employee's dependents). The Company shall provide Employee
with an executive medical reimbursement plan under which the Company agrees to
promptly reimburse Employee for any otherwise unreimbursed premium and/or
covered medical expenses, up to $10,000 per calendar year.
7. Reimbursement of Expenses: The Company agrees to promptly reimburse
Employee, within fifteen (15) days after presentation of receipts and other
appropriate documentation, for all reasonable, ordinary and necessary travel
costs and other necessary expenses incurred by Employee in performing his
duties pursuant to this Agreement.
8. Deductions: Deductions shall be made from Employee's compensation
for social security, federal and state withholding taxes, and any other such
taxes as may, from time to time, be required by governmental authority.
9. Termination: Employee's employment with the Company shall be
terminated as hereinafter provided:
A. Disability.
(i) In the event Employee shall become mentally or physically
disabled so as to be unable to perform his duties hereunder (such
determination to be made solely by the Company) for six (6) consecutive
months, the Company shall have the right to terminate Employee's employment
with the Company upon the expiration of such six (6) month period; provided,
however, that the Company shall be obligated to provide Employee with the such
severance compensation and benefits as hereinafter provided.
(ii) In the event Employee's employment is terminated by the
Company due to a disability as provided herein, the Company shall continue to
provide Employee with the basic major medical insurance benefits maintained by
the Company and shall pay Employee such severance compensation as hereinafter
provided for a period (the "Severance Period") which shall be twelve (12)
months from the date of Employee's termination. Employee's severance
compensation ("Severance Compensation") shall be determined as follows:
during the Severance Period Employee shall receive an amount equal to one
hundred percent (100%) of his annual base salary in effect at the commencement
of his disability. In addition, the Company shall pay Employee a prorated
portion of any annual bonus amount accrued through the Termination Date,
provided, however, that such bonus amount will be paid at the time that such
bonus amounts are normally paid by the Company. The Atlantic Coast Airlines,
Inc. flight pass privileges currently granted to Employee will continue for
the Severance Period. However, such flight pass privileges will be limited to
flights on Atlantic Coast Airlines only.
(iii) Nothing contained herein shall be construed to affect
Employee's rights under any disability insurance or similar policy, whether
maintained by the Company, Employee or another party.
(iv) For purposes of this Agreement, Employee shall be deemed
to be disabled when he shall have been absent from his duties on a full time
basis for six (6) consecutive months.
(v) At the end of any disability (other than a disability
that results in the involuntary termination of Employee's employment with the
Company), Employee shall return to work and this Agreement shall continue as
though such disability had not occurred.
(vi) If Employee desires to return to work at the end of any
disability, but there is a dispute as to whether he is able to perform his
duties hereunder, the Company shall have sole discretion in determining
whether Employee is able to perform his duties hereunder on a full-time basis.
B. Death.
(i) Employee's employment with the Company shall terminate
immediately upon Employee's death; provided, however, that the Company shall
be obligated to provide Employee with such severance compensation and benefits
as hereinafter provided.
(ii) In the event Employee's employment with the Company is
terminated due to his death, the Company shall continue to provide Employee's
dependents with the basic major medical insurance benefits maintained by the
Company (provided that such dependents were covered under the applicable
Company benefit plan at the time of Employee's death) and shall pay
Employee's estate Employee's "Severance Compensation" for the "Severance
Period." For purposes of this Paragraph 9B, the Severance Period shall be
twelve (12) months from the date of Employee's death. The amount of Employee's
Severance Compensation shall be determined as follows: during the Severance
Period, an amount equal to one hundred percent (100%) of Employee's annual
base salary in effect at the time of his death. In addition, the Company shall
pay Employee a prorated portion of any annual bonus amount accrued through the
Termination Date, provided however, that such bonus amount will be paid at the
time that such bonus amounts are normally paid by the Company.
(iii) Nothing contained herein shall be construed to affect
Employee's rights under any life insurance or similar policy, whether
maintained by the Company, Employee or another party.
C. Termination by Employee.
Employee may terminate his employment with the Company as provided in
Paragraph 3. In such event, the Company shall not be liable to Employee for
any compensation, bonus or fringe benefits after the date of termination of
employment.
D. Termination by the Company.
(i) Without Cause. The Company may, without cause, terminate
this Agreement at any time by giving to Employee fifteen (15) days' written
notice by Certified Mail, Return Receipt Requested, at the last known
residence of Employee, and such termination shall be effective on the
fifteenth (15th) day following the date of such notice (the "Termination
Date"). At the option of the Company, Employee's employment shall be
immediately terminated upon receipt of the notice, in which case Employee
shall continue to receive his full base salary and related benefits through
the Termination Date. In addition, the Company shall continue to provide
Employee with the basic major medical insurance benefits maintained by the
Company and shall pay Employee "Severance Compensation" for the "Severance
Period." For purposes of this Paragraph D1, the Severance Period shall be
twelve (12) months from the Termination Date. The amount of Employee's
Severance Compensation shall be determined as follows: during the Severance
Period, an amount equal to one hundred percent (100%) of Employee's annual
base salary in effect at the Termination Date. In addition, the Company shall
pay Employee a prorated portion of any annual bonus amount accrued through the
Termination Date, provided however, that such bonus amount will be paid at the
time that such bonus amounts are normally paid by the Company. In the
discretion of the Company, the Severance Compensation may be paid, in a single
lump sum payment or periodic payments in accordance with the reasonable
payroll practices of the Company as from time to time in effect for executive
personnel (but in no event less often than monthly). The Atlantic Coast
Airlines, Inc. flight pass privileges currently granted to Employee will
continue for the Severance Period. However, such flight pass privileges will
be limited to flights on Atlantic Coast Airlines only.
(ii) For "cause." Company may terminate Employee's employment
under this Agreement immediately for "cause." In such event, the Company
shall not be liable to Employee for any compensation, bonus or benefits after
the date of termination of employment. Cause shall be defined as any of the
following: (i) unauthorized misconduct in the performance of Employee's
duties hereunder, (ii) commission of an act of dishonesty by Employee or
personal misconduct, which act is harmful to the Company, (iii) breach of any
provision of this Agreement. Any termination under this Paragraph D2 shall
take effect immediately upon Employee's receipt of written notice from the
Company to Employee.
E. Acceleration of Stock Options.
In the event that Employee's employment is terminated by the Company
without "cause" (as defined in Paragraph 9D), as of the applicable Termination
Date, the option for Employee to purchase up to _________ shares of Common
Stock, par value $.02, of the Company granted _________________ (effective
____________) under the Company's 1995 Stock Plan (the "Option"), as specified
in the Atlantic Coast Airlines, Inc. Incentive Stock Option Agreement (the
"Option Agreement"), shall become 100% fully vested and exercisable by
Employee by written notice by Employee to the Secretary of the Company (such
notice specifying such further information regarding delivery of such shares
as the Secretary of the Company may reasonably request). Payment and period of
time for exercise shall be as specified in the Option Agreement.
10. Nonsolicitation and Confidentiality.
A. Nonsolicitation. For so long as Employee is an employee of the
Company and continuing for one (1) year thereafter, Employee shall not,
without the prior written consent of the Company, directly or indirectly, as a
sole proprietor, member of a partnership, stockholder or investor, officer or
director of a corporation, or as an employee, associate, consultant or agent
of any person, partnership, corporation or other business organization or
entity other than the Company: (i) solicit or endeavor to entice away from the
Company or any of its subsidiaries any person or entity who is, or, during the
then most recent 12-month period, was employed by, or had served as an agent
of, the Company or any of its subsidiaries; or (ii) solicit or endeavor to
entice away from the Company or any of its subsidiaries any person or entity
who is, or was within the then most recent 12-month period, a customer or
client (or reasonably anticipated (to the general knowledge of Employee or the
public) to become a customer or client) of the Company or any of its
subsidiaries.
B. Confidentiality. Employee covenants and agrees with the
Company that he will not at any time, except in performance of his obligations
to the Company hereunder or with the prior written consent of the Company,
directly or indirectly, disclose any secret or confidential information that
he may learn or has learned by reason of his association with the Company or
any of its subsidiaries and affiliates. The term "confidential information"
includes information not previously disclosed to the public or to the trade by
the Company's management, or otherwise in the public domain, with respect to
the Company's or any of its affiliates' or subsidiaries', products,
facilities, applications and methods, trade secrets and other intellectual
property, systems, procedures, manuals, confidential reports, price lists,
customer lists, technical information, financial information (including the
revenues, costs or profits associated with the Company), business plans,
prospects or opportunities, but shall exclude any information which (i) is or
becomes available to the public or is generally known in the industry or
industries in which the Company operates other than as a result of disclosure
by Employee in violation of his agreements under this Paragraph 10B or (ii)
Employee is required to disclose under any applicable laws, regulations or
directives of any government agency, tribunal or authority having jurisdiction
in the matter or under subpoena or other process of law.
C. Exclusive Property. Employee confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by Employee relating to
the business of the Company shall be and remain the property of the Company,
except for such papers customarily deemed to be the personal copies of
Employee.
D. Injunctive Relief. Without intending to limit the remedies
available to the Company, Employee acknowledges that a breach of any of the
covenants contained in this Section 10 may result in material and irreparable
injury to the Company or its affiliates or subsidiaries for which there is no
adequate remedy at law, that it will not be possible to measure damages for
such injuries precisely and that, in the event of such a breach or threat
thereof, the Company shall be entitled to seek a temporary restraining order
and/or a preliminary or permanent injunction restraining Employee from
engaging in activities prohibited by this Section 10 or such other relief as
may be required specifically to enforce any of the covenants in this Section
10. If for any reason, it is held that the restrictions under this Section 10
are not reasonable or that consideration therefor is inadequate, such
restrictions shall be interpreted or modified to include as much of the
duration and scope identified in this Section 10 as will render such
restrictions valid and enforceable.
11. Assignment: This Agreement, as it relates to the employment of
Employee, is a personal contract and the rights and interests of Employee
hereunder may not be sold, transferred, assigned, pledged or hypothecated.
However, this Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns including, without limitation, any
corporation or other entity into which the Company is merged or which acquires
all or substantially all of the outstanding common stock or assets of the
Company.
12. Invalid Provisions: The invalidity of any one or more of the clauses
or words contained in this Agreement shall not affect the reasonable
enforceability of the remaining provisions of this Agreement, all of which are
inserted herein conditionally upon being valid in law; and in the event one or
more of the words or clauses contained herein shall be invalid, this
instrument shall be construed as if such invalid words or clauses had not been
inserted or, alternatively, said words or clauses shall be reasonably limited
to the extent that the applicable court interpreting the provisions of this
Agreement considers to be reasonable.
13. Specific Performance: The parties hereby agree that any violation by
Employee of the covenants and agreements contained herein shall cause
irreparable damage to the Company, and the Company may, as a matter of course,
enjoin and restrain said violation by Employee by process issued out of a
court of competent jurisdiction, in addition to any other remedies that said
court may see fit to award.
14. Binding Effect: All the terms of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
15. Waiver of Breach or Violation Not Deemed Continuing: The waiver by
the Company of any provision of this Agreement shall not operate as, or be
construed to be, a waiver of any subsequent breach hereof.
16. Entire Agreement; Law Governing: This Agreement supersedes any and
all other agreements, either oral or in writing, between the parties hereto
with respect to the subject matter hereof, by and between the Company and
Employee, and contains all the covenants and agreements among the parties with
respect to such subject matter. This Agreement shall be construed in
accordance with the laws of the State of Georgia.
17. Paragraph Headings: The Paragraph headings contained in this
Agreement are for convenience only and shall in no manner be construed as a
part of this Agreement.
IN WITNESS WHEREOF, the Company has hereunto caused this Agreement to
be executed by a duly authorized officer and Employee has hereunto set his
hand as of the day and year first above written.
_______________________________
EMPLOYEE
COMPANY:
ATLANTIC COAST AIRLINES, INC.
By:
(CORPORATE SEAL)
______________________
Attest:_________________
D-9
DOCS_NY #15119 v7 /BNZ07!.DOC
EXHIBIT 10.12(i)
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") is made and entered into as
of the 28th day of January, 1997 (the "Effective Date"), by and between
ATLANTIC COAST AIRLINES, INC., a Delaware corporation and ATLANTIC COAST
AIRLINES, a California corporation (collectively, the "Company") and JAMES B.
GLENNON ("Glennon").
WITNESSETH THAT
WHEREAS, Glennon has been employed by the Company as Senior Vice
President, Chief Financial Officer and Treasurer, and has been a Director of
the Company; and
WHEREAS, the parties have agreed to discontinue Glennon's employment
relationship with the Company; and
WHEREAS, the Company and Glennon desire to expressly set forth in this
Agreement the terms of Glennon's departure from the Company;
NOW THEREFORE, in consideration of the agreements, representations,
covenants and warranties recited hereinbelow, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Glennon and the Company do hereby agree, represent, covenant and warrant as
follows:
1. Termination of Employment Glennon's employment with the Company will
terminate effective as of the close of business on Tuesday, January 28, 1997
(the "Termination Date").
2. Resignation as Director and Officer Glennon hereby resigns all of the
positions he presently holds with the Company, including all positions as
Director and all corporate offices, all effective as of the Termination Date.
Glennon will issue a separate letter to the Board of Directors confirming his
resignation in the form attached hereto as Exhibit 1.
3. Pre-Termination Compensation For the period ending on the Termination
Date, Glennon will receive compensation in the form of Glennon's full base
pay, paid at the annual rate of $145,000, plus auto allowance of $350 per
month, which will accrue for all days through the Termination Date and which
will be paid on the Company's regular payroll payment dates.
4. Severance Pay For the period beginning January 29, 1997 and ending
January 28, 1998 (the "Severance Period"), Glennon will receive compensation
as follows:
a) Glennon will receive severance compensation during the entire
Severance Period at the rate of Glennon's last annual full base
pay plus the value of his monthly auto allowance, in the total
amount of $149,200 per annum, to be paid on a bi-weekly basis on
the regular payroll payment dates at the same time and in the same
fashion as the Company's regular payroll payments.
b) Deductions will be made from Glennon's severance compensation for
social security, federal and state withholding taxes, and any
other such taxes as may from time to time be required by
governmental authority.
5. Senior Management Incentive Plan and Management Incentive Plan Glennon
will be entitled to receive a distribution from the Company's Senior
Management Incentive Plan and from its Management Incentive Plan for the
period ending December 31, 1996, both calculated as per the policy in place
during the applicable period, and to be paid in the same fashion and at the
same time as payments to other eligible employees. Glennon will not be
entitled to any further distributions under the Company's Senior Management
Incentive Plan, its Management Incentive Plan, or under any other incentive
plan.
6. Split Dollar Life Insurance Pursuant to the Split Dollar Agreement
between the Company and Glennon dated December 29, 1995 (the "Split Dollar
Agreement"), the Company will make the $25,000 payment due in January 1997.
The Company will not be required to make any further payment under the Split
Dollar Agreement or pursuant to the policy related thereto, and hereby
notifies Glennon that it will make no further payments. The terms of the
Split Dollar Agreement will remain in full force and effect pursuant to the
terms thereof.
7. Other Life Insurance The premium for Glennon's life insurance policy
with Allied Life (Policy IN0210492) has been paid through December 16, 1996.
The Company will pay the premium on this policy for one additional year,
through December 16, 1997.
8. Health Insurance During the Severance Period, Glennon will be entitled
to participate in the Company's medical and dental insurance plans as are
available to the Company's employees. The Company will pay premiums at the
rates provided to employees generally, with Glennon to pay the employee
contribution through a deduction from your severance payments. Glennon will
be entitled to participate in the Company's executive medical reimbursement
plan for any expenses accruing through the Termination Date, but not for any
expenses arising after the Termination Date. At the end of the Severance
Period, Glennon will be given all appropriate COBRA notices such that COBRA
will begin, if elected by Glennon, at that time.
9. Other Insurance Programs During the Severance Period, Glennon will be
permitted to participate in the Company's other insurance programs in which he
is presently participating (basic employee life insurance coverage, dental,
accidental death and dismemberment, long-term disability) in the same fashion,
to the same extent, with the same payroll deductions, and with the same
limitations as are offered to employees generally. These plans (including the
health insurance plan) will be subject to any changes that are made to the
plans as are applied to employees generally.
10. Tax Gross-Up Glennon will receive the same tax gross-up treatment for
qualifying reimbursements prior to the termination of his employment as he
received for the prior year.
11. Reimbursement of Expenses The Company will reimburse Glennon for
expenses incurred in performing his duties prior to the Termination Date, in
accordance with standard Company procedures, provided that all such expenses
shall be submitted no later than the later of March 31, 1997 or within 30 days
after information is available. Any claims for reimbursement under the
Company's executive medical reimbursement plan must also be submitted by that
date.
12. Stock Options Options to purchase the Company's common stock that have
been granted to Glennon during the period of his employment with the Company
will treated as follows:
a) Vesting:
i) Of an option granted 4/28/94 effective 4/18/94 to purchase
25,000 shares at $4.00 per share, 8,334 shares unvested as
of the date hereof will become 100% fully vested immediately
on the Termination Date.
ii) Of an option granted 1/17/95 effective 1/17/95 to purchase
5,000 shares at $2.625 per share, 1,667 of which vested on
1/17/97, the remaining 1,666 shares unvested as of the date
hereof will become 100% fully vested immediately on the
Termination Date.
iii) Of an option granted 1/17/96 effective 1/17/96 to purchase
20,000 shares at $9.25 per share, 6,667 of which vested on
1/17/97, the remaining 13,333 shares unvested as of the date
hereof will become 100% fully vested immediately on the
Termination Date.
iv) Of an option granted 4/17/96 effective 4/17/96 to purchase
10,000 shares at $16.125 per share, all 10,000 shares, which
were unvested as of the date hereof, will become 100% fully
vested immediately on the Termination Date.
v) Of an option granted 5/22/96 effective 5/22/96 to purchase
10,000 shares at $14.125 per share, all 10,000 shares, which
were unvested as of the date hereof, will become 100% fully
vested immediately on the Termination Date.
vi) Of an option granted (subject to conditions) 10/16/96
effective 10/16/96 to purchase 20,000 shares at $11.75 per
share, all of which were unvested as of the date hereof,
6,667 shares will become 100% fully vested immediately on
the Termination Date and without further condition, and the
remaining 13,333 shares will be canceled as of the
Termination Date.
b) All vested options identified above will expire if not exercised
prior to the close of business on January 28, 1998.
c) All other provisions of all stock option agreements will remain in
full force and effect except as specifically amended above. All
exercise of options will be handled expeditiously to the extent
within the control of the Company.
13. Travel Benefits During the Severance Period, Glennon and his eligible
family members will be entitled to travel benefits for travel on Atlantic
Coast Airlines in the same fashion as the Company's standard employee policy.
14. 401(K) and ESOP Glennon's participation in the Company's 401(k) and
ESOP plans as a present employee will terminate as of the Termination Date.
Glennon will be entitled to all benefits that were vested as of the
Termination Date as provided in each plan's standard vesting schedule.
Provisions of the plans with respect to former employees will apply.
15. Company Assets Glennon will promptly surrender to the Company all of the
Company's assets presently in his possession, including credit cards, laptop
computer, employee identification card, parking pass, and Hertz #1 Club Gold
card.
16. Death In the event of Glennon's death during the Severance Period, all
compensation agreed hereunder will be paid to Glennon's estate, and Glennon's
dependents will be entitled to all insurance coverage afforded to them
hereunder.
17. References The Company will respond to any requests for references on
Glennon's behalf through the issuance of a reference letter in a form to be
agreed between the parties.
18. Nonsolicitation and Confidentiality
a) Nonsolicitation Throughout the Severance Period, Glennon will
not, without the prior written consent of the Company, directly or
indirectly, as a sole proprietor, member of a partnership,
stockholder or investor, officer or director of a corporation, or
as an employee, associate, consultant or agent of any person,
partnership, corporation or other business organization or entity
other than the Company: (i) solicit or endeavor to entice away
from the Company, or any of its subsidiaries, any person or entity
who is, or during the then most recent six (6) month period, was
employed by, or had served as an agent or key consultant of, the
Company or any of its subsidiaries, excluding those employees,
agents or key consultants who may have served in that capacity
within six months prior to the Termination Date but are not so
serving on or after the Termination Date, and excluding
specifically Fred Palloni and individuals who would be covered
under this paragraph only through their affiliation with Fred
Palloni; or (ii) solicit or endeavor to entice away from the
Company or any of its subsidiaries any person or entity who is, or
was within the then most recent six (6) month period, a customer
or client (or reasonably anticipated (to the general knowledge of
Glennon or the public) to become a customer or client) of the
Company or any of its subsidiaries, excluding individual
passengers.
b) Confidentiality Glennon covenants and agrees with the Company
that he will not at any time, except with the prior written
consent of the Company, directly or indirectly, disclose any
secret or confidential information that he may have learned by
reason of his association with the Company or any of its
subsidiaries and affiliates. The term "confidential information"
includes information not previously disclosed to the public or to
the trade by the Company's management, or otherwise in the public
domain, with respect to the Company's or any of its affiliates' or
subsidiaries', products, facilities, applications and methods,
trade secrets, and other intellectual property, systems,
procedures, manuals, confidential reports, price lists, customer
lists, technical information, financial information (including the
revenues, costs or profits associated with the Company), business
plans, prospects or opportunities, but shall exclude any
information which (i) is or becomes available to the public or is
generally known in the industry or industries in which the Company
operates other than as a result of disclosure by Glennon in
violation of his agreements under this paragraph; (ii) Glennon is
required to disclose under any applicable laws, regulations or
directives of any governmental agency, tribunal or authority
having jurisdiction in the matter or under subpoena or other
process of law; or (iii) is disclosed by Glennon on a limited
basis to the extent necessary to assert any of Glennon's rights
under this Agreement.
c) Exclusive Property Glennon confirms that all confidential
information is and shall remain the exclusive property of the
Company. All business records, papers and documents containing
confidential information in Glennon's possession as a result of
his position with the Company will be turned over to the Company
promptly.
d) Breach Glennon acknowledges that in the event of a material
breach by him of any of the covenants contained in this Paragraph
during the Severance Period, all further obligations of the
Company for the remainder of the term of the Severance Period will
cease. If such a breach has occurred that is of a nature that
can be remedied or cured by Glennon such that the material harm to
the Company can be eliminated, it will provide Glennon with
written notice of that situation and will allow Glennon a fifteen
day period to cure said breach. The Company will respond promptly
and reasonably to any requests by Glennon for clarifications and
interpretations as to whether any proposed activity may be subject
to restriction pursuant to this Paragraph.
e) Injunctive Relief Without intending to limit the remedies
available to the Company, Glennon acknowledges that a breach of
any of the covenants contained in this Paragraph may result in
material and irreparable injury to the company or its affiliates
or subsidiaries for which there is no adequate remedy at law, that
it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat
thereof, the Company shall be entitled to seek a temporary
restraining order and/or a preliminary or permanent injunction
restraining Glennon form engaging in activities prohibited by this
Paragraph or such other relief as may be required specifically to
enforce any of the covenants in this Paragraph. If for any reason
it is held that the restrictions under this Paragraph are not
reasonable or that consideration therefor is inadequate, such
restrictions shall be interpreted or modified to include as much
of the duration and scope identified in this Paragraph as will
render such restrictions valid and enforceable.
19. Release
a) In further consideration of each act and promise above stated,
Glennon does hereby forever and finally release, settle, waive,
reach full accord and satisfaction, remise, discharge, and acquit
the Company, its parents, subsidiaries, affiliates, directors,
officers, agents, employees, representatives, successors, and
assigns, from each, every, and all claims, demands, actions, and
causes of action of any kind or nature, known or unknown,
including but not limited to, any and all claims for costs and
attorneys fees, arising or existing until the date of this
Agreement, and Glennon, for himself, his heirs, executors,
administrators, successors, and assigns, does hereby release,
remit, acquit, and forever discharge the Company, its parents,
subsidiaries, affiliates, directors, officers, agents,
representatives, employees, successors, and assigns, from any and
all claims or causes of action of each and every kind and nature
whatsoever, which Glennon has, may have or may accrue, which arise
or are claimed to arise out of Glennon's employment with or
cessation of employment from the Company, including, but not
limited to, any claim under the Age Discrimination in Employment
Act (29 U.S.C. S621, et seq.), or any other federal, state or
local anti-discrimination law or ordinance.
b) Glennon acknowledges that he has carefully read all the terms of
this Agreement, that it contains the entire agreement between him
and the Company, that he enters into this Agreement knowingly and
voluntarily and in exchange for the payments given him, which he
acknowledges are adequate and satisfactory, and that he is hereby
advised in writing by the Company to consult with an attorney
prior to executing this Agreement.
c) The Company further acknowledges that Glennon understands and has
been advised that he may take up to twenty-one (21) days in which
to consider this Agreement, that he understands that he may revoke
the Agreement for a period of seven (7) days following the date of
its execution, and that this Agreement shall not become effective
or enforceable, and the consideration agreed to by the Company
shall not become payable until the seven day revocation period has
expired.
20. Invalid Provisions The invalidity of any one or more of the clauses or
words contained in this Agreement shall not affect the reasonable
enforceability of the remaining provisions of this Agreement, all of
which are inserted herein conditionally upon being valid in law; and in
the event one or more of the words or clauses contained herein shall be
invalid, this instrument shall be construed as if such invalid words or
clauses had not been inserted or, alternatively, said words or clauses
shall be reasonably limited to the extent that the applicable court
interpreting the provisions of this Agreement considers to be
reasonable.
21. Confidentiality The parties agree that, express as required by law,
they will maintain in strict confidence the terms of this Agreement. It
is expressly agreed, however, that this prohibition does not apply to an
accountant, tax advisor, banker, attorney, or spouse, parents or
immediate family of Mr. Glennon provided that person is shown this
Agreement and agrees to abide by its terms of confidentiality and
nondisclosure.
22. Miscellaneous
a) All the terms of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
b) The waiver of any provision of this Agreement shall not operate
as, or be construed to be, a waiver of any subsequent breach
hereof.
c) This Agreement supersedes any and all other agreements, either
oral or in writing, between Glennon and the Company or any of its
subsidiaries, and contains all the covenants and agreements among
the parties with respect to such subject matter, except for
agreements remaining in effect as specifically referenced herein,
and except for any indemnifications in place prior to the date
hereof for acts occurring during the period of Glennon's
employment with the Company.
d) It is understood and agreed that this Agreement is not and cannot
be construed as an admission of liability; on the contrary, it is
expressly understood that any and all liability is denied.
e) This Agreement cannot be modified except in writing signed by
Glennon or by a duly appointed executor of his estate, and by the
a duly appointed officer of the Company.
f) This Agreement shall be construed in accordance with the laws of
the Commonwealth of Virginia.
THE NEXT PAGE IS THE SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has hereunto caused this Agreement to be
executed by a duly authorized officer and Glennon has hereunto set his hand as
of the day and year first above written.
_______________________________
JAMES B. GLENNON
Subscribed and sworn to before me
by the aforementioned James B. Glennon
this 29th day of January, 1997
_______________________________
Notary Public
ATLANTIC COAST AIRLINES
a California Corporation
By:_____________________________
Richard J. Kennedy, Secretary
ATLANTIC COAST AIRLINES, INC.
a Delaware Corporation
By:_____________________________
Richard J. Kennedy, Secretary
Subscribed and sworn to before me
by the aforementioned Richard J. Kennedy,
as Secretary of Atlantic Coast Airlines, Inc.
and Atlantic Coast Airlines,
this 29th day of January, 1997
_______________________________
Notary Public
D-8
DOCS_NY #15119 v7 /BNZ07!.DOC
PROMISSORY NOTE
U.S. $75,000.00 January 29, 1997
FOR VALUE RECEIVED, PAUL H. TATE, an individual (the "Borrower"),
does hereby promise to pay to the order of ATLANTIC COAST AIRLINES, INC., a
Delaware corporation ("Holder"), at its office at or at such other place as
the holder hereof may from time to time designate in writing, in lawful money
of the United States, the principal sum of SEVENTY-FIVE THOUSAND AND NO/100
DOLLARS ($75,000.00), with interest from January 29, 1997 (the "Borrowing
Date") on the principal balance from time to time remaining unpaid at a rate
of five and three-quarters percent (5 _%) per annum, compounded semi-annually,
computed on the basis of the actual number of days elapsed (in a year
consisting of 365 or 366 days, as the case may be). The entire unpaid balance
of principal of, and accrued and unpaid interest on, this Note shall be due
and payable in full on September 30, 1997 (the "Repayment Date").
Prepayment
Prior to the Repayment Date, the Borrower shall have the right to
prepay the principal amount of indebtedness evidenced hereby, or any portion
thereof, at any time without penalty or premium, provided, however, that any
amounts received shall be applied first to the repayment of any accrued but
unpaid interest hereunder and second to the reduction of the outstanding
principal balance hereof. Prepayment shall not postpone the Repayment Date or
vary the duty of the Borrower to pay all obligations when due, nor shall such
prepayments affect or impair the right of the Holder to pursue all remedies
available to it hereunder. In the event that Borrower at any time prepays any
amount of this Note, the Holder shall have no obligation to make any
subsequent advance hereunder. The books and records of Holder shall be prima
facie evidence of all outstanding principal of and accrued and unpaid interest
on this Note.
Event of Default
If the Borrower fails to pay this Note in accordance with its
terms on or before ten (10) days after written notice of such default from the
Holder to the Borrower, the entire principal balance and accrued and unpaid
interest owing hereon shall at once become due and payable without any other
notice, presentment or demand at the option of the holder of this Note.
The failure to exercise the option to accelerate the maturity of
this Note upon the happening of such event of default shall not constitute a
waiver of the right of the holder of this Note to exercise the same or any
other option at that time or at any subsequent time with respect to such
uncured default or any other event of default. The remedies of the holder
hereof, as provided in this Note and in any instrument evidencing, securing,
governing, guaranteeing or pertaining to the loan evidenced hereby, shall be
cumulative and concurrent and may be pursued separately, successively or
together as often as occasion therefor shall arise, at the sole discretion of
the holder hereof. The acceptance by the holder hereof of any payment under
this Note which is less than the payment in full of all amounts due and
payable at the time of such payment shall not, subject to the terms hereof,
(i) constitute a waiver of or impair, reduce, release or extinguish any remedy
of the holder hereof or the rights of the holder hereof to exercise the
foregoing option granted to the holder of this Note or under any other
instrument evidencing, securing, governing, guaranteeing or pertaining to the
loan evidenced hereby, at that time or at any subsequent time, or nullify any
prior exercise of any such option, or (ii) impair, reduce, release, extinguish
or adversely affect the obligations of any party liable under such documents
as originally provided therein.
After default under or maturity of this Note, principal and past-
due interest shall bear interest at the Maximum Rate, commencing on the fourth
day following the due date thereof, until paid, except as the parties
otherwise agree. As used herein, the term "Maximum Rate" means at any time
the maximum rate of nonusurious interest permitted by applicable law, provided
that in determining the Maximum Rate, due regard shall be given, to the extent
required by applicable law, to any and all relevant payments, fees, charges,
deposits, balances, agreements and calculations characterized as or which may
be deemed to constitute interest, or be deducted from principal to calculate
the interest rate or otherwise affect interest rate determinations, so that in
no event shall the Holder contract for or be entitled to charge, receive,
take, collect, reserve or apply, on this Note, any amount in excess of the
maximum rate of interest permitted by applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to the holder
hereof in excess of the Maximum Rate; and if from any circumstance the holder
hereof shall ever receive anything of value deemed interest by applicable law
in excess of the Maximum Rate, an amount equal to any excessive interest shall
be applied to the reduction of the principal hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of
principal hereof, such excess shall be refunded to the Borrower. All interest
paid or agreed to be paid to the holder hereof shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full period until payment in full of the principal (including the period of
any renewal or extension hereof) so that the interest hereon for such full
period shall not exceed the Maximum Rate.
Waivers
Except as otherwise provided herein, the makers, signers,
sureties, guarantors, endorsers and any other party now or hereafter liable
for the payment of this Note, in whole or in part, hereby severally waive
demand, presentment for payment, notice of nonpayment, notice of default,
notice of dishonor, notice of intent to demand, notice of intent to accelerate
maturity, notice of acceleration of maturity, diligence in collecting, grace,
notice and protest, and notice of any other kind whatsoever, and agree to one
or more renewals, extensions for any period, modifications, substitution of,
or failure to perfect, any security hereof, in whole or in part, with or
without notice, before or after maturity, without prejudice to the holder.
Waivers of Rights Hereunder
No delay on the part of the holder of this Note in the exercise of
any power or right under this Note or any other instrument executed in
connection herewith or securing this Note shall operate as a waiver thereof,
nor shall a single or partial exercise of any power or right preclude other or
further exercise thereof or exercise of any other power or right. Enforcement
by the holder of this Note of any security for the payment hereof shall not
constitute any election by it of the remedies so as to preclude the exercise
of any other remedy available to it.
Severability
Any provision of this Note that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability (but shall be construed and given
effect to the extent possible), without invalidating the remaining provisions
of this Note or affecting the validity or enforceability of such provision in
any other jurisdiction.
Costs
If this Note shall be collected by legal proceedings or through a
probate, bankruptcy or other court whether before or after maturity, or shall
be placed in the hands of an attorney for collection after default or
maturity, the Borrower agrees to pay all costs of collection, including,
without limitation, reasonable attorneys' fees and expenses.
Governing Law
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE AND THE LAWS OF THE UNITED STATES APPLICABLE
TO TRANSACTIONS IN DELAWARE.
EXECUTED AND DELIVERED effective as of the 29th day of January,
1997.
PAUL H. TATE,
________________________
[Footnote continued from previous page]
[Footnote continued on next page]
4
INDEMNITY AGREEMENT
THIS AGREEMENT is made between Atlantic Coast Airlines, Inc.,
a Delaware corporation (the "Company"), and _____________ ("Indemnitee").
The Company and Indemnitee desire that Indemnitee serve or
continue to serve as a director or officer of the Company. In view of the
potential risks of personal liability to which Indemnitee may be exposed
as a result of his service as a director or officer of the Company,
Indemnitee is unwilling to serve, or continue to serve, the Company as a
director or officer without assurances that adequate liability insurance,
indemnification or a combination thereof is, and will continue to be
provided. Therefore, in order to induce Indemnitee to serve as a director
or officer of the Company, the Company desires and intends hereby to
provide indemnification (including advancement of expenses) against any
and all liabilities asserted against Indemnitee to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware. For and in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree
as follows:
1. Continued Service. Indemnitee will serve or continue to
serve, at the will of the Company or under separate contract, if such
exists, as a director and/or officer so long as he is duly elected and
qualified in accordance with the Bylaws of the Company or until he tenders
his resignation.
2. Indemnification. The Company shall indemnify Indemnitee
as follows:
(a) The Company shall indemnify Indemnitee in the
event that he is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by
or in the right of the Company) by reason of the fact that he is or was a
director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with such action, suit or proceeding, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
(b) The Company shall indemnify Indemnitee in the
event that he is or was a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee or agent of the Company, or is or
was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually
and reasonably incurred by him or on his behalf in connection with the
defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interest of the Company and except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have
been adjudged to be liable to the Corporation for gross negligence or
willful misconduct in the performance of his duties to the Company unless
and only to the extent that the Delaware Court of Chancery shall determine
upon application that, despite the adjudication of liability but in view
of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such expenses as the Delaware Court of Chancery
shall deem proper.
(c) Any indemnification under paragraphs (a) and (b)
of this Section 2 (unless ordered by a court) shall be made by the Company
within 65 days of the submission by the Indemnitee of the Indemnification
Statement (as defined under Section 3(a) hereof) and only as authorized in
the specific case upon a determination (in accordance with Section 3
hereof) that indemnification of Indemnitee is proper in the circumstances
because he has met the applicable standard of conduct set forth in
paragraphs (a) and (b) of this Section 2. Such determination shall be
made (i) by a majority vote of the directors who are not or were not
parties to such action ("Disinterested Directors"), suit or proceeding,
even if the number of Disinterested Directors is less than a quorum, or
(ii) if there are no Disinterested Directors or if a majority of
Disinterested Directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. The independent legal
counsel may be outside counsel currently or previously employed by the
Company, provided that such counsel (A) has not provided legal services to
the Indemnitee, (B) does not regularly advise the Directors or senior
management of the Company with respect to their actions, duties and
responsibilities, and (C) and has not provided legal services to the
Company or the Indemnitee with respect to the transaction or matter out of
which the action, suit or proceeding arose.
(d) Expenses (including attorney fees) incurred by
Indemnitee in defending a civil, criminal, administrative or investigative
action, suit or proceeding to which Indemnitee is or was a party or is
threatened to be made a party by reason of the fact that he is or was a
director or officer of the Company shall be paid by the Company in advance
of the final disposition of such action, suit or proceeding within 14 days
of the receipt by the Company of a sworn statement of request for
advancement of expenses substantially in the form of Exhibit A attached
hereto and made a part hereof ("Undertaking"), averring that (i) he has
reasonably incurred or will reasonably incur actual expenses in defending
a civil, criminal, administrative or investigative action, suit or
proceeding, and (ii) he undertakes to repay such amount if it is
ultimately determined that he is not entitled to be indemnified by the
Company under this Agreement or otherwise; provided that no such expenses
shall be payable hereunder to the extent that the Disinterested Directors,
independent legal counsel, or stockholders, as the case may be, promptly
make a determination as provided herein that the Undertaking is with
respect to an excluded claim as defined in Section 5 hereof.
(e) The Company shall have no obligation to indemnify
Indemnitee under this Agreement for any amounts paid in a settlement of
any action, suit or proceeding effected without the Company's prior
written consent, which consent shall not be unreasonably withheld. The
Company shall not settle any claim in any manner that would impose any
obligation on Indemnitee without the Indemnitee's prior written consent.
Indemnitee shall not unreasonably withhold his consent to any proposed
settlement.
(f) The rights to indemnification and advancement of
expenses provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may be entitled under any statute, bylaw,
insurance policy, agreement, vote of stockholders or Disinterested
Directors or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office, and shall
continue after Indemnitee has ceased to be a director, officer, employee
or agent and shall inure to the benefit of his heirs, executors and
administrators.
3. Determination of Right to Indemnification. For purposes
of making the determination in a specific case under paragraph (c) of
Section 2 hereof whether to make indemnification, the Disinterested
Directors, independent legal counsel, or stockholders, as the case may be,
shall make such determination in accordance with the following procedure:
(a) Indemnitee may submit to the board of directors a
sworn statement requesting indemnification, which statement shall be
substantially in the form of Exhibit B attached hereto and made a part
hereof (the "Indemnification Statement"), averring that he has met the
applicable standard of conduct set forth in paragraphs (a) and (b) of
Section 2 hereof; and
(b) Submission of the Indemnification Statement to the
board of directors shall create a rebuttable presumption that Indemnitee
is entitled to indemnification under this Agreement, and the Disinterested
Directors, independent legal counsel, or stockholders, as the case may be,
shall within 60 days after submission of the Indemnification Statement
specifically determine that Indemnitee is so entitled, unless it or they
make a determination that (i) sufficient evidence exists to rebut the
presumption that Indemnitee has met the applicable standard of conduct set
forth in paragraphs (a) or (b) of Section 2 hereof or (ii) that the
Indemnification Statement is with respect to an excluded claim as defined
in Section 5 hereof.
4. Merger, Consolidation or Sale of Assets. In the event
that the Company shall be a constituent corporation in a consolidation or
merger, whether the Company is the resulting or surviving corporation or
is absorbed, Indemnitee shall stand in the same position under this
Agreement with respect to the resulting, surviving or changed corporation
as he would have with respect to the Company if its separate existence had
continued. The Board of Directors of the Company shall use its best
efforts to make any sale or transfer of substantially all of the assets of
the Company contingent upon the acquiring party expressly assuming or
guaranteeing the Company's obligations under this Agreement.
5. Certain Definitions. For purposes of this Agreement,
the following definitions apply herein:
"other enterprises" shall include employee benefit plans, and
civic, non-profit, or charitable organizations, whether or not
incorporated;
"fines" shall include any excise taxes assessed on Indemnitee
with respect to any employee benefit plan;
"serving at the request of the Company" shall include any
service at the request or with the express or implied authorization of the
Company, as a director, officer, employee or agent of the Company which
imposes duties on, or involves services by, Indemnitee with respect to a
corporation or "other enterprises," its participants or beneficiaries; and
if Indemnitee acted in good faith and in a manner he reasonably believed
to be in the interest of the participants and beneficiaries of such "other
enterprises," he shall be deemed to have acted in a manner "not opposed to
the best interests of the Company" as referred to in this Agreement; and
"excluded claim" shall include any claim (i) based upon or
attributable to Indemnitee gaining any personal profit or advantage to
which Indemnitee is not entitled, (ii) for an accounting of profits made
from the purchase or sale by Indemnitee of securities of the Company
within the meaning of Section 16 of the Securities Exchange Act of 1934,
as amended, or similar provisions of any state law, or (iii) the payment
of which by the Company is not permitted under any applicable law.
6. Attorney's Fees. In the event that Indemnitee
institutes any legal action to enforce his rights under, or to recover
damages for breach of this Agreement, Indemnitee, if he prevails in whole
or in part, shall be entitled to recover from the Company all attorneys'
fees and disbursements incurred by him.
7. Severability. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without
regard to its conflict of laws rules.
9. Modification, Survival. Subject to paragraph (e) of
Section 2 hereof, this Agreement contains the entire agreement of the
parties relating to the subject matter hereof and shall supersede all
other agreements and understandings, if any, between the parties with
respect to the matters contemplated herein. This Agreement may be
modified only by an instrument in writing signed by both parties hereto.
The provisions of this Agreement shall survive the termination of
Indemnitee's service as a director or officer of the Company.
10. Successors and Assigns. This Agreement shall be binding
upon all successors and assigns of the Company and any successors by
merger or otherwise by operation of law, and shall be binding upon and
inure to the benefit of the heirs, executors and administrators of the
Indemnitee.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement and set their seals effective as of the day of ,
199 .
ATLANTIC COAST AIRLINES, INC.
Attest: By:
Secretary President
(Corporate Seal) INDEMNITEE
[Footnote continued from previous page]
[Footnote continued on next page]
9
EXHIBIT 10.21(a)
Amendment Number One
to Acquisition Agreement
This Amendment Number One to Acquisition Agreement by and among
Jetstream Aircraft, Inc., a Delaware corporation ("JAI"), JSX Capital
Corporation, a Delaware corporation ("JSX"), and Atlantic Coast Airlines, a
California corporation ("ACA") is dated as of June 19, 1996.
Whereas, the parties have entered into an Acquisition Agreement for
Jetstream 41 Aircraft (the "Acquisition Agreement") dated as of December 30,
1994, which Acquisition Agreement provides for the lease to ACA of twenty
Jetstream 41 Aircraft (as defined in the Acquisition Agreement) on terms and
conditions contained therein; and
Whereas, eleven of the Jetstream 41 Aircraft have been delivered and
leased to ACA pursuant to the Acquisition Agreement, and nine of the Jetstream
Aircraft (the "Undelivered Aircraft") have not yet been delivered or leased to
ACA, and
Whereas, Section 9.1.8 of the Acquisition Agreement contains certain
conditions precedent to the delivery of the Undelivered Aircraft, and the
parties desire to clarify the effect of said conditions precedent and to amend
the obligations of the parties with respect to said Undelivered Aircraft;
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto acknowledge
and agree as follows:
1. Section 9.1.8 of the Acquisition Agreement is hereby deleted.
2. ACA's obligation to accept delivery of, and JAI's obligation to deliver,
the Undelivered Aircraft is hereby canceled. The parties shall have no
further obligations with respect to the delivery of Undelivered Aircraft
unless ACA elects to exercise the option as described below.
3. ACA shall have an option to accept delivery of any of the Undelivered
Aircraft on the same terms and conditions as contained in the
Acquisition Agreement subject to the conditions precedent in the
Acquisition Agreement and further subject to the following:
a) This option shall be exercised by ACA's providing written notice
to Jetstream of its intention to accept delivery of any of the
Undelivered Aircraft.
b) The option may be exercised in whole or in part, and may be
elected incrementally until expiration.
c) The delivery date of any Undelivered Aircraft shall be specified
in the notice but shall be at least six months after the delivery
of said notice, and with all deliveries to be completed on or
before June 30, 1997, both unless otherwise agreed by the parties.
Jetstream's obligation to meet a delivery date specified in a
notice shall be subject to availability, but in that event
delivery shall be completed as soon thereafter as Jetstream has
available delivery positions as of the date it receives notice.
d) This option will expire for any Undelivered Aircraft for which a
notice of exercise is not delivered on or before December 31,
1996.
THE NEXT PAGE IS THE SIGNATURE PAGE
In Witness Whereof, the parties hereto have caused this Amendment Number
One to Acquisition Agreement to be executed by their duly authorized officers
as of the date and year written above.
ATLANTIC COAST AIRLINES JETSTREAM AIRCRAFT, INC.
By:__________________________ By:__________________________
Its:__________________________ Its:__________________________
JSX CAPITAL CORPORATION
By:__________________________
Its:__________________________
D-3
DOCS_NY #15119 v7 /BNZ07!.DOC
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 12th day of October,
1995, by and between SHAWMUT CAPITAL CORPORATION ("Lender"), a Connecticut
corporation with an office at 6060 J. A. Jones Drive, Suite 200, Charlotte,
North Carolina 28287; and ATLANTIC COAST AIRLINES ("Borrower"), a California
corporation with its chief executive office and principal place of business at
1 Export Drive, Sterling, Virginia 20164; and ATLANTIC COAST AIRLINES, INC.
("Parent"; Borrower and Parent being herein collectively called the "Loan
Parties" and, individually, a "Loan Party"), a Delaware corporation with its
chief executive office and principal place of business at 1 Export Drive,
Sterling, Virginia 20164. Capitalized terms used in this Agreement have the
meanings assigned to them in Appendix A, General Definitions.
0. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to the amount of
the Revolver Loan Facility available upon Borrower's request therefor, as
follows:
0 . Loans. Lender agrees, for so long as no Default or Event of
Default exists and subject to the provisions of Section 9 below, to make
Revolver Loans to Borrower from time to time, as requested by Borrower in the
manner set forth in subsection 3.1 hereof, up to a maximum principal amount at
any time outstanding equal to the Borrowing Base at such time.
1 . Use of Proceeds of Revolver Loans. The Borrower shall use the
proceeds of the Revolver Loans as follows:
(i) On the Closing Date, the proceeds of the initial
Revolver Loan shall be used solely for the purposes of (i) paying and
satisfying in full Borrower's Indebtedness owing to Congress, and (ii) paying
the costs associated with the closing of the transactions contemplated by this
Agreement; and
(ii) All other Revolver Loans made on or after the
Closing Date shall be used solely for Borrower's general working capital needs
in a manner consistent with the provisions of this Agreement and Applicable Law
and for any other purposes not inconsistent with this Agreement.
2 . Reduction of Revolver Loan Facility. Borrower shall have the right
from time to time, upon not less than ninety (90) days written notice to
Lender, to reduce permanently the amount of the Revolver Loan Facility. Each
such reduction of the Revolver Loan Facility shall be in the amount of
$1,000,000 or such amount which is in an integral multiple of $1,000,000 in
excess thereof, or such lesser amount as shall constitute the entire Revolver
Loan Facility then existing as a result of any one or more previous reductions
thereof. Each reduction of the Revolver Loan Facility shall be accompanied by
payment of the Revolver Loans to the extent that the aggregate principal amount
of the Revolver Loans then outstanding exceeds the Borrowing Base after giving
effect to such reduction.
1. INTEREST, FEES AND CHARGES
0 . Interest.
.0 . Rate of Interest. Subject to the provisions of subsections
2.1.3 and 2.1.5 of this Agreement, Borrower agrees to pay interest on the
unpaid principal amount of the Loans outstanding from the respective dates such
principal amounts are advanced until paid (whether at stated maturity, on
acceleration, or otherwise) at a variable rate per annum equal to the Base Rate
in effect from time to time plus one and one-half percent (1.5%) (the
"Specified Percentage").
.1 . Computation of Interest.
( ) Interest shall be calculated on a daily basis
(computed on the actual number of days elapsed over a year of 360 days) on the
principal balance of the Loans outstanding at any time or from time to time.
The calculation of interest on the basis of a 360-day year, as opposed to a
year of 365 days, results in a higher effective rate of interest hereunder.
The applicable rates of interest shall be increased or decreased, as the case
may be, by an amount equal to any increase or decrease in the Base Rate, with
such adjustments to be effective as of the opening of business on the day that
any such change in the Base Rate becomes effective.
(i) Interest on each Loan shall accrue from and
including the date of such Loan to but excluding the date of any repayment
thereof; provided, however, that if a Loan is repaid on the same day made, one
day's interest shall be paid on such Loan. Accrued interest on all Loans shall
be paid upon the earliest of (1) the first day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, (2) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the Obligations,
or (3) the Expiration Date.
.2 . Default Rate of Interest. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the principal amount of
all Loans shall bear interest at a rate per annum equal to two percent (2%)
above the interest rate otherwise applicable thereto (the "Default Rate").
.3 . Maximum Interest. Regardless of any provision contained in this
Agreement or any of the other Loan Documents, in no contingency or event
whatsoever shall the aggregate of all amounts that are contracted for, charged
or collected pursuant to the terms of this Agreement or any of the other Loan
Documents and that are deemed interest under Applicable Law exceed the highest
rate permissible under any Applicable Law. No agreements, conditions,
provisions or stipulations contained in this Agreement or any of the other Loan
Documents, or the exercise by Lender of the right to accelerate the payment or
the maturity of all or any portion of the Obligations, or the exercise of any
option whatsoever contained in any of the Loan Documents, or the prepayment by
Borrower of any of the Obligations, or the occurrence of any contingency
whatsoever, shall entitle Lender to charge or receive in any event, interest or
any charges, amounts, premiums or fees deemed interest by Applicable Law (such
interest, charges, amounts, premiums and fees referred to herein collectively
as "Interest") in excess of the Maximum Rate and in no event shall Borrower be
obligated to pay Interest exceeding such Maximum Rate, and all agreements,
conditions or stipulations, if any, which may in any event or contingency
whatsoever operate to bind, obligate or compel Borrower to pay Interest
exceeding the Maximum Rate shall be without binding force or effect, at law or
in equity, to the extent only of the excess of Interest over such Maximum Rate.
If any Interest is charged or received in excess of the Maximum Rate
("Excess"), Borrower acknowledges and stipulates that any such charge or
receipt shall be the result of an accident and bona fide error, and such
Excess, to the extent received, shall be applied first to reduce the principal
Obligations and the balance, if any, returned to Borrower, it being the intent
of the parties hereto not to enter into a usurious or otherwise illegal
relationship. The right to accelerate the maturity of any of the Obligations
does not include the right to accelerate any interest that has not otherwise
accrued on the date of such acceleration, and Lender does not intend to collect
any unearned interest in the event of any such acceleration. Borrower
recognizes that, with fluctuations in the rate of interest set forth in
subsection 2.1.1 of this Agreement, and in the Maximum Rate, such an
unintentional result could inadvertently occur. All monies paid to Lender
hereunder or under any of the other Loan Documents, whether at maturity or by
prepayment, shall be subject to any rebate of unearned interest as and to the
extent required by Applicable Law. By the execution of this Agreement,
Borrower covenants that (i) the credit or return of any Excess shall constitute
the acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or
pursue any other remedy, legal or equitable, against Lender, based in whole or
in part upon contracting for, charging or receiving any Interest in excess of
the Maximum Rate. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by Lender, all interest at any time
contracted for, charged or received from Borrower in connection with any of the
Loan Documents shall, to the extent permitted by Applicable Law, be amortized,
prorated, allocated and spread in equal parts throughout the full term of the
Obligations. Borrower and Lender shall, to the maximum extent permitted under
Applicable Law, (i) characterize any non-principal payment as an expense, fee
or premium rather than as Interest and (ii) exclude voluntary prepayments and
the effects thereof. The provisions of this Section shall be deemed to be
incorporated into every Loan Document (whether or not any provision of this
Section is referred to therein). All such Loan Documents and communications
relating to any Interest owed by Borrower and all figures set forth therein
shall, for the sole purpose of computing the extent of Obligations, be
automatically recomputed by Borrower, and by any court considering the same, to
give effect to the adjustments or credits required by this subsection.
2.1.5. Adjustment in Rate of Interest. Provided no Default or Event of
Default then exists, the Specified Percentage shall be decreased by one quarter
of one percent (0.25%) if, for the fiscal year of the Loan Parties ending
December 31, 1995, the Consolidated Adjusted Net Earnings From Operations
exceed $4,800,000 and the Consolidated Debt Service Coverage Ratio is not less
than 1.4 to 1.0 as reflected on the audited financial statements of the Loan
Parties required to be delivered to Lender pursuant to Section 8.1.3(i) hereof,
and an additional one quarter of one percent (0.25%) if, for the fiscal year of
the Loan Parties ending December 31, 1996, Consolidated Adjusted Net Earnings
From Operations exceed $7,200,000 and the Consolidated Debt Service Coverage
Ratio is not less than 2.3 to 1.0, as reflected on such audited financial
statements. Any decrease in the Specified Percentage pursuant to this
subsection 2.1.5 shall become effective on the first day of the calendar month
next following the month in which Lender receives the audited financial
statements of the Loan Parties required to be submitted to Lender pursuant to
Section 8.1.3(i) hereof.
1 Fees.
.0 . Closing Fee. Borrower shall pay to Lender a closing fee of
$75,000, one half of which shall be paid concurrently with the initial Revolver
Loan hereunder and the balance payable upon the sooner to occur of (i) ninety
(90) days after the Closing Date or (ii) the Expiration Date. The entire
amount of the closing fee shall be fully earned upon Lender's making of the
initial Revolver Loan hereunder.
.1 . Unused Line Fee. Borrower shall pay to Lender a fee equal to
one-half of one percent (0.5%) per annum of the amount by which seventy-five
percent (75%) of the Revolver Loan Facility exceeds the Average Monthly Loan
Balance. The unused line fee shall begin to accrue on the Closing Date and
shall be payable monthly in arrears on the first day of each calendar month
hereafter and upon the Expiration Date.
2 . Computation of Interest and Fees. Interest, fees and collection
charges hereunder shall be calculated daily and shall be computed on the actual
number of days elapsed over a year of 360 days. For the purpose of computing
interest hereunder, all items of payment received by Lender shall be deemed
applied by Lender on account of the Obligations (subject to final payment of
such items) on the first (1st) Business Day after receipt by Lender of such
items in immediately available funds in Lender's account located at Harris
Trust & Savings Bank in Chicago, Illinois, and Lender shall be deemed to have
received such item of payment on the date specified in Section 3.3 hereof.
3 . Audit and Appraisal Fees and Expenses. Additionally, Borrower
shall pay to Lender all reasonable out-of-pocket expenses from time to time
incurred by Lender in connection with audits and appraisals of Borrower's books
and records and of the Collateral and such other matters related thereto as
Lender shall deem appropriate; provided, however, for so long as no Default or
Event of Default exists, the maximum amount of such audit and appraisal
expenses for which Borrower shall be obligated to pay Lender for any Loan Year
shall not exceed the sum of $8,000.
4 . Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists (except as otherwise set forth
below), Lender incurs legal or accounting expenses or any other costs or
out-of-pocket expenses in connection with (i) subject to the provisions of the
last sentence of this Section 2.5, the preparation, negotiation, execution and
delivery of this Agreement or any of the other Loan Documents, any amendment of
or modification of this Agreement or any of the other Loan Documents, (ii)
reasonable charges for Persons whom Lender may engage from time to time during
the existence of an Event of Default to render opinions concerning the books,
records and financial condition of Borrower and the condition and value of the
Collateral; (iii) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, Borrower or any other Person) in any way
relating to the Collateral, this Agreement or any of the other Loan Documents
or Borrower's affairs; provided, however, Borrower shall not be obligated for
the expenses and costs of Lender set forth in this Section 2.5(iii) in
connection with any litigation, contest, dispute, suit, proceeding or action
initiated by Lender or Borrower in which Borrower is ultimately the prevailing
party; (iv) any attempt to enforce any rights of Lender against Borrower or any
other Person which may be obligated to Lender by virtue of this Agreement or
any of the other Loan Documents, including, without limitation, the Account
Debtors; (v) any attempt to inspect, verify, protect, preserve, restore,
collect, sell, liquidate or otherwise dispose of or realize upon the Collateral
after the occurrence and during the continuance of an Event of Default; or (vi)
the filing and recording of the financing statements and all other documents
required by Lender to perfect Lender's Lien in the Collateral, including,
without limitation, any documentary stamp tax or any other taxes incurred
because of such filing or recording, and the conducting of searches in all
filing offices at such intervals as Lender may determine to confirm the
priority of Lender's Lien in the Collateral; then all such reasonable legal and
accounting expenses and other reasonable costs and out of pocket expenses of
Lender shall be charged to Borrower. All amounts chargeable to Borrower under
this Section 2.5 shall be Obligations secured by all of the Collateral, shall
be payable on demand to Lender, and shall bear interest from the date such
demand is made until paid in full at the rate applicable to Revolver Loans from
time to time. Borrower shall also reimburse Lender for expenses incurred by
Lender in its administration of the Collateral to the extent and in the manner
provided in Section 6 hereof. Notwithstanding the provisions of the foregoing
Section 2.5(i), Borrower shall be responsible for paying or reimbursing Lender
for no more than $35,000 of reasonable legal fees and expenses incurred by
Lender in connection with the preparation, negotiation, execution and delivery
of this Agreement and the other Loan Documents for which Borrower shall be
supplied with a reasonably detailed and itemized statement.
5 . Bank Charges. Borrower shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender pays to a bank or other similar
institution arising out of or in connection with (i) the forwarding to Borrower
or any other Person on behalf of Borrower by Lender of proceeds of Loans made
by Lender to Borrower pursuant to this Agreement and (ii) the depositing for
collection, by Lender, of any check or item of payment received or delivered to
Lender on account of the Obligations.
6 . Capital Adequacy. If after the date hereof Lender determines that
(a) the adoption of any Applicable Law, rule or regulation regarding capital
requirements for banks or bank holding companies or the subsidiaries thereof,
(b) any change in the interpretation or administration of any such law, rule or
regulation by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or (c) compliance by
Lender or its holding company with any request or directive of any such
governmental authority, central bank or comparable agency regarding capital
adequacy (whether or not having the force of law), has the effect of reducing
the return on Lender's capital to a level below that which Lender could have
achieved (taking into consideration Lender's and its holding company's policies
with respect to capital adequacy immediately before such adoption, change or
compliance and assuming that Lender's capital was fully utilized prior to such
adoption, change or compliance) but for such adoption, change or compliance as
a consequence of Lender's commitment to make the Loans pursuant hereto by any
amount deemed by Lender to be material:
(i) Lender shall promptly, after Lender's
determination of such occurrence, give notice thereof to Borrower; and
(ii) Commencing ninety (90) days after Lender's
giving notice to Borrower as set forth in clause (i) above, Borrower shall pay
to Lender, as an additional fee from time to time, on demand, such amount as
Lender certifies to be the amount that will compensate Lender for such
reduction.
A certificate of Lender claiming entitlement to compensation as set forth
above will be conclusive in the absence of manifest error. Such certificate
will set forth the nature of the occurrence giving rise to such compensation,
the additional amount or amounts to be paid to Lender, and the method by which
such amounts were determined. In determining such amount, Lender may use any
reasonable averaging and attribution method. For purposes of this Section 2.7
all references to Lender shall be deemed to include any bank holding company or
bank parent of Lender.
2. LOAN ADMINISTRATION.
0 . Manner of Borrowing Loans and Disbursements. Borrowings of Loans
shall be made and funded as follows:
.0 . Loan Requests.
( ) Whenever Borrower desires to borrow pursuant to
this Agreement, Borrower shall give Lender prior written notice (or telephonic
notice promptly confirmed in writing) of such borrowing request (a "Notice of
Borrowing"). Such Notice of Borrowing shall be given by Borrower no later
than 12:00 noon Charlotte, North Carolina time at the office of Lender
designated by Lender from time to time on the Business Day of the requested
date of such borrowing. Notices received after 12:00 noon shall be deemed
received on the next Business Day. Each Notice of Borrowing shall specify (i)
the principal amount of the borrowing and (ii) the date of borrowing (which
shall be a Business Day).
(i) Unless payment is otherwise timely made by
Borrower, the becoming due of any amount required to be paid under this
Agreement or any of the other Loan Documents as principal, accrued interest,
fees or other charges shall be deemed irrevocably to be a request by Borrower
for a Revolver Loan on the due date of, and in an aggregate amount required to
pay, such principal, accrued interest, fees or other charges, and the proceeds
of each such Revolver Loan may be disbursed by Lender by way of direct payment
of the relevant Obligation. Within a reasonable time after the payment by
Lender of any fees or other charges that are not of a routine or administrative
nature, Lender shall give Borrower notice thereof and send to Borrower (if
available to Lender) any invoice or other supporting documentation for such fee
or other charge.
(ii) As an accommodation to Borrower, Lender may
permit telephonic requests for borrowings and electronic transmittal of
instructions, authorizations, agreements or reports to Lender by Borrower.
Unless Borrower specifically directs Lender in writing not to accept or act
upon telephonic or electronic communications from Borrower, Lender shall have
no liability to Borrower for any loss or damage suffered by Borrower as a
result of Lender's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Lender by
Borrower and Lender shall have no duty to verify the origin of any such
communication or the authority of the person sending it.
.1 . Disbursement. Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of each Revolver Loan requested by Borrower, or deemed to
be requested, pursuant to subsection 3.1.1 as follows: (i) the proceeds of
each Revolver Loan requested under subsection 3.1.1(i) shall be disbursed by
Lender in lawful money of the United States of America in immediately available
funds, in the case of the initial borrowing, in accordance with the terms of
the written disbursement letter from Borrower, and in the case of each
subsequent borrowing, by wire transfer to such bank account as may be agreed
upon by Borrower and Lender from time to time or elsewhere if pursuant to a
written direction from Borrower; and (ii) the proceeds of each Revolver Loan
requested under subsection 3.1.1(ii) shall be disbursed by Lender by way of
direct payment of the relevant interest or other Obligation.
1 . Payments. Except where evidenced by notes or other instruments
issued or made by Borrower to Lender specifically containing payment provisions
which are in conflict with this Section 3.2 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), the
Obligations shall be payable as follows:
.0 . Repayment of Revolver Loans. Borrower's obligation to pay the
principal of, and interest on, the Revolver Loans shall be evidenced by the
Loan Account (a statement of which shall be furnished monthly to Borrower
pursuant to Section 3.6 hereof) and all outstanding principal amounts and
accrued interest with respect to the Revolver Loans shall be due and payable as
follows:
( ) The Revolver Loans shall be paid by Borrower to
Lender immediately upon the earliest of (1) the receipt by Lender or Borrower
of any proceeds of any of the Collateral, to the extent of such proceeds, (2)
the occurrence of an Event of Default in consequence of which Lender elects to
accelerate the maturity and payment of such Revolver Loans, or (3) the
Expiration Date. Interest accrued on the principal amount of Revolver Loans
shall be calculated and paid as provided in Section 2.1 hereof.
(i) Notwithstanding anything to the contrary
contained elsewhere in this Agreement, if an Overadvance Condition shall exist,
Borrower shall, without the necessity of a demand, repay the outstanding
Revolver Loans in an amount sufficient to reduce the aggregate unpaid principal
amount of all such Revolver Loans by an amount equal to such excess.
.1 . Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided in
Section 2 hereof, to Lender or to any other Person designated by Lender in
writing.
.2 . Other Obligations. The balance of the Obligations requiring the
payment of money, if any, shall be payable by Borrower to Lender as and when
provided in this Agreement, the Other Agreements or the Security Documents, or,
if no date of payment is otherwise specified in the Loan Documents, on demand.
2 . Application of Payments and Collections. All items of payment
received by Lender by 1:00 p.m., Charlotte, North Carolina time, on any
Business Day shall be deemed received on that Business Day. All items of
payment received after 1:00 p.m., Charlotte, North Carolina time, on any
Business Day shall be deemed received on the following Business Day. Borrower
irrevocably waives the right to direct the application of any and all payments
and collections at any time or times hereafter received by Lender from or on
behalf of Borrower, and Borrower does hereby irrevocably agree that Lender
shall have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Lender or
its agent against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records, provided
such application of payments and collections is made in a manner consistent
with this Agreement and the other Loan Documents. If as the result of the
clearance and collection of all Accounts of Borrower through ACH and the direct
payment of all funds credited to Borrower's Clearing Bank Account to Lender for
application to the Obligations, all as provided in subsections 6.2.5 and 6.2.6
hereof, a credit balance exists in the Loan Account, such credit balance shall
not accrue interest in favor of Borrower, but shall be available to Borrower at
any time or times for so long as no Default or Event of Default exists. Lender
may, at its option, offset such credit balance against any of the Obligations
upon and after the occurrence of an Event of Default.
3 . All Loans to Constitute One Obligation. The Loans shall constitute
one general Obligation of Borrower and shall be secured by Lender's Lien in all
of the Collateral.
4 . Loan Account. Lender shall enter all Revolver Loans as debits to
Borrower's Loan Account and shall also record in the Loan Account all payments
made by Borrower on the Revolver Loans and all proceeds of Collateral which are
finally paid to Lender, and may record therein other debits and credits,
including interest and all charges and expenses, properly chargeable to
Borrower under this Agreement and the other Loan Documents.
5 . Statements of Account. Lender will account to Borrower monthly
with a statement of Loans, charges and payments made pursuant to this
Agreement, and such account rendered by Lender shall be deemed final, binding
and conclusive upon Borrower unless Lender is notified by Borrower in writing
to the contrary within 30 days after the date on which such accounting is
deemed to have been sent pursuant to section 11.8. Such notice shall only be
deemed an objection to those items specifically objected to therein.
3. TERM AND TERMINATION
0 . Term of Agreement. Subject to Lender's right to cease making Loans
to Borrower upon or after the occurrence of any Default or Event of Default,
this Agreement shall be in effect for a period of three (3) years from the last
day of the month hereof, through and including September 30, 1998 (the
"Original Term"), and this Agreement shall automatically renew itself for one
(1) year periods thereafter (each a "Renewal Term"), unless earlier terminated
as provided in Section 4.2 hereof.
1 . Termination.
.0 Termination by Lender. Upon at least ninety (90) days prior
written notice to Borrower, Lender may terminate this Agreement as of the last
day of the Original Term or the then current Renewal Term and Lender may
terminate this Agreement without notice upon or after the occurrence of an
Event of Default.
.1 Termination by Borrower. Upon at least ninety (90) days prior
written notice to Lender, Borrower may, at its option, terminate this
Agreement; provided, however, no such termination shall be effective until
Borrower has paid all of the Obligations in immediately available funds. Any
notice of termination given by Borrower shall be irrevocable unless Lender
otherwise agrees in writing, and Lender shall have no obligation to make any
Loans on or after the termination date stated in such notice.
.2 Termination Upon Expiration of United Express Operating
Agreement. This Agreement shall, at Lender's option, automatically terminate
three (3) months before the United Express Termination Date.
.3 Termination Charges. At the effective date of termination of
this Agreement for any reason, Borrower shall pay to Lender (in addition to the
then outstanding principal, accrued interest and other charges owing under the
terms of this Agreement and any of the other Loan Documents) as liquidated
damages for the loss of the bargain and not as a penalty, an amount equal to
the product obtained by multiplying the highest of the Average Monthly Loan
Balance during the immediately preceding 12-month period ending with the month
immediately preceding the date of such termination (or shorter period of time
this Agreement is in effect), times two percent (2%) if termination occurs
during the First Loan Year; and one percent (1%) if termination occurs during
either the Second or Third Loan Year or during any Renewal Term in the event
that Borrower pays any amounts to Lender pursuant to Section 2.7 of this
Agreement as a result of a determination by Lender that such payment is
required thereunder, Borrower may, within ninety (90) days after Lender's
giving Borrower written demand for payment of any such amount, terminate this
Agreement without the payment of any termination fee. If termination occurs on
the last day of the Original Term or any Renewal Term, no termination charge
shall be payable.
.4 Effect of Termination. Upon the Expiration Date, all of the
Obligations shall be immediately due and payable. All undertakings,
agreements, covenants, warranties and representations of Borrower contained in
the Loan Documents shall survive any such termination and Lender shall retain
its Liens in the Collateral and all of its rights and remedies under the Loan
Documents notwithstanding such termination until Borrower has paid the
Obligations to Lender, in full, in immediately available funds, together with
the applicable termination charge, if any. Notwithstanding the payment in full
of the Obligations, Lender shall not be required to terminate its security
interests in the Collateral unless, with respect to any loss or damage Lender
may incur as a result of dishonored checks or other items of payment
constituting uncollected funds received by Lender from Borrower or any Account
Debtor and applied to the Obligations before final collection, Lender shall, at
its option, (i) have received a written agreement, executed by Borrower and by
any Person whose loans or other advances to Borrower are used in whole or in
part to satisfy the Obligations, indemnifying Lender from any such loss or
damage; or (ii) have retained such monetary reserves and Liens on the
Collateral for such period of time as Lender, in its reasonable discretion, may
deem reasonably necessary to protect Lender from any such loss or damage.
4. SECURITY INTERESTS
0 . Security Interest in Collateral. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing Lien upon all of the following Property and interests in Property of
Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
( ) All Accounts;
(i) All General Intangibles;
(ii) All Documents;
(iii) All Instruments;
(iv) All Chattel Paper;
(v) All tickets, exchange orders and other billing
documents for the air transportation of passengers and property, whether
processed or unprocessed;
(vi) All right, title and interest of Borrower in and to the
settlement accounts maintained with the Clearing Bank and all sums now or
hereafter in, payable to or withdrawable from such accounts;
(vii) All monies and other Property of any kind now or at any
time or times hereafter in the possession or under the control of Lender or a
bailee or Affiliate of Lender;
(viii) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through (viii)
above, including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(ix) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (ix) above.
1 . Lien Perfection; Further Assurances. At Lender's request, Borrower
shall execute such UCC-1 financing statements as are required by the Code and
such other instruments, assignments or documents as are necessary to perfect
Lender's Lien upon any of the Collateral and, at Lender's request, shall take
such other action as may be directed by Lender to perfect or to continue the
perfection of Lender's Lien upon the Collateral. Unless prohibited by
Applicable Law, Borrower hereby authorizes Lender to execute and file any such
financing statement on Borrower's behalf. The parties agree that a carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any appropriate office in lieu thereof.
At Lender's request, Borrower shall also promptly execute or cause to be
executed and shall deliver to Lender any and all documents, instruments and
agreements deemed necessary by Lender to give effect to or carry out the terms
or intent of the Loan Documents.
5. COLLATERAL ADMINISTRATION
0 . General
.0 Location of Collateral. All Collateral will at all times be kept
by Borrower at its chief executive office set forth in Exhibit B hereto and
shall not, without the prior written approval of Lender, be moved therefrom
except, prior to an Event of Default and Lender's acceleration of the maturity
of the Obligations in consequence thereof, for a relocation of Borrower's chief
executive office to another location within the continental United States if
(i) Borrower gives Lender written notice of such new location at least 60 days
prior to moving the Collateral to such new location, and (ii) Lender's Lien in
the Collateral is and continues to be a duly perfected Lien thereon (and
Borrower shall have taken such action as may be required pursuant to Section
5.2 hereof to perfect Lender's Lien thereon) subject to no other Lien thereon
except for Permitted Liens.
.1 Protection of Collateral. All expenses of protecting, storing,
handling and maintaining the Collateral, any and all excise, property, sales,
and use taxes imposed by any state, federal, or local authority on any of the
Collateral or in respect of the collection thereof shall be borne and paid by
Borrower. If Borrower fails to promptly pay any portion thereof when due,
Lender may, at its option, but shall not be required to, pay the same and
charge Borrower therefor. Lender shall not be liable or responsible in any way
for the safekeeping of any of the Collateral or for any loss or damage thereto
(except for reasonable care in the custody thereof while any Collateral is in
Lender's possession) or for any diminution in the value thereof, but the same
shall be at Borrower's sole risk.
1 . Administration of Accounts.
.0 Records, Schedules and Assignments of Accounts. Borrower shall
keep accurate and complete records in accordance with standard air carrier
industry practice of its Accounts and all payments and collections thereon and
shall submit to Lender:
(i) On such periodic basis as Lender shall request, but no
less frequently than weekly, a Borrowing Base Certificate;
(ii) Copies of each recap sheet submitted to the ACH under
the ACH Procedure Manual concurrently with the sending thereof to ACH;
(iii) Copies of each monthly settlement sheet received from
ACH pursuant to the ACH Procedure Manual, no later than the third (3rd)
Business Day after the receipt thereof; and
(iv) Upon Lender's request therefor, copies of all interline
invoices submitted to, or received from, ACH under the ACH Procedure Manual,
and such other matters and information relating to the Accounts of Borrower
included on any Borrowing Base Certificate as Lender shall from time to time
reasonably request.
In addition, if Accounts owing by any Account Debtor to Borrower in an
aggregate amount in excess of $25,000 become ineligible because they fall
within one of the specified categories of ineligibility set forth in the
definition of Eligible Accounts or otherwise established by Lender, Borrower
shall notify Lender of such occurrence no later than the second (2d) Business
Day following such occurrence and the Borrowing Base shall thereupon be
adjusted to reflect such occurrence.
.1 Discounts, Allowances, Disputes. If Borrower grants any
discounts or allowances that are not reflected in the calculation of the face
value of each Account involved, Borrower shall report such discounts or
allowances to Lender as part of the next required Borrowing Base Certificate.
In the event any amounts due and owing in excess of $25,000 are in dispute
between Borrower and any Account Debtor, Borrower shall provide Lender with
written notice thereof at the time of submission of the next Borrowing Base
Certificate, explaining in detail the reason for the dispute, all claims
related thereto and the amount in controversy.
.2 Taxes. If an Account of Borrower includes a charge for any tax
payable to any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge Borrower therefor, provided, however that
Lender shall not be liable for any taxes to any governmental taxing authority
that may be due by Borrower.
.3 Account Verification. Whether or not a Default or an Event of
Default has occurred, any of Lender's officers, employees or agents shall have
the right, at any time or times hereafter, in the name of Lender, any designee
of Lender or Borrower, to take reasonable steps to verify the validity, amount
or any other matter relating to any Accounts of Borrower by verbal or written
communications. Borrower shall cooperate fully with Lender in an effort to
facilitate and promptly conclude any such verification process.
.4 Transmission of Funds. Borrower shall cause all funds credited
to its Clearing Bank Account to be sent by federal funds wire transfer to the
account of Lender referred to in Section 2.3 of this Agreement.
6.2.6 Collection of Accounts and Other Proceeds of
Collateral. All Eligible Accounts of Borrower shall be cleared and collected
for payment by ACH pursuant to the ACH Procedure Manual. After the occurrence
of an Event of Default, all funds, items of payment or other remittances
received by Borrower on account of, or with respect to, its Accounts or the
proceeds of any other Collateral shall be held as Lender's property by Borrower
as trustee of an express trust for Lender's benefit and, no later than the
first (1st) Business Day after receipt, Borrower shall immediately forward the
same in kind to Lender for application to the Obligations. All funds credited
to the Clearing Bank Account shall immediately become the property of Lender,
and Borrower shall obtain the agreement by the Clearing Bank in favor of Lender
to waive any offset rights the Clearing Bank may otherwise have against the
funds so credited. Lender assumes no responsibility for the Clearing Bank
Account or its maintenance or operation, including, without limitation, any
claim of accord and satisfaction or release with respect to deposits made by
the Clearing Bank thereto.
2 . Payment of Charges. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall
be payable on demand and shall bear interest from the date such advance was
made until paid in full at the rate applicable to Revolver Loans from time to
time.
6. REPRESENTATIONS AND WARRANTIES
0 . General Representations and Warranties. To induce Lender to enter
into this Agreement and to make Loans hereunder, each Loan Party warrants,
represents and covenants to Lender that:
.0 Organization and Qualification. Each Loan Party is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Loan Party is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
each state or jurisdiction listed on Exhibit C hereto and in all other states
and jurisdictions where the character of its Properties or the nature of its
activities make such qualification necessary or in which the failure of such
Loan Party or its respective Subsidiaries to be so qualified would have a
Material Adverse Effect.
.1 Corporate Power and Authority. Each Loan Party is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other
Loan Documents by each Loan Party have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or approval of
the shareholders of such Loan Party; (ii) contravene such Loan Party's charter,
articles or certificate of incorporation or by-laws; (iii) violate, or cause
such Loan Party to be in default under, any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
in effect having applicability such Loan Party; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which such Loan Party is a party or by
which it or its Properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than Permitted Liens)
upon or with respect to any of the Properties now owned or hereafter acquired
by such Loan Party.
.2 Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a legal,
valid and binding obligation of each Loan Party enforceable against it in
accordance with its respective terms.
.3 Capital Structure. Exhibit D hereto states (i) the name of each
corporate or joint venture Affiliates of each Loan Party and the nature of the
affiliation, (ii) the number, nature and holder of all outstanding Securities
of each Loan Party, and (iii) the number of authorized, issued and treasury
shares of each Loan Party. Each Loan Party has good title to all of the shares
it purports to own of the stock of each of its Subsidiaries, free and clear in
each case of any Lien other than Permitted Liens. All such shares have been
duly issued and are fully paid and non-assessable. There are no outstanding
options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any Securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of any Loan Party or any its respective Subsidiaries, except as listed on
Exhibit D. There are no outstanding agreements or instruments binding upon any
Loan Party's shareholders relating to the ownership of its shares of capital.
Borrower is a wholly-owned Subsidiary of Parent and is the only Subsidiary of
Parent. Borrower has no Subsidiaries.
.4 Corporate Names. No Loan Party has been known as or used any
corporate, fictitious or trade names except those listed on Exhibit E hereto.
Except as set forth on Exhibit E, no Loan Party has been the surviving
corporation of a merger or consolidation or acquired all or substantially all
of the assets of any Person.
.5 Chief Executive Office. Each Loan Party's chief executive
office is as listed on Exhibit B hereto.
.6 Title to Properties; Priority of Liens. Each Loan Party has
good, indefeasible and marketable title to and fee simple ownership of, or
valid and subsisting leasehold interests in, all of its real Property, and good
title to all of the Collateral and all of its other Property, and, in the case
of the Collateral, free and clear of all Liens except Permitted Liens. Each
Loan Party has paid or discharged all lawful claims which, if unpaid, might
become a Lien against any of such Loan Party's Properties that is not a
Permitted Lien. The Liens granted to Lender under Section 5 hereof are first
priority Liens, subject only to those Permitted Liens that are expressly stated
to have priority over the Liens of Lender.
.7 Accounts. Lender may rely, in determining which Accounts of
Borrower are Eligible Accounts, on all statements and representations made by
Borrower with respect to any Account or Accounts. Unless otherwise indicated
in writing to Lender, with respect to each Account listed on a Borrowing Base
Certificate:
( ) It is genuine and in all respects what it
purports to be, and it is not evidenced by a judgment;
(i) It arises out of a completed, bona fide
rendition of air transportation services by Borrower in the ordinary course of
its business and in accordance with the terms and conditions of all contracts
or other documents relating thereto and forming a part of the contract between
Borrower and the Account Debtor;
(ii) It is for a liquidated amount maturing as stated
in the duplicate invoice covering such service, a copy of which has been
furnished or is available to Lender;
(iii) To the best knowledge of Borrower, such Account,
and Lender's Lien therein, is not, and will not (by voluntary act or omission
of Borrower) be in the future, subject to any offset, deduction, defense,
dispute, counterclaim or any other adverse condition except for, in the case of
Accounts owing by United, United's right of setoff for current amounts owing
under the United Express Agreements, and in the case of all other Accounts,
offsets arising in the ordinary course of business for settlement through the
ACH under the ACH Agreement in accordance with the ACH Procedure Manual, and
each such Account is absolutely owing to Borrower and is not contingent in any
respect or for any reason;
(iv) Borrower has made no agreement with any Account
Debtor thereunder for any extension, compromise, settlement or modification of
any such Account or any deduction therefrom, except for, in the case of
Accounts owing by United, United's right of setoff for amounts owing under the
United Express Agreements, and except for discounts or allowances reported to
Lender pursuant to Section 6.2.2 hereof;
(v) To the best knowledge of Borrower, there are no
facts, events or occurrences which in any way impair the validity or
enforceability of any Accounts or tend to reduce the amount payable thereunder
from the face amount of the invoice and statements delivered to Lender with
respect thereto;
(vi) To the best of Borrower's knowledge, the Account
Debtor thereunder (1) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (2) such Account
Debtor is Solvent; and
(vii) To the best of Borrower's knowledge, there are
no proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such Account.
.8 Financial Statements; Fiscal Year.
( ) The Consolidated and consolidating balance
sheets of the Loan Parties and such other Persons described therein (including
the accounts of all Subsidiaries of each Loan Party for the respective periods
during which a Subsidiary relationship existed) as of December 31, 1992,
December 31, 1993, December 31, 1994 and June 30, 1995, and the related
statements of income, changes in stockholder's equity, and changes in financial
position for the periods ended on such dates, have been prepared in accordance
with GAAP, and present fairly the financial position of the Loan Parties and
such Persons as of such dates and the results of the Loan Parties' operations
for such periods. Since June 30, 1995, there has been no material change in
the condition, financial or otherwise, of any Loan Party and such other Persons
as shown on the Consolidated balance sheet as of such date;
(i) The Consolidated and consolidating balances
sheets of the Loan Parties and such other Persons described therein, and the
related statements of income, changes in stockholder's equity, and changes in
financial position, which are from time to time delivered to Lender pursuant to
Section 8.1.3 of this Agreement fairly present the financial position of the
Loan Parties and such Persons at such dates and the results of the operations
of the Loan Parties and such Persons for the periods set forth therein; and
(iii) The
fiscal year of each Loan Party ends on December 31 of each year.
.9 Full Disclosure. The financial statements referred to in
subsection 7.1.9 hereof do not, nor does this Agreement or any other written
statement of any Loan Party or its respective Subsidiaries to Lender, contain
any untrue statement of a material fact or omit a material fact necessary to
make the statements contained therein or herein not misleading. There is no
fact known to any Loan Party which such Loan Party has failed to disclose to
Lender in writing which materially affects adversely or, so far as can now be
foreseen, will materially affect adversely the Properties, business, prospects,
profits or condition (financial or otherwise) of a Loan Party or the ability
of a Loan Party to perform this Agreement or the other Loan Documents.
.10 Solvent Financial Condition. The Loan Parties are now and,
after giving effect to the Loans to be made hereunder, at all times will be,
Solvent on a Consolidated basis.
.11 Surety Obligations. No Loan Party is obligated as surety or
indemnitor under any surety or similar bond or other contract issued or entered
into any agreement to assure payment, performance or completion of performance
of any undertaking or obligation of any Person other than the other Loan Party.
.12 Taxes. The federal tax identification number of each Loan Party
is shown on Exhibit F hereto. Each Loan Party has filed all federal, state
and local tax returns and other reports it is required by law to file and has
paid, or made provision for the payment of, all taxes, assessments, fees,
levies and other governmental charges upon it, its income and Properties as and
when such taxes, assessments, fees, levies and charges that are due and
payable, except to the extent being Properly Contested. The provision for
taxes on the books of each Loan Party is adequate for all years not closed by
applicable statutes, and for its current fiscal year.
.13 Brokers. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
.14 Patents, Trademarks, Copyrights and Licenses. Each Loan Party
owns or possesses all the patents, trademarks, service marks, trade names,
copyrights and licenses necessary for the present and planned future conduct of
its business, without any known conflict with the rights of others. All such
patents, trademarks, service marks, tradenames, copyrights, licenses and other
similar rights are listed on Exhibit G hereto.
.15 Governmental Consents. Each Loan Party has, and is in good
standing with respect to, all governmental consents, approvals, licenses,
authorizations, permits, certificates, inspections and franchises necessary to
continue to conduct its business as heretofore or proposed to be conducted by
it and to own or lease and operate its Properties as now owned or leased by it.
.16 Compliance with Laws. Each Loan Party has duly complied with,
and its Properties, business operations and leaseholds are in compliance in all
material respects with, the provisions of all Applicable Law and there have
been no citations, notices or orders of noncompliance issued to any Loan Party
or any of its respective Subsidiaries under any such law, rule or regulation
where such non-compliance could reasonably be expected to have a Material
Adverse Effect. Each Loan Party and its respective Subsidiaries has
established and maintains an adequate monitoring system to insure that it
remains in compliance with all federal, state and local laws, rules and
regulations applicable to it.
.17 Restrictions. No Loan Party is a party or subject to any
contract, agreement, or charter or other corporate restriction, which
materially and adversely affects its business or the use or ownership of any of
its Properties. No Loan Party is a party or subject to any contract or
agreement which restricts its right or ability to incur Indebtedness, other
than as set forth on Exhibit H hereto, none of which prohibit the execution of
or compliance with this Agreement or the other Loan Documents by any Loan Party
or any of its respective Subsidiaries, as applicable.
.18 Litigation. Except as set forth on Exhibit I hereto, there are
no actions, suits, proceedings or investigations pending or threatened against
or affecting any Loan Party, or the business, operations, Properties,
prospects, profits or condition of any Loan Party, and no such action, suit or
proceeding will, if decided adversely, have a Material Adverse Effect. No Loan
Party is in default with respect to any order, writ, injunction, judgment,
decree or rule of any court, governmental authority or arbitration board or
tribunal.
.19 No Defaults. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or any
Loan Party's performance hereunder, constitute a Default or an Event of
Default. No Loan Party is in default, and no event has occurred and no
condition exists which constitutes, or which with the passage of time or the
giving of notice or both would constitute, a default in the payment of any
Indebtedness to any Person for Money Borrowed.
.20 Leases. Each Loan Party is in compliance in all material
respects with all of the terms of each of its respective capitalized and
operating leases.
.21 Pension Plans. Except as disclosed on Exhibit J hereto, no Loan
Party has any Plan. Each Loan Party is in full compliance with the
requirements of ERISA and the regulations promulgated thereunder with respect
to each Plan. No fact or situation that could result in a Material Adverse
Effect exists in connection with any Plan. No Loan Party has any withdrawal
liability in connection with a Multiemployer Plan.
.22 Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between any Loan Party and any customer or any group
of customers whose purchases individually or in the aggregate are material to
the business of any Loan Party, or with any material supplier, and there
exists no present condition or state of facts or circumstances which would
materially affect adversely any Loan Party or prevent any Loan Party from
conducting such business after the consummation of the transactions
contemplated by this Agreement in substantially the same manner in which it has
heretofore been conducted.
.23 Labor Relations. Except as described on Exhibit K hereto, no
Loan Party is a party to any collective bargaining agreement. There are no
material grievances, disputes or controversies with any union or any other
organization of any Loan Party's or any of its respective Subsidiaries'
employees, or threats of strikes, work stoppages or any asserted pending
demands for collective bargaining by any union or organization.
1 . Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of a Loan Party's business or operations that would
render the information in any exhibit attached hereto either inaccurate,
incomplete or misleading, so long as Lender has consented to such changes or
such changes are not expressly prohibited by this Agreement or the other Loan
Documents.
2 . Survival of Representations and Warranties. All representations
and warranties of each Loan Party contained in this Agreement or any of the
other Loan Documents shall survive the execution, delivery and acceptance
thereof by Lender and the parties thereto and the closing of the transactions
described therein or related thereto.
7. COVENANTS AND CONTINUING AGREEMENTS
0 . Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, each Loan Party
covenants that, unless otherwise consented to by Lender in writing, it shall:
.0 Visits and Inspections. Permit representatives of Lender, from
time to time, as often as may be reasonably requested, but only during normal
business hours upon reasonable advance notice, to visit and inspect the
Properties of each Loan Party, inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its independent
accountants, each Loan Party's business, assets, liabilities, financial
condition, business prospects and results of operations.
.1 . Notices. Notify Lender in writing (i) of the occurrence of any
event or the existence of any fact which renders any representation or warranty
in this Agreement or any of the other Loan Documents inaccurate, incomplete or
misleading in any material respect; (ii) promptly after a Loan Party's learning
thereof, of the commencement of any litigation affecting any Loan Party or any
of its Properties, whether or not the claim is considered by such Loan Party to
be covered by insurance, and of the institution of any administrative
proceeding which, in either case, if decided adversely could reasonably be
expected to have a Material Adverse Effect; (iii) promptly after the execution
of any amendment or modification to the United Express Operating Agreement that
would extend the United Express Termination Date and send to Lender a copy
thereof; (iv) promptly after a Loan Party's learning thereof, of any organized
labor dispute of a material nature to which a Loan Party may become a party,
any strikes or walkouts by organized labor relating to any of its facilities,
and the final expiration of any collective bargaining agreement to which it is
a party or by which it is bound; (v) promptly after a Loan Party's learning
thereof, of any material default by any Loan Party under any note, indenture,
loan agreement, mortgage, lease, deed, guaranty or other similar agreement
relating to any Indebtedness of such Loan Party exceeding $200,000; (vi)
promptly after the occurrence thereof, of any Default or Event of Default;
(vii) promptly after the occurrence thereof, of any default or event of default
by Borrower or United under any of the United Express Agreements; (viii)
promptly after the rendition thereof, of any judgment rendered against a Loan
Party in an amount exceeding $200,000 which is not fully covered by insurance;
and (ix) of the ordering of any services from United under the United Express
Emergency Response Agreement, and give Lender full particulars of the services
ordered and the estimated costs thereof.
.2 Financial Statements. Keep adequate records and books of account
with respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all its financial transactions; and cause to be
prepared and furnished to Lender the following (all to be prepared in
accordance with GAAP applied on a consistent basis, unless Borrower's certified
public accountants concur in any change therein and such change is disclosed to
Lender and is consistent with GAAP):
( ) not later than 91 days after the close of
each fiscal year of the Loan Parties, audited financial statements of the Loan
Parties as of the end of such year, on a Consolidated and consolidating basis,
certified by BDO Seidman or other firm of independent certified public
accountants of recognized standing selected by the Loan Parties but acceptable
to Lender (except for a qualification for a change in accounting principles
with which the accountant concurs);
(i) not later than 60 days after the end of
the months of January, February and December in each fiscal year of the Loan
Parties, and 45 days after the end of each other month in each fiscal year of
the Loan Parties, unaudited interim financial statements of the Loan Parties as
of the end of such month and of the portion of the Loan Parties' financial year
then elapsed, on a Consolidated and consolidating basis, certified by a
financial officer of the Loan Parties as prepared in accordance with GAAP and
fairly presenting the Consolidated financial position and results of operations
of the Loan Parties for such month and period subject only to changes from
audit and year-end adjustments and except that such statements need not contain
notes;
(ii) promptly after the sending or filing
thereof, as the case may be, copies of any proxy statements, financial
statements or reports which each Loan Party has made available to its
shareholders and copies of any regular, periodic and special reports or
registration statements which each Loan Party files with the Securities and
Exchange Commission or any governmental authority which may be substituted
therefor, or any national securities exchange;
(iii) currently with the delivery of the monthly
financial statements described in clause (ii) of this subsection 8.1.3, an
accurate and complete report of the accounts payable of the Loan Parties, in
form and substance satisfactory to Lender;
(iv) promptly after the filing thereof, copies
of any annual report to be filed with ERISA in connection with each Plan; and
(v) such other data and information (financial
and otherwise) maintained by the Loan Parties as Lender, from time to time, may
reasonably request, bearing upon or related to the Collateral or each Loan
Party's financial condition or results of operations.
Concurrently with the delivery of the financial statements
described in clause (i) of this subsection 8.1.3, the Loan Parties shall cause
to be prepared and shall furnish to Lender a certificate of the aforesaid
certified public accountants certifying to Lender that, based upon their
examination of the financial statements of the Loan Parties performed in
connection with their examination of said financial statements, they are not
aware of any Default or Event of Default, or, if they are aware of such Default
or Event of Default, specifying the nature thereof, and acknowledging, in a
manner satisfactory to Lender, that they are aware that Lender is relying on
such financial statements in making its decisions with respect to the Loans.
No later than ten days after receipt of the accountants' letter to the
management of the Loan Parties that is prepared in connection with the
financial statements described in clause (i) of this subsection 8.1.3, but in
no event later than 150 days after the end of each fiscal year, the Loan
Parties shall forward to Lender a copy of such accountants' letter.
Concurrently with the delivery of the financial statements described in clause
(i) of this subsection 8.1.3 and those financial statements described in clause
(ii) of this subsection 8.1.3 which are for the last month in a fiscal quarter
of the Loan Parties, the Loan Parties shall cause to be prepared and furnished
to Lender a Compliance Certificate in the form of Exhibit L hereto executed by
a financial officer of the Loan Parties.
.3 Projections. No later than 45 days after the end of each fiscal
year of the Loan Parties, deliver to Lender Projections of the Loan Parties for
the forthcoming fiscal year, month by month.
.4 Taxes and Liens. Pay and discharge all taxes prior to the date
on which such taxes become delinquent or penalties attach thereto, except and
only to the extent that such taxes are being Properly Contested. Each Loan
Party shall also pay, discharge or provide a bond with respect to, any lawful
claims which, if unpaid or unbonded, might become a Lien against any Property
of any Loan Party except for Permitted Liens.
.5 Tax Returns. File all federal, state and local tax returns and
other reports any Loan Party is required by law to file and maintain adequate
reserves for the payment of all taxes, assessments, governmental charges and
levies imposed upon it, its income or its profits, or upon any Property
belonging to it.
.6 Compliance with Applicable Laws. Comply with all Applicable
Laws, and obtain and keep in force any and all licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its Property or
to the conduct of its business, which violation or failure to obtain might have
a Material Adverse Effect.
8.1.8 Insurance. Maintain, with financially sound and
reputable insurers, insurance with respect to its Properties and business
against such casualties and contingencies of such type (including general
liability) and in such amounts as is customary in the business of Borrower or
as otherwise reasonably required by Lender.
1 . Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, each Loan Party
covenants that, unless Lender has first consented thereto in writing, it will
not:
.0 Mergers; Consolidations; Acquisitions. Merge or consolidate with
any Person or acquire all or any substantial part of the Properties of any
Person; provided, however, the foregoing restriction shall not apply to (i) a
merger by Parent with and into Borrower with Borrower as the surviving
corporation or (ii) a merger by Borrower with and into Parent with Parent as
the surviving corporation, provided, in the case of a merger pursuant to clause
(ii) hereof, the following conditions are first satisfied by the Loan Parties:
(a) Borrower shall have given Lender not less than fifteen (15) days prior
written notice of the effective date of such merger, (b) Lender shall have
received, in form and substance satisfactory to Lender and its counsel, an
assumption agreement as of the effective date of the merger, duly executed by
Parent, pursuant to which Parent shall assume, adopt, ratify and confirm all of
the Obligations of Borrower under this Agreement and the other Loan Documents,
together with such other documents as Lender or its counsel may reasonably
require, (c) Lender shall have received copies of all agreements, documents and
instruments relating to the merger as executed by the parties thereto,
including the certificates of merger as issued and certified by the Secretary
of States of the jurisdictions of incorporation of each Loan Party, (d)
Lender's Lien in the Collateral is and continues to be a duly perfected Lien
thereon (and each Loan Party shall have taken such action as may be required
pursuant to Section 5.2 hereof to perfect Lender's Lien thereon) subject to no
other Lien thereon except for Permitted Liens, and (e) no Default or Event of
Default shall exist immediately before or after giving effect to such merger.
.1 Loans. Make any loans or other advances of money (other than for
salary, travel advances, advances against commissions and other similar
advances in the ordinary course of business) to any Person.
.2 Affiliate Transactions. Enter into, or be a party to any
transaction with any Affiliate of a Loan Party or stockholder, except in the
ordinary course of and pursuant to the reasonable requirements of such Loan
Party's business and upon fair and reasonable terms which are fully disclosed
to Lender and are no less favorable to such Loan Party than would obtain in a
comparable arm's length transaction with a Person not an Affiliate of such Loan
Party.
.3 Limitation on Liens. Create or suffer to exist any Lien upon any
of the Collateral, whether now owned or hereafter acquired, except:
( ) Liens at any time granted in favor of
Lender;
(i) Liens for taxes (excluding any Lien
imposed pursuant to any of the provisions of ERISA) not yet due or that are
being Properly Contested;
(ii) statutory Liens arising in the ordinary
course of such Loan Party's business by operation of law or regulation, but
only if payment in respect of any such Lien is not at the time required or such
Liens are being Properly Contested and do not, in the aggregate, materially
detract from the value of the Collateral or materially impair the use thereof
in the operation of such Loan Party's business; and
(iv) Liens of JSX in the Collateral, provided
that such Liens are at all times junior and subordinate to the Lien of Lender
in the Collateral and are subject to the JSX Intercreditor Agreement; and
(v) such other Liens as Lender may hereafter
approve in writing.
.4 Distributions. Declare or make any Distributions, except that,
commencing on March 31, 1997, Borrower may make Distributions to Parent for
substantially contemporaneous Distributions by Parent on its Series A
Cumulative Convertible Preferred Stock, as in existence on the Closing Date, if
and only to the extent that (i) no Default or Event of Default then exists or,
after giving effect to such Distribution, will exist, and (ii) such
Distribution has been duly authorized by all necessary corporate action and is
permitted by Applicable Law.
.5 Disposition of Collateral. Sell, lease or otherwise dispose of
any of the Collateral.
.6 Restricted Investment. Make or have any Restricted Investment.
.7 Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than a Subsidiary of a
Loan Party.
.8 Fiscal Year. Change its fiscal year from that described in
subsection 7.1.9(iii).
8.2.10 Guaranties. Become liable upon the obligations of any
Person other than the other Loan Party, by assumption, endorsement or guaranty
thereof or otherwise (other than to Lender), except the endorsement of checks
in the ordinary course of business.
8.2.11 United Express Agreements. Enter into, or agree to,
any amendment, modification, supplement or termination of any United Express
Agreement subsequent to the date of this Agreement if the effect of such
amendment, modification, supplement or termination would (i) shorten the period
during which the United Express Operating Agreement is in effect or (ii)
increase, or could reasonably be expected to increase, the amount of any fees,
charges or other Indebtedness owing by Borrower to United which, pursuant to
the United Non-Offset Agreement, United is permitted to offset against the
Accounts of Borrower owing by United.
8.2.12 ACH Membership. Withdraw from being an associate
member of the ACH.
8.2.13 Subsidiaries. Hereafter create any Subsidiary or
divest itself of any material assets by transferring them to any Subsidiary to
whose existence Lender has consented.
2 . Specific Financial Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, each Loan
Party covenants that, unless otherwise consented to by Lender in writing, it
shall comply with the following financial covenants:
.0 Consolidated Adjusted Tangible Net Worth. The Consolidated
Adjusted Tangible Net Worth of the Loan Parties shall be not less than the
amount shown below as of the date and for the period set forth below:
Consolidated Adjusted
Date or Period Tangible Net Worth
Fiscal year ended December 31, 1995 $ 3,750,000
Fiscal quarter ended March 31, 1996 $ 100,000
Fiscal quarter ended June 30, 1996 $ 5,100,000
Fiscal quarter ended September 30, 1996 $ 8,650,000
Fiscal year ended December 31, 1996 $10,500,000
Fiscal quarter ended March 31, 1997 $ 7,100,000
Fiscal quarter ended June 30, 1997 $12,600,000
Fiscal quarter ended September 30, 1997 $16,500,000
Fiscal year ended December 31, 1997 $18,100,000
and at all times thereafter
.1 Profitability. The Consolidated Adjusted Net Earnings From
Operations of the Loan Parties shall be not less than the amount shown below
for the period corresponding thereto:
Consolidated Adjusted Net
Period Earnings From Operations
Fiscal quarter ended December 31, 1995 $ 900,000
Fiscal quarter ended March 31, 1996 ($3,900,000)
First two fiscal quarters ended June 30, 1996
$1,275,000
Consolidated Adjusted Net
Period Earnings From Operations
First three fiscal quarters ended $4,500,000
September 30, 1996
Fiscal year ended December 31, 1996 $6,400,000
First fiscal quarter ended March 31, 1997
($2,800,000)
and first fiscal quarter ended of each fiscal
year thereafter
First two fiscal quarters ended $2,700,000
June 30, 1997 and the first two fiscal
quarters of each fiscal year thereafter
First three fiscal quarters ended
$6,950,000
September 30, 1997 and the first three
fiscal quarters of each fiscal year thereafter
Fiscal year ended December 31, 1997 and
$8,300,000
each fiscal year thereafter
.2 Consolidated Debt Service Coverage Ratio. The Consolidated Debt
Service Coverage Ratio of the Loan Parties shall be not less than the ratio
shown below for the period corresponding thereto:
Consolidated Debt Service
Period Coverage Ratio
Fiscal quarter ended December 31, 1995 1.8 to 1.0
Fiscal quarter ended March 31, 1996 -5.9 to 1.0
First two fiscal quarters ended 1.0 to 1.0
June 30, 1996
First three fiscal quarters 1.75 to 1.0
ended September 30, 1996
Fiscal year ended December 31, 1996 2.0 to 1.0
First fiscal quarter ended March 31, 1997 -7.1 to 1.0
and the first fiscal quarter of each fiscal
year thereafter
First two fiscal quarters ended June 30, .75 to 1.0
1997 and the first two fiscal quarters
of each fiscal year thereafter
Consolidated Debt Service
Period Coverage Ratio
First three fiscal quarters ended 2.2 to 1.0
September 30, 1997 and the first
three fiscal quarters of each
fiscal year thereafter
Fiscal year ended December 31, 1997 2.0 to 1.0
and each fiscal year thereafter
.3 Capital Expenditures. The Loan Parties shall not make Capital
Expenditures (including, without limitation, by way of capitalized leases)
which, in the aggregate exceed the amount shown below for the period
corresponding thereto:
Period Capital Expenditures
Fiscal quarter ended December 31, 1995 $3,700,000
Fiscal year ended December 31, 1996 $7,900,000
Fiscal year ended December 31, 1997 $4,150,000
and each fiscal year thereafter
CONDITIONS PRECEDENT
0 . Conditions Precedent to Initial Revolver Loan on Closing Date.
Notwithstanding any other provision of this Agreement or any of the other Loan
Documents, and without affecting in any manner the rights of Lender under the
other sections of this Agreement, it is understood and agreed that Lender will
have no obligation to make the initial Revolver Loan under Section 1 of this
Agreement on the Closing Date unless and until, in addition to each of the
conditions set forth in Section 9.2 hereof, each of the following conditions
has been satisfied:
.0 Documentation. Lender shall have received the following
documents, each to be in form and substance satisfactory to Lender and its
counsel:
( ) Copies of all filing receipts or acknowledgments
issued by any governmental authority to evidence any filing or recordation
necessary to perfect the Liens of Lender in the Collateral and evidence in a
form acceptable to Lender that such Liens constitute valid and perfected first
priority security interests and Liens, subject only to those Permitted Liens
which are expressly stated to have priority over the Liens of Lender;
(i) Copies of the Articles or Certificate of
Incorporation of each Loan Party, and all amendments thereto, certified by the
Secretary of State or other appropriate official of its respective jurisdiction
of incorporation;
(ii) Good standing certificates for each Loan Party
issued by the Secretary of State or other appropriate official of such Loan
Party's jurisdiction of incorporation and each jurisdiction where the conduct
of such Loan Party's business activities necessitates qualification and in
which the failure of such Loan Party to be so qualified would have a Material
Adverse Effect;
(iii) A closing certificate signed by the chief
executive or financial officer of each Loan Party, dated as of the Closing
Date, stating that (a) the representations and warranties set forth in Section
7 hereof are true and correct in all material respects on and as of such date,
(b) each Loan Party is on such date in compliance in all material respects with
all the terms and provisions set forth in this Agreement and the other Loan
Documents and (c) on such date no Default or Event of Default has occurred and
is continuing;
(iv) The Security Documents duly executed, accepted
and acknowledged by or on behalf of each of the signatories thereto;
(v) The Other Agreements duly executed and delivered
by Borrower;
(vi) The favorable, written opinion of counsel to
each Loan Party as to the transactions contemplated by this Agreement and the
other Loan Documents;
(vii) Written instructions from Borrower directing the
application of proceeds of the initial Revolver Loan made to Borrower pursuant
to this Agreement on the Closing Date;
(viii) Certificates of the Secretary or an Assistant
Secretary of each Loan Party certifying (a) that attached thereto is a true and
complete copy of the Bylaws of such Loan Party, as in effect on the date of
such certification, (b) that attached thereto is a true and complete copy of
the resolutions adopted by the Board of Directors of such Loan Party,
authorizing the execution, delivery and performance of this Agreement and the
other Loan Documents to which such Loan Party is a party and the consummation
of the transactions contemplated hereby and thereby, and (c) as to the
incumbency and genuineness of the signature of each officer of each Loan Party
executing this Agreement or any of the Loan Documents;
(x) Agreement duly executed by Borrower and the
Clearing Bank providing irrevocable instructions for the wire transfer by the
Clearing Bank to Lender of all funds credited to the Clearing Bank Account, in
form and substance satisfactory to Lender, together with the termination duly
executed by Congress of any payment instructions to the contrary;
(xi) Written confirmations from Congress of the
balance due on the Indebtedness owed to it as of the Closing Date and that
simultaneously with the receipt thereof Congress will execute and deliver to
Lender such releases and terminations as may be necessary to release and cancel
of record its Liens in any Collateral;
(xii) The duly executed JSX Intercreditor Agreement;
(xiii) The duly executed United Non-Offset Agreement;
(xiv) Evidence satisfactory to Lender and Lender's
counsel that United has waived all defaults and events of default which may
exist under any of the United Express Agreements as of the Closing Date; and
(xv) Such other documents, instruments and agreements
as Lender shall reasonably request in connection with the foregoing matters.
.1 No Injunction, etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain
or prohibit, or to obtain damages in respect of, or which is related to or
arises out of this Agreement or the Loan Documents or the consummation of the
transactions contemplated hereby or which, in Lender's reasonable judgment,
would make it inadvisable to consummate the transactions contemplated by this
Agreement or any of the other Loan Documents.
.2 Consents. All approvals, licenses, consents and filings
necessary to permit the transactions contemplated by this Agreement shall have
been obtained and made.
.3 Material Adverse Change. There shall not have occurred any
material adverse change in the financial condition, results of operations or
business of Borrower or the value of the Collateral from June 30, 1995 to the
Closing Date, or any event, condition or state of facts which would reasonably
be expected to have a Material Adverse Effect, as reasonably determined by
Lender.
.4 No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing.
.5 Liens. Lender shall be satisfied that this Agreement and the
other Loan Documents create or will create, as security for the Obligations, a
valid and enforceable perfected first priority security interest in and Lien
upon all of the Collateral in favor of Lender, subject to no other Liens other
than Permitted Liens which are expressly stated to have priority over the Liens
of Lender.
9.1.7 Closing Date. The Closing Date shall not be after
thirty (30) days from the execution of this Agreement by Borrower to Lender.
1 . Conditions Precedent to All Revolver Loans. Notwithstanding any of
the provisions of this Agreement or the other Loan Documents, and without
affecting in any manner the rights of Lender under the other sections of this
Agreement, it is understood and agreed that Lender will have no obligation to
make any Revolver Loan (including the initial Revolver Loan) unless and until,
in addition to the conditions set forth in Section 9.1, each of the following
conditions has been and continues to be satisfied:
.0 Events of Default. No Default, Event of Default or Overadvance
Condition shall exist.
.1 Delivery of Documents. Lender shall have received copies of all
documents, reports and information required to be delivered to Lender
hereunder.
.2 Representations and Warranties. The representations and
warranties contained in Section 7 of this Agreement and in the Loan Documents
shall be true and correct in all material respects except for changes in the
nature of a Loan Party's business or operations that would render the
information contained in any Exhibit attached hereto either inaccurate,
incomplete or misleading, so long as Lender has consented to such changes or
such changes are not expressly prohibited by this Agreement or the other Loan
Documents.
2 . Waiver of Conditions Precedent. If Lender makes any Revolver Loan
prior to the fulfillment of any of the conditions precedent set forth in
Sections 9.1 and 9.2 hereof, unless Lender shall have waived in writing the
fulfillment of such condition, the making of such Revolver Loan shall
constitute only an extension of time for the fulfillment of such condition and
not a waiver thereof, and each Loan Party shall thereafter use its best efforts
to fulfill such condition promptly.
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
0 . Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
.0 Payment of Loans. Borrower shall fail to make any payment of
principal, interest or premium, if any, owing on the Loans within two (2)
Business Days of the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise).
.1 Payment of Other Obligations. Borrower shall fail to pay any of
the other Obligations (other than those dealt with specifically in Section
10.1.1 hereof) on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise) and such failure shall continue for a
period of three (3) Business Days after Lender's giving Borrower written notice
thereof.
.2 Misrepresentations. Any representation, warranty or other
statement made or furnished to Lender by or on behalf of any Loan Party or any
Subsidiary of any Loan Party in this Agreement, any of the other Loan Documents
or any instrument, certificate or financial statement furnished in compliance
with or in reference thereto proves to have been false or misleading in any
material respect when made or furnished or when reaffirmed pursuant to Section
7.2 hereof.
.3 Breach of Specific Covenants. Any Loan Party shall fail or
neglect to perform, keep or observe any covenant contained in Sections 5.2,
6.1.1, 6.2, 8.1.1, 8.1.3, 8.2 or 8.3 hereof on the date that such Loan Party is
required to perform, keep or observe such covenant.
.4 Breach of Other Covenants/Other Agreements. Any Loan Party shall
fail or neglect to perform, keep or observe any covenant contained in this
Agreement (other than a covenant which is dealt with specifically elsewhere in
Section 10.1 hereof) or the Other Agreements and the breach of such other
covenant or the Other Agreements is not cured to Lender's satisfaction within
fifteen (15) days after the sooner to occur of such Loan Party's receipt of
notice of such breach from Lender or the date on which such failure or neglect
first becomes known to any officer of such Loan Party.
.5 Default Under Security Documents. Any event of default shall
occur under, or any Loan Party shall default in the performance or observance
of any term, covenant, condition or agreement contained in, any of the Security
Documents and such default shall continue beyond any applicable grace period.
.6 Other Defaults. There shall occur any default or event of
default on the part of any Loan Party under any agreement, document or
instrument to which such Loan Party is a party or by which such Loan Party or
any of its Property is bound, creating or relating to any Indebtedness for
Money Borrowed in excess of $200,000 in the aggregate (other than the
Obligations) and such default or event of default shall continue and remain
uncured beyond the applicable notice and grace period with respect thereto, if
any.
.7 Insolvency and Related Proceedings. Any Loan Party shall cease
to be Solvent; or United or any Loan Party shall suffer the appointment of a
receiver, trustee, custodian or similar fiduciary, or shall make an assignment
for the benefit of creditors, or any petition for an order for relief shall be
filed by or against any Loan Party or United under the Bankruptcy Code (if
against a Loan Party or United, the continuation of such proceeding for more
than 60 days); or any Loan Party shall make any offer of settlement, extension
or composition to their respective unsecured creditors generally.
.8 Business Disruption. Any Loan Party shall suffer the loss or
revocation of any license or permit now held or hereafter acquired by any Loan
Party which is necessary to the continued or lawful operation of a material
part of its business; or any Loan Party shall be enjoined, restrained, or
otherwise permanently prevented by court, governmental or administrative order
from conducting all or any material part of its business affairs; or any
material lease or agreement pursuant to which any Loan Party leases, uses or
occupies any Property shall be canceled or terminated prior to the expiration
of its stated term; or any Loan Party or United ceases scheduled air
transportation services other than on a temporary basis.
.9 Change of Ownership. Parent shall cease to own and control,
beneficially and of record, all of the issued and outstanding stock of
Borrower.
.10 ERISA. If any Plan is terminated by the Pension Benefit
Guaranty Corporation or a trustee is appointed by the United States district
court for any Plan, or if any Loan Party is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from such Loan Party's complete or partial withdrawal from such
Plan.
.11 Challenge to Agreement. Any Loan Party or any Affiliate of any
of them, shall challenge or contest in any action, suit or proceeding the
validity or enforceability of this Agreement, or any of the other Loan
Documents, the legality or enforceability of any of the Obligations or the
perfection or priority of any Lien granted to Lender. Nothing set forth herein
shall preclude a Loan Party from enforcing its rights, and Lender's duties and
obligations, under this Agreement and the other Loan Documents.
.12 Criminal Forfeiture. Any Loan Party or any Subsidiary of any
Loan Party shall be criminally indicted or convicted under any law that could
lead to a forfeiture of any Property of any Loan Party or any Subsidiary of any
Loan Party.
.13 Judgments. One or more money judgments, writs of attachment or
similar process is filed against any Loan Party or any Subsidiary of any Loan
Party or any of their respective Property involving liability of $200,000 or
more in the aggregate (to the extent not paid or fully covered by insurance
provided by a carrier who has acknowledged coverage), and the same is not
released, discharged or bonded within thirty (30) days after the entry thereof.
.14 Repudiation of or Default Under Guaranty Agreement. Any
Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof.
.15 ACH Procedure Manual. Borrower shall cease scheduled air
transportation services other than on a temporary basis for a work stoppage
and, in consequence thereof, ACH shall have directed the Clearing Bank to
withhold twenty-five percent (25%) of the net funds due Borrower in any
subsequent settlement in which Borrower is a net creditor, pursuant to
paragraph 8 of the settlement regulations set forth in Section B of the ACH
Procedure Manual.
.16 Withdrawal as Member. Borrower shall give notice of withdrawal
from the ACH Agreement.
.17 Termination or Breach of the United Express Operating Agreement
or the United Express Agreements. The termination for any reason of the United
Express Operating Agreement by Borrower without the prior written consent of
Lender as required by Section 8.2.11 hereof or by United; or Borrower shall
default in the payment (beyond the applicable grace period with respect
thereto, if any) with respect to any Indebtedness owing under any of the United
Express Agreements or fail to perform or observe any term, covenant or
agreement on its part to be performed or observed pursuant to any of the United
Express Agreements, the effect of which failure is to cause, or permit, United
to terminate any of the United Express Agreements.
1 . Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with Section 3.2 hereof, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations shall,
at the option of Lender and without presentment, demand, protest or further
notice by Lender, become at once due and payable and Borrower shall forthwith
pay to Lender the full amount of such Obligations, provided, that upon the
occurrence of an Event of Default specified in subsection 10.1.8 hereof, all of
the Obligations shall become automatically due and payable without declaration,
notice or demand by Lender.
2 . Other Remedies. Upon and after the occurrence of an Event of
Default, Lender shall have and may exercise from time to time the following
rights and remedies:
.0 All of the rights and remedies of a secured party under the Code
or under other applicable law, and all other legal and equitable rights to
which Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained
in this Agreement or any of the other Loan Documents, and none of which shall
be exclusive.
.1 The right to terminate this Agreement as provided in Section
4.2.1 hereof.
.2 The right to notify Account Debtors to make remittance to Lender
of all sums due on Accounts of Borrower, collect such Accounts directly from
the Account Debtors, and take such other and further action with respect
thereto as set forth in Section 11.1.2 hereof.
.3 The right to take immediate possession of the Collateral, and to
(i) require Borrower to assemble the Collateral, at Borrower's expense, and
make it available to Lender at Borrower's chief executive office, and (ii)
enter any premises where any of the Collateral shall be located and to keep and
store the Collateral on said premises until sold (and if said premises be the
Property of Borrower, Borrower agrees not to charge Lender for storage
thereof).
.4 The right to sell or otherwise dispose of all or any Collateral
in a commercially reasonable manner, at public or private sale or sales, with
such notice as may be required by law, in lots or in bulk, for cash or on
credit, all as Lender, in its sole discretion, may deem advisable. Borrower
agrees that 10 days written notice to Borrower of any public or private sale or
other disposition of Collateral shall be reasonable notice thereof, and such
sale shall be at such locations as Lender may designate in said notice. Lender
shall have the right to conduct such sales on Borrower's premises, without
charge therefor, and such sales may be adjourned from time to time in
accordance with applicable law. Lender shall have the right to sell, lease or
otherwise dispose of the Collateral, or any part thereof, for cash, credit or
any combination thereof, and Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. The proceeds realized from the sale of any Collateral
may be applied, after allowing 2 Business Days for collection, first to the
reasonable costs, expenses and attorneys' fees incurred by Lender in collecting
the Obligations, in enforcing the rights of Lender under the Loan Documents and
in collecting, retaking, completing, protecting, removing, storing, advertising
for sale, selling and delivering any Collateral, second to the interest due
upon any of the Obligations; and third, to the principal of the Obligations.
If any deficiency shall arise, Borrower shall remain liable to Lender therefor.
If there shall be any surplus, Lender shall remit such surplus to Borrower or
other Person entitled thereto.
3 . Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of any
Loan Party contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule or contained in any other agreement between Lender and any
Loan Party, heretofore, concurrently, or hereafter entered into, shall be
deemed cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements herein contained. The failure or delay of
Lender to require strict performance by any Loan Party of any provision of this
Agreement or to exercise or enforce any rights, Liens, powers, or remedies
hereunder or under any of the aforesaid agreements or other documents or
security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such requirements, Liens, rights,
powers, and remedies shall continue in full force and effect until all Loans
and all other Obligations owing or to become owing from Borrower to Lender
shall have been fully satisfied. None of the undertakings, agreements,
warranties, covenants and representations of any Loan Party contained in this
Agreement or any of the other Loan Documents and no Event of Default by any
Loan Party under this Agreement or any other Loan Documents shall be deemed to
have been suspended or waived by Lender, unless such suspension or waiver is by
an instrument in writing specifying such suspension or waiver and is signed by
a duly authorized representative of Lender and directed to the Loan Parties.
10. MISCELLANEOUS
0 . Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in Borrower's or Lender's name, but
at the cost and expense of Borrower:
.0 At such time or times as Lender or its agent, in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Lender or under Lender's
control.
.1 At such time or times during the existence of an Event of Default
as Lender or its agent, in its sole discretion, may determine: (i) demand
payment of the Accounts of Borrower from the Account Debtors, enforce payment
of such Accounts by legal proceedings or otherwise, and generally exercise all
of Borrower's rights and remedies with respect to the collection of its
Accounts; (ii) in a commercially reasonable manner settle, adjust, compromise,
discharge or release any of Borrower's Accounts or other Collateral or any
legal proceedings brought to collect any of such Accounts or other Collateral;
(iii) sell or assign any of Borrower's Accounts and other Collateral upon and
for such commercially reasonable terms and amounts and at such time or times as
Lender deems advisable; (iv) take control, in any manner, of any item of
payment or proceeds relating to any Collateral; (v) prepare, file and sign
Borrower's name to a proof of claim in bankruptcy or similar document against
any Account Debtor or to any notice of lien, assignment or satisfaction of lien
or similar document in connection with any of the Collateral; (vi) receive,
open and dispose of all mail addressed to Borrower and to notify postal
authorities to change the address for delivery thereof to such address as
Lender may designate; (vii) endorse the name of Borrower upon any of the items
of payment or proceeds relating to any Collateral and deposit the same to the
account of Lender on account of the Obligations; (viii) endorse the name of
Borrower upon any Chattel Paper, Document, Instrument, invoice, freight bill,
bill of lading or similar document or agreement relating to Borrower's Accounts
and any other Collateral; (ix) use Borrower's stationery for the purpose of,
and sign the name of Borrower to, verifications of its Accounts and notices
thereof to Account Debtors; (x) use the information recorded on or contained in
any data processing equipment and computer hardware and software relating to
Borrower's Accounts and any other Collateral; and (xi) do all other acts and
things necessary, in Lender's determination, to fulfill Borrower's obligations
under this Agreement.
11.1.3 The power of attorney granted pursuant to this Section
11.1, being coupled with an interest, shall be irrevocable by Borrower until
all of the Obligations are paid and satisfied in full.
1 . Indemnity. Borrower hereby agrees to indemnify Lender and hold
Lender harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including reasonable attorneys
fees and legal expenses) on account of, or as the result of, a claim made,
asserted or initiated by any Person other than a Loan Party that any Loan
Party has failed to observe, perform or discharge such Loan Party's duties
hereunder or under any of the Loan Documents. In addition, Borrower shall
defend Lender against and save it harmless from all claims of any Person with
respect to the Collateral. Additionally, if any taxes (excluding taxes imposed
upon or measured by the net income of Lender, but including, without
limitation, any intangibles tax, stamp tax, recording tax or franchise tax)
shall be payable by Lender or any Loan Party on account of the execution or
delivery of this Agreement, or the execution, delivery, issuance or recording
of any of the other Loan Documents, or the creation of any of the Obligations,
by reason of any existing or hereafter enacted federal, state, foreign or local
statute, rule or regulation, Borrower will pay (or will promptly reimburse
Lender for the payment of) all such taxes, including, without limitation, any
interest and penalties thereon, and will indemnify and hold Lender harmless
from and against all liability in connection therewith. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrower under this
Section 11.2 shall survive the payment in full of the Obligations and the
termination of this Agreement.
2 . Modification of Agreement; Sale of Interest. This Agreement may
not be modified, altered or amended, except by an agreement in writing signed
by each Loan Party and Lender. No Loan Party may sell, assign or transfer any
interest in this Agreement, any of the other Loan Documents, or any of the
Obligations, or any portion thereof, including, without limitation, such Loan
Party's rights, title, interests, remedies, powers, and duties hereunder or
thereunder. Each Loan Party hereby consents to Lender's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof or
thereof, including, without limitation, Lender's rights, title, interests,
remedies, powers, and duties hereunder or thereunder; provided, however, no
such sale, assignment, participation, transfer or other disposition by Lender
will result in any diminution of the rights and obligations of the Loan Parties
under this Agreement and the other Loan Documents. In the case of an
assignment, the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would if it were "Lender" hereunder and
Lender shall be relieved of all obligations hereunder upon any such
assignments. Each Loan Party agrees that it will use its best efforts to
assist and cooperate with Lender in any manner reasonably requested by Lender
to effect the sale of participations in or assignments of any of the Loan
Documents or any portion thereof or interest therein, including, without
limitation, assisting in the preparation of appropriate disclosure documents;
provided, however, Borrower shall not be responsible for reimbursing Lender for
any fees or expenses incurred by Lender in connection with any such sale,
participation or assignment. Each Loan Party further agrees that Lender may
disclose credit information regarding such Loan Party and its Subsidiaries to
any potential participant or assignee.
3 . Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
4 . Successors and Assigns. This Agreement, the Other Agreements and
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of each Loan Party and Lender permitted under Section
11.3 hereof.
5 . Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2
hereof and except as otherwise provided in any of the other Loan Documents by
specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
6 . Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which counterparts taken together shall constitute
but one and the same instrument.
7 . Notice. All notices, requests and demands to or upon a party
hereto, to be effective, shall be in writing and shall be sent by certified or
registered mail, return receipt requested, by personal delivery against
receipt, by overnight courier or by facsimile and, unless otherwise expressly
provided herein, shall be deemed to have been validly served, given or
delivered immediately when delivered against receipt, three Business Day after
deposit in the mail, postage prepaid, or one (1) Business Day after deposit
with an overnight courier, addressed as follows:
If to Lender: Shawmut Capital Corporation
6060 J. A. Jones Drive, Suite 200
Charlotte, North Carolina 28287
Attention: Southeast Loan Administration
With a copy to: Carruthers & Roth, P.A.
235 North Edgeworth Street
Greensboro, North Carolina 27401
Attention: Kenneth M. Greene, Esq.
If to Borrower: Atlantic Coast Airlines
1 Export Drive
Sterling, Virginia 20164
Attention: Director of Treasury Management
If to Parent: Atlantic Coast Airlines, Inc.
1 Export Drive
Sterling, Virginia 20164
Attention: Senior Vice-President and General Counsel
With a copy to: Bagileo, Silverberg & Goldman, L.L.P.
Georgetown Place, Suite 120
1101 30th Street, Northwest
Washington, D.C. 20007
Attention: Robert P. Silverberg, Esq.
or to such other address as each party may designate for itself by notice
given
in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2
hereof shall not be effective until received by Lender. Any written notice or
demand that is not sent in conformity with the provisions hereof shall
nevertheless be effective on the date that such notice is actually received by
the noticed party.
8 . Credit Inquiries. Each Loan Party hereby authorizes and permits
Lender, at its discretion and without any obligation to do so, to respond to
credit inquiries from third parties concerning a Loan Party or any of its
Subsidiaries.
9 . Time of Essence. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
10 . Entire Agreement; Appendix A and Exhibits. This Agreement and the
other Loan Documents, together with all other instruments, agreements and
certificates executed by the parties in connection therewith or with reference
thereto, embody the entire understanding and agreement between the parties
hereto and thereto with respect to the subject matter hereof and thereof and
supersede all prior agreements, understandings and inducements, whether express
or implied, oral or written, including, without limitation, the letter from
Lender to Borrower dated July 17, 1995. Appendix A and each of the exhibits
attached hereto are incorporated into this Agreement and by this reference made
a part hereof.
11 . Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
12 . GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE
BEEN MADE IN THE STATE OF NORTH CAROLINA. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NORTH CAROLINA: PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL
SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN NORTH CAROLINA, THE
LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND
PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND
THE ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH
COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE
DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF NORTH CAROLINA. AS
PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF
ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY
LOAN PARTY OR LENDER, EACH LOAN PARTY HEREBY CONSENTS AND AGREES THAT
THE SUPERIOR COURT OF MECKLENBURG COUNTY, NORTH CAROLINA, OR, AT
LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE WESTERN
DISTRICT OF NORTH CAROLINA, CHARLOTTE DIVISION, SHALL HAVE NON-EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
SUCH LOAN PARTY AND LENDER PERTAINING TO THIS AGREEMENT OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH LOAN PARTY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH LOAN PARTY
HEREBY WAIVES ANY OBJECTION WHICH SUCH LOAN PARTY MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH LOAN PARTY
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE
OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH LOAN PARTY AT THE
ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL
BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT
THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF
ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY
ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE
FORUM OR JURISDICTION.
13 . WAIVERS BY LOAN PARTIES. EACH LOAN PARTY WAIVES (i) TO THE
FULLEST EXTENT PROVIDED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY
JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEED-
ING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY
OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii) EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED HEREIN, PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT AND ALL OTHER
NOTICES REQUIRED BY LAW; (iii) NOTICE PRIOR TO TAKING POSSESSION OR
CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE
REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. EACH LOAN PARTY
ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO
LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH THE LOAN
PARTIES. EACH LOAN PARTY WARRANTS AND REPRESENTS THAT IT HAS REVIEWED
THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14
IN WITNESS WHEREOF, this Agreement has been duly executed under seal
on the day and year specified at the beginning of this Agreement.
ATTEST: ATLANTIC COAST AIRLINES
("Borrower")
_________________________________________ By:_________________________________
Secretary Title:___________________________
[CORPORATE SEAL]
ATTEST: ATLANTIC COAST AIRLINES, INC.
("Parent")
_________________________________________ By:_________________________________
Secretary Title:___________________________
[CORPORATE SEAL]
Accepted in Charlotte, North Carolina
SHAWMUT CAPITAL CORPORATION
("Lender")
By:_______________________________
Title:_________________________
SCC\ATLANTIC\ATLANTIC.LSA
3/HAB/10-10-95
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement, dated of even date
herewith, by and between Shawmut Capital Corporation and Atlantic Coast
Airlines and Atlantic Coast Airlines, Inc., the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
ACH - Airline Clearing House, Inc., a Delaware corporation.
ACH Agreement - the Associate Membership Agreement, dated January
3, 1992, which incorporates by reference the Agreement Relating to the
Settlement of Interline Accounts through Airlines Clearing House, Inc. dated as
of February 1, 1948, as amended from time to time, each among ACH, certain air
carriers that are and may become party thereto, and Borrower.
ACH Procedure Manual - the Manual of Procedure for the clearing and
settlement functions of ACH as in effect from time to time.
Account - any right to payment for goods sold or leased or for
services rendered which is not evidenced by an Instrument, Document or Chattel
Paper, whether secured or unsecured, and whether or not earned by performance.
Account Debtor - any Person who is or may become obligated under or
on account of an Account.
Adjusted Tangible Assets - with respect to any Person, all assets
of such Person except: (i) any surplus resulting from any write-up of assets
subsequent to the Closing Date; (ii) deferred assets, other than prepaid
insurance and prepaid taxes; (iii) patents, copyrights, trademarks, trade
names, non-compete agreements, franchises and other similar intangibles; (iv)
goodwill, including any amounts, however designated on a Consolidated balance
sheet of such Person or its Subsidiaries, representing the excess of the
purchase price paid for assets or stock over the value assigned thereto on the
books of such Person; (v) Restricted Investments; (vi) unamortized debt
discount and expense; (vii) assets located and notes due from obligors outside
of the United States of America; and (viii) Accounts, notes and other
receivables due from Affiliates or employees.
Affiliate - as to any Person, any other Person (other than a
Subsidiary): (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
such Person; (ii) which beneficially owns or holds 5% or more of any class of
the Voting Stock of such Person; or (iii) 5% or more of the Voting Stock (or in
the case of a Person which is not a corporation, 5% or more of the equity
interest) of which is beneficially owned or held by such Person or a Subsidiary
of such Person. For the purposes of the Agreement, United shall not be deemed
an Affiliate of a Loan Party.
Agreement - the Loan and Security Agreement referred to in the
first sentence of this Appendix A, as the same may hereafter be amended,
modified, supplemented or restated from time to time, all exhibits hereto and
this Appendix A.
Applicable Law - all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant or Loan Documents in question,
including, but not limited to, all applicable common law and equitable
principles; all provisions of all applicable state and federal constitutions,
statutes, rules, regulations and orders of governmental bodies; orders,
judgments and decrees of all courts and arbitrators; and all Environmental
Laws.
Availability - the amount of money which Borrower is entitled to
borrow from time to time as Revolver Loans, such amount being the difference
derived when the sum of the principal amount of Revolver Loans then outstanding
(including any amounts which Lender may have paid for the account of Borrower
pursuant to any of the Loan Documents and which have not been reimbursed by
Borrower) is subtracted from the Borrowing Base. If the amount outstanding is
equal to or greater than the Borrowing Base, Availability is zero (0).
Availability Reserve - on any date of determination thereof, an
amount equal to the sum of (i) any amounts which Borrower is obligated to pay
pursuant to the provisions of the Loan Documents but does not pay when due and
which Lender elects to pay pursuant to any of the Loan Documents for the
account of Borrower; and (ii)the estimated cost of services ordered by Borrower
from United under the United Express Emergency Response Agreement; and (iii)
such reserves established by Lender in such amounts, and with respect to such
matters, events, conditions or contingencies as to which Lender, in its credit
judgment based upon its usual and customary credit and collateral
considerations, determines reserves should be established from time to time,
including, without limitation, with respect to (1) improper billings, other
billing and settlement errors which occur from time to time under the ACH
Procedures Manual, and (2) other sums chargeable against Borrower's Loan
Account as Revolver Loans under any section of the Agreement.
Average Monthly Loan Balance - the amount obtained by adding the
aggregate unpaid balance of all Loans owing by Borrower to Lender at the end of
each day during the month in question and by dividing that sum by the number of
days in such month.
Bank - Shawmut Bank Connecticut, N.A.
Base Rate - the rate of interest announced or quoted by Bank from
time to time as its prime rate for commercial loans, whether or not such rate
is the lowest rate charged by Bank to its most preferred borrowers; and, if
such prime rate for commercial loans is discontinued by Bank as a standard, a
comparable reference rate designated by Bank as a substitute therefor shall be
the Base Rate.
Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(i) the amount of the Revolver Loan Facility; or
(ii) the sum of:
(a) sixty-five percent (65%) of the net amount
of Eligible Accounts outstanding at such date;
MINUS
(b) the Availability Reserve.
For purposes hereof, the net amount of Eligible Accounts at any
time shall be the face amount of such Eligible Accounts less any and all
returns, rebates, discounts (which may, at Lender's option, be calculated on
shortest terms), sales taxes, credits, allowances or excise taxes of any nature
at any time issued, owing, claimed by Account Debtors, granted, outstanding or
payable in connection with such Accounts at such time (including current
amounts owing by Borrower to United under the United Express Agreements).
Borrowing Base Certificate - a certificate submitted by Borrower
certifying to Lender the amount of Borrower's Eligible Accounts as of a
specific date, and rendition of air transportation services and Accounts of
Borrower collected since the date of the previous Borrowing Base Certificate,
such certificate to be in form and detail satisfactory to Lender.
Business Day - any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of North Carolina or the State
of Illinois or is a day on which banking institutions located in such states
are closed.
Capital Expenditures - expenditures made or liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
Chattel Paper - shall have the meaning ascribed to "chattel paper"
under the Code.
Clearing Bank - The Chase Manhattan Bank, N.A., and any successor
clearing bank under the ACH Procedure Manual.
Clearing Bank Account - The account maintained by Borrower at the
Clearing Bank in which, pursuant to the ACH Procedure Manual, all funds due and
payable to Borrower are credited.
Closing Date - the date on which all of the conditions precedent in
Section 9 of the Agreement are satisfied and the initial Revolver Loan is made
under the Agreement.
Code - the Uniform Commercial Code as adopted and in force in the
State of North Carolina, as from time to time in effect.
Collateral - all of the Property and interests in Property of
Borrower described in Section 5 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and performance
of any of the Obligations.
Congress - Congress Financial Corporation.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
Consolidated Adjusted Net Earnings From Operations - with respect
to any Person for any fiscal period, means the net earnings (or loss) after
provision for income taxes for such fiscal period of such Person and its
Subsidiaries, as reflected on the financial statements of such Person supplied
to Lender pursuant to subsection 8.1.3 of the Agreement, but excluding:
(i) any gains arising from the sale of capital assets
during such fiscal period which are, in the aggregate for all such gains, in
excess of 100,000;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary of any such Person
accrued prior to the date it became a Subsidiary of such Person;
(iv) earnings of any corporation, substantially all
the assets of which have been acquired in any manner by such Person, realized
by such corporation prior to the date of such acquisition;
(v) any portion of the net earnings of any
Subsidiary of such Person which for any reason is unavailable for payment of
dividends to such Person;
(vi) the earnings of any Person to which any assets
of such Person shall have been sold, transferred or disposed of, or into which
such Person shall have merged, or been a party to any consolidation or other
form of reorganization, prior to the date of such transaction;
(viii) any gain arising from the acquisition of any
Securities of such Person; and
(ix) any gain arising from extraordinary or
non-recurring items.
Consolidated Adjusted Tangible Net Worth - with respect to any
Person, at any date means a sum equal to:
(i) the net book value (after deducting related
depreciation, obsolescence, amortization, valuation, and other proper reserves)
at which the Adjusted Tangible Assets of such Person and its Subsidiaries would
be shown on a Consolidated balance sheet at such date in accordance with GAAP,
minus
(ii) the amount at which the liabilities of such
Person and its Subsidiaries (other than capital stock and surplus) would be
shown on such Consolidated balance sheet in accordance with GAAP, and including
as liabilities all reserves for contingencies and other potential liabilities.
Consolidated Cash Flow - with respect to any Person for any fiscal
period, the sum of (i) Consolidated Adjusted Net Earnings From Operations of
such Person for such fiscal period, plus (ii) depreciation and amortization
expense of such Person for such fiscal period which were subtracted from
earnings in calculating Consolidated Adjusted Earnings From Operations of such
Person for such fiscal period, minus (iii) Capital Expenditures not financed by
Permitted Purchase Money Indebtedness which are incurred by such Person during
such fiscal period, minus (iv) Distributions paid by such Person during such
fiscal period.
Consolidated Current Assets - with respect to any Person at any
date means the amount at which all of the Consolidated current assets of such
Person would be properly classified as Consolidated current assets shown on a
Consolidated balance sheet of such Person at such date in accordance with GAAP
except that amounts due from Affiliates and investments in Affiliates shall be
excluded therefrom.
Consolidated Current Liabilities - with respect to any Person at
any date means the amount at which all of the Consolidated current liabilities
of such Person would be properly classified as Consolidated current liabilities
on a Consolidated balance sheet of such Person at such date in accordance with
GAAP.
Consolidated Debt Service Coverage Ratio - with respect to any
Person for any period of determination, the ratio of (i) Consolidated Cash Flow
of such Person for such period to (ii) payments of principal on Indebtedness
for Money Borrowed required to be paid by such Person during such period
Default - an event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in subsection 2.1.3 of the Agreement.
Distribution - in respect of any corporation means and includes:
(i) the payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities (or any warrant or option for the purchase of any
such Securities) unless made contemporaneously from the net proceeds of the
sale of Securities.
Document - shall have the meaning ascribed to "document" under the
Code.
Dollars - and the sign $ shall refer to currency of the United
States of America.
Eligible Account - an inter-airline Account of Borrower arising and
created in the ordinary course of Borrower's business from the rendition of air
transportation and related services which Lender, in its sole credit judgment,
based upon its usual and customary credit and collateral considerations, deems
to be an Eligible Account. To be an Eligible Account, such Account must be
subject to Lender's perfected Lien and no other Lien other than a Permitted
Lien, must be cleared and collected through the Clearing Bank pursuant to the
ACH Procedure Manual, and must be billed monthly by a recap sheet submitted to
ACH, no later than the nineteenth (19th) day of each month, for all air
transportation and related services rendered and revenues earned during the
preceding month. Without limiting the generality of the foregoing, no Account
of Borrower shall be an Eligible Account if:
(i) it arises out of air transportation and related
services rendered by Borrower to a Subsidiary, or an Affiliate of Borrower, or
to a Person controlled by an Affiliate of Borrower; or
(ii) payment of such Account is not received from the
ACH within fifteen (15) days after the Settlement Date for such Account; or
(iii) any covenant, representation or warranty
contained in the Agreement with respect to such Account has been breached; or
(iv) in the case of Accounts owing by United, are
subject to any right of offset other than United's right of setoff for amounts
owing under the United Express Agreements, and, in the case of all other
Accounts, the Account Debtor is also Borrower's creditor or supplier, or the
Account Debtor has disputed liability with respect to such Account, or the
Account Debtor has made any claim with respect to any other Account due from
such Account Debtor to Borrower, or the Account otherwise is subject to any
right of setoff by the Account Debtor; or
(v) the Account Debtor has commenced a voluntary
case under the federal bankruptcy laws, as now constituted or hereafter
amended, or made an assignment for the benefit of creditors, or a decree or
order for relief has been entered by a court having jurisdiction in the
premises in respect of the Account Debtor in an involuntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any other
petition or other application for relief under the federal bankruptcy laws has
been filed against the Account Debtor, or if the Account Debtor has failed,
suspended business, ceased to be Solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for all or
a significant portion of its assets or affairs; or
(vi) the Account is evidenced by Chattel Paper or an
Instrument of any kind, or has been reduced to judgment; or
(vii) the Account is contingent in any respect or for
any reason; or
(viii) the Account Debtor is the United States of
America or any department, agency or instrumentality thereof, unless Borrower
assigns its right to payment of such Account to Lender, in a manner
satisfactory to Lender, so as to comply with the Assignment of Claims Act of
1940 (31 U.S.C. S203 et seq., as amended); or
(ix) the Account is subject to a Lien other than a
Permitted Lien; or
(x) the air transportation and related services
giving rise to such Account have not been performed by Borrower or the Account
otherwise does not represent a final sale; or
(xi) Borrower has made any agreement with the Account
Debtor for any deduction therefrom, except, in the case of Accounts owing by
United, United's right of setoff for amounts owing under the United Express
Agreements; or
(xii) Borrower has made an agreement with the
Account Debtor to extend the time of payment thereof; or
(xiii) Borrower has failed to comply with the
provisions of Section 6.2.1 with respect to such Account and the Account Debtor
obligated thereon; or
(xiv) It is not based upon or evidenced by passenger
tickets, exchange orders or other passenger billing documents which have been
separated and put into batches in accordance with the requirements of the ACH
Procedure Manual.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and all rules and regulations from time to time promulgated
thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
Expiration Date - the date on which the Agreement is terminated
pursuant to Section 4.1 or 4.2 thereof.
GAAP - generally accepted accounting principles in the United
States of America in effect from time to time.
General Intangibles - with respect to any Person, all general
intangibles of Borrower, including, without limitation, all choses in action,
causes of action, corporate or other business records, deposit accounts,
inventions, blueprints, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, service marks, goodwill,
brand names, copyrights, registrations, licenses, franchises, customer lists,
tax refund claims, computer programs, operational manuals, all claims under
guaranties, security interests or other security held by or granted to such
Person to secure payment of any of the Accounts by an Account Debtor, all
rights to indemnification and all other intangible property of every kind and
nature (other than Accounts).
Guarantor - Parent and any other Person who may hereafter guarantee
payment or performance of the whole or any part of the Obligations.
Guaranty Agreement - the Guaranty Agreement executed by each
Guarantor in form and substance satisfactory to Lender.
IATA - International Air Transport Association.
Indebtedness - as applied to a Person means, without duplication:
(i) all items which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness is to be
determined, including, without limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such
Person has guaranteed,
(iii) all reimbursement obligations in connection with
letters of credit or letter of credit guaranties issued for the account of such
Person, and
(iv) in the case of Borrower (without duplication),
the Obligations.
Instrument - shall have the meaning ascribed to "instrument" under
the Code.
JSX - JSX Capital Corporation, a Delaware corporation, and its
successors and assigns.
JSX Intercreditor Agreement - the intercreditor agreement to be
executed on or about the Closing Date between Lender and JSX, and to be
acknowledged by the Loan Parties, setting forth Lender's and JSX's relative
rights and interests in Indebtedness and Property of Borrower, all in form and
substance satisfactory to Lender.
Lien - any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien" shall
also include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purpose of the Agreement, Borrower
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement or other arrangement pursuant to which
title to the Property has been retained by or vested in some other Person for
security purposes.
Loan - a Revolver Loan or all or any of them as the context may
require.
Loan Account - the loan account established on the books of Lender
pursuant to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the
Security Documents.
Loan Year - the twelve-month period commencing on November 1 of
each year and ending on October 31 of the following year, except that the First
Loan Year shall commence on the Closing Date and end on October 31, 1996.
References to a numerical Loan Year shown below shall mean the period
corresponding thereto:
Loan Year Period
First Loan Year Closing Date through October 31,
1996
Second Loan Year November 1, 1996 through October 31, 1997
Third Loan Year November 1, 1997 through October 31,
1998
Material Adverse Effect - the effect of any event or condition
which, alone or when taken together with other events or conditions occurring
or existing concurrently therewith, (i) has or may be reasonably expected to
have a material adverse effect upon the business, operations, Properties,
condition (financial or otherwise) of the Loan Parties and their respective
Subsidiaries taken as a whole; (ii) has or may be reasonably expected to have
any material adverse effect whatsoever upon the validity or enforceability of
the Agreement or any of the other Loan Documents; (iii) has or may be
reasonably expected to have any material adverse effect upon the Collateral,
the Liens of Lender with respect to the Collateral or the priority of such
Liens; or (iv) materially impairs the ability of the Loan Parties and their
respective Subsidiaries or any Guarantor to perform their respective
obligations under the Agreement, any Guaranty Agreement or any of the other
Loan Documents or of Lender to enforce or collect the Obligations or realize
upon any of the Collateral in accordance with the Loan Documents and Applicable
Law.
Maximum Rate - the maximum non-usurious rate of interest permitted
by Applicable Law that at any time, or from time to time, may be contracted
for, taken, reserved, charged or received on the Indebtedness in question or,
to the extent permitted by Applicable Law, under such Applicable Law that may
hereafter be in effect and which allow a higher maximum non-usurious interest
rate than Applicable Law now allows. Notwithstanding any other provision
hereof, the Maximum Rate shall be calculated on a daily basis (computed on the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be).
Money Borrowed - with respect to any Person means (i) Indebtedness
arising from the lending of money by any other Person to such Person; (ii)
Indebtedness, whether or not in any such case arising from the lending by any
other Person of money to such Person, (a) which is represented by notes payable
or drafts accepted that evidence extensions of credit, (b) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments, or
(c) upon which interest charges are customarily paid (other than accounts
payable) or that was issued or assumed as full or partial payment for Property;
(iii) Indebtedness that constitutes a Capitalized Lease Obligation; (iv)
reimbursement obligations with respect to letters of credit or guaranties of
letters of credit and (v) Indebtedness of such Person under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed under clauses
(i) through (iii) hereof, if owed directly by such Person.
Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
Notice of Borrowing - as defined in Section 3.1.1(i) of the
Agreement.
Obligations - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest, fees and other
charges thereon, owing, arising, due or payable from the Loan Parties or any of
them to Lender of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, whether arising under the
Agreement or any of the other Loan Documents or otherwise, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however acquired.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and
documents (other than the Agreement and the Security Documents), heretofore,
now or hereafter executed by a Loan Party, any Subsidiary of a Loan Party or
any other third party and delivered to Lender in respect of the transactions
contemplated by the Agreement.
Overadvance - a Revolver Loan made by Lender when an Overadvance
Condition exists or would result from the making of such Revolver Loan.
Overadvance Condition - at any date, a condition such that the
principal amount of the Revolver Loans outstanding to Borrower on such date
exceeds the Borrowing Base on such date.
Permitted Liens - any Lien of a kind specified in subsection 8.2.4
of the Agreement.
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of a Loan Party that is covered by Title IV of ERISA.
Projections - The Loan Parties' forecasted Consolidated and
consolidating (i) balance sheets, (ii) profit and loss statements, and (iii)
cash flow statements, all prepared on a consistent basis with the Loan Parties'
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.
Properly Contested - in the case of any Indebtedness of any Loan
Party or any of its Subsidiaries (including, but not limited to, any taxes or
other governmental charges) that is not paid as and when due or payable by
reason of such Loan Party's or any Subsidiary's bona fide dispute concerning
its liability to pay same or concerning the amount thereof, that (i) such
Indebtedness is being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, (ii) such Loan Party
has established appropriate reserves as shall be required in conformity with
GAAP, (iii) the non-payment of such Indebtedness will not have a Material
Adverse Effect; (iv) no Lien is imposed upon such Loan Party's or any
Subsidiary's Property with respect to such Indebtedness unless such Lien is at
all times junior and subordinate in priority to the Liens in favor of Lender
(except only with respect to taxes that have priority as a matter of any
state's Applicable Laws); and (v) if such contest is abandoned, settled or
determined adversely to such Loan Party or any of its Subsidiaries, such Loan
Party forthwith pays such Indebtedness and all penalties and interest in
connection therewith.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Related United Express Agreements - those agreements between United
and Borrower described on Exhibit A attached hereto, as the same may be
amended, modified, supplemented or restated from time to time.
Renewal Term - as defined in Section 4.1 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b)
of ERISA.
Restricted Investment - any investment made in cash or by delivery
of Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of a Loan
Party to the extent existing on the Closing Date;
(ii) Property to be used in the ordinary course of
business;
(iii) Consolidated Current Assets arising from the
sale of goods and services in the ordinary course of business of a Loan Party
and its Subsidiaries;
(iv) investments in direct obligations of the United
States of America, or any agency thereof or obligations guaranteed by the
United States of America, provided that such obligations mature within one year
from the date of acquisition thereof;
(v) investments in certificates of deposit maturing
within one year from the date of acquisition issued by (a) a bank or trust
company organized under the laws of the United States or any state thereof
having capital surplus and undivided profits aggregating at least $100,000,000,
or (b) for a period of six (6) months after the Closing Date, Riggs National
Bank;
(vi) investments in commercial paper given a rating
of A or better by a national credit rating agency and maturing not more than
270 days from the date of creation thereof; and
(vii) investments in certificates of deposit (a) issued
by a bank which issues a letter of credit for the account of a Loan Party, (b)
securing the reimbursement obligations of a Loan Party with respect to such
letter of credit, and (c) maturing on a date corresponding to the expiration
date of such letter of credit.
Revolver Loan - a Loan made by Lender as provided in Section 1.1 of
the Agreement.
Revolver Loan Facility - $20,000,000, as reduced from time to time
pursuant to Section 1.3 of the Agreement; provided, however, that, for all
purposes of the Agreement except for the calculation of the unused line fee
payable by Borrower to Lender pursuant to Section 2.2.2 of the Agreement, the
Revolver Loan Facility shall not exceed $17,000,000 until such time as Lender
shall have received an amendment to the JSX Intercreditor Agreement, duly
executed by JSX and acknowledged by Borrower in a form satisfactory to Lender,
increasing the maximum principal amount of the Obligations permitted to be
secured by Lender's first priority Lien in the Collateral from the sum of
$17,000,000 to the sum of $20,000,000.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Documents - each Guaranty Agreement, and all other
instruments and agreements now or at any time hereafter securing the whole or
any part of the Obligations.
Settlement Date - in the case of ACH transactions between Borrower
and an Account Debtor, the twenty-eighth (28th) calendar day of the month
following the month in which the air transportation services are rendered and
revenues earned, and, in the case of IATA transactions between Borrower and an
Account Debtor, the fifteenth (15th) calendar day of the second month following
the month in which the air transportation services are rendered and revenues
earned, and, if such calendar day falls on a Saturday, Sunday or legal holiday
observed by the Clearing Bank, the Settlement Date shall be the next working
day.
Solvent - as to any Person, such Person (i) owns Property whose
fair saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is generally able to
pay all of its Indebtedness as such Indebtedness matures and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
Specified Percentage - as defined in Section 2.1.1 of the
Agreement.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination.
United - United Airlines, Inc., a Delaware corporation.
United Express Agreements - the United Express Operating Agreement
and the Related United Express Agreements or any one or more of them as the
context may require.
United Express Emergency Response Agreement - the Emergency
Response Services Agreement between United and Borrower dated June 23, 1995,
which constitutes one of the United Express Related Agreements.
United Express Operating Agreement - the United Express Agreement
between United and Borrower, dated October 1, 1991, as the same is amended,
modified, supplemented or restated from time to time, pursuant to which, among
other things, Borrower has acquired a non-exclusive license to use trademarks,
service marks, trade names, and logos and related intellectual property rights
in the operations of Borrower's business.
United Express Termination Date - the termination date of the
United Express Operating Agreement as that date may be modified pursuant to the
terms of the United Express Operating Agreement and as may be permitted by the
terms of the Agreement.
United Non-Offset Agreement - the non-offset agreement to be
executed by Lender and United on or about the Closing Date pursuant to which
United agrees to limit its right of setoff against Borrower to current amounts
owing by Borrower to United under the United Express Agreements, all in form
and substance satisfactory to Lender.
Voting Stock - Securities of any class or classes of a corporation
the holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing similar
functions).
Other Terms. All other terms contained in the Agreement shall
have, when the context so indicates, the meanings provided for by the Code to
the extent the same are used or defined therein. Accounting terms not
otherwise specifically defined herein shall be construed in accordance with
GAAP consistently applied.
Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Whenever in the
Agreement the word "including" is used, it is understood to mean "including,
without limitation". Any pronoun used shall be deemed to cover all genders.
The section titles, table of contents and list of exhibits appear as a matter
of convenience only and shall not affect the interpretation of the Agreement.
All references to statutes and related regulations shall include any amendments
of same and any successor statutes and regulations. All references to any of
the Loan Documents shall include any and all modifications thereto and any and
all extensions or renewals thereof.
IN WITNESS WHEREOF, the parties have caused this Appendix to be duly
executed by their duly authorized officers on October __, 1995.
ATTEST: ATLANTIC COAST AIRLINES
("Borrower")
_________________________________________ By:_________________________________
Secretary Title:___________________________
[CORPORATE SEAL]
ATTEST: ATLANTIC COAST AIRLINES, INC.
("Parent")
_________________________________________ By:_________________________________
Secretary Title:___________________________
[CORPORATE SEAL]
Accepted in Charlotte, North Carolina
SHAWMUT CAPITAL CORPORATION
("Lender")
By:__________________________________
Title:______________________________
LIST OF EXHIBITS
Exhibit A Related United Express Agreements
Exhibit B Each Loan Party's Chief Executive Office and Business
Locations
Exhibit C Jurisdictions in which each Loan Party is Authorized to
do Business
Exhibit D Capital Structure of Each Loan Party
Exhibit E Corporate Names
Exhibit F Tax Identification Numbers of Subsidiaries
Exhibit G Patents, Trademarks, Copyrights and Licenses
Exhibit H Contracts Restricting Borrower's Right to Incur Debts
Exhibit I Litigation
Exhibit J Pension Plans
Exhibit K Labor Contracts
Exhibit L Compliance Certificate
EXHIBIT A
RELATED UNITED EXPRESS AGREEMENTS
EXHIBIT B
CHIEF EXECUTIVE OFFICES
1. Borrower currently has the following chief executive office:
2. Parent currently has the following chief executive office:
3. Borrower maintains its books and records relating to Accounts and General
Intangibles at:
4. Parent maintains its books and records relating to Accounts and General
Intangibles at:
EXHIBIT C
JURISDICTIONS IN WHICH THE LOAN PARTIES
ARE AUTHORIZED TO DO BUSINESS
Name of Entity
Jurisdictions
Borrower California, Virginia,
Georgia, Connecticut, Kentucky, Maine, Maryland, Massachusetts, New Hampshire,
New Jersey, New York, North Carolina, Ohio, Rhode Island, South Carolina,
Tennessee, Vermont and West Virginia
Parent Delaware and Virginia
EXHIBIT D
CAPITAL STRUCTURE
1. The name of each Loan Party's corporate or joint venture Affiliates and
the nature of the affiliation are as follows:
Borrower: NONE
Parent: NONE
2. The classes and number of authorized shares of each Loan Party and the
record owner of such shares are as follows:
Borrower:
Class of Stock
Number of Shares
Issued and Outstanding
Number of Shares
Authorized but Unissued
Common
All owned by Parent
Parent: The common stock of Parent is publicly traded. All of
the preferred shares of Parent are currently held by JSX Capital Corporation.
Class of Stock
Number of Shares
Issued/ Outstanding
Number of Shares
Authorized but Unissued
Common
8,347,524/8,335,024
8,652,476
Preferred
3,825/3,825
4,175
The above information is as of June 30, 1995.
3. The number, nature and holder of all other outstanding Securities of each
Loan Party are as follows:
There are no other Securities of the Loan Parties than those set forth in
items 2 & 3 above.
EXHIBIT E
CORPORATE NAMES
1. Borrower's correct corporate name, as registered with the Secretary of
State of the State of California, is:
Atlantic Coast Airlines
2. Parent's correct corporate name, as registered with the Secretary of
State of the State of Delaware, is:
Atlantic Coast Airlines, Inc.
3. In the conduct of its business, Borrower has used the following names:
4. In the conduct of its business, Parent has used the following names:
EXHIBIT F
TAX IDENTIFICATION NUMBERS OF EACH LOAN PARTY
Entity Number
Borrower 77-0291749
Parent 13-3621051
EXHIBIT G
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
With the exception of computer software licenses, neither Borrower nor
Parent has any patents, trademarks, copyrights, service marks, tradenames,
licenses and other similar rights other than those licensed from United under
the United Express Agreements.
EXHIBIT H
CONTRACTS RESTRICTING LOAN PARTY'S RIGHT TO INCUR DEBTS
1. Contracts that restrict the right of Borrower to incur Indebtedness:
Title of Contract
Identity of
Parties
Nature of
Restriction
Term of Contract
2. Contracts that restrict the right of Parent to incur Indebtedness:
Title of Contract
Identity of
Parties
Nature of
Restriction
Term of Contract
EXHIBIT I
LITIGATION
1. Actions, suits, proceedings and investigations pending against any Loan
Party:
Title of Action
Nature of Action
Complaining
Parties
Jurisdiction or
Tribunal
NONE
2. The only threatened actions, suits, proceedings or investigations of
which any Loan Party is aware are as follows:
NONE
EXHIBIT J
PENSION PLANS
The Loan Parties have the following Plans:
Party
Type of Plan
Atlantic Coast Airlines, Inc.
Employees Stock Ownership Plan
Employee Stock Ownership Plan
Atlantic Coast Airlines 401(k) Plan
401(k) Plan
Atlantic Coast Airlines Pilot 401(k)
Plan
401(k) Plan
EXHIBIT K
COLLECTIVE BARGAINING AGREEMENTS; LABOR CONTROVERSIES
1. The Loan Parties are parties to the following collective bargaining
agreements:
Type of Agreement
Parties
Term of Agreement
Collective Bargaining
Agreement
ACA-Association of
Flight Attendants, AFL-
CIO
May 1, 1994 - April 30,
1997
Collective Bargaining
Agreement
ACAI-Airlines Pilot
Assoc. Int.
*
2. Material grievances, disputes of controversies with employees are as
follows:
Parties Involved
Nature of Grievance, Dispute or
Controversy
NONE
3. Threatened strikes, work stoppages and asserted pending demands for
collective bargaining are as follows:
Parties Involved
Nature of Matter
ACA-Aircraft Mechanic Fraternal
Assoc. (Borrower has no labor
agreement with the Association)
**
* This agreement terminates March 31, 1996 unless notice to Borrower is given
120 days prior to the termination date in which case the agreement is
automatically renewed subject to the right to amend the agreement.
** The Association has threatened to take a strike vote. Borrower has brought
litigation questioning the association's right to do so. Even if the
litigation is unsuccessful, the NMB will not, as required, likely declare an
impass, which is a condition precedent to a strike.
EXHIBIT L
COMPLIANCE CERTIFICATE
[Letterhead of Parent]
__________________, 19__
Shawmut Capital Corporation
6060 J. A. Jones Drive
Suite 200
Charlotte, North Carolina 28287
The undersigned, a financial officer of Atlantic Coast Airlines,
Inc., a Delaware corporation ("Parent"), gives this certificate to Shawmut
Capital Corporation ("Lender") in accordance with the requirements of
subsection 8.1.3 of that certain Loan and Security Agreement dated October 12,
1995, between Parent and its Subsidiary Atlantic Coast Airlines and Lender
("Loan Agreement"). Capitalized terms used in this Certificate, unless
otherwise defined herein, shall have the meanings ascribed to them in the Loan
Agreement.
1. Based upon my review of the Consolidated balance sheets
and statements of income of the Loan Parties for the [fiscal year] [quarterly
period] ending __________________, 19__, copies of which are attached hereto, I
hereby certify that:
(a) Consolidated Adjusted Tangible Net Worth for the period
is $_______________;
(b) Consolidated Adjusted Earnings From Operations for the
period is $_______________;
(c) Consolidated Debt Service Coverage Ratio for the period
is ____ to 1.0; and
(d) Capital Expenditures during the period and for the
fiscal year to date total $__________ and $__________, respectively.
2. No Default exists on the date hereof, other than:
__________________ _______________________________________________ [if none, so
state]; and
3. No Event of Default exists on the date hereof, other
than __________________ _________________________________________ [if none, so
state].
Very truly yours,
_______________________________
A Financial Officer
__________________________________________________
ATLANTIC COAST AIRLINES, INC.
ATLANTIC COAST AIRLINES
__________________________________________________
__________________________________________________
__________________________________________________
LOAN AND SECURITY AGREEMENT
Dated: October 12, 1995
$20,000,000
__________________________________________________
__________________________________________________
__________________________________________________
SHAWMUT CAPITAL CORPORATION
__________________________________________________
TABLE OF CONTENTS
Page
SECTION 1. CREDIT FACILITY -1-
1.1. Loans -1-
1.2. Use of Proceeds of Revolver Loans -1-
1.3. Reduction of Revolver Loan Facility -1-
SECTION 2. INTEREST, FEES AND CHARGES -1-
2.1. Interest -1-
2.2 Fees. -3-
2.3. Computation of Interest and Fees -3-
2.4. Audit and Appraisal Fees and Expenses -3-
2.5. Reimbursement of Expenses -3-
2.6. Bank Charges -4-
2.7. Capital Adequacy -4-
SECTION 3. LOAN ADMINISTRATION -4-
3.1. Manner of Borrowing Loans and Disbursements -4-
3.2. Payments -5-
3.3. Application of Payments and Collections -6-
3.4. All Loans to Constitute One Obligation -6-
3.5. Loan Account -6-
3.6. Statements of Account -6-
SECTION 4. TERM AND TERMINATION -6-
4.1. Term of Agreement -6-
4.2. Termination -6-
SECTION 5. SECURITY INTERESTS -7-
5.1. Security Interest in Collateral -7-
5.2. Lien Perfection; Further Assurances -8-
SECTION 6. COLLATERAL ADMINISTRATION -8-
6.1. General -8-
6.2. Administration of Accounts -8-
6.3. Payment of Charges -9-
SECTION 7. REPRESENTATIONS AND WARRANTIES -10-
7.1. General Representations and Warranties -10-
7.2. Continuous Nature of Representations and Warranties -13-
7.3. Survival of Representations and Warranties -13-
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS -13-
8.1. Affirmative Covenants -13-
8.2. Negative Covenants -15-
8.3. Specific Financial Covenants -17-
SECTION 9. CONDITIONS PRECEDENT -19-
9.1. Conditions Precedent to Initial Revolver Loan on Closing Date -19-
9.2. Conditions Precedent to All Revolver Loans -21-
9.3. Waiver of Conditions Precedent -21-
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT -21-
10.1. Events of Default -21-
10.2. Acceleration of the Obligations -23-
10.3. Other Remedies -23-
10.4. Remedies Cumulative; No Waiver -24-
SECTION 11. MISCELLANEOUS -24-
11.1. Power of Attorney -24-
11.2. Indemnity -25-
11.3. Modification of Agreement; Sale of Interest -25-
11.4. Severability -25-
11.5. Successors and Assigns -26-
11.6. Cumulative Effect; Conflict of Terms -26-
11.7. Execution in Counterparts -26-
11.8. Notice -26-
11.9. Credit Inquiries -26-
11.10. Time of Essence -27-
11.11. Entire Agreement; Appendix A and Exhibits -27-
11.12. Interpretation -27-
11.13. GOVERNING LAW; CONSENT TO FORUM -27-
11.14. WAIVERS BY LOAN PARTIES -27-
(..continued)
EXHIBIT 10.27(a)
SPLIT DOLLAR AGREEMENT
AGREEMENT made the _____ day of ________, 199__, by and between ATLANTIC
COAST AIRLINES, INC., a corporation organized and existing under the laws of
the State of Delaware, (hereinafter called the "Company") and
___________________ (hereinafter called the "Employee").
WHEREAS, the Employee wants to insure his life, for the benefit and
protection of his family, under a policy to be issued by the Minnesota Mutual
Life Insurance Company (hereinafter called the "Insurer"); and
WHEREAS, the Company wants to help the Employee provide insurance for
the benefit and protection of his family by paying the full amount of the
premiums due on the policy on the Employee's life; and
WHEREAS, the Employee will be the owner of the policy of insurance on
his life acquired pursuant to the terms of this Agreement, and the policy will
be assigned to the Company as security for the repayment of the amount which
the Company will contribute toward payment of the premiums due on the policy;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, it is agreed between the parties hereto as follows:
ARTICLE 1
Application for Insurance. The Employee will apply to the Insurer for a
certain insurance policy on his life in the face amount of $__________
(hereinafter called the "Policy"), and he will do everything necessary to
cause the Policy to be issued. When the Policy is issued, the Policy number,
face amount and plan of insurance shall be recorded on Schedule A attached
hereto and the Policy shall then be subject to the terms of this Agreement.
ARTICLE 2
Ownership of Insurance. The Employee shall be the owner of the Policy
on the Employee's life acquired pursuant to the terms of this Agreement and he
may exercise all the rights of ownership with respect to the Policy except as
otherwise hereinafter provided. Notwithstanding the foregoing, the Employee
may not assign any right of ownership with respect to the Policy to any other
party, except as specifically provided in Article 8 hereof.
ARTICLE 3
Election of Dividend Option. To the extent that the Insurer declares
dividends on the Policy, the Company shall have the right to choose the option
or combination of options it desires from among those offered by the Insurer.
The Company shall notify the Employee and the Insurer of its choice, and the
Employee agrees to execute any documents necessary to choose or change the
Policy's dividend option.
ARTICLE 4
Payment of Premiums on Policy.
A. On or before each due date the Company will pay to the Insurer the
full amount of each premium on the Policy on the Employee's life acquired
pursuant to the terms of this Agreement.
B. Notwithstanding the foregoing, unless provided otherwise under the
terms of any employment agreement or severance agreement between the Company
and the Employee, in the event of the termination of the employment of the
Employee by the Company or resignation of his employment with the Company, at
the option of the Company, the obligation to pay to the Insurer the full
amount of each premium on the Policy on the Employee's life acquired pursuant
to the terms of this Agreement which has a due date on or after the date of
any such termination, retirement or resignation shall be the sole obligation
of the Employee.
ARTICLE 5
Disability Waiver of Premium. If the Policy appertaining to this
Agreement is issued with a supplemental agreement providing for waiver of
premium in the event of disability, or any additional death benefit, the
additional premium for such supplemental agreement shall be paid by the
Company for the benefit of the Employee. In the event said waiver-of-premium
benefit becomes operational, the Company's interest in the Policy at death,
under Section 10, or on surrender, under Section 12, shall be limited to
(a) the total premiums paid by the Company, pursuant to Section 4 of this
Agreement, less any Company indebtedness which may exist against the Policy
and any interest due on such Company indebtedness; or, if less, (b) the total
cash value of the Policy, including dividend accumulations and the cash value
of the dividend additions at the last Policy anniversary before the premium
was waived, less any Company indebtedness which may exist against the Policy
and any interest due on such indebtedness.
ARTICLE 6
Employee's Obligation to Company. The Employee shall be obligated to
repay to the Company the lesser of the aggregate amount paid by the Company,
under Article 4 of this Agreement, to the Insurer as premiums on this Policy
on the Employee's life acquired pursuant to the terms of this Agreement or the
aggregate amount of cash value in this Policy on the Employee's life acquired
pursuant to the terms of this Agreement. This obligation of the Employee to
the Company shall be payable as provided in Article 10 and Article 11 of this
Agreement.
ARTICLE 7
Assignment of Policy. The Employee will collaterally assign the Policy
on his life, acquired pursuant to the terms of this Agreement, to the Company
as security for the repayment of the amounts which the Company will pay on
behalf of the Employee under Article 4 of this Agreement. This collateral
assignment will not be altered or changed without the consent of the Company.
ARTICLE 8
Additional Policy Benefits and Riders. The Employee may add a rider to
the Policy on his life, acquired pursuant to the terms of this Agreement, for
his own benefit. Upon written request by the Company, the Employee may add a
rider to the Policy for the benefit of the Company. Any additional premium
for any rider which is added to the Policy shall be paid by the party which
will be entitled to receive the proceeds of the rider.
ARTICLE 9
Death Claims.
A. When the Employee dies, the Company shall be entitled to receive a
portion of the death benefits provided under the Policy on the Employee's life
acquired pursuant to the terms of this Agreement. The amount to which the
Company will be entitled shall be the total amount which it has paid, pursuant
to Article 4 of this Agreement, as premiums on the Policy on the Employee's
life less the amount of any Company indebtedness which may exist against the
Policy and any interest due on such Company indebtedness. The receipt of this
amount by the Company shall constitute satisfaction of the Employee's
obligation under Article 6 of this Agreement.
B. When the Employee dies, the beneficiary or beneficiaries named by
the Employee shall be entitled to receive the amount of the death benefits
provided under the Policy on the Employee's life in excess of the amount
payable to the Company under Paragraph A of this Article. This amount shall
be paid under the settlement option elected by the Employee.
ARTICLE 10
Termination of Agreement. This Agreement shall terminate on the
repayment in full by the Employee of the contributions made by the Company
under Article 4 of this Agreement toward payment of the premiums due on the
Policy on the Employee's life acquired pursuant to the terms of this
Agreement, provided that upon the receipt of such repayment the Company
releases the collateral assignment of the Policy made by the Employee pursuant
to Article 7 of this Agreement.
This Agreement shall not terminate and shall remain in full force and
effect upon the Employee's termination of employment with the Company and
shall also remain in full force and effect in the event of the disability of
the Employee. Provided however, that upon such Termination or disability of
the Employee, the Employee shall have an immediate obligation to repay to the
Company a dollar amount equal to the lesser of (a) the aggregate amount of
contributions made by the Company under Article 4 of this Agreement toward
payment of the premiums due on the Policy on the Employee's life acquired
pursuant to the terms of this Agreement through the Termination Date or date
of disability or (b) the aggregate value of the cash value of the Policy
through the Termination Date or date of disability of the Employee. The
receipt of this amount by the Company shall constitute satisfaction of the
Employee's obligation under Article 6 of this Agreement.
ARTICLE 11
Surrender of Policy. Upon surrender of the Policy, or any portion
thereof, on the Employee's life acquired pursuant to the terms of this
Agreement or upon the surrender of any or all of the paid up additions
standing to the credit of such Policy, if any, by the Employee at any time
before any death benefit is payable under the Policy, the Company shall have
the sole right to collect such surrender proceeds of the Policy or any such
surrender value of such paid-up additions in an amount not to exceed the total
amount the Company has paid, pursuant to Article 4 of this Agreement, as
premiums on the Policy on the Employee's life less the amount of any Company
indebtedness which may exist against the Policy and any interest due on such
Company indebtedness.
ARTICLE 12
Insurance Company Not a Party. The Insurer
(a) shall not be deemed to be a party to this Agreement for any
purpose nor in any way responsible for its validity;
(b) shall not be obligated to inquire as to the distribution of any
monies payable or paid by it under the Policy on the Employee's life acquired
pursuant to the terms of this Agreement;
(c) shall be fully discharged from any and all liability under the
terms of any Policy issued by it, which is subject to the terms of this
Agreement, upon payment or other performance of its obligations in accordance
with the terms of such Policy.
ARTICLE 13
Fiduciary Provisions. The Board of Directors of the Company is hereby
designated as the "Named Fiduciary" for the Split Dollar Plan established by
this Agreement, and it shall have the authority to control and manage the
operation and administration of such Plan. However, the Insurer shall be the
fiduciary of the Plan solely with regard to the review and final decision on
the claim for benefits under its Policy, as provided in the claims procedure
set forth in Article 15.
ARTICLE 14
Allocation of Fiduciary Responsibilities. The Named Fiduciary may
allocate its responsibilities for the operation and administration of the
Split Dollar Plan, including the designation of a person to carry out
fiduciary responsibilities under such Plan. The Named Fiduciary shall effect
such allocation of its responsibilities by delivering to the Company a written
instrument signed by its members that specifies the nature and extent of the
responsibilities allocated under the Split Dollar Plan, together with a signed
acknowledgment of their acceptance by the persons to whom the responsibilities
were allocated.
ARTICLE 15
Claims Procedure. The following claims procedure shall apply to the
Split Dollar Plan:
(a) Filing of a Claim for Benefits. The Trust or the beneficiary of
the Policy shall make a claim for the benefits provided under the Policy in
the manner provided in the Policy.
(b) Claim Denial. With respect to a claim for benefits under said
Policy, the Insurer shall be the entity which reviews and makes decisions on
claims denials according to the terms of the Policy.
(c) Notification to Claimant of Decisions. If a claim is wholly or
partially denied, notice of the decision, meeting the requirements of Section
(d) below following, shall be furnished to the claimant within a reasonable
period of time after a claim has been filed.
(d) Content of Notice. The Insurer shall provide, to any claimant who
is denied a claim for benefits, written notice setting forth in a manner
calculated to be understood by the claimant, the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent Policy or provisions of this
Agreement on which the denial is based;
(3) A description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(4) An explanation of this Agreement's claim review procedure,
as set forth in Sections (e) and (f) below.
(e) Review Procedure. The purpose of the review procedure set forth
in this Section and Section (f) following is to provide a method by which a
claimant under the Split Dollar Plan may have a reasonable opportunity to
appeal a denial of claim for a full and fair review. To accomplish that
purpose, the claimant or his/her duly authorized representative:
(1) May request a review upon written application to the
Insurer;
(2) May review pertinent Split Dollar Plan documents or
agreements; and
(3) May submit issues and comments in writing. A claimant (or
his/her duly authorized representative), shall request review by filing a
written application for review at any time within sixty (60) days after
receipt by the claimant of written notice of the denial of the claim.
(f) Decision on Review. A decision on review of a denial of a claim
shall be made in the following manner:
(1) The decision on review shall be made by the Insurer, which
may, at its discretion, hold a hearing on the denied claim. The Insurer shall
make its decision promptly, unless special circumstances (such as the need to
hold a hearing) require an extension of time for processing, in which case a
decision shall be rendered as soon as possible, but not later than one hundred
twenty (120) days after receipt of the request for review.
(2) The decision on review shall be in writing and shall include
specific reasons for the decision, written in a manner calculated to be
understood by the claimant, and specific references to the pertinent Policy or
provisions of this Agreement on which the decision is based.
ARTICLE 16
Amendment of Agreement. This Agreement shall not be modified or amended
except by a writing signed by the Company and the Employee. This Agreement
shall be binding upon the heirs, administrators or executors and the
successors and assigns of each party of this Agreement.
ARTICLE 17
State Law. This Agreement shall be subject to and shall be construed
under the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
EMPLOYEE
By:
ATLANTIC COAST AIRLINES, INC.
By:
Attest:
(CORPORATE SEAL)
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EXHIBIT 10.29(a)
AGREEMENT OF
ASSIGNMENT OF LIFE INSURANCE DEATH BENEFIT
AS COLLATERAL
(Execute in duplicate)
A. For value received, the undersigned hereby assigns, transfers and
sets over to Atlantic Coast Airlines, Inc., its successors or assigns, (herein
called the "Assignee") the death benefit under Policy No. _______________,
issued by the Minnesota Mutual Life Insurance Company (hereinafter called the
"Insurer") and any supplementary contracts issued in connection therewith
(said policy and contracts being herein called the "Policy"); upon the life of
__________________ (the "Owner") subject to all the terms and conditions of
the Policy and to all superior liens, if any, which the Insurer may have
against the Policy. The Owner agrees and the Assignee by the acceptance of
this assignment agrees to the conditions and provisions herein set forth.
B. It is understood and agreed that the Assignee shall have the sole
right to collect from the Insurer a portion of the net proceeds of the Policy,
when it becomes a claim by death, equal to the total amount of the then
existing Liabilities, and that all other rights under the Policy, including,
by way of illustration and not limitation, the right to surrender the Policy,
the right to make Policy loans, the right to designate and change the
beneficiary, and the right to elect and to receive dividends are reserved
exclusively to the Owner of the Policy and are excluded from this assignment
and do not pass by virtue hereof and may be exercised by the Owner on the sole
signature of the owner. Nothing herein shall affect funds, if any, now or
hereafter held by the Insurer for the purpose of paying premiums under the
Policy.
C. The Assignee covenants and agrees with the undersigned as follows:
1. That any balance of sums payable by the Insurer upon the
death of the undersigned under the Policy remaining after payment of the then
existing Liabilities, matured or unmatured, shall be paid by the Insurer to
the persons entitled thereto under the terms of the Policy had this assignment
not been executed;
2. That the Assignee, not having any right to obtain policy
loans from the Insurer, will not take any steps to borrow against the Policy,
except that the Owner of the Policy MAY direct the Insurer to pay the proceeds
of any Policy loan to the Assignee, in which event the Assignee shall reduce
the amount of existing Liabilities by the amount of such Policy loan and
interest accrued to the date such Policy loans are repaid by the Assignee.
3. That the Assignee will upon request forward without
unreasonable delay to the Insurer the Policy for endorsement of any
designation or change of beneficiary or any election of an optional mode of
settlement; provided, however, that any such designation, change or election
shall be made subject to this assignment and to the rights of the Assignee
hereunder.
4. That, upon surrender of the Policy or any portion thereof or
upon the surrender of any or all of the paid-up additions standing to the
credit of the Policy, if any, by the Owner at any time before any death
benefit is payable under the Policy, the Assignee shall have the sole right to
collect such surrender proceeds of the Policy or any such surrender value of
such paid-up additions.
D. This assignment of a portion of the life insurance death benefit
under the Policy is made as collateral security for all liabilities of the
Owner, or any of them, to the Assignee, either now existing or that may
hereafter arise with respect to premiums advanced for or paid on the Policy by
the Assignee (all of which liabilities secured or to become secured are herein
called "Liabilities").
E. The Insurer is hereby authorized to recognize the Assignee's claim
hereunder without investigating the validity or the amount of the Liabilities,
or the application to be made by the Assignee of any amount to be paid to the
Assignee. The sole receipt of the Assignee for any sum received shall be a
full disclosure and release therefore to the Insurer. A check for all or any
part of the insurance death benefit payable under the Policy and assigned
herein shall be drawn to the exclusive order of the Assignee in such amount as
may be requested by the Assignee.
F. Except as otherwise provided in the Split Dollar Agreement
effective as of the
1st day of July, 1996 by and between the Assignee and the Owner, the Assignee
shall be under no obligation to pay any premium on the Policy. The principal
of or interest on any loans or advances on the Policy, or any other charges on
the Policy shall be an obligation of the Owner, and not an obligation of the
Assignee, except as otherwise specifically provided herein under Paragraph
C.2.
G. The Assignee may take or release other security, may release any
party primarily or secondarily liable for any of the Liabilities, may grant
extensions, renewals or indulgences with respect to the Liabilities, or may
apply to the Liabilities in such order as the Assignee shall determine, the
insurance death benefit payable under the Policy hereby assigned without
resorting or regard to other security.
H. In the event of any conflict between the provisions of this
assignment and provisions of the note or other evidence of any Liability, with
respect to the Policy or rights of collateral security therein, the provisions
of this assignment shall prevail.
I. The undersigned declares no proceedings in bankruptcy are pending
against him and that his property is not subject to any assignment for the
benefit of creditors.
Signed and sealed this day of
, 19 .
Witness Owner
Address
ACCEPTANCE OF ASSIGNMENT
Date
ATTEST ATLANTIC COAST AIRLINES, INC.
BY: BY:
Signature and Title Signature and
Title
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EXHIBIT 10.31
Senior Management Incentive Plan
Applies to certain officers of the Company
Payable annually
Payout depends on two factors: year over year improvement in earnings per
share, and relative share price performance compared to peer group
For each factor, payout depends on which of four levels of achievement is
attained
No payout if share price is not above that of January 1st of the applicable
year
D-64
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* CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT
PURCHASE AGREEMENT
FOR
TWELVE (12) JETSTREAM 4100 AIRCRAFT
BETWEEN
AERO INTERNATIONAL (REGIONAL)
as agent for and on behalf of
British Aerospace (Operations) Limited
and
ATLANTIC COAST AIRLINES
Dated: February 23, 1997
TABLE OF CONTENTS
PURCHASE AGREEMENT 3
SECTION 1. DEFINITIONS 4
SECTION 2. THE AIRCRAFT 7
SECTION 3. PURCHASE PRICE AND PAYMENT TERMS 9
SECTION 4. BUYER FINANCING 11
SECTION 5. [RESERVED] 14
SECTION 6. RESIDUAL VALUE GUARANTEE 15
SECTION 7. DELIVERY AND ACCEPTANCE 16
SECTION 8. TRANSFER OF TITLE AND FERRY 18
SECTION 9. INSURANCE 20
SECTION 10. EXCUSABLE AND INEXCUSABLE DELAY 22
SECTION 11. AIRCRAFT WARRANTY AND GUARANTEES 25
SECTION 12. TRAINING AND TECHNICAL REPRESENTATIVE 26
SECTION 13. [RESERVED] 28
SECTION 14. QUALIFIED ROTABLE SPARES FINANCING 29
SECTION 15. TAXES AND LICENSES 30
SECTION 16. REPRESENTATIONS AND WARRANTIES 32
SECTION 17. CONDITIONS PRECEDENT 35
SECTION 18. FURTHER ASSURANCES 36
SECTION 19. EVENT OF TERMINATION 37
SECTION 20. MISCELLANEOUS 40
EXHIBIT A - Jetstream 41 Aircraft Delivery Schedule
EXHIBIT B - Aircraft Warranty and Supplier Warranties
EXHIBIT B-1 - Addenda to Aircraft and Supplier Warranties
EXHIBIT C - Change Orders
EXHIBIT D - Form of Operating Lease Agreement
EXHIBIT D-1 - Backstop Terms
EXHIBIT E - Payment Instructions
EXHIBIT F-1 - Form of Residual Value Agreement
EXHIBIT F-2 - Form of Put Agreement
EXHIBIT F-3 - Table of Residual Values
EXHIBIT G - *
EXHIBIT H - Certificate of Acceptance
EXHIBIT I-1 - Amendments to Jetstream 32 Return Conditions
EXHIBIT I-2 - Amendments to Jetstream 32 Return Conditions
EXHIBIT I-3 - Amendments to Jetstream 32 Return Conditions
EXHIBIT J - Additional Product Support
EXHIBIT K - Purchase Price Revision
EXHIBIT L - Confirmation of Sale
EXHIBIT M - Dispute Resolution
EXHIBIT N - Jetstream 32 Aircraft
PURCHASE AGREEMENT FOR
JETSTREAM 41 AIRCRAFT
This PURCHASE AGREEMENT (the "Agreement") by and between AERO
INTERNATIONAL (REGIONAL) a Societe par Actions Simplifiee, having a share
capital of FF 300,000, whose registered office is situated at 1 Allee Pierre
Nadot, 31712 Blagnac Cedex, France, registered at the Companies' Registry in
Toulouse under No B 402 685 507, acting as agent for and on behalf of British
Aerospace (Operations) Limited, (hereinafter referred to as "the Seller"); and
ATLANTIC COAST AIRLINES, a California corporation located at 515A Shaw Road,
Dulles, Virginia 20166 ("Buyer") is dated as of February 23, 1997.
WHEREAS Buyer has agreed to purchase certain additional Jetstream 41
aircraft from Seller (as hereinafter defined); and
WHEREAS in connection with Buyer's agreement to purchase the Jetstream 41
aircraft Seller has agreed to provide certain backstop financing pending, or in
certain cases, in the absence of, Buyer's completion of permanent financing;
and
* ; and
WHEREAS Seller will provide or will cause to be provided to Buyer certain
product support services and spare parts financing as provided for herein in
connection with the new Jetstream 41 aircraft acquired by Buyer; and
WHEREAS Seller will provide or will cause to be provided certain residual
value guarantees with respect to the Jetstream 41 aircraft purchased by Buyer
under this Agreement; and
WHEREAS Buyer and Manufacturer have entered into an agreement concerning
the refinancing of certain Jetstream 41 aircraft existing in Buyer's fleet,
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and based upon the mutual
premises and promises herein contained, the parties hereto do hereby agree as
follows:
SECTION 1.- DEFINITIONS
Except as otherwise specified, the following terms have the respective
meanings set forth below:
Acceptance Flight Tests: Those flight tests as defined in Section 7.2.1 of this
Agreement.
Adjusted Base
Purchase Price: Has the meaning assigned to it in Section 3.2.
Affiliated Company: means any corporation, entity or individual
which directly or indirectly, controls, or is
controlled by, or is under a common control with, such
person or entity. For purposes of this definition,
"control" (including "controlled by" and "under common
control") shall mean the power, directly or
indirectly, to direct or cause the direction of the
management and policies of such person, whether
through the ownership of voting securities or by
contract or otherwise.
AIRAMS: means AI(R) Customer Support, Inc., a company
incorporated in Delaware and located at 13850 McLearen
Road, Herndon, VA.
Aircraft: Jetstream Aircraft Limited Jetstream Series 4100 twin
engined turboprop transport aircraft, including the
airframe and two (2) installed engines and propellers.
Backstop Financing Means the lease financing described in Exhibit D-1.
Base Purchase Price: Has the meaning assigned to it in Section 3.1.
Business Days: Means any day other than a Saturday or Sunday or
a day on which commercial banks are required or
authorized to close in New York, New York or
Washington D.C.
CAA: The Civil Aviation Authority of the United Kingdom and
any successor agency.
Certificate of Acceptance: A certificate in respect of each Aircraft
substantially in the form attached hereto as Exhibit H.
Change Order: A written amendment to the Manufacturer's
Specification.
Conditions Precedent: Those events as defined in Section 17 of this
Agreement.
Customer Specification: The Manufacturer's Specification as modified by Change
Orders (i) executed in conjunction with this Agreement
and attached hereto as Exhibit C and (ii) executed
subsequent to the date hereof and incorporated as of
such subsequent date.
Delivery Date: With respect to each Aircraft, the actual date
of delivery thereof.
Event of Termination: Those events as defined in Section 19 of this
Agreement.
Excusable Delay: A failure or delay in performance as defined in Section
10.1 of this Agreement.
FAA: The Federal Aviation Administration of the United
States of America and any successor agency.
FARs: The Federal Aviation Regulations of the FAA.
JACO means Jet Acceptance Corporation, a Delaware
corporation.
Inexcusable Delay: Has the meaning assigned to it in Section 10.4.
Lease Agreement: Is a lease agreement substantially in the form of
Exhibit D pursuant to which Seller shall provide
Backstop Financing on the terms and subject to the
conditions set forth in Exhibit D-1 of this Agreement.
LIBOR means as applicable to each period indicated, the per
annum rate for deposits in dollars for six months
quoted two Business Days prior to the first day of such
period as such rate is published as the "British
Banker's LIBOR Fixing" for dollar deposits as of 11:00
am on such date.
Manufacturer: Means British Aerospace (Operations) Limited, a
company incorporated under the laws of England and
Wales under the Companies Act of 1985 having its
registered office at Warwick House, P.O. Box 87,
Farnborough Aerospace Centre, Farnborough Hants GU14
6YU.
Manufacturer's Facility: Means the Manufacturer's facility at Prestwick,
Scotland.
Manufacturer's Specification: The Jetstream Aircraft Type Specification DV/M
490.262/96 (SEP94), Issue 6, dated June 1995.
Modification Program: Has the meaning assigned to it in Section 3.4.1.
Purchase Price: Has the meaning assigned to it in Section 3.3.
Qualified First Officer: Any pilot with at least one thousand five
hundred (1,500) total flight hours (including a minimum
of five hundred [500] flight hours on multi-engined
aircraft) who possesses multi-engined, commercial
aircraft and flight instrument ratings.
Qualified Flight Captain: Any pilot with at least two thousand five
hundred (2,500) total flight hours (including a minimum
of one thousand [1,000] flight hours on turboprop or
turbojet aircraft) who possesses multi-engined,
commercial aircraft, flight instrument and ATP ratings.
Qualified Rotable Spares: Any new and unused item of special tooling
uniquely required to maintain the Aircraft or any new
and unused serial numbered rotable spare part or
component for the Aircraft (excluding engines and
engine related parts) with an individual current list
price at time of delivery of Two Thousand U.S. Dollars
(U.S. $2,000) or more; excluding however any consumable
item or items and any quick engine change kits.
Regulatory Change: Has the meaning assigned to it in Section 2.3.
Return Payment: Has the meaning assigned to it in Section 13.4.
Scheduled Delivery Date: With respect to each Aircraft, that date specified in
the notice provided pursuant to Section 7.1.2 of this
Agreement.
Sublease Agreement Means a sublease agreement between Buyer, or its
Affiliated Company, and Jet Acceptance Corporation
("JACO"), or its Affiliated Company in respect of a
Jetstream 32 aircraft.
SECTION 2 - THE AIRCRAFT
2.1 Each Aircraft shall be manufactured and offered for delivery to Buyer in
a manner conforming to the Customer Specification.
2.2 Each Aircraft shall be offered for delivery to Buyer with a CAA
Certificate of Airworthiness for Export which shall qualify for the
issuance of a United States FAA Certificate of Airworthiness.
2.3 Buyer acknowledges and agrees that in the event any requirement,
regulation or mandate of the CAA or of the FAA or any law or any
interpretation thereof becomes effective between the date of this
Agreement and the Delivery Date of an Aircraft which has the effect of
requiring any changes or modifications to the Customer Specification or
to any work carried out or to be carried out in the manufacture of such
Aircraft or to the testing with respect thereto ("Regulatory Change"),
* Seller shall, without any obligation or requirement to secure the
permission or consent of Buyer, provided, however, that Seller shall
consult with Buyer on the proposed change or modification, make such
changes or modifications to the Customer Specification, or to the
Aircraft or carry out such testing, or if such modifications or changes
shall be embodied following the Delivery Date of an Aircraft, Seller
shall consult and agree with Buyer on a schedule for such Regulatory
Change to be embodied.
2.3.1 Seller shall undertake all modifications, changes and testing
required by such Regulatory Change at Seller's expense if such
Regulatory Change is exclusively required for the Aircraft *
and not generally applicable to turboprop passenger transport
aircraft certificated under the category applicable to the
Aircraft.
2.3.2 In the case of a Regulatory Change applicable to the Aircraft
* plus any other turboprop passenger transport aircraft
certified under the category applicable to the Aircraft, the Base
Purchase Price for the Aircraft may be increased to reflect the
cost of all changes, modifications and testing required by such
Regulatory Change, provided, however, that (i) * (ii) the
cost shall not exceed the cost charged for the same changes on
aircraft of other best customer operators of Jetstream 41 aircraft
or (ii) in order to standardize with other aircraft already in
Buyer's fleet, Buyer may elect to embody the Regulatory Change on
the Aircraft at its own cost by providing sufficient notice to
Seller.
2.3.3 Seller shall provide Buyer with written notice of each such
Regulatory Change and shall issue to Buyer a Change Order executed
by Seller stating the change or modifications to the Aircraft or
the testing required and the adjustment to the Base Purchase Price,
to the extent permitted by this Agreement, necessitated by such
change, modification or testing, which Change Order automatically
shall be binding on both parties hereto notwithstanding the absence
of Buyer's signature thereon.
2.3.4 Prior to the delivery of each Aircraft, Seller shall be entitled to
fly each Aircraft and to use any part thereof for such period or
periods as shall be necessary in connection with CAA or FAA
requirements related to the Aircraft and Seller shall be under no
liability to Buyer in respect of any reasonable use or depreciation
of the Aircraft occasioned thereby. Seller shall minimize its use
of any Aircraft or part or parts thereof as provided for in this
Section 2..3.4.
SECTION 3 - PURCHASE PRICE AND PAYMENT TERMS
3.1 The Base Purchase Price for each Aircraft is * .
3.2 The Base Purchase Price shall be adjusted to determine the "Adjusted
Base Purchase Price", as follows:
3.2.1 To include the cost of changes to the Customer Specification
required by Buyer after the date hereof.
3.2.2 To include the cost of Regulatory Changes pursuant to the terms
of Clause 2.3.2, except those paid directly by Buyer.
3.3 *
3.4 Buyer shall pay to Seller the Purchase Price for each Aircraft upon
execution by Buyer of the Certificate of Acceptance for such Aircraft,
provided, however, that with respect to any Aircraft delivered under a
Lease Agreement, Buyer shall pay all amounts specified in the Lease
Agreement due upon delivery of such Aircraft.
3.4.1 Subject to the conditions specified herein, the first Aircraft
delivered under this Agreement shall be delivered to Buyer under a
Lease Agreement. Buyer's obligation to pay the lease rentals due
under such Lease Agreement shall be waived until the later of (i)
March 1, 1997 or (ii) the date of completion of the J41
modification program currently being performed by Seller on
Buyer's existing fleet of Jetstream 41 aircraft (the "Modification
Program"), subject to the provisions of Section 3.4.2.
3.4.2 In the event the date of completion of the Modification Program is
delayed due to reasons resulting from the acts or omissions of
Buyer, the obligation to pay the lease rentals for such Aircraft
shall occur on the date the Modification Program would have been
completed if such acts or omissions of Buyer had not occurred.
3.5 *
3.6 All amounts payable by one party to the other pursuant to this Agreement
shall be payable in U.S. Dollars in immediately available funds, by
Federal Funds transfer or same day book entry transfer to the accounts
specified in Exhibit E attached hereto.
SECTION 4 - BUYER FINANCING
*
[THREE PAGES OF CONFIDENTIAL MATERIALS HAVE BEEN OMITTED].
SECTION 5 - RESERVED
This Section intentionally left blank.
SECTION 6 - RESIDUAL VALUE GUARANTEE
6.1 The Seller shall cause the Manufacturer to issue to Buyer or its
designated assignee (subject to the limitations on assignment by Buyer
provided in the residual value guarantee) for each Aircraft on the
Delivery Date, (or such subsequent date within one (1) year of the
Delivery Date) as requested by Buyer, for such Aircraft a residual value
guarantee (guaranteed by British Aerospace plc, if requested) which
shall be substantially in the form and substance of either (i) the
Residual Value Agreement attached hereto as Exhibit F-1 or the Put
Agreement attached hereto as Exhibit F-2, as Buyer may elect with
respect to each Aircraft. The value shall be based upon the term of the
residual value guarantee and the amounts as provided in Exhibit F-3
attached hereto.
6.2 Seller agrees to enter into discussions in good faith as reasonably
requested by Buyer with parties designated by Buyer on the forms in
Exhibit F-1 and F-2.
SECTION 7 - DELIVERY AND ACCEPTANCE
7.1 Each Aircraft shall be offered to Buyer for acceptance and delivery in
accordance with the Customer Specification at the Manufacturer's
Facility.
7.1.1 The Aircraft shall be delivered to Buyer in accordance with the
schedule contained in Exhibit A attached hereto and incorporated
herein and each delivery is subject to satisfaction of the
Conditions Precedent specified in Section 17 of this Agreement.
7.1.2 Seller shall provide Buyer initial notice of the Scheduled Delivery
Date for each Aircraft not less than forty five (45) days prior
thereto and final notice not less than ten (10) days prior thereto
which such notice shall, in addition to the general requirement for
notice herein, be sent via facsimile message to Buyer's Senior Vice
President of Operations which notice shall specify it is being
provided in accordance with this Section 7.1.2, provided, however,
that notice for the first two (2) Aircraft shall be provided within
five (5) Business Days of the date hereof, and provided further
that such Scheduled Delivery Date shall be during the month
specified in Exhibit A attached hereto.
7.1.3 Buyer acknowledges and agrees that the delivery schedule for the
Aircraft as set forth in Exhibit A attached hereto is subject to
modification on account of any change by Buyer to the Customer
Specification subsequent to the date of this Agreement or as a
result of a Regulatory Change.
7.2 Buyer shall have the right during the five (5) days following the
Scheduled Delivery Date of each Aircraft to perform a ground inspection
and a flight inspection of each Aircraft to enable Buyer to ascertain
that such Aircraft is in compliance with the terms of this Agreement.
7.2.1 Buyer may, as part of such inspection, request Seller to operate
each Aircraft for a period not to exceed three (3) hours (each an
"Acceptance Flight Test") to demonstrate in ambient conditions at
such location as specified in Section 7.1 that the Aircraft
complies with the requirements of this Agreement in respect of
those requirements which can only be demonstrated in flight.
7.2.1.1 Buyer may designate not more than three (3)
representatives to participate at Buyer's expense and risk in
the Acceptance Flight Tests and Seller hereby indemnifies and
holds Buyer (together with its respective directors, officers
and employees) harmless against any and all liability arising
therefrom, except in cases of gross negligence or willful
misconduct by Buyer or its representatives.
7.2.1.2 The Aircraft shall be operated only by Seller's
nominees during the Acceptance Flight Tests, although
Seller's nominees shall follow the reasonable instructions of
Buyer during the Acceptance Flight Tests.
7.2.2 In the event following such ground and flight inspection, Buyer
ascertains that any Aircraft is not in compliance with the
requirements of this Agreement, Buyer shall immediately notify
Seller in writing of each such noncompliance whereupon Seller shall
investigate the noncompliance and shall, at Buyer's option, either
rectify or have rectified the same within a reasonable period of
time or agree to rectify the noncompliance after delivery of the
Aircraft to Buyer. Upon Seller's rectification of the
noncompliance, Seller shall demonstrate to Buyer that the Aircraft
meets the contractual requirements of this Agreement, including
permitting Buyer to conduct additional ground or flight inspection,
or both, as necessary. Upon satisfactory demonstration by Seller
that the Aircraft complies with the requirements of this Agreement,
or upon Seller agreeing to rectify any noncompliance to the
satisfaction of Buyer after delivery of the Aircraft to Buyer,
Buyer shall accept the Aircraft and execute a Certificate of
Acceptance in respect to that Aircraft in accordance with Section
8.1 (noting any noncompliance to be rectified after delivery).
7.3 Buyer may refuse to accept any Aircraft by reason of Seller's failure to
meet the requirements of this Agreement unless such failure is minor and
does not materially affect the performance, economic operation,
appearance, or maintenance of the Aircraft; provided however, Seller
shall remedy such failure by a date to be agreed between the parties.
7.4 *
SECTION 8 - TRANSFER OF TITLE AND FERRY
8.1 Upon delivery of each Aircraft in compliance with this Agreement, Buyer
shall accept each Aircraft and shall execute a Certificate of Acceptance
with respect thereto.
8.2 With respect to each Aircraft purchased at delivery by Buyer, property
in, title to and risk of loss of or damage to each Aircraft shall pass
to Buyer upon acceptance by Buyer of the Aircraft and payment to the
Seller of the balance of the Purchase Price for each Aircraft in
accordance with the provisions of Section 3.4.
8.3 With respect to each Aircraft purchased at delivery by Buyer, each
Aircraft shall be delivered by Seller to Buyer with good, legal and
marketable title free and clear of all liens, encumbrances and rights of
others of any nature whatsoever and Seller will warrant and defend such
title forever against all claims and demands whatsoever. Seller shall
issue an executed confirmation of sale to Buyer in the form attached
hereto as Exhibit L.
8.4 *
8.5 If Buyer fails to make the necessary arrangements, or fails to comply
with its obligations under this Agreement to accept an Aircraft, *
except in cases due to reasons which are not within Buyer's reasonable
control, then without prejudice to any other remedies and rights of
Seller, Buyer shall, in respect of any subsequent period during which the
Aircraft remains at the Manufacturer's Facility, promptly reimburse
Seller for all reasonable costs and pay Seller's costs for storage,
maintenance, preservation and insurance accruing in consequence of
Buyer's failure to take delivery of such Aircraft.
8.6 Seller shall assist Buyer as reasonably requested to file any
applications and secure all necessary approvals for the purpose of
ferrying the Aircraft to a location in the Eastern United States as
designated by Buyer.
SECTION 9 - INSURANCE
9.1 At all times following delivery of an Aircraft * the Buyer shall
obtain and maintain at its own expense Third Party and Passenger Legal
Liability Insurance Policies as hereinafter provided in respect of the
Aircraft to be effective on transfer of title in accordance with Section
8.2. For each Aircraft delivered to Buyer under a Lease Agreement,
Buyer shall comply with all insurance requirements of the Lease
Agreement. Prior to the transfer of title, or the execution of the Lease
Agreement, all insurance in respect of the Aircraft shall be the
responsibility of the Seller.
9.2 Not less than ten (10) days before the Scheduled Delivery Date of each
Aircraft, or such shorter period as reasonably necessary to review such
insurance certificate, Buyer shall deliver or cause to be delivered to
the Seller a draft Certificate of Insurance and not less than two (2)
Business Days before the Delivery Date of each Aircraft the Buyer shall
deliver or cause to be delivered to the Seller a Certificate of
Insurance evidencing the insurance coverage required by this Section 9.
9.3 At all times following delivery of an Aircraft to Buyer, that Aircraft
shall in all respects remain at the Buyer's risk and the Buyer hereby:
9.3.1 indemnifies the Seller and the Manufacturer, except in case of
gross negligence or willful misconduct by Seller or Manufacturer,
against any claims, demands, or expenses whatsoever without any
limitation which may be made against the Seller, the Manufacturer,
or their servants or agents and which may arise either directly or
indirectly out of ferry flights made by the Aircraft using pilots
designated by Seller and accepted by Buyer and waives any claim of
its own against the Seller or Manufacturer arising out of such
flying unless such claim is made within the terms of Section 11,
and
9.3.2 undertakes to name the Seller and the Manufacturer in the Buyer's
Third Party and Passenger Legal Liability Insurance Policies (which
shall be taken out and maintained in a manner and with insurers
reasonably acceptable to Seller) for the period of such ferry
flights in such a manner that the Seller and Manufacturer are held
harmless under the Hull Policy and are indemnified as an additional
insured under the Third Party and Passenger Legal Liability
Insurance Policies. The said policies of insurance shall provide
the following minimum limits of cover:
Public Liability/Property Damage/Passenger Liability, any one
accident/occurrence/combined single limit: One Hundred Fifty
Million U.S. Dollars U.S. $150,000,000).
SECTION 10 - EXCUSABLE AND INEXCUSABLE DELAY
10.1 Seller shall not be liable to Buyer for any failure or delay in carrying
out its obligations to deliver an Aircraft under this Agreement,
including but not limited to, failure of Seller or Manufacturer to
deliver an Aircraft on the Scheduled Delivery Date due to causes not
within the Seller's or Manufacturer's reasonable control including, but
not limited to, acts of God or of the public enemy; war; warlike
operations, insurrections or riots; fires, floods or explosions;
epidemics or quarantine restrictions; any act of government or any
governmental priorities, allocations, regulation or orders affecting
materials seasonably ordered, facilities or Aircraft; failure of or
delays in transportation; strikes or other government recognized labor
troubles; inability after due and timely diligence to procure materials
or parts by Seller or Manufacturer; failure of the engine manufacturer to
furnish engines for the Aircraft provided such failure results from any
cause that is not within the reasonable control of such engine
manufacturer (excluding all labor troubles other than strikes); and
serious accidents (except accidents caused by the negligent acts or
omissions of Seller or the Manufacturer), or any other cause beyond
Seller's or Manufacturer's reasonable control or not occasioned by
Seller's or Manufacturer's fault or negligence and any such failure or
delay shall be considered an "Excusable Delay".
10.2 In the event of an Excusable Delay, Seller's obligations under this
Agreement shall be deferred only for such period or periods of time
during which the circumstances giving rise to the Excusable Delay are
present.
10.3 Seller shall notify Buyer of any Excusable Delay within a reasonable
period following receipt of actual knowledge of such delay and,
thereafter, Seller shall provide Buyer with reasonable updates of
Seller's performance, if any, under the Agreement with respect to such
delays.
10.4 Buyer acknowledges and agrees that, in the event Seller fails to deliver
any Aircraft on the Scheduled Delivery Date as provided for in Section
7.1.2 herein for any reason other than Excusable Delay (as defined in
Section 10.1 of this Agreement) and other than reasons specified in
Section 4 or 10.6, (hereinafter referred to as "Inexcusable Delay") and
such failure to deliver continues for more than * days after the
Scheduled Delivery Date, such failure will result in delay damages to
Buyer, the sum of which Buyer and Seller acknowledge and agree would be
impractical or difficult to ascertain.
10.4.1 As a reasonable estimate of the amount of damages Buyer shall
suffer in the event of an Inexcusable Delay, Seller shall pay to
Buyer as liquidated damages an amount equal to * per day for
the first * days and * per day thereafter. Such
damages shall become payable by Seller commencing upon the *
day after the Scheduled Delivery Date (which, for the purposes of
this Section 10.4, if the Seller does not notify Buyer pursuant to
Section 7.1.2 of a Scheduled Delivery Date, the last day of the
month shall be automatically deemed to be the Scheduled Delivery
Date) and continuing for each additional day thereafter through the
earliest of (i) the actual Delivery Date with respect to such
Aircraft, (ii) the date on which Buyer improperly refuses or delays
acceptance of the Aircraft, or (iii) the date on which Buyer
obtains the right to terminate this Agreement with respect to such
Aircraft in accordance with Section 10.4.2 hereof.
10.4.2 In the event the delivery of an Aircraft is delayed more than
* days beyond the Scheduled Delivery Date as provided for in
Section 7.1.2 herein, and such delay is due to Excusable Delay or
an Inexcusable Delay, Buyer shall have the right to terminate this
Agreement with respect to such Aircraft. Any termination in
accordance with this Section 10.4.2 shall be by Buyer providing
Seller with written notice of intent to so terminate within *
days after the expiration of such * day period. In the event
of the termination of this Agreement with respect to any Aircraft,
Seller shall return to Buyer all deposits and progress payments
theretofore made by Buyer with respect to such Aircraft.
10.4.3 Buyer acknowledges and agrees that the remedies as provided in this
Section 10.4 are its sole and exclusive remedies with respect to
Seller's failure to deliver any Aircraft as scheduled due to an
Inexcusable Delay and that any payments made pursuant to this
Section are in full and final settlement of all claims, liabilities
and damages for late delivery of any Aircraft or failure to deliver
any Aircraft and that in no event shall Seller be liable to Buyer
for damages in respect of delay in delivery or nondelivery with
respect to any individual Aircraft in excess of * , except in
cases of gross negligence or willful misconduct.
10.5 *
10.6 Buyer shall not be liable to Seller for any necessary delay in carrying
out its obligations to accept delivery of an Aircraft under this
Agreement on the Scheduled Delivery Date due to causes not within Buyer's
reasonable control, provided that such causes significantly impair
Buyer's ability to accept delivery of an Aircraft, including, but not
limited to, acts of God or of the public enemy; war; warlike operations,
insurrections or riots; fires, floods or explosions; epidemics or
quarantine restrictions; strikes or other government recognized labor
troubles; or any other similar impairments beyond Buyer's reasonable
control. Any delay in delivery of an Aircraft due to causes specified in
this Section 10.6 shall be excluded from Excusable Delay or Inexcusable
Delay.
SECTION 11 - AIRCRAFT WARRANTY & GUARANTEES
11.1 Seller shall provide Buyer with (i) a warranty for the Aircraft delivered
under this Agreement in accordance with Exhibit B attached hereto, (ii)
the Maintenance Cost Guarantee as set forth in Exhibit D attached to the
Agreement to Lease dated December 30, 1994, as modified in accordance
with Exhibit G attached hereto and the Operational Performance and
Operational Availability Guaranties in accordance with the Agreement to
Lease and the Product Support Agreement dated December 23, 1992, as
modified in accordance with Exhibit G attached hereto.
11.2 Seller undertakes to obtain vendors' warranties with respect to those
parts of the Aircraft excluded from the warranty provided in Exhibit B
hereto and, to the extent assignable, Seller shall assign to Buyer all
such vendor warranties with respect to the Aircraft.
11.3 Seller and Buyer hereby agree to certain warranty administration
procedures as provided in Exhibit B-1 and certain dispute resolution
measures as provided in Exhibit M attached hereto.
11.4 *
11.5 *
SECTION 12 - TRAINING AND TECHNICAL REPRESENTATIVE
12.1 Seller shall cause AIRAMS to provide Buyer ground instruction and flight
conversion training for Buyer's Qualified Flight Crews with respect to
the Aircraft as follows:
12.1.1 Seller shall provide * ground training course per Aircraft
delivered to Buyer, up to a maximum total of * ground
training courses, for the purpose of familiarizing with the
Aircraft up to * Qualified Flight Captains or *
Qualified First Officers, or any combination thereof, per Aircraft
delivered to Buyer, up to a combined maximum of * Qualified
Flight Captains or First Officers.
12.1.2 Seller shall provide flight conversion training not to exceed
* hours per pilot plus * hours per pilot for check
rides for those pilots who have completed the training specified in
Section 12.1.1. The flight conversion training shall be conducted
on the FAA approved Jetstream 41 flight simulator at the Reflectone
Training Center.
12.1.3 The training specified in Sections 12.1.1 and 12.1.2 shall be
carried out at such times as may be mutually agreed between the
parties but timed so as to facilitate the delivery schedule of the
Aircraft and the entry into commercial service of the Aircraft.
12.1.4 All ground instruction courses shall be provided at Reflectone's
training facility located at Sterling, Virginia near Dulles
International Airport.
12.1.5 The training specified above, including the cost of any course
materials, shall be free-of-charge to Buyer; provided however, all
cost of travel, subsistence, lodging and other expenses associated
with attendance of Buyer's personnel at such training courses and
the expenses of operating any Aircraft for training, including the
cost of fuel, fluids, repairs, maintenance and parts, shall be for
Buyer's account. Such training is for Buyer's personnel and does
not include any training for pilots which pay for their own
training and are hired subsequent to completing the training.
12.1.6 Seller shall provide Buyer with aircraft specific manuals for each
Aircraft upon delivery of such Aircraft to Buyer. Seller shall
also provide to Buyer at no additional charge revision service for
(i) a mutually agreed list of Buyer's Jetstream 41 manuals and a
mutually agreed list of Buyer's Jetstream 32 manuals, both through
the period ending * years from the date of delivery of the
first Aircraft hereunder.
12.2 Seller shall cause AIRAMS to make available to Buyer the services of a
technical representative, based at AIRAMS' facility in Herndon, Virginia
for a period of one (1) year from the delivery of the first Aircraft
delivered under this Agreement, provided, however, that such
representative may also be available to assist any other J41 operator in
the Eastern United States.
SECTION 13
[RESERVED]
SECTION 14 - QUALIFIED ROTABLE SPARES FINANCING
14.1 Seller shall provide or arrange lease or debt financing on behalf of
Buyer for initial provisioning Qualified Rotable Spares purchased by
Buyer from Seller for the Aircraft. The maximum aggregate amount of
financing available shall be in the amount of * with the actual
amount of financing, subject to the maximum amount, to be based upon the
value of initial provisioning, Qualified Rotable Spares purchased by
Buyer.
14.2 The terms and conditions of the Qualified Rotable Spares financing shall
be generally consistent with the Lease Agreement Covering Aircraft Spare
Parts for Tranche six (6) to be entered into between Seller's Affiliated
Company and Buyer. The rate of interest applicable to the financing
provided hereunder shall be based upon the U.S. Prime Rate published in
the Wall Street Journal as of the date of delivery of the spare parts,
plus a spread of * %, provided, however, that if the prime rate on
such date is equal to or greater than * %, the spread added to the
Prime Rate shall be reduced to * %.
14.3 Funding of the Qualified Rotable Spares shall take place in no more than
three (3) tranches, with the first financing tranche being available to
Buyer no earlier than the Delivery Date of the first Aircraft and the
final financing tranche occurring no later than the Delivery Date of the
last Aircraft and the second financing tranche to be available on a date
to be mutually agreed.
14.4 Any obligation of Seller to provide Buyer with financing for Qualified
Rotable Spares is conditional upon and subject to satisfaction of all of
the conditions precedent specified in Section 17 of this Agreement.
SECTION 15 - TAXES AND LICENSES
15.1 The Seller shall pay all taxes, duties, imposts, or similar charges
imposed on the Seller, Manufacturer, Buyer, or any of their respective
Affiliated Companies which may be levied by the Government of the United
Kingdom or any political subdivision thereof in connection with the
manufacture, sale, export, delivery, assembly, purchase, and storage of
the Aircraft or of any component or part, or services furnished
exclusively under this Agreement which accrue prior to or on the passing
of title of or execution of a Lease Agreement on the Delivery Date for
each Aircraft (as the case may be) or of the delivery date of such
service, component or part, provided, however, that the parties hereby
agree that, as between the parties, nothing in this Agreement, or in any
other agreement between the parties, shall be taken to impose any duty,
liability or obligation on the Seller or Buyer to pay any documentary or
stamp duty or tax assessed, payable or levied by the Government of the
United Kingdom on or in connection with any transfer document, including
a bill of sale for any Aircraft.
15.2 Subject to Clause15.4 hereof, all taxes, duties, imposts, or similar
charges imposed by the U.S. or any political subdivision thereof, (other
than the amount of those taxes, duties, imposts, or similar charges
based on or measured by the Seller's, Manufacturer's, or any of their
Affiliated Companies' gross or net income, except taxes in the nature of
sales, use or transfer taxes) which are imposed on the Seller,
Manufacturer, Buyer or any of their respective Affiliated Companies in
connection with this Contract shall be the responsibility of the Buyer.
Seller agrees to use commercially reasonable best efforts to take such
actions as Buyer may reasonably request to minimize any such taxes,
duties, imposts, or similar charges.
15.3 All other taxes, duties, imposts, or similar charges which are levied in
connection with this Agreement shall be the responsibility of the person
upon whom the tax is imposed.
15.4 Nothing contained herein shall be construed to override or supersede any
specific provision providing for indemnification or payment of taxes
contained in any other document entered into in connection with this
Agreement.
15.5 If a claim is made against either party to the Agreement for any taxes,
duties, imposts or similar charges, which is to be borne by the other
party to this Agreement, the first party shall promptly notify the
second party. If reasonably requested by the second party, the first
party shall, at the second party's expense, take such action as the
second party may reasonably direct to contest such claim, including
payment under protest, if such is necessary or appropriate. If payment
is made, the first party shall, at the second party's expense, seek to
recover such payment and if permitted by law, permit the second party in
the first party's name to file a claim, or prosecute an action to
recover such payment.
15.6 The obtaining of any import licenses or authorizations required to
import the Aircraft into the United States, and any associated costs,
shall be the responsibility of Buyer. Seller shall assist Buyer to
obtain necessary import licenses and authorizations to import the
Aircraft into the United States. The Buyer shall not be responsible for
any costs associated with obtaining the CAA C of A.
15.7 The Seller shall, at its sole cost and expense, apply in the name of the
Seller or Buyer as Consignor, whichever is appropriate, for a United
Kingdom export license where such an export license is required by the
United Kingdom Customs Authorities and be responsible for the customs
documentation and clearance of the Aircraft on departure from the United
Kingdom. Buyer shall cooperate as reasonably requested by Seller to
provide any assistance required to permit Seller to comply with this
Section.
SECTION 16 - REPRESENTATIONS AND WARRANTIES
16.1 Buyer represents and warrants to Seller that as of the date of this
Agreement and as of the Delivery Date of each Aircraft:
16.1.1 Buyer is a corporation organized and existing in good standing
under the laws of California and has the corporate power to own its
property and to carry on its business as now being conducted and is
duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned by it
therein or in which the transaction of its business makes such
qualification necessary except to the extent that the failure to be
so qualified would not have a material adverse effect on Buyer's
abilities to comply with its obligations under this Agreement,
taken as a whole.
16.1.2 Buyer has full power and authority to enter into this Agreement and
to incur the obligations provided for herein which have been duly
authorized by all proper and necessary corporate action and no
consent or approval of stockholders, lenders or any other person
or consent or approval of, notice to or filing with, any public
authorities is required as a condition to the execution, delivery
or validity of this Agreement.
16.1.3 Each person executing this Agreement or any document delivered in
connection with this Agreement is authorized to do so.
16.1.4 This Agreement constitutes a valid and legally binding obligation
of Buyer enforceable in accordance with its terms.
16.1.5 There are no proceedings pending or threatened against Buyer or any
affiliate of Buyer before any court or administrative agency that,
in the opinion of the executive officers of Buyer, will materially
adversely affect the financial condition or operations of Buyer.
16.1.6 There is no charter, bylaw or preference stock provision of Buyer
and no provision of any existing mortgage debenture, contract or
agreement binding on Buyer or effecting its properties that would
conflict with or in any way prevent the execution, delivery or
carrying out the terms of this Agreement by Buyer.
16.1.7 There is no material adverse change from the date hereof or as
otherwise represented to Seller by Buyer or on behalf of Buyer in
the financial condition of Buyer as evidenced in Buyer's financial
statements which would prevent Buyer from performing its duties and
obligations under this Agreement or under a Lease Agreement.
16.1.8 Buyer is in compliance with all the terms and conditions of this
Agreement and there exists no material, continuing default or Event
of Termination under this Agreement and no default under any other
agreement between Seller or its Affiliated Companies, or a Trident
company, and Buyer or its Affiliated Companies, notice of which has
been provided to Buyer.
16.1.9 There is no law or governmental regulation or order that would be
contravened by the execution, delivery and performance of this
Agreement by Buyer.
16.2 Seller represents and warrants to Buyer that as of the date of this
Agreement and as of the Delivery Date of each Aircraft:
16.2.1 Seller is a Societe par Actions Simplifiee duly organized and
validly existing pursuant to the laws of France, has the corporate
power and authority to carry on its business as now conducted and
to enter into and perform its obligations under the Agreement and
is duly qualified to transact business in each jurisdiction in
which the conduct of its business requires such qualification,
except to the extent that the failure to be so qualified would not
have a material adverse effect on Seller's and its Affiliated
Companies' abilities to comply with their obligations under this
Agreement, taken as a whole.
16.2.2 Seller has full power and authority to enter into this Agreement
and the authority to bind the Manufacturer, and with respect to
each, to incur the obligations provided for herein which have been
duly authorized by all proper and necessary corporate action and no
consent or approval of stockholders, lenders or any other person or
consent or approval of, notice to or filing with, any public
authorities is required as a condition to the execution, delivery
or validity of this Agreement.
16.2.3 Each person executing this Agreement or any document delivered in
connection with this Agreement is authorized to do so.
16.2.4 This Agreement constitutes a valid and legally binding obligation
of Seller enforceable in accordance with its terms.
16.2.5 There are no proceedings pending or threatened against Seller, or
any Affiliated Company, before any court or administrative agency
that, in the opinion of the executive officers of Seller, will
materially adversely affect the power or ability of Seller, or such
Affiliated Company, to perform its obligations under this
Agreement.
16.2.6 There is no charter, bylaw or preference stock provision of Seller
and no provision of any existing mortgage debenture, contract or
agreement binding on Seller or effecting its properties that would
conflict with or in any way prevent the execution, delivery or
carrying out the terms of this Agreement by Seller.
16.2.7 There is no law or governmental regulation or order that would be
contravened by the execution, delivery and performance of this
Agreement by Seller.
SECTION 17 - CONDITIONS PRECEDENT
17.1 As conditions precedent to Seller's obligations under this Agreement and
to the delivery of each Aircraft:
17.1.1 All representations and warranties of Buyer contained in this
Agreement shall be true and correct.
17.1.2 All legal matters and documents incident to this Agreement and to
the transactions contemplated hereby shall be completed and in form
and substance reasonably satisfactory to Seller.
17.2 As conditions precedent to Buyer's obligations under this Agreement to
accept delivery of each Aircraft and pay the Purchase Price for each
such Aircraft:
17.2.1 All representations and warranties of Seller contained in this
Agreement shall be true and correct.
17.2.2 With respect to the Backstop Financing, Seller has, or has caused
its designee, to provide the financing and enter into the related
agreements as provided for and subject to the limitations in this
Agreement.
17.2.3 *
SECTION 18 - FURTHER ASSURANCES
18.1 Each party shall execute and deliver to the other party promptly such
other documents and assurances and take such further action as either
party may reasonably request from time to time in order to effectively
carry out the intent and purposes of this Agreement, including, but not
limited to, (i) Seller's cooperation with Buyer and Buyer's financial
advisor to assist in the arrangement of Buyer's financing for the
Aircraft and (ii) Buyer providing Seller copies of such financial
information representing the financial condition and operations of Buyer
as requested by Seller including, but not limited to, all quarterly
financial statements and audited annual financial statements, and
permitting Seller access to Buyer's principal financial officers to
discuss the affairs, finances and accounts of Buyer.
18.2 Buyer shall furnish Seller information concerning the use, operation and
maintenance of the Aircraft as Seller may from time to time reasonably
request, and Buyer shall permit Seller to inspect the records maintained
for the Aircraft, provided such visits do not interfere unreasonably
with the operations of Buyer.
18.3 Seller agrees to hold in confidence any information obtained pursuant to
this provision unless such information has been otherwise disseminated to
the public or in the event Seller is required or compelled by law or by
regulatory authorities to disclose the same.
SECTION 19 - EVENT OF TERMINATION
19.1 Each of the following shall constitute an Event of Termination and upon
the occurrence thereof Seller may at its option terminate this Agreement:
19.1.1 If Buyer is in default with respect to any of its obligations under
this Agreement, provided that Seller shall have provided Buyer with
written notice of such default and provided an opportunity to cure
such default (within five (5) days of receipt of notice for payment
default and within thirty (30) days of such notice for all other
defaults), or if Buyer is in default under any other agreements
contemplated under this Agreement, or if Buyer or its Affiliated
Companies is in default under any other lease or sublease agreement
or any other agreement between Seller, Manufacturer, or their
Affiliated Companies or any Trident company and Buyer or its
Affiliated Companies, provided that Buyer shall have been notified
of such default and given time to cure such default in accordance
with the relevant provisions of the applicable agreement.
19.1.2 If Buyer admits in writing its inability to pay its debts as they
become due or makes a general assignment for the benefit of
creditors;
19.1.3 If Buyer files a voluntary petition under any state or federal
court in bankruptcy or insolvency laws or if such a petition is
filed against Buyer and such petition is not dismissed within sixty
(60) days;
19.1.4 If Buyer petitions for, or acquiesces in, the appointment of any
receiver, trustee or similar officer to liquidate or conserve its
business or any substantial part of its assets;
19.1.5 If Buyer ceases doing business as a going concern;
19.1.6 If Buyer commences under the laws of any competent jurisdiction any
proceeding involving its insolvency, readjustment of debt,
dissolution, liquidation or any other similar proceeding for the
relief of financially distressed debtors;
19.1.7 If Buyer becomes the object of any proceeding or action of the type
described in Subsections 19.1.3, 19.1.4 or 19.1.6 above relating to
a substantial part of its assets and such proceeding or action
remains undismissed or unstayed for a period of at least sixty (60)
days; or
19.1.8 If Buyer sells all or a substantial part of its assets; or
19.1.9 If any material warranty or representation made or furnished to
Seller by or on behalf of Buyer is false when made or furnished.
19.2 In addition to the foregoing rights of termination, Seller reserves the
right, at its sole option, to delay or cancel the delivery of any
Aircraft, or to terminate its obligation to provide Backstop Financing,
in the event of any material adverse change in the financial condition of
Buyer which in the reasonable opinion of Seller would materially prevent
Buyer from obtaining financing or from meeting its obligations under a
Lease Agreement with respect to any of the Aircraft in accordance with
the terms of this Agreement. Seller shall notify Buyer of its intention
to delay or cancel the delivery of any Aircraft pursuant to this Section
at least fifteen (15) days prior to such cancellation. In the event of a
cancellation of delivery of an Aircraft pursuant to this Section 19.2, no
party will have any liability or be subject to any additional penalty to
the other as a result of such cancellation.
19.3 If Seller shall terminate this Agreement following the occurrence of an
Event of Termination, Seller shall not be obligated to reimburse Buyer
for any deposit or other amounts paid with respect hereto or with respect
to any Aircraft.
19.4 If Buyer is in default under any other agreements between Seller,
Manufacturer, or any of their Affiliated Companies, and Buyer, which
default has been declared in writing by the party in interest and is
continuing, and which default shall permit the party in interest to
terminate said other agreement, it shall be deemed a default under any of
such agreements executed by the parties and shall be deemed a default
under this Agreement; in which event Buyer will be liable to Seller for
repayment of all damages incurred by Seller in respect of this Agreement
and Seller will have all rights permitted by law to recover from Buyer
such damages.
19.5 *
SECTION 20 - MISCELLANEOUS
20.1 EXCEPT AS PROVIDED FOR IN THIS AGREEMENT INCLUDING THE EXHIBITS HERETO,
SELLER AND MANUFACTURER MAKE NO WARRANTY OR REPRESENTATION OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, OR ANY PART THEREOF,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OF THE
AIRCRAFT OR THE FITNESS OF THE AIRCRAFT FOR ANY PARTICULAR PURPOSE AND
BUYER ACKNOWLEDGES AND AGREES THAT THE WARRANTY OBLIGATIONS AND
LIABILITIES OF SELLER AND MANUFACTURER HEREUNDER AND THE RIGHTS AND
REMEDIES OF BUYER HEREUNDER ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND
BUYER HEREBY WAIVES, ALL OTHER WARRANTIES, GUARANTEES, OBLIGATIONS RIGHTS
AND REMEDIES IN TORT, (EXCEPT WITH RESPECT TO SELLER'S OR MANUFACTURER'S
WILFUL MISCONDUCT OR GROSS NEGLIGENCE), CONTRACT OR OTHERWISE, EXPRESS OR
IMPLIED (EXCEPT AS OTHERWISE SPECIFICALLY STATED IN THIS AGREEMENT)
ARISING BY LAW OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, STRICT
LIABILITY IN TORT, NEGLIGENCE, ANY IMPLIED WARRANTY OF MERCHANTABILITY,
ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, DEALING, OR
USAGE OF TRADE, AND ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE. BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS PROVIDED FOR
HEREIN, NEITHER SELLER, MANUFACTURER, THEIR PARENTS, NOR THEIR AFFILIATED
COMPANIES OR THEIR RESPECTIVE DIRECTORS, OFFICERS OR EMPLOYEES SHALL IN
ANY EVENT BE LIABLE PURSUANT TO THIS AGREEMENT WITH RESPECT TO THE
AIRCRAFT FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING,
WITHOUT LIMITATION, LOSS OF USE OF THE AIRCRAFT, LOSS OF REVENUES OR
PROFITS.
20.2 The acceptance of any payment by Seller after it is due shall not be
deemed to be a waiver of any breach by Buyer of its obligations under
this Agreement.
20.3 If either party fails to make payments when due, a service charge on such
overdue amount shall then begin to accrue and be due and payable by the
nonpaying party at a rate equal to the lesser of * per month or the
lawful maximum rate.
20.4 This Agreement may not be amended or modified except in writing signed by
the parties, except as otherwise provided by this Agreement.
20.5 This Agreement cannot be assigned, in whole or in part, by any party
without the prior written consent of the other parties, provided,
however, the Buyer (i) may assign the Aircraft warranty and related
product support services and guarantees without such consent in
connection with the financing of any Aircraft, and (ii) may assign its
rights to purchase any Aircraft to an entity or trustee on behalf of an
entity which is financing the acquisition of an Aircraft, provided that
Buyer's rights to Backstop Financing shall not be assignable and Seller
shall be under no greater obligations than those specified herein; and
provided further that Seller may assign this Agreement to Manufacturer,
or any of their respective Affiliated Companies. Notwithstanding any
assignment of this Agreement, the assigning party shall remain fully
liable to the other party to perform all the obligations and duties of
the assigning party hereunder and the exercise by any assignee of any of
the rights assigned shall not release the assigning party from any of
its duties or obligations to the other party under this Agreement, save
to the extent that such exercise by the assignee shall constitute
performance of such duties and obligations.
20.6 This Agreement will be governed by and construed in accordance with the
laws of the Commonwealth of Virginia of the United States of America.
20.7 Any judicial proceeding brought against the Buyer or Seller involving any
matter in any way arising out of, related to or connected with this
Agreement or the Aircraft may be brought in the U.S. District Court for
the Eastern District of the Commonwealth of Virginia or in a state court
in the Commonwealth of Virginia in the Eastern District and, by execution
and delivery of this Agreement, Buyer and Seller each (a) accept,
generally and unconditionally and irrevocably submit to the exclusive
jurisdiction of such courts and any related appellate court, and
irrevocably agree to be bound by any final, nonappealable judgment
rendered thereby in any action or proceeding in connection with this
Agreement and (b) irrevocably waive any objection it may now or hereafter
have as to the venue of any such suit, action or proceeding brought in
such a court or that such court is an inconvenient forum or that the
party is immune from suit.
20.8 Nothing in this Agreement:
20.8.1 Will convey to Buyer the right to, and Buyer will not, reproduce or
cause or assist in the reproduction of an aircraft, or material
part thereof, of design identical with or similar to that of the
Aircraft or parts thereof; or
20.8.2 Will give to Buyer a license under any patents or other rights
owned or controlled by the Manufacturer or Seller.
20.9 Section headings used herein are for convenience of reference only and
will not affect or limit the interpretation of this Agreement.
20.10 This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts all of which once
executed and delivered shall be deemed to be an original and all of which
taken together shall constitute one in the same document.
20.11 The Seller indemnifies and saves harmless the Buyer against any claims,
(excluding, however, any losses relating to loss of profits or loss of
use) resulting from infringement by the Aircraft of any United Kingdom or
United States patent provided:
20.11.1 either (a) from the date of design of the Aircraft, or its
relevant component or part, until the date that the infringement
claim is determined, the United States shall have been a party to
the Chicago Convention on International Civil Aviation of 7th
December 1944 and are fully entitled to the benefits of Article
27 thereof or, (b) from the date of design until the date such
infringement claim is determined the United States shall have
been a party to the International Convention for the protection
of Industrial Property 20th March 1883 (the Paris Convention); and
20.11.2 that all claims shall be forthwith reported in writing to the
Seller who shall have the absolute conduct and control at its
expense of all negotiations and proceedings in the name of the
Buyer; and
20.11.3 that the Buyer shall take all reasonable steps in cooperation
with the Seller to reduce any royalties, damages and costs
arising out of such claims and shall furnish to the Seller all
data, papers, records and other assistance within the Buyer's
knowledge, possession or power relevant to resisting such claims,
actions or proceedings; and
20.11.4 that no condition, warranty, or indemnity, either express or
implied, is given in respect of patents or registered designs
except as stated herein.
20.12 The patent indemnity provided in Section 20.12 shall not extend to parts
or spares not manufactured by the Manufacturer or pursuant to
Manufacturer's detailed design. The Seller shall, however, so far as
possible and necessary, use reasonable efforts to obtain, and to the
extent obtained, to assign to the Buyer any rights the Seller may have
against the manufacturers of such other parts or spares.
20.13 All indemnity obligations of Buyer and Seller under this Agreement
shall survive and continue in full force and effect notwithstanding
delivery of the Aircraft or expiration or termination of this Agreement.
20.14 If any provisions of this Agreement shall be held to be invalid or
unenforceable, the validity and enforceability and the remaining
provisions hereof shall not be affected or impaired in any way.
20.15 All notices and requests in connection with this Agreement will be given
in writing and may be given by registered letter, by express delivery or
facsimile, addressed as follows:
Buyer: Atlantic Coast Airlines
515A Shaw Road
Sterling, Virginia 20166
Attention: President
Fax Number: (703) 925-6294
Seller: Aero International (Regional)
1 Allee Pierre Nadot
31712 Blagnac Cedex
France
Attention: SVP Commercial
Fax Number: 33 562 21 6361
or to such other address as the party to receive the notice or request
will designate by notice to the other. Notices sent by registered letter
shall be deemed to have been received in the ordinary course of post;
notices sent by express delivery shall be deemed to have been received
on the second Business Day after it was dispatched; and notices sent by
facsimile shall be deemed to have been received (where receipt is
confirmed by any addressee by telephone) on the date of transmission.
20.16 This Agreement together with the exhibits, schedules and appendices
referenced herein (including all Exhibits listed in the Table of Contents
and hereby incorporated by such reference), constitute the entire
agreement of the parties and supersede all proposals, oral or written,
all prior negotiations and all other communications between Buyer and
Seller with respect to the subject matters contained herein.
20.17 Seller and Buyer each bear and shall be responsible for their own costs
and expenses associated with the negotiation, preparation and the
execution of this Agreement together with any other agreements or
documents relating to the subject matter of this Agreement.
20.18 BUYER HEREBY ACKNOWLEDGES AND AGREES THAT ALL INFORMATION REGARDING
JETSTREAM AIRCRAFT PRODUCTS, INCLUDING THE AIRCRAFT AND SPARES, PRICING,
GUARANTEES AND THE TERMS AND CONDITIONS CONTAINED IN THIS AGREEMENT ARE
FURNISHED BY SELLER TO BUYER AND IS BEING SUBMITTED TO BUYER UNDER AN
EXPRESS CLAIM OF CONFIDENTIALITY FOR THE SOLE AND ABSOLUTE PURPOSE OF
PROVIDING BUYER WITH JETSTREAM AIRCRAFT, THAT DISCLOSURE OF SUCH
INFORMATION WOULD LIKELY HAVE AN ADVERSE IMPACT ON THE COMPETITIVE
POSITION OF THE MANUFACTURER, SELLER, ITS PARENT OR ITS AFFILIATED
COMPANIES IN THE AIRCRAFT MANUFACTURING OR AIRLINE INDUSTRY AND THAT SUCH
INFORMATION SHALL BE HELD IN STRICT CONFIDENCE BY BUYER AND SHALL NOT BE
DISCLOSED BY BUYER OTHER THAN TO BUYER'S OFFICERS AND EMPLOYEES, BUYER'S
COUNSEL, FINANCIAL ADVISOR AND OTHER REPRESENTATIVES STRICTLY ON A
NEED-TO-KNOW BASIS OR AS OTHERWISE REQUIRED BY LAW OR REGULATION. IF
BUYER FILES THIS AGREEMENT WITH ANY GOVERNMENTAL AUTHORITY, BUYER AGREES
TO SEEK CONFIDENTIAL TREATMENT FOR SUCH PORTIONS OF THIS AGREEMENT AS
SELLER MAY REASONABLY REQUEST AND SHALL USE COMMERCIALLY REASONABLE
EFFORTS TO LIMIT DISCLOSURE HEREOF AND THE FILING OF THIS AGREEMENT TO
THE MAXIMUM EXTENT PERMITTED BY LAW OR REGULATION.
20.19 SELLER HEREBY ACKNOWLEDGES AND AGREES THAT ALL NONDISCLOSABLE INFORMATION
REGARDING BUYER'S BUSINESS, FINANCES AND OPERATIONS SUBMITTED TO SELLER
ARE FURNISHED TO SELLER UNDER AN EXPRESS CLAIM OF CONFIDENTIALITY, THAT
DISCLOSURE OF SUCH INFORMATION WOULD LIKELY HAVE AN ADVERSE IMPACT ON THE
COMPETITIVE POSITION OF BUYER AND THAT SUCH INFORMATION SHALL BE HELD IN
STRICT CONFIDENCE BY SELLER AND SHALL NOT BE DISCLOSED OTHER THAN TO
SELLER'S OFFICERS, EMPLOYEES AND AFFILIATED COMPANIES STRICTLY ON A
NEED-TO-KNOW BASIS OR AS OTHERWISE REQUIRED BY LAW OR REGULATION.
20.20 Neither of the parties may announce the signing of this Agreement without
the prior approval of the other and further provided that the content of
any notice has been agreed to in advance by the other party.
20.21 The effective date of this Agreement shall be that date first set forth
in the preamble.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers.
ATLANTIC COAST AIRLINES AERO INTERNATIONAL (REGIONAL) SAS
as agent for and on behalf of
British Aerospace (Operations), Limited
By: By:
Its: Its:
Date: Date:
EXHIBIT A
JETSTREAM 41 AIRCRAFT DELIVERY SCHEDULE
*
EXHIBIT B
PART A - AIRCRAFT WARRANTY
Section 1. The Seller warrants that subject to all the conditions of this
Warranty, the Aircraft, including, but not limited to parts,
components and assemblies thereof manufactured or assembled by the
Manufacturer, together with all applicable documentation and
Manuals therefor in hard copy or otherwise (below in this Warranty
collectively referred to as "Manuals"), shall on the Delivery Date
conform to the Customer Specification referred to in this Purchase
Agreement and shall be free from defect due to:
1.1 defective material or
1.2 defective workmanship including process of manufacture or
1.3 defective design on the part of Manufacturer including (i)
selection of materials and (ii) process of manufacture having
regard to the state of the art at the date of such design.
1.4 in the case of Manuals manifest error.
Section 2. The Buyer's remedy and The Seller's obligations under this Warranty
shall be limited to defects which:
2.1 occur and are discovered by the Buyer within thirty six (36)
months of the date of the Certificate of Acceptance of the
Aircraft in which the defect occurs, and
2.2 are notified by the Buyer to the Seller on a Warranty Report
Form within * days of each discovery.
Section 3. This Warranty shall not extend to:
3.1 normal wear and tear.
3.2 any parts not manufactured by the Manufacturer or to its
detailed design, but it shall extend to any workmanship on
the part of the Manufacturer or Seller in installing any such
part in the Aircraft.
3.3 a part regarded as defective for the sole reason only that
some modification, alteration or replacement thereof is
required by a change in regulation on the part of an
airworthiness authority after acceptance of the Aircraft.
3.4 any part of the Aircraft which after acceptance has been
altered otherwise than by the Seller or with the Seller's
written approval unless it is proved that such alteration has
not been a contributory cause of the fault.
3.5 any part of the Aircraft from which the Manufacturer's
identification mark, name or serial number has been removed,
unless Buyer can otherwise verify such removed information..
3.6 any part of the Aircraft if the Aircraft or any part thereof
has been subjected to any experimental operation by the Buyer
or any type of operation or use in contravention of the
airworthiness regulations or the Manufacturer's design or
operational limitations then in force applicable to the
Aircraft or outside the type of operation or use for which
the Aircraft or the part was intended, unless it is proved
that any such use was not a contributory cause of the fault.
3.7 any Manual or part thereof of which the Seller or
Manufacturer is not the author nor embodiments incorporated
in Manuals at the direction or request of the Buyer.
3.8 a Manual or part thereof regarded as faulty for the sole
reason only that the Buyer has not incorporated amendments
offered to it by the Seller or Manufacturer.
Section 4. If any part of an Aircraft or Manual is proved to be defective and
within the terms of this Warranty the Seller at its option shall:
4.1 repair the part or rectify without charge, or
4.2 replace such part with a similar part free from defect, and
any part so replaced shall become the property of the Seller,
or
4.3 reimburse the Buyer's costs in rectifying the defect in
accordance with paragraph 6 below, or
4.4 in respect of defects in design replace such part without
charge with a modified part or parts and, similarly, supply
such modified part or parts in respect of all the Aircraft
purchased by the Buyer which are within Warranty and subject
to the same fault.
Section 5. If any part of an Aircraft or Manual is proved to be defective and
within the terms of this Warranty the Seller shall bear all
reasonable costs of packing, insurance and transport which may be
incurred in sending the said part to the Seller or Manufacturer and
in returning the repaired or rectified, replacement or modified
part or parts to the Buyer, provided that the Buyer will make no
charge for such transport on its own services and the Buyer will
bear the labor cost of component removal and replacement.
Section 6. Subject to the Seller's agreement which shall not be unreasonably
witheld the Buyer may carry out rectification by repair of any
defect within the terms of this Warranty. In that event:
6.1 The Seller shall reimburse to the Buyer the costs of such
rectification which shall not exceed the product of the
Seller's normal direct manhours for such rectification and
the Seller's then current direct labor rate, and
6.2 Neither the Seller nor Manufacturer shall be under any
liability whatsoever in respect of workmanship or material in
such rectification.
Section 7. The Seller shall diligently remedy a defect within the terms of
this Warranty and the provisions of this Warranty shall apply to
any repair, rectification, replacement or modification pursuant to
Section 4, provided however that in their application to such
replacement, rectification or repair, references to the date of the
Certificate of Acceptance for an Aircraft shall be construed as
referring either to the date of the handing back of an Aircraft or
part to the Buyer with the replacement, rectification or repair
incorporated therein, or to the date of the Seller's election in
the case of local repair, or to the date of delivery of the
replacement to the Buyer, whichever shall be the earliest date (as
the case may require). Notwithstanding the foregoing provisions of
this Clause, Neither the Seller nor Manufacturer shall in any
circumstances be under any liability in respect of any such
replacement, rectification or repair, for defects not discovered
within forty-eight (48) months after the date of the Certificate of
Acceptance for the Aircraft.
PART B - SUPPLIER WARRANTIES
Section 1. The Seller shall require Vendors or Suppliers of equipment
installed in the Aircraft to offer Warranty protection in respect
of such equipment and the Seller undertakes to assign to the Buyer
the benefits of such Warranties and to furnish a Vendor Warranty
Manual incorporating all such Warranties. The Buyer's sole rights
and remedies in respect of the failure of any such equipment shall
be as stated in such Warranties, and any other warranties
conditions or representations rights or remedies expressed or
implied by stature or common law regarding such equipment are to
the extent permitted by applicable law hereby excluded. Unless
otherwise stated therein such warranties shall be governed and
constructed under the laws of England.
Section 2. Notwithstanding the provision of paragraph 1. above the Seller
undertakes to take prompt and diligent action to mediate between
the Buyer and the appropriate Supplier in the event that the Buyer
notifies the Seller that its claim under the terms of the said
Supplier's Warranty has been unfairly rejected by, or has received
an inadequate or dilatory response from, the said Supplier
.
Section 3. Notwithstanding the provision of paragraph 1. above, the Seller
undertakes to offer warranty protection in respect of Vendor or
Supplier equipment installed in the Aircraft in the event such
Vendor or Supplier ceases doing business as a going concern. Such
warranty protection shall be in accordance with the terms and
conditions of the applicable Vendor or Supplier warranty.
EXHIBIT B-1
Addendum to Exhibit B, Part A - Aircraft Warranty
In addition to the provisions of Part A - Aircraft Warranty, the following
claim and other procedures shall apply:
1. In the event Buyer believes any Part of an Aircraft is defective and
within the terms of this warranty, the Buyer shall return the Part to
Seller's designee AIRAMS for a warranty adjudication.
2. The AIRAMS adjudication shall state the reason for the adjudication and
shall include a copy of the repairer's investigation report (if
applicable).
3. All adjudications will be provided to Buyer in writing within sixty (60)
days from the date of receipt by AIRAMS of the Part (unless otherwise
required by AIRAMS) and Warranty Claim Form, which ever is later.
4. Failure to supply Buyer with a written adjudication as provided for and
within the time frame stated in Section 3 above shall result in the
claim being deemed automatically accepted by AIRAMS and the transaction
including, but not limited to the cost of repairs and freight charges,
as applicable, will be processed free of charge.
5. In the event Buyer requests a unit exchange transaction, such
transaction shall be processed in accordance with the terms detailed in
the then current AI(R) Spares Price Book. Buyer shall return the
unserviceable part within thirty (30) days from the date of Buyer's
receipt of an exchanged unit. In the event Buyer fails to return the
unserviceable part within thirty (30) days from the date of Buyer's
receipt of an exchange unit (unless prevented by Force Majeure at that
term is defined in the Jetstream 41 Free of Charge Exchange Program
Agreement between the parties dated February 23, 1997), AIRAMS will
invoice Buyer for the price of a new unit as listed in the then current
AI(R) Spares Price Book (less any discounts as applicable). In the event
Buyer believes it had previously returned the unserviceable part to
AIRAMS, provided Buyer notified AIRAMS within thirty (30) days of
Buyer's receipt of the corresponding exchanged unit that it had returned
the unserviceable part to AIRAMS or that the unserviceable part had been
separated from the aircraft during operations, AIRAMS will not invoice
Buyer for such corresponding exchanged unit.
Addendum to Exhibit B, Part B - Supplier Warranties
In addition to the provisions of Part B - Supplier Warranties, the following
claim and other procedures shall apply:
1. In the event Buyer believes any vendor or supplier part of an Aircraft
is defective and within the terms of the applicable vendor or supplier
warranty, the Buyer may return the Part to its designee AIRAMS pursuant
to the Customer Property Warranty Repair provisions of the then current
AI(R) Spares Price Book for process and adjudication.
2. The AIRAMS adjudication shall state the reason for the adjudication and
shall include a copy of the repairer's investigation report (if
applicable).
3. All adjudications will be provided to Buyer in writing within *
days from the date of receipt by AIRAMS of the part and Warranty Claim
Form, which ever is later.
4. Failure to supply Buyer with a written adjudication as provided for and
within the time frame stated in Section 3 above shall result in the
claim being deemed automatically accepted by AIRAMS and the transaction
including, but not limited to the cost of repairs and freight charges,
as applicable, will be processed free of charge.
5. In the event Buyer requests a unit exchange transaction, such
transaction shall be processed in accordance with the terms detailed in
the then current AI(R) Spares Price Book. Buyer shall return the
unserviceable part within thirty (30) days from the date of Buyer's
receipt of an exchanged unit. In the event Buyer fails to return the
unserviceable part within thirty (30) days from the date of Buyer's
receipt of an exchange unit(unless prevented by Force Majeure at that
term is defined in the Jetstream 41 Free of Charge Exchange Program
Agreement between the parties dated February 23, 1997), AIRAMS will
invoice Buyer for the price of a new unit as listed in the then current
AI(R) Spares Price Book. In the event Buyer believes it had previously
returned the unserviceable part to AIRAMS, provided Buyer notified
AIRAMS within thirty (30) days of Buyer's receipt of the corresponding
exchanged unit that it had returned the unserviceable part to AIRAMS or
that the unserviceable part had been separated from the aircraft during
operations, AIRAMS will not invoice Buyer for such corresponding
exchanged unit.
EXHIBIT C
CHANGE ORDERS
*
[29 PAGES OF CONFIDENTIAL MATERIALS OMITTED]
EXHIBIT D
FORM OF OPERATING LEASE AGREEMENT
LEASE AGREEMENT
dated as of , 199
between
FIRST SECURITY BANK ,
NATIONAL ASSOCIATION
Not in its individual capacity but
solely as owner trustee
Lessor,
and
ATLANTIC COAST AIRLINES
Lessee,
Covering One British Aerospace (Operations) Limited
Jetstream Series 4100 Model Turboprop Aircraft
Serial Number U.S. Registration Number
TABLE OF CONTENTS
Heading Page
SECTION 1. DEFINITIONS. 1
SECTION 2. ACCEPTANCE UNDER LEASE AND CONDITIONS PRECEDENT 7
SECTION 3. TERM AND RENT 9
SECTION 4. NET LEASE, ETC. 9
SECTION 5. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES AND QUIET
ENJOYMENT 10
SECTION 6. POSSESSION, OPERATION AND USE, MAINTENANCE, INSIGNIA
AND RESERVES 12
SECTION 7. CERTAIN NOTICES 17
SECTION 8. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS
AND ADDITIONS 17
SECTION 9. RISK, LOSS, DESTRUCTION OR REQUISITION 19
SECTION 10. INSURANCE. 22
SECTION 11. LIENS 25
SECTION 12. TITLE, RECORDATION, FURTHER ASSURANCE, AND COOPERATION WITH
FINANCIERS. 26
SECTION 13. RETURN OF AIRCRAFT AND RECORDS 29
SECTION 14. TAX INDEMNITY, GENERAL INDEMNITY. 34
SECTION 15. EVENTS OF DEFAULT. 40
SECTION 16. REMEDIES 42
SECTION 17. LESSOR'S RIGHT TO PERFORM FOR LESSEE. 43
SECTION 18. COUNTERPARTS 44
SECTION 19. ASSIGNMENT 44
SECTION 20. MISCELLANEOUS 44
SECTION 21. REPRESENTATIONS, WARRANTIES
AND ASSURANCES OF LESSEE 47
SECTION 22. GENERAL UNDERTAKINGS OF LESSEE 49
Exhibit A - Lease Acceptance Supplement
Schedule 1 to Exhibit A - Description of Aircraft
Schedule 2 to Exhibit A - Schedule of Rental Payments
Schedule 3 to Exhibit A - Schedule of Stipulated Loss Values
Exhibit B - Schedule of Life-Limited Components
Exhibit C - Schedule of Present Insured Parties
Exhibit D - *
Exhibit E - Side Letter Re: Termination / Event of Loss Payments
Lease Agreement, dated as of ______, 19__, between FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association, having its principal
place of business at 79 South Main Street, Salt Lake City, Utah, 84130, not in
its individual capacity but solely as Owner Trustee under the Trust Agreement
(as hereinafter defined) ("Lessor"), and ATLANTIC COAST AIRLINES, a California
corporation, having its principal place of business at 515A Shaw Road,
Sterling, Virginia, 20166 ("Lessee").
WHEREAS, the purpose of this Lease is to lease to Lessee one British
Aerospace (Operations) Limited Jetstream Series 4100 Model ____ aircraft.
WHEREAS, First Security Bank, National Association, is the Owner Trustee
under the Trust Agreement, dated as of ______, 19__, with Owner Participant
British Aerospace Asset Management, Inc. (the "Trust Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Lessor and Lessee agree as follows:
SECTION 1. DEFINITIONS.
The following terms shall have the following meanings for all purposes of
this Lease. Unless otherwise defined in this Lease: (i) references to
agreements shall be deemed to mean and include such agreements as the same may
be amended and supplemented from time to time, and (ii) references to parties
to agreements shall be deemed to include the successors and permitted assigns
of such parties.
"Agent" shall mean any Person party to a Financier Document designated as
Agent under such Financier Document;
"Aircraft" shall mean the Airframe leased and delivered under this Lease
and the Engines initially installed on such Airframe and the Propellers
initially installed on such Engines, or any engine or propeller substituted for
any of said Engines or Propellers under this Lease, as permitted by this Lease
whether or not any of said initial or substitute Engines or Propellers may from
time to time be installed on such Airframe.
"Airframe" shall mean and include: (i) the Aircraft (except Engines and
Propellers) leased by the Lessor to the Lessee, which Aircraft has the Federal
Aviation Administration Registration Number and manufacturer's serial number
specified in the Lease Acceptance Supplement executed and delivered on the
Delivery Date and (ii) any and all Parts so long as the same shall be
incorporated or installed in or attached to such Airframe, or, so long as the
same shall be leased hereunder, in accordance with the terms of Section 8 of
this Lease, after removal from such Airframe.
"Applicable Law" shall mean all applicable laws, treaties, judgments,
decrees, injunctions, writs and orders of any court, governmental agency or
authority and rules, regulations, orders, directives, licenses and permits of
any governmental body, instrumentality, agency or authority.
"Banks" shall mean the Persons party to any Financier Document and
notified to Lessee in writing as a Bank;
"Basic Rent" shall mean all rent payable pursuant to Section 3(b) for the
Term.
"Business Day" shall mean any day other than a Saturday, Sunday or a day
on which banks in the State of New York are authorized or permitted to be
closed.
"Certificated Air Carrier" shall mean any corporation (except the United
States Government) domiciled in the United States of America and holding a
certificate under 49 U.S.C. Section 41102 by the Department of Transportation
or any predecessor or successor agency thereof, or in the event such
certificates shall no longer be issued, any corporation (except the United
States Government) domiciled in the United States of America and legally
engaged in the business of transporting for hire passengers or cargo by air
predominantly to, from or between points within the United States of America,
and, in either event, operating commercial aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more of cargo.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Default" shall mean any event which constitutes an Event of Default
under this Lease, but for any requirement in connection therewith for the
giving of notice or the lapse of time, or the happening of any further
condition, event or act.
"Delivery Date" shall mean the date on which the Aircraft is delivered to
the Lessee under this Lease, which date shall be set forth in the Lease
Acceptance Supplement.
"Engine" shall mean and include: (i) each of the two Allied Signal
Propulsion model TPE-331-14 engines (except propellers) initially installed on
the Airframe and listed by manufacturer's model and serial number in the Lease
Acceptance Supplement, whether or not from time to time thereafter installed on
the Airframe (ii) any engine which may at any time be conveyed to the Lessor or
its nominee pursuant to Section 9(b) or 13(b); and (iii) any and all Parts, so
long as the same shall be incorporated or installed in or attached to any
Engine subject to this Lease, or, so long as the same shall be leased
hereunder, in accordance with the terms of Section 8 of this Lease, after
removal from such Engine.
"Event of Default" shall have the meaning assigned thereto in Section 15
hereof.
"Event of Loss" with respect to the Airframe or any Engine or Propeller
shall mean any of the following events: (i) the actual or constructive total
loss thereof; (ii) such Airframe, Engine or Propeller shall become lost or
stolen for a period greater than 45 days, destroyed, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever; (iii) the
condemnation, confiscation, requisition or taking of title thereof; or (iv) the
condemnation, confiscation, requisition or taking of use for a period in excess
of six consecutive months by any government or instrumentality or agency
thereof, or for a period that extends beyond the end of the Term; provided
however that if the definition of Event of Loss in the Loan Agreement (or any
alternative expression thereunder corresponding to the definition of Event of
Loss hereunder) differs from the foregoing definition, but does not differ to
the point that the definition varies from reasonable aircraft insurance
practices, the foregoing shall be deemed to be substituted by the terms of the
relevant definition in the Loan Agreement. An Event of Loss with respect to
the Airframe shall constitute an Event of Loss with respect to the Aircraft.
"Federal Aviation Administration" or "FAA" shall mean the Federal
Aviation Administration and any successor agency.
"Federal Aviation Act" shall mean 49 U.S.C., Subtitle VII - Aviation
Programs, as may be amended from time to time.
"Financier(s)" means each financial institution(s), including each Bank,
which from time to time provides financing in respect of all or part of the
Aircraft to Lessor or Owner Participant, together with any Agent, trustee
(including, without limitation, Security Trustee) or guarantor thereof, or any
other party having or which it is proposed shall have any interest in the
Aircraft, whether directly or indirectly, by way of ownership or security.
"Financier Document" shall mean the Mortgage, the Loan Agreement, any
Lessor Assignment of Insurances and any other document entered into in
connection with any financing referred to in section 12(f) and designated as a
Financier Document by notice from Lessor or Owner Participant to Lessee;
"Financier's Liens" shall mean the Mortgage, any other liens arising as a
result of (i) claims against or affecting any of Agent, Banks or Security
Trustee in each case not related to the transactions contemplated by the Lease
and the Financier Documents or (ii) acts or omissions of any of Agent, Banks or
Security Trustee relating to the Lease and the Financier Documents.
"Hourly Reserve Rate" means Garrett Engine Division of Allied Signal's
then-current recommended hourly set-aside rate for the cost of major and
intermediate periodic inspections on the engines model TPE-331-14GR/HR engine,
adjustable as set forth below. If no recommended set-aside is available,
Hourly Reserve Rate shall be calculated by the sum of the estimated costs for a
major and an intermediate periodic inspection divided by the then approved TBO.
In the event that the engine is operated on an approved "on condition"
program, the Hourly Reserve Rate shall be calculated by dividing the Lessee's
fleet average cost of each comparable type of shop visit over the previous
twelve months by the Lessee's fleet average time between the shop visits. If
no such history is available, the amount shall be based on a rate to be
mutually agreed between Lessee and Lessor.
"Indemnified Parties" shall mean Lessor (both in its individual capacity
and as Owner Trustee), Owner Participant, and each Financier and the Security
Trustee , (including, each previous Lessor (both in its individual capacity and
as Owner Trustee), Owner Participant (including, Financier and Security Trustee
which has transferred its relevant interest as permitted hereunder), and
affiliates, successors, assigns, agents, servants, officers and employees of
each of the foregoing.
"Insured Parties" shall mean Lessor (both in its individual capacity and
as Owner Trustee), Owner Participant, Banks, Agent, Security Trustee, each
Financier, the Security Trustee (including, each previous Lessor (both in its
individual capacity and as owner Trustee), Owner Participant, Financier and
Security Trustee which has transferred its relevant interest as permitted
hereunder for a period of two (2) years from the date of such transfer), and
any other Person who Lessor notifies Lessee in writing is to be an Insured
Party. The present Insured Parties are identified in Exhibit C hereto, which
Exhibit shall be deemed amended by any proper notice from any Insured Party.
"Lease" or "Lease Agreement" shall mean this Lease Agreement dated as of
the date first stated above, between the Lessor, as lessor, and the Lessee, as
lessee.
"Lease Acceptance Supplement" shall mean a Lease Acceptance Supplement,
substantially in the form of Exhibit A hereto, entered into on the Delivery
Date covering the Aircraft leased hereunder.
"Leased Aircraft" shall mean any British Aerospace (Operations) Limited
Jetstream Series 4100 Model 4101 Turboprop aircraft (other than the Aircraft)
leased or subleased, bailed or consigned to Lessee by Lessor, Owner
Participant, Seller, Manufacturer, Trident, any of their affiliates, or any
trustee acting on behalf of any of them.
"Lessee Assignment of Insurances" shall mean a security assignment by
Lessee in favor of Lessor of all its rights, title and interest to and in all
policies and contracts of insurance from time to time in existence in respect
of or relating to the Aircraft as required by this Lease Agreement (and other
than third party liability insurances, insurances or coverage not required by
this Lease Agreement, or other policies or contracts of insurance taken out in
accordance with Section 10(f)) and all the benefit of all such policies and
contracts of insurances in form and substance satisfactory to each Insured
Party.
"Lessor Assignment of Insurances" shall mean a security assignment by
Lessor in favor of any Financier of all its right, title and interest to and in
all policies and contracts of insurance from time to time in existence in
respect of or relating to the Aircraft as required by this Lease Agreement (and
other than third party liability insurances, insurances or coverage not
required by this Lease Agreement, or other policies or contracts of insurance
taken out in accordance with Section 10(f)) and all the benefit of all such
policies and contracts of insurances in form and substance satisfactory to any
such Financier.
"Lessor's Liens" means any Liens arising as a result of (i) claims
against or affecting either the Lessor or Owner Participant, in each case not
related to the transactions contemplated by the Operative Agreements, or (ii)
acts or omissions of either the Owner Participant or Lessor in each case not
related to or contemplated by the Operative Agreements.
"Lien" shall mean any mortgage, pledge, security interest, lien,
encumbrance, title retention arrangement or other charge of any kind on
property (real, personal or mixed, tangible or intangible).
"Loan Agreement" shall mean the loan agreement which may be entered into
in connection with any financing referred to in Section 12(f) and designated as
a "Loan Agreement" by notice from Lessor to Lessee.
"Manufacturer" shall mean British Aerospace (Operations) Limited, a
company organized under the laws of England and Wales, and any corporation
which succeeds thereto by merger or consolidation or which acquires all or
substantially all of the assets thereof.
"Mortgage" shall mean any aircraft mortgage which may be entered into in
connection with any financing referred to in Section 12(f) and designated as a
"Mortgage" by notice from Lessor or Owner Participant to Lessee.
"Operative Agreements" shall mean and include this Lease, each Financier
Document, the Trust Agreement, the Lessee Assignment of Insurances, and any
other document, instrument or agreement required under any thereof or which is
entered into in connection with any thereof or is supplemental thereto.
"Overdue Rate" means the lesser of the lawful maximum rate or the prime
lending rate plus four percent (4%). Prime lending rate shall mean the rate
appearing in the Wall Street Journal on the fifteenth day (or the next
succeeding publication day) of the month preceding the date on which any
payment is due to Lessor, which prime lending rate shall be adjusted on the
fifteenth day of each succeeding month.
"Owner Participant" shall mean British Aerospace Asset Management, Inc.
and its successors and assigns.
"Parts" shall mean any and all appliances, parts, instruments,
appurtenances, accessories, furnishings, seats, and other equipment of whatever
nature (other than Engines or engines or Propellers or propellers and temporary
replacement parts as provided in Section 8 of this Lease), which may from time
to time be incorporated or installed in or attached to any Airframe, Engine or
Propeller.
"Permitted Liens" shall have the meaning assigned thereto in Section 11
hereof.
"Person" shall mean an individual, partnership, corporation, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Propeller" shall mean and include: (i) each of the two propellers for
the Aircraft listed by manufacturer's serial number in the Lease Acceptance
Supplement, whether or not from time to time thereafter installed on an Engine
or installed on any other engine; and (ii) any propeller which may at any time
be conveyed to the Lessor or its nominee pursuant to Section 9(c) or 13(b) of
this Lease in replacement for a Propeller leased hereunder, and (iii) any and
all Parts, so long as the same shall be incorporated or installed in or
attached to any Propeller subject to this Lease, or, so long as the same shall
be leased hereunder in accordance with the terms of Section 8 of this Lease,
after removal from such Propeller.
"Rent" shall mean all Basic Rent and Supplemental Rent hereunder.
"Rent Payment Dates" shall mean each day on which an installment of Basic
Rent is payable during the Term.
"Replacement Engine" shall mean any engine conveyed to the Lessor or its
nominee pursuant to Section 9(c) or 13(b) in replacement of an Engine Leased
hereunder.
"Replacement Propeller" shall mean any propeller conveyed to the Lessor
or its nominee pursuant to Section 9(c) or 13(b) in replacement of a Propeller
the leased hereunder.
"Responsible Officer" shall mean (a) when used with respect to any Person
any of the Chairman of the Board, the President, the Secretary, the Treasurer,
Company Secretary, or any Vice President, Assistant Secretary or Assistant
Treasurer of such Person and (b) when used with respect to the subject matter
of any covenant, agreement or obligation referred to in this Lease, any officer
or any managerial employee of such Person who in the performance of his
operational responsibilities would reasonably be expected to have knowledge of
such matters. In the case of Owner Participant, a Director shall also be
considered a responsible officer at such time that a non-U.S. company becomes
Owner Participant.
"Security Trustee" means such financial institutions as Lessor may from
time to time advise Lessee which act as Trustee under the Mortgage.
"Seller" shall mean Aero International (Regional), a Societe par Actions
Simplifee, acting as agent for and on behalf of the Manufacturer.
"Stipulated Loss Value" shall mean the amount determined in accordance
with Schedule 3 to the Lease Acceptance Supplement.
"Supplemental Rent" shall mean all amounts, liabilities and obligations
(other than Basic Rent) which the Lessee is obligated to pay hereunder,
including, without limitation, Stipulated Loss Value payments.
"Tax" means all license and registration fees and all taxes, levies,
imposts, duties, charges, assessments or withholdings of any nature whatsoever
together with any penalties, additions to tax, fines or interest thereon.
"Term" shall mean the period from and including the Delivery Date and
ending on the day immediately preceding the twelfth (12th) anniversary of the
Delivery Date except as otherwise provided in Exhibit D hereto.
"Trident" shall mean Trident Turboprop (Dublin) Limited, a company
organized under the laws of Ireland.
"Trust" shall mean the trust created by the Trust Agreement.
"Trust Agreement" shall mean the Trust Agreement dated as of , 19
between the Owner Participant and Lessor as amended, supplemented or otherwise
modified from time to time.
SECTION 2. ACCEPTANCE UNDER LEASE AND CONDITIONS PRECEDENT.
(a) Acceptance Under Lease. Lessor shall lease to Lessee, and Lessee
shall accept and lease from Lessor, the Aircraft on the terms and conditions
set forth herein, such leasing to be evidenced by the execution and delivery
of a Lease Acceptance Supplement.
(b) Conditions Precedent. Lessor's obligation to lease the Aircraft
to Lessee is subject to the fulfillment of the following conditions to the
satisfaction of Lessor on or before the date of acceptance of the Aircraft:
(i) Representations and Warranties. The representations,
warranties and assurances set forth in Section 21 shall be true on the
Delivery Date and no Event of Default specified in Section 15 shall have
occurred or be continuing, no event which shall have occurred and be
continuing, with the giving of notice or lapse of time or both would
constitute such an Event of Default, and Lessee shall have furnished to Lessor
a certificate of an officer of Lessee to such effect dated the Delivery Date
confirming such facts.
(ii) Corporate Action. Lessee shall have furnished to Lessor
satisfactory proof that Lessee has taken all corporate action necessary to
authorize this Lease and the transactions contemplated hereby.
(iii) No Change in Applicable Law. No change shall have occurred
after the date of execution and delivery of this Agreement in Applicable Law
or interpretation thereof by appropriate regulatory authorities which, in the
reasonable opinion of Lessor or its counsel, would make it illegal or
potentially illegal for Lessor to enter into, or to perform any of its
obligations under, this Lease.
(iv) No Litigation. No action or proceeding shall have been
instituted nor shall any action or proceeding be threatened before any court
or governmental agency, nor shall any order, judgment or decree have been
issued or proposed to be issued by any court or governmental agency, at the
time of delivery, to set aside, restrain, enjoin or prevent the completion and
consummation of this Lease, or which might have a material adverse effect on
the financial condition or business prospects of Lessee or the ability of
Lessee to carry on its business as presently proposed to be conducted.
(v) No Material Adverse Change. There shall not have been any
material adverse change in the business, assets, liabilities, financial
condition, results of operations or business prospects of Lessee.
(vi) Opinions of Counsel.
(A) Lessor shall receive from counsel for Lessee an
opinion dated the date of acceptance of the Aircraft reasonably satisfactory
to Lessor and Owner Participant as to certain of the matters set forth in
Section 21 of this Lease prior to the Delivery Date.
(B) Lessor shall receive from Daugherty, Fowler & Peregrin
special FAA counsel, an opinion reasonably satisfactory to Lessor and Owner
Participant, and dated the date of acceptance of the Aircraft as to the
registration of the Aircraft and the eligibility of this Lease for recordation
at the FAA and the due filing thereof for recordation at the FAA.
(vii) Approval of Lessor's Counsel. All matters incident to this
transaction shall be reasonably satisfactory to counsel for Lessor.
(viii) Insurance. Lessee shall have furnished to Lessor
certificates of insurance satisfactory to Lessor evidencing the insurance
required by Article 10 of this Lease.
(ix) Lessee Assignment of Insurances. Lessee shall have executed
in favor of Lessor the Lessee Assignment of Insurances, if requested.
(x) Additional Information. Lessee shall have furnished Lessor
with such other opinions, documents, evidence, materials and information as
Lessor may reasonably request.
(xi) Guaranty. Receipt of guaranty from Atlantic Coast Airlines,
Inc. a Delaware Corporation, in the form previously provided by Lessee for
other aircraft leased from Lessor, guaranteeing the obligations of the Lessee
hereunder.
(xii) Letter Re Termination/Event of Loss Payments. Lessor
and Lessee shall have executed and delivered a sideletter regarding
Termination/Event of Loss Payments in the form attached hereto as Exhibit E.
SECTION 3. TERM AND RENT.
(a) Term. The Term for the Aircraft shall commence on the Delivery
Date and shall continue until the last day of the Term.
(b) Basic Rent. Lessee agrees to pay Basic Rent for the Aircraft
monthly in the applicable amount set forth in Schedule 2 to Exhibit A hereto.
(c) Supplemental Rent. Lessee also agrees to pay to Lessor, or to
whomsoever shall be entitled thereto, any and all Supplemental Rent when the
same shall become due and owing, and in the event of any failure on the part
of the Lessee to pay any Supplemental Rent, Lessor shall have all rights,
powers and remedies provided for herein or by law or equity in the case of
nonpayment of Basic Rent. Lessee will also pay, on demand, as Supplemental
Rent, interest at the Overdue Rate on any part of any installment of Basic
Rent not paid within five (5) Business Days after it is due for any period for
which the same shall be overdue, provided, however, that such five business
day grace period shall not be available to Lessee more than once in each
fiscal quarter in each of its fiscal years during the Term and, to the extent
permitted by Applicable Law, on any payment of Supplemental Rent not paid when
due for the period until the same shall be paid.
(d) Manner of Payment. All Rent shall be paid by Lessee to Lessor at
its address referred to in Section 20 hereof, or as Lessor may otherwise
direct, in immediately available funds consisting of lawful currency of the
United States of America, so that Lessor receives the full amount of such
payment on the due dates thereof. If any Rent is due on a day which is not a
Business Day, such Rent shall be paid on the next succeeding Business Day.
SECTION 4. NET LEASE, ETC.
This Lease is a net lease. Lessee acknowledges and agrees that its
obligations to pay all Rent due and owing under the terms hereof shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation (a) any set off, counterclaim,
recoupment, defense or other right which Lessee may have against the
Manufacturer, the Seller, Lessor, Owner Participant, any Financier any
affiliate of any of them, or anyone else for any reason whatsoever, (b) any
defect in the title, airworthiness, eligibility for registration under the
Federal Aviation Act, condition, design, operation or fitness for use of, or
any damage to or loss or destruction of, the Aircraft, or any interference,
interruption or cessation in or prohibition of the use or possession thereof
by Lessee for any reason whatsoever, including, without limitation, any such
interference, interruption, cessation or prohibition resulting from the act of
any governmental authority, or any violation by Lessor of Section 5(b) hereof,
(c) any Liens, encumbrances or rights of others with respect to the Aircraft,
(d) the invalidity or unenforceability or lack of due authorization or other
infirmity of this Lease or any lack of right, power or authority of Lessor or
Lessee to enter into this Lease, (e) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessee, or any other
person, or (f) any other cause whether similar or dissimilar to the foregoing,
any present or future Applicable law notwithstanding, it being the intention
of the parties hereto that all Rent being payable by Lessee hereunder shall
continue to be payable in all events in the manner and at the times provided
herein. Such Rent shall not be subject to any abatement and the payments
thereof shall not be subject to any set off or reduction for any reason
whatsoever, including any present or future claims of Lessee against the
Lessor under this Lease or otherwise. Each Rent payment made pursuant to this
Lease by Lessee shall be final and Lessee will not seek to recover all or any
part of such payment from Lessor, Owner Participant, Agent, Bank, any
Financier or the Security Trustee, for any reason whatsoever. To the extent
permitted by Applicable Law, Lessee hereby waives any rights which it may now
have or which may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease except in accordance with the terms
hereof. Nothing contained in this Section 4 shall be construed to limit the
right of Lessee to make any claim it might have against Lessor or any other
Person (including, without limitation, that Rent payments demanded from or
paid by the Lessee are or were erroneous) or to pursue such claim in such
manner as Lessee shall deem appropriate.
SECTION 5. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES AND QUIET
ENJOYMENT.
(a) Disclaimer of Warranties. LESSOR LEASES AND LESSEE TAKES THE
AIRCRAFT "AS-IS, WHERE-IS". LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN
LESSEE AND EACH OF LESSOR (FOR THE PURPOSES OF THIS SECTION 5(A), IN ITS
INDIVIDUAL CAPACITY OR OTHERWISE), OWNER PARTICIPANT AND ANY FINANCIER: (i)
THE AIRFRAME AND EACH ENGINE ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED THAT THE
AIRFRAME AND EACH ENGINE ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, AND (iii)
NONE OF LESSOR, OWNER PARTICIPANT OR ANY FINANCIER MAKE, HAS MADE OR SHALL BE
DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, AND
LESSEE HEREBY WAIVES, RELEASES AND RENOUNCES, ANY WARRANTY, REPRESENTATION,
GUARANTY, LIABILITY AND OBLIGATION OF LESSOR, OWNER PARTICIPANT OR ANY
FINANCIER, AND ANY RIGHT, CLAIM AND REMEDY OF LESSEE AGAINST SUCH PARTIES,
EXPRESS OR IMPLIED, ARISING BY OPERATION OF LAW, COURSE OF PERFORMANCE, COURSE
OF DEALING, USAGE OF TRADE OR OTHERWISE, AS TO:
(i) THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR
ANY PARTICULAR PURPOSE OF THE AIRFRAME, ANY ENGINE, ANY PROPELLER, ANY PART,
ANY DATA OR ANY OTHER THING DELIVERED, SOLD OR TRANSFERRED HEREUNDER,
(ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO
THE AIRFRAME, ANY ENGINE, ANY PROPELLER ANY PART, ANY DATA OR ANY OTHER THING
DELIVERED, SOLD OR TRANSFERRED HEREUNDER,
(iii) THE ABSENCE OF LATENT OR ANY OTHER DEFECT OR NONCONFORMANCE
IN THE AIRFRAME, ANY ENGINE, ANY PROPELLER ANY PART, ANY DATA OR ANY OTHER
THING DELIVERED, SOLD OR TRANSFERRED HEREUNDER, WHETHER OR NOT DISCOVERABLE,
OR
(iv) THE ABSENCE OF ANY ACTUAL OR ALLEGED INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT OR THE LIKE.
LESSEE FURTHER WAIVES, DISCLAIMS, RELEASES AND RENOUNCES ANY LIABILITY,
RIGHT, CLAIM, REMEDY OR OBLIGATION BASED ON TORT, INCLUDING STRICT LIABILITY,
WHETHER OR NOT ARISING FROM THE NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR
IMPUTED) EXCEPT FOR WILLFUL MISCONDUCT OR GROSS NEGLIGENCE, OF LESSOR, OWNER
PARTICIPANT OR ANY FINANCIER, ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY FOR LOSS OF OR DAMAGE TO THE AIRFRAME, ANY ENGINE, ANY PROPELLER ANY
PART, ANY DATA OR ANY OTHER THING DELIVERED, SOLD OR TRANSFERRED HEREUNDER, OR
ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRFRAME, ANY ENGINE, ANY PROPELLER ANY PART, ANY DATA OR ANY
OTHER PHYSICAL THING DELIVERED, SOLD OR TRANSFERRED HEREUNDER.
Nothing contained in this Section 5(a) shall be deemed to modify or
otherwise affect any warranties or other obligation of any manufacturer,
subcontractor, or supplier to Lessee with respect to the Airframe or any
Propeller, Engine or Part or any other rights Lessee has under Section 4 of
this Lease.
(b) Quiet Enjoyment. Lessor covenants with Lessee that, subject to no
Default or Event of Default having occurred and continuing, subject to the
provisions of the Operative Agreements, unless compelled to do so by any
person claiming a right in or title to the Aircraft or any part thereof
superior to Lessor or unless compelled to do so by any Applicable Law, Lessor
will not knowingly disturb the quiet use, possession and enjoyment of the
Aircraft by Lessee.
(c) Subordination. Lessee acknowledges and agrees that this Lease and
the subleasing of the Aircraft hereunder are subject and subordinate to the
provisions of the Mortgage and the respective rights of Security Trustee and
each other Financier thereunder and that the interest of Lessee is subject to
and subordinate to the respective interests of Security Trustee, and each
other Financier. Lessor and Lessee accordingly acknowledge and agree that
Lessor's obligation to lease the Aircraft to Lessee hereunder and the Lessee's
obligation hereunder to pay Basic Rent for future periods shall automatically
terminate upon any enforcement of the Mortgage unless the Security Trustee,
Agent, Bank, or the other Financiers require otherwise.
(d) Compliance with Operative Agreements. Lessor hereby covenants and
agrees that it shall perform its obligations under the Operative Agreements
including the Lease provided that Lessor shall have no liability whatsoever to
Lessee for any failure to perform such obligations in circumstances where
(i) Lessee shall have failed to perform any corresponding obligations under
the Lease or (ii) such failure shall result, whether directly or indirectly,
from a failure by Lessee to perform any express and specific obligations under
the Lease or from the occurrence of a Default or an Event of Default.
SECTION 6. POSSESSION, OPERATION AND USE, MAINTENANCE, INSIGNIA AND
RESERVES.
(a) Possession. Lessee shall not sublease, or otherwise in any manner
deliver, relinquish or transfer possession of the Airframe, or any Engine or
Propeller leased hereunder to any Person or install any Engine, or permit any
Engine to be installed on any airframe other than the Airframe or install any
Propeller, or permit any Propeller to be installed, on any engine other than
an Engine during the Term, without, in each case, the prior written consent of
Lessor, provided that so long as no Event of Default has occurred which is
continuing Lessee, may, without the prior written consent of Lessor:
(i) deliver possession of the Airframe or any Engine or
Propeller to any organization for testing or other similar purposes or for
service, repair, maintenance or overhaul work on such Airframe, Engine or
Propeller or for alterations or modifications in or additions to such
Airframe, Engine or Propeller, to the extent required or permitted by the
terms of this Lease;
(ii) install any of the Engines or Propellers on an aircraft
owned by Lessee or leased by or hired to Lessee on terms whereby (i) Lessee
has full operational control of such aircraft (ii) title to the relevant
Engine or Propeller remains vested in the Lessor and (iii) such Engine or
Propeller does not thereby become subject to any Lien (other than a Permitted
Lien);
(iii) install on the Aircraft any engines or propellers owned by
Lessee, or leased by or hired to Lessee on terms whereby (i) title to each
Engine or Propeller (whether or not installed on the Aircraft) remains vested
in Lessor; and (ii) neither the Aircraft nor any Engine or Propeller (whether
or not installed on the Aircraft) thereby becomes subject to any Lien (other
than a Permitted Lien).
(b) Operation and Use. Lessee agrees not to (i) operate the Airframe
or any Engine or Propeller or permit the Airframe or any Engine or Propeller to
be operated except in a passenger configuration, in commercial or other
operations for which Lessee is duly authorized by the FAA or other governmental
authority having jurisdiction over Lessee or such Airframe, Engine or
Propeller; (ii) use or permit the Aircraft to be used for a purpose for which
the Aircraft is not designed or reasonably suitable; (iii) base the Aircraft
outside the United States or operate, use or locate any Airframe, Engine or
Propeller, or suffer such Airframe, Engine or Propeller to be operated, used or
located (A) in any area excluded from coverage by any insurance required by the
terms of Section 10 hereof or (B) outside the contiguous 48 United States or
Canada, or the Bahamas, or (C) in any recognized, or in Lessor's reasonable
judgment, threatened area of hostilities unless fully covered by war risk
insurance. Lessee will not permit the Aircraft or any Engine or Propeller to
be maintained, used or operated during the Term in violation of any Applicable
Law, or for matters not covered by Applicable Law, contrary to any
manufacturer's operating manuals or instructions. Lessee agrees not to operate
the Aircraft, or suffer the Aircraft to be operated or kept in any place
(i) unless the Aircraft is covered by insurance as required by the provisions
of Section 10 hereof, or (ii) contrary to or inconsistent with the terms of
such insurance and will not do or permit to be done or left undone anything
whereby any policy required hereunder would or might reasonably be expected to
be rendered in whole or in part invalid or unenforceable. Lessor will
favorably respond to requests as may be made by Lessee from time to time for
permission to utilize the Aircraft in countries located in the Caribbean region
in addition to the Bahamas, provided that the Aircraft will remain registered
and based in the United States, that the proposed countries of use are
identified reasonably in advance to Lessor based on a specific proposal for
utilization of the Aircraft, that Lessee obtains additional insurance coverage
as may be appropriate in light of the proposed foreign use which is consistent
with the obligations of Lessor under the Financier Documents, and that Lessor
can reasonably satisfy itself that said use will not result in any breach of
the Financier Documents or undue physical, political, or legal risk to the
Aircraft, to title thereto, or to any interest therein. Lessor reserves the
right to withdraw its consent to foreign use as a result of material changes in
circumstances involving any country for which permission was previously
granted, provided that Lessor will use its best efforts to provide thirty (30)
days prior written notice to Lessee prior to its withdrawal of such consent.
(c) Maintenance. Lessee, at its own cost and expense, shall service,
repair, maintain and overhaul, test or cause the same to be done to the
Airframe and each Engine and Propeller during the Term (i) so as to keep such
Airframe, Engine and Propeller in as good operating condition and appearance as
when delivered to Lessee by the Lessor hereunder, ordinary wear and tear
excepted, (ii) so as to keep such Airframe, Engine or Propeller in such
operating condition as may be necessary to enable a standard airworthiness
certificate for the Aircraft to be maintained in good standing at all times
under the applicable rules and regulations of the FAA and (iii) in accordance
with a maintenance program approved by the FAA and which Lessee would generally
apply to aircraft of the same type as the Aircraft. Lessee shall maintain all
records, logs technical data materials and other materials required in the
format required by the Department of Transportation or the FAA to be maintained
in respect of the Aircraft in an accurate, current and complete condition in
accordance with good commercial aviation practice and shall promptly furnish to
Lessor upon written request, or if verbally, confirmed in writing within
24 hours, such information as may be necessary to file any required reports
with any governmental authority because of Lessee's use or operation of the
Aircraft.
(d) Insignia. On or prior to the Delivery Date or as soon as is
practicable thereafter, Lessee shall place and maintain in the cockpit of the
Airframe in a location reasonably adjacent to the airworthiness certificate of
the Aircraft, in the cockpit or on the flight deck of the Aircraft and on each
Engine, a fireproof metal nameplate having dimensions of not less than six (6)
inches by four (4) inches identifying the leasehold interest of the Lessor and
the ownership interest of the Lessor in the Aircraft, as follows:
"This Aircraft/Engine together with its accessories installed thereon is
owned by First Security Bank, National Association in its capacity as Owner
Trustee, and is leased to Atlantic Coast Airlines [and is mortgaged to
.]"
and in addition, Lessee shall attach to and keep upon the Propellers such
labels, plates or markings as are necessary or advisable to evidence Lessor's
ownership thereof. Lessee will not allow the name of any Person other than
those listed in this Section 6(d) or their respective successors or assigns, to
be placed on the Aircraft or any Engine or Propeller as a designation that
might be interpreted as a claim of ownership, Lien, or of any interest therein,
provided, however, that Lessee may operate the Aircraft in its livery,
including its name and logo so long as the above mentioned fireproof nameplates
are not covered or painted over.
The size of the name plates to be affixed to the Aircraft and to each
Engine may be reduced to reasonably accommodate space limitations, provided
that the size of the name plate not be reduced to the extent that the effect
would be to diminish the prominence of the statement contained therein.
(e) Engine Maintenance Reserves/GED Agreement.
(i) Lessee shall enter into an agreement with Garrett Engine
Division of Allied Signal ("GED") or such comparable engine repair facility as
is acceptable to the parties (collectively, the "GED Agreement") for scheduled
and unscheduled maintenance and support of the Engines. Lessee shall be
permitted to provide for the maintenance and repair of Engines under the GED
Agreement under terms and conditions acceptable to Lessor in lieu of Lessee's
payment of Engine Maintenance Reserves to Lessor as provided below. Lessee
shall provide Lessor with: a copy of the GED Agreement; copies of any
amendments (to be provided prior to their effective date); and copies of any
renewals or extensions thereof (to be provided, to the extent possible at least
twelve months prior to the scheduled termination). Terms and prices contained
in the GED Agreement may be withheld from Lessor if required by GED, provided
that the Lessee does not impose such a restriction.
(ii) At any time during the term of this Lease that the Engines
are no longer eligible for maintenance and repair by GED under the GED
Agreement, or that Lessee is in default under the GED Agreement for nonpayment,
or that either Lessee or GED are in default under the GED Agreement for any
other reason which such default has been declared, Lessee shall commence
payments to Lessor. Such payments ("Engine Maintenance Reserves") will be
applied to scheduled and unscheduled maintenance and support of the Engine as
described in this Section 6(e). Engine Maintenance Reserves shall be paid
monthly in arrears on the fifteenth day of each succeeding month. The amount
of Engine Maintenance Reserves in respect of each Engine shall be in an amount
equal to the Hourly Reserve Rate times the aggregate number of Engine flight
hours occurring on the Engines since the prior intermediate and major shop
inspections on the Engines.
(iii) In the event that the GED Agreement is terminated for any
reason, Lessee shall pay an initial deposit to Lessor for Engine Maintenance
Reserves to cover time accrued to date. This initial deposit shall be paid to
Lessor (or to a party designated by Lessor to hold Engine Maintenance Reserves)
in addition to the ongoing payments provided in subparagraph (ii) above, and
shall be expended and applied, to the extent paid in, as Engine Maintenance
Reserves as provided in this Section 6(e). Such initial deposit shall in all
circumstances be due in full no later than twelve months following the date of
termination of the GED Agreement, and shall be paid in twelve monthly
installments, due at the time of payment of Engine Maintenance Reserves as
described in subparagraph (ii) above. The amount of the initial deposit due at
the end of twelve months will be the Hourly Reserve Rate multiplied by the
total number of hours accrued on all of the J41 Engines since the last major
periodic inspection on each of the J41 Engines as of the date of termination of
the GED Agreement, adjusted for any intermediate inspection that may have
occurred. To the extent there are any amounts owed to Lessee by GED with
respect of the Engines upon termination of the GED Agreement, such amount shall
be assigned to Lessor and Lessee's payment required in accordance with this
Section shall be reduced by an equivalent amount upon payment to Lessor of the
assigned amounts.
(iv) In the event of a Default or Event of Default under this
Lease Agreement or any other agreement between Lessor or Owner Participant (or
any agreement whereby Owner Participant is the beneficiary pursuant to a trust)
and Lessee or any affiliate of Lessee (a "Lessee Agreement"). Lessor shall
have the right at any time following such Default or Event of Default to apply
funds held as Engine Maintenance Reserves to cure any such Default or Event of
Default.
(v) Provided Lessee is not in default under this Lease Agreement,
disbursements from funds paid as Engine Maintenance Reserves by Lessee for the
Engines shall be made to Lessee by the party holding the Engine Maintenance
Reserves for costs actually incurred by Lessee in connection with intermediate
and major shop periodic inspections on the Engines. Such disbursements will be
made upon the written request of Lessee to Lessor, accompanied by evidence
satisfactory to Lessor (including invoices, purchase orders, etc.) that such
engine inspection has been performed by Lessee and expenses incurred and paid.
Advance disbursements to third parties will be made if necessary to proceed
with the work provided adequate protection is made to ensure proper completion
of the work and to ensure release of the Engine by said third party.
(vi) The amount required to be paid by Lessee as Engine
Maintenance Reserves shall be subject to adjustment annually to reflect both
Lessee's operational results and changes in the GED's recommendations as may be
mutually agreed. Such amount may also be adjusted in the event of a
significant change in maintenance intervals on Lessee's TPE-331-14GR/HR engine
fleet as mutually agreed by both Lessor and Lessee.
(vii) In the event that Engine Maintenance Reserves have been paid
under this Section 6(e), and upon the occurrence of an Event of Loss involving
the Aircraft on which the Engine is installed, Lessee shall be entitled to the
prompt return of Engine Maintenance Reserves payments. This reimbursement
shall take place at the time of settlement of any insurance claim provided no
Default or Event of Default has occurred which is continuing at the time of
insurance settlement. If there is an Event of Default at the time of
settlement, reimbursement will be made upon satisfactory cure of all such
Defaults or Events of Default. Reimbursement shall not be made in the event of
an Event of Loss involving an Engine that is to be replaced, but a positive or
negative adjustment will be made to the reserve account to reflect changes in
the hours and cycles between the original Engine and the Replacement Engine.
(f) Removal of Engines and Propellers. Lessee will ensure than
no Engine or Propeller installed on the Aircraft is at any time removed from
the Aircraft other than:
(i) if replaced as permitted by this Agreement; or
(ii) if the removal is of an obsolete item and is in
accordance with the Lessee's maintenance program;
(iii) (A) during the course of maintaining, servicing,
repairing, restoring or testing that Engine, Propeller or the Aircraft, as the
case may be; or (B) as part of a normal engine or propeller rotation program;
or (C) for the purpose of making such modifications to the Engine, Propeller or
the Aircraft, as the case may be, as are required under this Agreement, or by
the manufacturer of the Engines or Propellers; or
(iv) as provided for in Section 6(a)(i), (ii) or (iii);
and then in each case only if it is reinstalled or replaced by an engine or
propeller complying with the requirements in Section 6(g), or in the case of a
removal for the reasons set out in Section 6(f)(iii) the requirements of
paragraphs (i), and (iii) of Section 6(g) and not paragraph (ii) until the
expiration of the term of this Agreement or early termination of this
Agreement, as soon as practicable and in any event no later than the expiration
of the term of this Agreement or early termination of this Agreement.
(g) Installation of Engines and Propellers.
Lessee will ensure that, except as permitted by this Agreement, no
engine or propeller is installed on the Aircraft unless:
(i) it is an engine of the same model as, or an improved or
advanced version of the Engine or Propeller it replaces, which has the
same value and utility and which is in the same or better operating
condition (without regard to hours or cycles) assuming that such Engine
or Propeller was in the condition and repair as required to be maintained
by the terms of this Agreement;
(ii) in each case, it has become and remains the property of
Lessor free from any Liens except Lessor's Liens and the Lien of the
Mortgage and upon installation on the Aircraft will without further act
be subject to this Agreement; and
(iii) in each case, Lessee has all necessary information as to its
source and maintenance records.
SECTION 7. CERTAIN NOTICES.
As soon as possible and in any event within 30 days after the occurrence of
any Default or Event of Default which is continuing, Lessee shall notify
Lessor of such Default or Event of Default, setting forth in detail the nature
of such Default or Event of Default and the action which Lessee proposes to
take with respect thereto. Lessee shall immediately notify Lessor of any
"aircraft accident" as defined in 49 CFR Part 830 with respect to the Airframe
or any Engine or Propeller, which notice shall indicate the time, place and
nature of the accident, the damage caused to property and the names and
addresses of any persons injured.
SECTION 8. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS AND
ADDITIONS
(a) Replacement of Parts. Lessee, at its own cost and expense, shall
promptly replace all Parts that may from time to time during the Term become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair
or permanently rendered unfit for use for any reason whatsoever. In addition,
in the ordinary course of maintenance, service, repair, overhaul or testing,
Lessee may remove any Parts, provided that Lessee shall replace such Parts as
promptly as practicable with replacement Parts or temporary replacement parts
as provided in Section 8(c) hereof. All replacement Parts shall be free and
clear of all Liens (except Permitted Liens) and shall be in as good operating
condition as, and shall have a value and utility at least equal to, the Parts
replaced assuming such replaced Parts were in the condition and repair
required to be maintained by the terms hereof.
(b) Title to Parts. All Parts at any time removed from the Airframe
or any Engine or Propeller, shall remain subject to this Lease and the
Mortgage, no matter where located, until such time as such Parts shall be
replaced by Parts that have been incorporated or installed in or attached to
such Airframe, Engine or Propeller and that meet the requirements for
replacement Parts specified above. Immediately upon any replacement Part
(other than a temporary replacement Part) becoming incorporated or installed
in or attached to any Airframe, Engine or Propeller as above provided, without
further act, (i) title to such replacement Part shall thereupon immediately
vest in the Lessor; (ii) title to the replaced Part shall thereupon vest in
Lessee, free and clear of all rights of Lessor, Financier(s) and Owner
Participant, and shall no longer be deemed a Part hereunder; and (iii) such
replacement Part shall become subject to this Lease and the Lien of the
Financiers and be deemed part of such Airframe, Engine or Propeller, as the
case may be, for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached to such Airframe, Engine
or Propeller.
(c) Pooling of Parts. Any Part removed from the Airframe or any
Engine or Propeller as provided in Section 8(a) hereof may be subjected by
Lessee to a normal pooling arrangement customary in the airline industry
entered into in the ordinary course of Lessee's business with any air carrier,
provided the part replacing such removed Part shall be incorporated or
installed in or attached to such Airframe, Engine or Propeller in accordance
with Sections 8(a) and 8(b) as promptly as possible after the removal of such
removed Part. In addition, any temporary replacement part when incorporated
or installed in or attached to any Airframe, Engine or Propeller in accordance
with Section 8(a) hereof may be owned by another airline or vendor as
customary in the airline industry, subject to such a normal pooling or leasing
arrangement, provided Lessee shall, at its own expense, as promptly thereafter
as reasonably possible, either (i) cause title to such temporary replacement
part to vest in Lessor in accordance with Section 8(b)(iii) hereof by Lessee
acquiring title thereto for the benefit of Lessor free and clear of all Liens
except Permitted Liens, at which time such temporary replacement part shall
become a Part and become subject to this Lease; or (ii) replace such temporary
replacement part by incorporating or installing in or attaching to such
Airframe, Engine or Propeller a further replacement Part owned by Lessee free
and clear of all Liens except Permitted Liens, and by causing title to such
further replacement Part to vest in Lessor in accordance with Section 8(b)
hereof.
(d) Alterations, Modifications and Additions. Lessee, at its own
expense, shall make such alterations and modifications in and additions to the
Airframe or any Engine or Propeller as may be required to be made from time to
time during the Term by Applicable Law regardless upon whom such requirements
are, by their terms, nominally imposed. Title to all Parts incorporated on,
installed in or attached or added to the Airframe or any Engine or Propeller
as the result of any alteration, modification or addition required by the
preceding sentence shall vest without further act in Lessor and become subject
to the Mortgage and this Lease and the Lien of the Financiers. In addition,
Lessee, at its own expense, may from time to time make or cause to be made
such alterations and modifications in and additions to the Airframe, any
Engine or any Propeller as Lessee may deem desirable in the proper conduct of
its business, (any such additions for purposes of this Section 8(d) called
"Additional Parts") including, without limitation, removal of Parts (for
purposes of this Section 8(d) called "Obsolete Parts"); provided that no such
alteration, modification, addition or removal shall materially diminish the
value or utility of the Airframe, such Engine or such Propeller, or impair the
condition or airworthiness thereof immediately prior to such alteration,
modification, addition or removal assuming the Airframe, such Engine or such
Propeller was then of the value and utility and in the condition and
airworthiness required to be maintained by the terms of this Lease.
Notwithstanding anything to the contrary, Lessee may, at any time during the
Term, remove any Additional Part; provided that (i) such Additional Part is in
addition to, and not in replacement of or substitution for, any Part
originally incorporated or installed in or attached to the Airframe, such
Engine or such Propeller at the time of delivery thereof hereunder or any part
in replacement of, or substitution for, any such Part, (ii) such Additional
Part is not required to be incorporated or installed in or attached or added
to such Airframe, Engine or Propeller pursuant to the first sentence of this
Section 8(d) and (iii) such Additional Part can be removed from the Airframe,
such Engine or such Propeller without materially diminishing or impairing the
value, utility, condition or airworthiness required to be maintained by the
terms of this Lease which the Airframe, such Engine or such Propeller would
have had at such time had such addition not occurred. Upon the removal by
Lessee of any Additional Part as provided in the immediately preceding
sentence or the removal of any Obsolete Part permitted by this Section 8(d),
title thereto shall, without further act, vest in Lessee, free and clear of
all rights of Owner Participant any Financier, the Security Trustee, or Lessor
as appropriate or any Lessor Liens and such Additional Part or Obsolete Part
shall no longer be deemed part of the Airframe, the Engine or Propeller from
which it was removed. Title to any Additional Part not removed by Lessee
prior to the return of the Airframe, such Engine or such Propeller to Lessor
hereunder shall vest in the Lessor without further act.
SECTION 9. RISK, LOSS, DESTRUCTION OR REQUISITION.
(a) Risk. Throughout the Term and until redelivery of the Aircraft in
accordance with Section 13, Lessee shall bear all risks of loss, theft, damage
and destruction of or to the Aircraft and every part thereof, and no such
loss, theft, damage or destruction, nor any other event or circumstance of any
nature whatsoever, shall impair or frustrate any obligation of Lessee under
this Lease (including without limitation as to the payment of Rent or other
payments) so that all such obligations shall continue in force and effect.
(b) Event of Loss with Respect to the Aircraft. Upon the occurrence
of an Event of Loss with respect to the Aircraft during the Term, Lessee shall
forthwith (and in any event within seven (7) days after such occurrence) give
Lessor written notice of such Event of Loss. On the "Casualty Termination
Date" (which is defined as the earlier of: (x) the date on which insurance
proceeds are paid, or (y) the date which is the first Rent Payment Date
occurring not less than 60 days after such Event of Loss), Lessee shall pay
Lessor an amount equal to the sum of (i) the Stipulated Loss Value of such
Aircraft as of the Casualty Termination Date, plus (ii) if not previously paid
by Lessee, all other Rent due and payable on or prior to such Casualty
Termination Date. Notwithstanding such Event of Loss, Lessee's obligation to
pay Basic Rent hereunder up to such Casualty Termination Date shall continue,
such Basic Rate to be payable on the due date therefor.
Upon payment in full of the Stipulated Loss Value for the Aircraft and
other Rent payable as provided in the immediately preceding paragraph, (xx)
this Lease (except for Supplemental Rent obligations surviving pursuant to
Section 14 hereof or which have otherwise accrued but not been paid as of the
date of such payment) shall terminate; (yy) any remaining insurance proceeds
(other than proceeds of policies maintained by Lessor for its own account)
shall be promptly paid over to Lessee; subject to the rights of any Insured
Party under the Operative Agreements and (zz) Lessor shall subject to the
rights of insurers and other Insured Parties seek to cause title to such
Airframe, Engines and Propellers to be conveyed to Lessee or its designee, as-
is, where-is, without recourse or warranty, express or implied, except for a
warranty from Lessor against Lessor's Liens, and shall exercise such rights as
it has to cause the release of the Lien of the Mortgage.
(c) With Respect to an Engine or Propeller. Upon the occurrence
during the Term of an Event of Loss with respect to an Engine or Propeller not
involving an Event of Loss with respect to the Aircraft, Lessee shall give
Lessor prompt written notice thereof and Lessee shall replace, at its sole
cost, such Engine or propeller as soon as reasonably practicable after the
occurrence of such Event of Loss by duly conveying to Lessor as a replacement
for said Engine or Propeller, title to another engine or propeller of the type
specified in the applicable Lease Acceptance Supplement which engine or
propeller shall be free and clear of all Liens except Permitted Liens and
shall have a value and utility at least equal to, and be in as good operating
condition as, the Engine or Propeller with respect to which such Event of Loss
occurred, assuming such Engine or Propeller was of the value and utility and
in the condition and repair required by the terms hereof immediately prior to
the occurrence of such Event of Loss. Lessee agrees that on the date that the
Replacement Engine or Replacement Propeller, as the case may be, is delivered
(hereinafter referred to in this Section 9(c) as the "Replacement Closing
Date") the following documents at the Lessee's sole cost and expense shall
have been duly authorized, executed and delivered by the respective party or
parties thereto and shall be in full force and effect, and the Lessee shall
deliver or cause to be delivered an executed counterpart of each thereof (or,
in the case of the Bill of Sale referred to below, a photocopy thereof) to
Lessor, each Financier:
(i) a Lease Supplement covering the Replacement Engine or
Replacement Propeller, as the case may be; and
(ii) a full warranty bill of sale (as to title), in form and
substance reasonably satisfactory to the Lessor and each Financier, covering
the Replacement Engine or Replacement Propeller, as the case may be, and to
deliver a certificate from a Responsible Officer of Lessee certifying that
such Replacement Engine or Replacement Propeller complies with this
Section 9(c). Lessee agrees to take such further action as Lessor may
reasonably request with respect to such Replacement Engine or Replacement
Propeller including, without limitation, the actions required to be taken by
it under this Section 9(c) but excluding, without limitation, an opinion of
counsel for Lessee relating to such Replacement Engine or Replacement
Propeller. Such Replacement Engine or Replacement Propeller, upon being
titled in the name of Lessor free of all Liens, shall be deemed an "Engine" or
"Propeller", as the case may be, as defined herein for all purposes hereof.
Upon full compliance with this Section 9(c), Lessor shall subject to the
rights of the insurers and other Insured Parties, seek to cause title in and
to the Engine or Propeller which suffered such Event of Loss to be conveyed to
Lessee, as-is, where-is, without recourse or warranty, express or implied,
except for a warranty from Lessor against Lessor's Liens, and shall exercise
such rights as it has to cause the release of the Lien of the Mortgage with
respect to the Engine or Propeller. No Event of Loss with respect to an
Engine or Propeller on any Aircraft under the circumstances contemplated by
the terms of this Section 9(c) shall result in any reduction in Rent or Lessee
obligation to pay Basic Rent hereunder. Lessee agrees that it shall at all
times during the term of this Lease maintain on each Airframe two Engines or
other engines suitable for use on such Airframe and a Propeller or other
propeller on each Engine suitable for use on such Engine.
(d) Payments from Governmental Authorities for Requisition of Title or
Use.
(i) Any payments on account of an Event of Loss (other than
insurance proceeds or other payments the application of which is provided for
in this Lease) received at any time by Owner Participant, Lessor, any
Financier, or by Lessee from any governmental authority or other Person will
be applied as follows:
(A) if such payments are received with respect to an
Airframe, so much of such payments as shall not exceed the Stipulated Loss
Value required to be paid by Lessee pursuant to Section 9(b) hereof, shall be
applied in reduction of Lessee's obligation to pay such Stipulated Loss Value,
to the extent not already paid by Lessee, and, to the extent already paid by
Lessee, shall be applied to reimburse Lessee for its payment of such
Stipulated Loss Value, and the balance, if any, of such payment remaining
thereafter shall be paid to or retained by Lessor; and
(B) if such payments are received with respect to an
Engine or Propeller under the circumstances contemplated by Section 9(c) or
9(d)(iii) hereof, such payments shall subject to the terms of the Operative
Agreement be paid over to, or retained by, Lessee, provided that Lessee shall
have fully performed the terms of Section 9(c) hereof with respect to the
Event of Loss for which such payments are made.
(ii) In the event of a requisition for use by any government, so
long as it does not constitute an Event of Loss, of the Aircraft during the
Term, Lessee shall promptly notify Lessor of such requisition and all the
Lessee's obligations under this Lease shall continue to the same extent as if
such requisition had not occurred except to the extent that any failure or
delay in the performance or observance of each obligation by Lessee shall have
been prevented or delayed by such requisition, provided that Lessee's
obligations for the payment of money and under Section 10 hereof shall in no
way be affected, reduced or delayed by such requisition. Any payments
received by Lessor or Lessee from such government with respect to such
requisition shall be paid over to or retained by, Lessee. If the Lessor shall
receive any such payments, Lessor shall use its best commercially reasonable
efforts to secure such payments on the behalf of Lessee.
(iii) In the event of the requisition for use by a government of
any Engine or Propeller (but not an Airframe) for a period exceeding 45 days,
Lessee shall replace such Engine or Propeller hereunder by complying with the
terms of Section 9(c) hereof to the same extent as if an Event of Loss had
occurred with respect to such Engine or Propeller, and any payments received
by Lessor, or Lessee from such government with respect to such requisition
shall be paid over to, or retained by, Lessee provided that, if the Airframe
and Engines or engines are not returned prior to the end of the Term then,
notwithstanding that the Term shall have ended, Lessee shall be obliged to
return the Airframe and such Engines or engines to Lessor pursuant to, and in
all other respects to comply with the provisions of, Section 13 promptly upon
their return and any payments received by Lessee in respect of any such period
after the end of the Term shall be paid over and belong solely to Lessor.
(e) Application of Payments During Existence of Event of Default. Any
amount referred to in this Section 9 or Section 10 hereof which is payable to
Lessee shall not be paid to Lessee, or, if it has been previously paid
directly to Lessee, shall not be retained by Lessee and shall be promptly paid
over to Lessor, if at the time of such payment an Event of Default shall have
occurred and be continuing, but shall be paid to and held by Lessor (or so
long as the Lien of the Security Trustee shall not have been discharged and
the Security Trustee so requires, the Security Trustee) as security for the
obligations of Lessee under this Lease, and at such time as there shall not be
continuing any such Event of Default such amount shall, subject to the terms
of the Operative Agreements be paid over to Lessee.
SECTION 10. INSURANCE.
(a) Third Party Liability Insurance. Lessee shall, without expense to
any Insured Party, maintain or cause to be maintained in effect, at all times
during the Term, with insurers of recognized reputation and responsibility,
comprehensive aircraft and general liability insurance against third party
bodily injury or property damage (including without limitation contractual
liability, cargo liability, passenger legal liability/property damage
including war risk and allied perils as clause AV52 (all paragraphs deleted
except B) or equivalent coverage) with respect to the Aircraft in an amount
not less than a $150,000,000 combined single limit, or such greater amounts as
Lessee may carry from time to time on other similar aircraft in its fleet.
Such insurance shall be of the type usually carried by corporations engaged in
the same or a similar business, similarly situated to Lessee and owing and
operating similar aircraft and engines, and covering such other risks as are
customarily insured against by such corporations.
(b) Insurance Against Loss or Damage to the Aircraft and Engines.
Lessee shall, without expense to any Insured Party, maintain or cause to be
maintained in effect, at all times during the Term, with insurers of
recognized reputation and responsibility, all-risk, agreed value ground and
flight hull insurance, excluding war risks and allied perils (but including
extended coverage against the type of risks excluded by clauses (c), (e) and
(g) of the War, Hijacking and Other Perils Exclusion Clause (AVN 48B)),
covering the Aircraft for an amount in respect of such Aircraft not less than
the Stipulated Loss Value from time to time. Such hull insurance shall cover
Engines and Propellers or engines and propellers and Parts temporarily removed
from the Airframe pending replacement by installation of the same or similar
engines, propellers or Parts on such Airframe. Such insurance shall be of the
type usually carried by corporations engaged in the same or a similar
business, similarly situated with and owning and operating similar aircraft,
engines and propellers and covering such other risks as are customarily
insured against by such corporations. If and to the extent that Lessee
maintains war risk and allied perils insurance (including governmental
confiscation insurance) in effect with respect to other similar owned or Lease
aircraft in its fleet, Lessee shall maintain such insurance in effect with
respect to the Aircraft in an amount in respect of such Aircraft not less than
the Stipulated Loss Value of such Aircraft from time to time.
(c) Additional Insureds; Loss Payee. Lessee shall cause all policies
of insurance carried in accordance with this Section 10 to name the Insured
Parties as additional insureds as their respective interests may appear (it
being understood that the Insured Parties have no operational interest). Such
policies shall provide with respect to such additional insureds that (i) none
of their respective interests in such policies shall be invalidated by any act
or omission or breach of warranty of Lessee or of any other named insured;
(ii) no cancellation or lapse of coverage for nonpayment of premium or
otherwise, and no material change of coverage which adversely affects the
interests of such additional insured, shall be effective as to such additional
insured until 30 days (or, with respect to war risk insurance such lesser
period as may be customary in the London market for such insurance in such
area of the world) after receipt by such additional insured of written notice
from the insurers of such cancellation, lapse, or change; (iii) the Insured
Parties shall have no liability for premiums, commissions, calls, assessments
or advances with respect to such policies; (iv) the insurers waive any rights
of set-off, counterclaim, deduction or subrogation against such additional
insureds and their respective directors, officers, employees and agents. Each
liability policy shall provide that (i) all the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured, (ii) such policies will be primary
without any right of contribution from any other insurance carried by such
additional insureds and (iii) to the extent of the coverage provided, coverage
shall include and insure the indemnity provisions of Section 14 of this Lease
and the indemnity provisions contained in the Financier Documents. Each hull
policy shall, where appropriate, include a 50/50 claim funding arrangement in
the form of AVS 103 (this being an agreement between insurers and not forming
part of the policies of insurance) and provide that, so long as the insurers
shall not have received written notice from the Lessor that an Event of
Default has occurred and is continuing, or the Security Trustee or the Lessor
requires payment of the relevant amounts to it pursuant to the Operative
Agreements, any proceeds of less than $500,000 shall be payable to Lessee to
be applied to repair of the Aircraft; any proceeds of over $500,000 but less
than an Event of Loss shall be payable to Lessor or if applicable under the
Operative Agreements the Security Trustee (with prior written notice of
payment of any proceeds of over $1,000,000 given to the Insured Parties) and
any proceeds in respect of an Event of Loss, or if the insurers shall have
received written notice that an Event of Default under the Financier Documents
has occurred and is continuing, any single loss, regardless of the amount,
shall be payable to the Security Trustee as long as the Mortgage is in effect
and to Lessor after the Lien of the Mortgage shall have been discharged.
Furthermore the insurances required to be maintained by this Section 10 shall
not be affected by any other insurance which may be available to any of Lessor
and the Financiers so as to reduce the amount payable to any Financier, it
being warranted by the relevant additional named insured that they will not
knowingly effect or authorize the placement of other insurances covering the
same subject matter except on a contingency or secondary basis.
(d) Deductibles and Self-Insurance. Lessee may from time to time self-
insure, by way of deductible provisions in insurance policies, the risks
required to be insured against pursuant to this Section 10 in such reasonable
amounts as are then applicable to similar owned or Leased aircraft in Lessee's
fleet but in no case shall such self-insurance exceed an aggregate hull and
liability self-insurance retention of $280,000 per Aircraft per occurrence, and
with deductibles under any liability policy not to exceed $1,250 for each and
every loss with respect to passenger baggage, and $5,000 for each and every
loss with respect to cargo.
(e) Application of Hull Insurance Proceeds. Any payments received by
Owner Participant or Lessor under policies of hull insurance required to be
maintained by Lessee pursuant to this Section 10, shall subject to the terms of
the Operative Agreements be applied as follows:
(i) If such payments are received with respect to loss or damage
(including an Event of Loss with respect to an Engine or Propeller) not
constituting an Event of Loss with respect to an Airframe, such payments shall
be paid over to or retained by Lessee or the repairer of the Aircraft upon, or
at Lessor's option in conjunction with, Lessee performance of its repair or
replacement obligations under this Lease; and
(ii) If such payments are received with respect to an Event of
Loss with respect to an Airframe, so much of such payments as shall not exceed
the amount required to be paid by Lessee pursuant to Section 9 hereof shall be
applied in reduction of Lessee's obligations to pay such amount if not already
paid by Lessee, and to reimburse Lessee if it shall have paid all or part of
such amount, and the balance, if any, of such payments, subject to the rights
of any Insured Party under the Operative Agreements shall be promptly paid over
to, or retained by, Lessee.
(f) Insurance for Own Account. Nothing in this Section 10 shall
prohibit any of the Lessee or the Insured Parties from obtaining insurance for
their own account and any proceeds payable thereunder shall be payable as
provided in the insurance policy relating thereto, provided that no such
insurance may be obtained which would limit or otherwise adversely affect the
coverage or payment of any insurance required to be obtained or maintained
pursuant to this Section 10.
(g) Reports, Etc. Lessee shall begin negotiations or cause
negotiations to begin for the renewal of each required policy at least 30 days
before its expiration. Lessee shall, both on the Delivery Date and during the
Term, furnish to the Insured Parties in satisfactory from evidence of insurance
or renewal of the insurance policies required pursuant to this Section 10 and
the Lessee Assignment of Insurances (in a form acceptable to the Insured
Parties) prior to the cancellation, lapse or expiration of such insurance
policies and, on the renewal dates of the insurance policies carried by Lessee
pursuant to this Section 10, a report signed by a firm of independent aircraft
insurance brokers, appointed by Lessee and reasonably satisfactory to Lessor,
stating the opinion of such firm that the insurance then carried and maintained
on the Aircraft complies with the terms hereof (including, without limitation,
with respect to war risk insurance, if required). Lessee will cause such firm
to advise each Insured Party in writing promptly of any default in the payment
of any premium and of any other act or omission on the part of the Lessee of
which they have knowledge and which would in such firm's opinion invalidate or
render unenforceable, in whole or in any material part, any insurance on the
Aircraft. Lessee will also cause such firm to advise each Insured Party in
writing at least 30 days prior to the termination or cancellation of, or
material adverse change in, such insurance carried and maintained on the
Aircraft pursuant to this Section 10. Lessee will also procure that the firm
shall confirm to Lessor and the Security Trustee that the terms and conditions
of any provision for cancellation and automatic termination contained in such
policy are in accordance with normal market practice.
(h) Amendments to Insurances. Without prejudice to the foregoing
provisions, if due to changes in aviation insurance market practice and custom
Lessee is unable at any time to comply with its obligations under this Section
10, any Insured Party is reasonably of the view that the insurances required to
be maintained pursuant to this Section 10 afford less protection to the Insured
Parties, than would reasonably be required, Lessor shall forthwith notify
Lessee and as soon as practicable thereafter the insurance broker for Lessee
and the insurance broker(s) for such Insured Party shall meet in good faith to
consider what (if any) changes might be made to the terms and conditions of the
insurances required hereunder in order to take account of the changes in
aviation insurance market practice and custom. On the basis of the
recommendations of such insurance brokers such Insured Party and Lessee will
meet as soon as practicable in order to negotiate in good faith with a view to
reaching agreement on what (if any) amendments should be made to such
provisions and upon such agreement being reached, the parties will take
appropriate steps to amend the insurances accordingly.
(i) Ground Insurance. When the insurances required hereunder are not
maintained in full force and effect, the Aircraft shall be grounded and Lessee
shall, if required by Lessor, maintain at its sole cost, such ground insurance
as is of the type customarily carried by operators of aircraft similar to the
Aircraft being adequately insured, and subject to the Aircraft being adequately
insured, Lessor may require the Aircraft to proceed to or remain at an airport
designated by Lessor acting reasonably (at Lessor's sole cost and expense)
until the provisions of this Section 10 shall be fully complied with.
SECTION 11. LIENS.
Lessee shall not during the Term, directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to any Airframe, Engine
or Propeller or title thereto or the respective rights, title and interests
therein of Owner Participant, any Financier, or Lessor, or in this Lease except
(a) the respective rights of Lessor and Lessee as provided herein; the Lien of
the Mortgage and the rights of the parties to the other Operative Agreements;
(b) the rights of others under agreements or arrangements to the extent
expressly permitted in Section 6(a) and 8(c) thereof; (c) Liens for Taxes
either not yet due or being contested in good faith by appropriate proceedings
so long as such proceedings do not involve any material danger of the sale,
forfeiture or loss of the Airframe, Engines, Propellers or Parts; (d) material
suppliers', mechanics', airports', workers', repairers', employees' or other
like liens arising in the ordinary course of business and for amounts the
payment of which either is not yet delinquent or is being contested in good
faith by appropriate proceedings, and so long as such proceedings do not
involve a material danger of the sale, forfeiture or loss of any Airframe,
Engine or Propeller or Parts; (e) Liens arising out of judgments or awards
against Lessee (and for payment of which adequate reserves have been provided
with respect to which at the time an appeal or proceedings for review is being
prosecuted in good faith and there shall have been secured a stay of execution
pending such appeal or proceedings for review so long as such proceedings do
not involve a material danger of the sale, forfeiture or loss of any Airframe,
Engine, Propeller or Parts; and (f) Lessor's Liens; provided that the aggregate
amount of Liens permitted by clause (c), (d) and (e) shall not exceed $150,000
without the prior written consent of the Lessor (Liens described in clauses (a)
through (f) above (and to the extent approved to be outstanding in the case of
clauses (c), (d) and (e)) are referred to herein as "Permitted Liens"). Lessee
shall promptly, at its own expense, take such action as may be necessary to
duly discharge any such Lien not excepted above if the same shall arise at any
time. Lessee shall indemnify and hold Lessor harmless from and against any and
all losses which Lessor may sustain arising therefrom (including any claim by
Owner Participant or any Financier).
SECTION 12. TITLE, RECORDATION, FURTHER ASSURANCE, AND
COOPERATION WITH FINANCIERS.
(a) Title. Legal title to the Aircraft shall at all times be vested in
Lessor exclusively. The acceptance of the Aircraft by Lessee and Lessee's
possession thereof shall constitute merely a Lease. It is intended that this
Lease constitute a true lease for tax and all other purposes and Lessee has no
right, title or interest in the Aircraft other than as a Lessee hereunder and
shall not claim any interest other than as Lessee hereunder. Without limiting
the foregoing, Lessee shall not file any federal, state or local tax return
claiming ownership of the Aircraft.
(b) Registration. Prior to or concurrently with acceptance of the
Aircraft by Lessee, the Aircraft shall be registered by Lessor in the United
States and Lessee shall not take any action or allow any event to occur that
might jeopardize such registration and Lessor, except as permitted under this
Lease Agreement shall not take any action or allow any event to occur that
might jeopardize such registration.
(c) FAA Regulations. Lessee shall at all times comply with all FAA
regulations and other requirements of the FAA during the Term that are required
to maintain the Aircraft in a condition to satisfy the FAA Type Certificate and
a valid current U.S. Standard Airworthiness Certificate on the Aircraft,
including but not limited to all service, inspection, maintenance,
modification, repair and overhaul of the Aircraft; and in relation to the
flight crew standards and the operations of the Aircraft, whether performed by
Lessee or by others for Lessee. Lessee shall consult with Lessor and, if
necessary or appropriate, the FAA, with respect to the action required to meet
such requirements, including the execution of maintenance, flight operations
and other contracts with persons or firms duly authorized by the FAA. Lessee
and Lessor will execute all required documents and otherwise cooperate with all
reasonable requests of each other to complete the activities contemplated in
this Section 12(c).
(d) Recordation of Lease. Lessor shall cause this Lease, all exhibits
hereto, any Lease Supplements, and any and all additional instruments which
shall be executed pursuant to the terms hereof so far as permitted by
Applicable Law, to be kept, filed and recorded and to be re-executed, re-filed
and re-recorded at all times during the Term in the office of the FAA, pursuant
to the Federal Aviation Act and in such other places or with such other
governmental authority as Lessor may reasonably request to perfect and preserve
Lessor's rights hereunder. The schedule of rental payments shall not be filed
unless required by law or regulation.
(e) Further Assurances. Lessee shall promptly and duly execute and
deliver to Lessor such further documents (prepared at Lessor's sole expense)
and assurances and take such further action as Lessor may from time to time
during the Term reasonably request in order to establish and protect the rights
and remedies created in favor of the Indemnified Parties hereunder or under the
Operative Agreements or the title of Lessor to the Aircraft, including, without
limitation, if requested by Lessor, at the reasonable expense of Lessee, the
execution and delivery of supplements or amendments hereto, in recordable form,
subjecting any replacement or substituted engine or propeller to this Lease and
the recording of filing of counterparts hereof, or of financing statements with
respect hereto, in accordance with the laws of such jurisdiction as Lessor may
reasonably deem advisable.
(f) Cooperation with Financiers. Lessee acknowledges that Owner
Participant and Lessor will finance the acquisition of the Aircraft subsequent
to the date of this Lease and may refinance the outstanding obligations at any
time and from time to time (the initial and each subsequent financing are
referred to herein as a "Financing"). Lessee further acknowledges that Lessor
or Owner Participant may, at any time and from time to time prior to or during
the Term sell their respective interests in the Aircraft and this Lease to a
new owner, and that owner may at any time and from time to time prior to or
during the Term, grant Liens over the Aircraft or any part thereof (including,
without limitation, the Mortgage) and Lessor may, at any time and from time to
time prior to or during the Term, grant Liens over its rights under this
Agreement to a Financier as security for Owner Participant's or, as the case
may be, Lessor's obligations to such Financier. Lessee further acknowledges
that it will cooperate with Lessor with respect to a restructuring of the terms
hereof at the time of the first Financing, including the execution of a new
lease or sublease in replacement of this Lease on terms to be mutually agreed,
subject to the terms of Subsection (i) below.
(g) Notification of Status of Financing. Lessor undertakes to keep
Lessee informed as to the selection of the Financiers and the structure
arranging the implementation of any Financing.
(h) Assurances to Financiers. Lessee undertakes to provide all
reasonable assistance to every owner, Owner Participant, Lessor, and any
Financier and their respective representatives and advisers including
relocating the Aircraft to a selected jurisdiction at the time of any Financing
provided such relocation does not deprive Lessee of the Aircraft for a period
of more than 24 hours, and including entering into all additional documents,
including operative agreements and any assignment of insurances (including
amendments thereto) and amendments to or replacements of this Lease which may
be necessary to permit the Financing to be completed and in connection with the
perfection and maintenance of any Lien in relation to the Aircraft or any
operative agreements required by any Financier, including but without
limitation the making of all necessary filings and registrations. Lessee's
operations as an operator of commercial aircraft shall not be restricted or
otherwise impaired in any material way as a result of the implementation of any
such Financing. If any Financier shall impose upon Owner Participant or Lessor
any requirements as to insurance, reinsurance, maintenance, operation or
otherwise in respect of the Aircraft which are additional to or inconsistent
with the requirements of this Lease, Lessee shall, upon receipt of notice from
Lessor specifying such additional or inconsistent requirements and at all times
thereafter during the Term unless and until Lessor shall otherwise specify by
notice in writing, comply with such additional or inconsistent requirements in
addition to, or, as the case may be, instead of the requirements of this Lease.
(i) Effects of Financing and Assignments. Further to Subsections 12(f)
and 12(h) with respect to any Financing, and to Section 19 with respect to an
assignment by Lessor, Lessor hereby confirms the following:
(i) Lessee's operations as an operator of commercial aircraft, as
a provider of air transportation, and of the Aircraft shall not be restricted
or otherwise impaired in any material way as a result of the implementation of
any such Financing or assignment.
(ii) Except as provided in Section 5(c), such Financing or
assignment will not result in any limitation or diminution of Lessee's rights
or Lessor's obligations under the Lease.
(iii) In the event of Financing, Lessee will not be held
responsible under this Section 12 for the incremental cost of any ongoing
material obligations including but not limited to those referenced in the last
sentence of Section 12(h) required as a result of said Financing beyond: (A)
those existing as of the date immediately preceding such Financing, and (B)
those obligations identified in this Lease (except as specified in the last
sentence of Section 12(h)) but which do not apply until such time as a
Financing takes place.
(iv) In the event of a Financing, Lessee will not be held
responsible under Section 14 for the incremental cost of any obligations which
result in the Lessee being in a materially worse position than: (A) its
position at the date immediately preceding such Financing, and (B) the position
it will be in under the terms of this Lease at such time as a Financing takes
place. For the purpose of this clause, it is expressly understood that Lessee
would not be considered to be in a materially worse position under a Financing
involving tax depreciation benefits in the United States provided that such
Financing allows limited foreign use consistent with that permitted in this
Lease.
(v) Lessor will use its best efforts to minimize the imposition
on Lessee of administrative requirements or costs incurred at the time of
Financing as a result of said Financing or assignment. In the event of
untoward administrative requirements, Lessor will on a case by case basis
consider the reimbursement of Lessee's attorneys' fees for purposes of closing,
dependent on the extent of those requirements and on Lessee's use of its best
efforts to minimize those expenses. Lessor will also in any case reimburse
Lessee for any direct costs incurred in connection with an aircraft relocation
required to accommodate a Financing.
SECTION 13. RETURN OF AIRCRAFT AND RECORDS.
(a) Return of Aircraft. With respect to the Aircraft, at the
expiration of the Term, or upon the termination of this Lease pursuant to
Section 16, Lessee, at its own expense, shall, except as otherwise provided in
Section 16 hereof, return such Aircraft by delivering the same to Lessor at
such location within the continental United States as selected by Lessor, with
such Aircraft fully equipped with the Engines and the Propellers.
(b) Return of other Engines and Propellers. Lessee may return the
Airframe with an engine or propeller other than an Engine or Propeller (the
Engine or Propeller that is not being returned is referred to in this
paragraph as "Replaced Equipment" and that provided in its place is referred to
as "Substitute Equipment"), and the Substitute Equipment shall be deemed to be
an Engine or Propeller for all purposes hereof, provided that the following
conditions have been met:
(i) Lessee shall have provided Lessor with at least 30 days'
advance notice prior to the Return Date identifying the Substitute Equipment
including maintenance status and ownership interests.
(ii) Substitute Equipment shall have a value and utility at least
equal to, and shall be in as good operating condition as, Replaced Equipment
(other than as to accumulated hours, changes in which shall affect return
conditions calculations), shall be in the condition and repair required by the
terms hereof for an Engine or Propeller upon return, shall be of the same or
another manufacturer of the same or a comparable or improved model and suitable
for installation and use on the Aircraft with the other Engine and Propellers
duly installed on the Airframe.
(iii) Lessor, and all parties with ownership, leasehold or security
interests in Replaced Equipment shall be granted identical interests in
Substitute Equipment, free and clear of any other liens or interests. There
shall be delivered to and accepted by the appropriate party full warranty (as
to title) bills of sale, amendments to leases and security agreements,
opinions, and all other documents as deemed necessary or appropriate to create
identical interests in the Substitute Equipment.
(iv) Lessor, and all parties with ownership, leasehold or security
interests in the Replaced Equipment shall have conveyed title thereof to the
proper party and shall have released all liens and interests therein.
Conveyance of title to Replaced Equipment by Lessor as applicable shall be as-
is, where-is, without recourse or warranty, express or implied except a
warranty from Lessor against Lessor's Liens, and a warranty of all Lessor's
right, title and interest in and to the Replaced Equipment.
(v) Lessor or its agent shall be exclusively responsible for all
communications with all parties with ownership, leasehold or security interests
in Replaced Equipment and in any Substitute Equipment in which Lessor also has
an interest. Lessor makes no representation or warranty that the necessary
actions or approvals will be obtained or of the costs thereof. Lessee shall be
responsible for all communications with any other parties.
(vi) Lessee shall be responsible for all fees or expenses charged
in connection with this substitution by Lessor and by all parties with
ownership, leasehold or security interests in Replaced Equipment or Substitute
Equipment. Lessee shall also be responsible for recording fees and for
Lessor's attorneys' reasonable fees and reasonable expenses. Lessor shall not
charge a fee to Lessee for Lessor's services and will use reasonable efforts to
mitigate third party attorneys' fees.
(c) Maintenance Status. The maintenance status of individual
components on the Aircraft may vary from delivery condition but the overall
maintenance status of the Aircraft at the time of the Aircraft's return to
Lessor shall be subject to the following minimum standards:
(i) All parts, systems and components (other than Engines and
their associated line replaceable units) that are considered under the Lessee's
FAA maintenance program and the Manufacturer recommended maintenance program to
be "on-condition" shall be functioning and serviceable.
(ii) All Components (as hereinafter defined) that are listed in
Exhibit B as having a defined life between service, inspections, overhaul or
replacement by way of hours, cycles or calendar time shall have one-half time
remaining of the then defined life in hours, cycles or calendar time between
service, inspections, overhaul or replacement; provided that if subsequent to
the date hereof any Component is considered under the Lessee's FAA maintenance
program and the Manufacturer's recommended maintenance program to be "on-
condition", such Component shall be deleted from the list of Components in
Exhibit B and shall be returned to Lessor in the condition required by
Subsection (c)(i) hereof and; provided Aircraft shall be deemed to have
satisfied return conditions for Components if all Components on average meet
the half-life standard set forth in subsection (c)(ii).
Average half-life shall be measured by application of the formula set forth
below. In the event the Half-Life Variance is greater than zero, there shall
be deemed to be a deficiency in the overall maintenance status of the Aircraft,
and Lessee shall make a payment to Lessor in the amount of the Half-Life
Variance. In the event the Half-Life Variance is less than zero, there shall
be deemed to be a betterment in the overall maintenance status of the Aircraft,
and Lessor shall make a payment to Lessee in the amount of the Half-Life
Variance. The formula to calculate the Half-Life Variance is as follows:
Half-Life Variance = S (TBO/2 - TRr) x (Vo/TBO)
Where:
"Half-Life Variance" - is the sum of the difference in value for
all individual Components fitted on the Aircraft between the
maintenance standard as defined in subparagraph (c)(ii) above and
the value at the date of return of the Aircraft.
"Components" - as used in this Section, is defined in Section
13.(c)(ii). Engines (both HSI/GBI and hard-time overhaul) shall
not be included in the calculation.
"TBO" - is the limit between major maintenance events (overhauls,
inspections, or replacements) for each Component as specified in
Seller's Jetstream 41 Maintenance Manual as approved by the FAA,
and as generally accepted in the United States for operation of
such Aircraft, which limit shall be specified in Exhibit B hereto
but which is subject to adjustment from time to time to conform to
changes in the Jetstream 41 Maintenance Manual, provided, however,
that such change is generally accepted in the United States for
operation of Jetstream 41 Aircraft.
"Vo" - is the projected cost of each major maintenance event for
each Component based on the direct cost of overhaul, inspection or
replacement for said Components as required by the Lessee's FAA
approved maintenance program. Vo shall be agreed between Lessor
and Lessee from time to time during the term of this Lease based
upon Lessee's experienced cost of overhaul and that generally
available in the marketplace.
"TRr" - is the time remaining on each Component at the time of
return of the Aircraft until the next major maintenance event as
identified at the time of return of the Aircraft.
(iii) All exterior painted surfaces shall be in good condition,
ordinary wear and tear only excepted. The interior shall be in good, clean,
undamaged and untorn appearance and condition, ordinary wear and tear only
excepted.
(d) Records. Upon the return of the Aircraft, Lessee shall deliver to
Lessor all logs, manuals, certificates, data and inspection, modification,
repair, and overhaul records which are required to be maintained with respect
thereto under applicable rules and regulations of the FAA, Department of
Transportation or other government agency having jurisdiction over the
Aircraft. All records shall be in full compliance with Part 135 or Part 121 as
amended or superseded, whichever is applicable to Lessee. If Lessor so
requests, Lessee shall also provide a copy of the portions of the Lessee's
general maintenance manual which relate to the maintenance and records
practices for the Aircraft. Obligations with respect to the return of manuals
shall not be imposed on Lessee to the extent Lessee would be required to
acquire more individual copies of manuals than it has previously been required
to maintain as part of the operation of its fleet of Jetstream 41 aircraft.
Lessee shall be required to return such manuals that Lessee has been required
to maintain, to the extent that they become surplus to Lessee as a result of
the return of aircraft.
(e) General Condition of Aircraft. Upon return of the Aircraft, the
Aircraft's fuel tanks shall be full (provided that if the fuel tanks are not
full at delivery, Lessee will be obligated upon return to provide the same
level of fuel as at delivery) and the Aircraft shall (1) be in the same good
operating order, repair, condition and appearance as when received, ordinary
wear and tear excepted; (2) be free and clear of all Liens (other than Lessor's
Liens); (3) be clean by airline standard; (4) have installed the full
complement of parts, accessories and loose equipment delivered by Lessor in
respect of the Aircraft and any such parts, accessories and loose equipment as
is required for an Aircraft operating under FAR Part 135; (5) have a valid,
standard FAA Certificate of Airworthiness under FAR Part 135 or FAR Part 121 as
applicable of the Federal Aviation Regulations; (6) be in compliance with the
Manufacturer's original equipment specifications; (7) have undergone,
immediately prior to redelivery, a next scheduled check in accordance with the
Lessee's FAA approved equalised maintenance program; (8) be in compliance with
Lessee's FAA approved maintenance and corrosion control programs, (9) be in
compliance with all applicable airworthiness directives and Manufacturer's
mandatory service bulletins, applicable in reference to effective date, which
by the term thereof must be complied with on the Lease termination date,
however compliance may not be by way of recurring inspection unless the
Manufacturer has failed to provide a final corrective modification, to include
applicable part(s) for replacement, prior to the Lease termination date in
which case compliance may be by way of recurring inspection; (10) have
installed all applicable vendor's and Manufacturer's service bulletin kits
received free of charge by Lessee that are appropriate for the Aircraft or to
the extent not installed, those kits shall be furnished free of charge to
Lessor; (11) have any and all damage (or repairs of damage) to the Aircraft, be
demonstrated by Lessee to be within structural repair manual limits, or else be
covered by concessionary paperwork acceptable to the FAA; (12) have wings free
of fuel leaks noted as excessive or out of specified limits as defined in the
applicable Aircraft Maintenance Manual or Fuel Tank Component Maintenance
Manual; (13) have landing gear and wheel wells clean and free of excessive or
out of specified limit leaks as defined in the applicable Aircraft Maintenance
Manual or Landing Gear Component Maintenance Manual; (14) have the fuselage,
wings and empennage in compliance with the latest applicable structural
inspection or within 12 months of the last structural inspection, as designated
in the approved maintenance program ; (15) a fuel tank treatment program shall
be in operation as required; (16) have emergency equipment that has a calendar
life a minimum of one (1) year or one hundred percent (100%) of its total
approved life, whichever is less, remaining; and (17) have all Lessee
identification (i.e., name and logo) removed from the Aircraft, if requested by
Lessor, at Lessee's cost and expense.
(f) Engines. Lessee agrees to maintain each Engine on a program as
contained in the Lessee's approved maintenance manual or included in the
Jetstream 41 Maintenance Review Board (MRB) Report. In the event Engines are
maintained on a hard time program, Lessee shall return Engines with an average
of half time remaining of the then approved Engine manufacturer's program
(provided that no individual Engine shall have less than one quarter time
remaining to the next /CAM inspection) or pay the financial equivalent as
determined by the formula below.. In the event Engines are maintained in
accordance with an on condition maintenance program, Lessee shall provide data
trend information substantiating that there are no less than 3000 hours
remaining before / a CAM inspection, and similar time remaining with respect to
line replaceable units or shall pay the financial equivalent as determined by
the formula below .
Variance = (Vo/TBO) x (T - [TBO - TSO])
Where:
Vo = Projected cost of shop visit if Engines are on hard time or
average price of shop visits over the fleet if Engines are on
condition.
TBO = Hard time between CAM inspection if Engines are operated on a
hard time program or the average time achieved by the fleet between
CAM inspection if applied to Engines on condition.
T = TBO/2 if an Engine is operated on hard time or 3,000 hours if
an Engine is operated on condition.
TSO = Time since last CAM.
(g) Half-Time Equivalency. To the extent that the Engines are returned
in a condition better than the standard required in paragraph (h)
above, Lessee may apply the betterment ( as determined by the
formula in paragraph (h) above) solely against amounts owning
Lessor under paragraph (c)(ii).
(h) Final Inspection. Immediately prior to return of the Aircraft,
Lessee, at its own expense, shall make the Aircraft available to Lessor for
inspection ("Final Inspection") at Lessee's primary maintenance location in
order to verify that the condition thereof complies with the provisions of this
Section 13. In the event that, due to delays caused by Lessee, any required
work, repairs or services delays the return of the Aircraft to Lessor beyond
the expiration or earlier termination of the Term of this Lease, Lessee shall
continue to pay Rent in the same manner as if there had been no expiration or
termination of this Lease for the number of days until such required work,
repair or servicing has been completed and the Aircraft is returned to Lessor
as provided hereinabove pending which Lessee shall have no right to use the
Aircraft. The period allowed for the Final Inspection shall have such duration
as to permit Lessor to conduct the following:
(i) inspection of all records, logs and other materials referred
to herein;
(ii) inspection of the Airframe, Engines, and Parts including
without limitation, data trend reports for Engines; and
(iii) an operational test flight or flights of a total duration not
exceeding three hours with Lessor's representatives as observers. Lessee shall
maintain adequate insurance coverage for such flight or flights in accordance
with the terms of this Agreement and such additional insurance coverage, if
any, as Lessor may reasonably require.
(i) Storage. Upon any expiration or termination of this Lease with
respect to the Aircraft, at the written request of Lessor received by Lessee
ten (10) days in advance of the date provided for redelivery to Lessor
hereunder, subject to availability of space at Lessee's facilities, Lessee
shall arrange, or shall cause to be arranged, storage of such Aircraft beyond
the Term for a period not exceeding ninety (90) days at Lessor's risk and
expense.
(j) Alterations. At the time of return of the Aircraft, if not
otherwise specified in Lessee's records returned to Lessor, Lessee shall notify
Lessor of any alterations made to the Aircraft as a result of any Applicable
Law, rule, regulation or order of any government or governmental authority.
SECTION 14. TAX INDEMNITY, GENERAL INDEMNITY.
(a) General Tax Indemnity. Subject to exclusions stated in Section
14(b) below, Lessee agrees to indemnify, defend and hold harmless each
Indemnified Party, against all Taxes, howsoever imposed (whether imposed upon
any Indemnified Party, all or any part of the Aircraft or otherwise), by any
Federal, state or local government, political subdivision, or taxing authority
in the United States, by any government or taxing authority of or in a foreign
country or of or in a territory or possession of the United States, or by any
international authority, upon or with respect to or in connection with, based
upon or measured by, in whole or in part:
(i) the Aircraft, the Airframe, the Engines, the Propellers, the
Parts, or any part of any of the foregoing or interest therein;
(ii) the manufacture, modification, purchase, financing, ownership,
delivery, non-delivery, leasing, possession, use, operation, return, storage,
transfer of title, sale, acceptance, rejection or other disposition of or
action or event with respect to the Aircraft, the Airframe, the Engines, the
Propellers, the Parts, or any part of any of the foregoing or interest
therein;
(iii) the rentals, receipts, income or earnings, gains or revenue
arising from the purchase, financing, ownership, delivery, leasing,
possession, use, operation, return, storage, transfer of title, sale,
substitution, or other disposition of the Aircraft, the Airframe, the Engines,
the Propellers, the Parts, or any part of any of the foregoing or interest
therein;
(iv) the Lease or the Rent or other sums payable by Lessor;
(v) the property, or the income or other proceeds received with
respect to the property, held by the Security Trustee under the Mortgage; or
(vi) the Operative Agreements or amendments or supplements thereto,
their execution or the transactions contemplated thereby.
(b) Taxes Excluded. The indemnity provided for in Section 14(a) above
shall not extend to any Taxes not due in whole or part to: (1) the acts or
omissions of Lessee; (2) the delivery or acceptance of the Aircraft by or to
Lessee; (3) the use, possession, maintenance or operation of the Aircraft by
Lessee; (4) the misrepresentations of Lessee; or (v) the breach of any
covenant or warranty by Lessee. The indemnity provided for in Section 14(a)
above shall not extend to any of the following:
(i) in the case of the Lessor and its respective successors,
transferees or assigns permitted under the terms of the Operative Agreements,
taxes on, based on, or measured by, the income, capital, franchises, excess
profits or conduct of business (other than taxes which are in the nature of
sales, use, value added, excise, license or property taxes) of such
Indemnified Party imposed by the United States of America or any state or
local or foreign government or other taxing authority (collectively, "Income
Taxes") other than "Covered Income Taxes" (as such term is defined below);
(ii) in the case of each Financier and the Security Trustee and
their respective successors, transferees or assigns permitted under the terms
of the Operative Agreements, taxes on, based on, or measured by income,
receipts, capital, franchises or conduct of business of such Indemnified
Party, other than such Taxes imposed by any taxing authority of any
jurisdiction to the extent such Taxes exceed the amount that would have been
imposed had the Aircraft never been operated to or used in such jurisdiction;
(iii) Taxes relating to the Aircraft for any period after the
expiration or early termination of the Term and return of the Aircraft by
Lessee, except that Taxes incurred in connection with the exercise of any
remedies pursuant to Section 16 hereof following the occurrence of an Event of
Default or pursuant to Exhibit D shall not be excluded from the indemnity
provided for in Section 14(a) hereof;
(iv) Taxes imposed against the Owner Trustee or Security Trustee
with respect to any fees received by it for services rendered in its capacity
as Security Trustee under the Mortgage and Taxes imposed on the Lessor with
respect to fees or compensation for services rendered in its capacity as
Trustee under the Trust Agreement;
(v) as to any Indemnified Party, Taxes in respect of the
Aircraft or the Operative Agreements which arise out of or are caused by the
willful misconduct or gross negligence of such Indemnified Party, or the
breach by such Indemnified Party of any express covenant, agreement or
representation in the Operative Agreements;
(vi) Taxes which become payable by reason of any transfer by an
Indemnified Party of all or any portion of its interest in the Aircraft, the
Mortgage, the Trust Estate, any interest in any Operative Agreement or shares
of stock in an Indemnified Party (other than transfers which occur as a result
of the exercise of any rights under Section 16 or Exhibit D hereof, or any
remedies under the Mortgage);
(vii) Income Taxes imposed on the Trust or the Owner Participant
other than Covered Income Taxes; and
(viii) Taxes imposed by way of deduction or withholding by
the U.S. Federal Government on payments to a Person who is not a United
States Person or, except for Covered Income Taxes, by any foreign
government on payments to any Person (provided, that if in any case any
such Taxes are imposed as a result of a change in a tax treaty after the
date hereof that is not already published as a proposed change on the
date hereof or on the date an Indemnified Party becomes an Indemnified
Party, Lessee and the applicable Indemnified Parties agree to negotiate
in good faith a restructuring of the transaction contemplated hereby to
eliminate such Taxes without changing the economic terms of this
transaction, but if such Taxes are not so eliminated within 90 days from
the date of the imposition of such Taxes, Lessor may (unless Lessee
agrees to extend the indemnity provided for in Section 14(a) above to
cover such Taxes) elect to terminate this Lease on not less than an
additional 90 days prior notice to Lessee, whereupon the Term of this
Lease shall terminate and Lessee shall return the Aircraft to Lessor in
the condition required under Section 13 hereof on the date so selected
by Lessor in its notice of termination).
For purposes of this Section 14(b), a "Covered Income Tax" shall mean an
Income Tax (including, without limitation, a tax imposed upon gross income or
receipts) imposed on an Indemnified Party by any taxing authority (excluding
the U.S. Federal Government) (A) in whose jurisdiction the Indemnified Party
(including for this purpose all entities with which it is combined, integrated
or consolidated in such taxing authority's jurisdiction) did not engage in
business, did not maintain an office or other place of business, and was not
otherwise located, but the term "Covered Income Tax" shall include any Income
Tax imposed by a jurisdiction in which the Indemnified Party is deemed to
engage in business, or be otherwise located, to the extent it results from
the operation of the Aircraft in such jurisdiction or the transactions
contemplated by the Operative Agreements, or (B) in whose jurisdiction the
Indemnified Party in fact is doing business, maintaining an office or other
place of business, or is otherwise located, if such circumstance was no factor
in the imposition of such Tax.
(c) Amount of Payment. The amount Lessee shall be required to pay
with respect to any Tax indemnified against under Section 14(a) hereof shall
be an amount which (after taking into account all United States Federal,
state or local, and any foreign income tax effects on the Indemnified Party
and the anticipated realization by such Indemnified Party of tax benefits
resulting from the transaction to which such indemnity is related, the present
value of any anticipated future tax benefits to be realized by such party as a
result of deducting or crediting such Tax or as a result of the matters
immediately giving rise thereto, and the loss of use of money between the time
indemnity payments are included in income and tax benefits are realized) will
be sufficient to restore the Indemnified Party to the same position such party
would have been in had such Tax not been incurred or paid. For purposes of
this Section 14(c), it shall be assumed that any payment made to any Person
shall be taxable to the Indemnified Party at the highest applicable United
States Federal, state, and local and foreign rates in effect for the taxable
year for which the computation is made. Computations involving the loss of
use of money and present values shall be based on the corporate base rate on
the date payment is made under Section 14, as adjusted for applicable income
tax effects and compounded quarterly on the Rent Payment Dates.
(d) Procedures. Any amount payable to an Indemnified Party pursuant
to Section 14(a) above shall be paid within 30 days after receipt of a written
demand therefor from such Indemnified Party accompanied by a written statement
describing in reasonable detail the basis for such indemnity and the
computation of the amount so payable, provided that such amount need not be
paid prior to the time such Taxes are due to be paid.
(e) Refund. If a payment with respect to Tax under this Section 14 as
calculated pursuant to Section 14(c) above turns out to have been incorrectly
made because the Tax was not payable by the Indemnified Party or should not
have been indemnified against then, upon receipt by an Indemnified Party of a
refund or credit of all or part of any Taxes which Lessee shall have paid for
such Indemnified Party or for which Lessee shall have reimbursed or
indemnified such Indemnified Party, and provided there shall not have occurred
any Event of Default, such Indemnified Party shall pay to Lessee (or if such
Indemnified Party is not Lessor, Lessor shall pay to Lessee) an amount which,
after subtraction of the amount of any further net tax savings (or addition of
the amount of any net tax detriment), if any, realized by such Indemnified
Party as a result of the receipt thereof and payment under this paragraph, is
equal to the amount of such refund and any interest received by such
Indemnified Party on such refund (or if such Indemnified Party is not Lessor
an amount equal to the amount received by Lessor pursuant to the Financier
Documents which is referable on any such Tax which Lessee has so paid or for
which Lessee has so reimbursed or indemnified); provided, however, that such
amount shall not be payable (i) before such time as Lessee shall have made all
payments or indemnities then due and payable to such Indemnified Party under
Section 14(a) and under any other provision of the Operative Agreements or
(ii) to the extent that the amount of such payment would exceed (A) the amount
of all prior payments (other than amounts attributable to interest) by Lessee
to such Indemnified Party with respect to such Taxes less (B) the amounts of
all prior payments (other than amounts attributable to interest) by Lessor to
Lessee with respect to such Taxes.
(f) Reports and Returns. In case any report or return is required to
be made with respect to any Tax which is subject to indemnification under
Section 14(a) hereof, Lessee will either make such report or return in such
manner as will show the ownership of the Aircraft in the Lessor and shall send
a copy of the applicable portion of such report or return to the Indemnified
Party or, where Lessee is not permitted to file such report or return, will
notify the Indemnified Party of such requirement and prepare and deliver such
report or return to the Indemnified Party in such manner as shall be
satisfactory to such Indemnified Party within a reasonable time prior to the
time such report or return is to be filed.
(g) Withholding Taxes. All payments of Rent hereunder will be free
and clear of all withholding taxes, and if any withholding taxes are required
with respect to any such payments, Lessee shall pay an additional amount such
that the net amount actually received will be equal to the amount that would
be due absent such withholding. Each Indemnified Party shall promptly pay to
Lessee the amount of any withholding taxes for which Lessee has no obligation
to indemnify such Indemnified Party under this Section 14.
(h) General Indemnity. The Lessee hereby agrees to assume liability
for, and does hereby agree to indemnify, protect, save and keep harmless
(provided such indemnity shall not extend to the Manufacturer of the Aircraft
or any of its component parts and their affiliates for any claims arising out
of Manufacturer's legal liability as a manufacturer, repairer or supplier of
the Aircraft or any of its component parts) each Indemnified Party from and
against any and all liabilities, obligations, losses, damages, penalties,
claims (including claims by an employee of the Lessee or any of its agents or
contractors), actions, suits and related costs, judgments, expenses and
disbursements, including reasonable legal fees and expenses, of whatsoever
kind and nature excluding Taxes (for purposes of this Section 14(h)
collectively called "Expenses"), imposed on, asserted against or incurred by
any Indemnified Party, in any way resulting from or arising out of (i) this
Lease and the other Operative Agreements, (ii) the construction, installation,
ownership, design, maintenance, storage, delivery, lease, sublease,
possession, use, operations or condition of any Airframe, Engine or Propeller
or engine or propeller used in connection with the Aircraft (including,
without limitation, latent and other defects, whether or not discoverable by
the Indemnified Party or the Lessee, and any claim for patent, trademark or
copyright infringement and any claim arising under the strict liability
doctrine in tort), or (iii) the sale or other disposition of any Airframe,
Engine or Propeller or any portion thereof pursuant to Section 8, 9 or 16 or
Exhibit D hereof. . Except to the extent fairly attributable to the failure
of Lessee fully to discharge its obligations under this Lease the indemnities
contained in this Section 14(h) shall not apply, as to any Indemnified Party,
to any Expense to the extent resulting from or arising out of one or more of
the following: (A) any breach of a representation or warranty in this Lease
of such Indemnified Party; or (B) a breach by such Indemnified Party of any
express covenant or other agreement in this Lease to be performed or observed
by such Indemnified Party; or (C) the gross negligence or willful misconduct
of such Indemnified Party; or (D) a disposition (voluntary or involuntary) by
such Indemnified Party of all or any part of such Indemnified Party's interest
in the Airframe, or any Engine or Propeller or the Operative Agreements (other
than as contemplated by Sections 8, 9 and 16 and Exhibit D or following the
occurrence of a Default or Event of Default); or (E) any Taxes whether or not
Lessee is required to indemnify for such Taxes pursuant to the other Sections
of this Section 14 hereof (it being agreed that the other Sections of this
Section 14 provide for Lessee's sole liability to indemnify with respect to
Taxes); or (F) acts or events with respect to the Airframe or any Engine or
Propeller after the later of (i) return of possession of the Airframe or such
Engine or such Propeller to the Lessor or its designee pursuant to the terms
of the Lease, or (ii) the termination of the Term with respect to the Airframe
or such Engine or Propeller in accordance with the Lease; or (G) the
authorization or giving of any future amendments, supplements, waivers or
consents with respect any of the Operative Agreements other than such as have
been requested by or consented to by Lessee or as contemplated hereunder or
resulting from or arising out of a Default or Event of Default. If Lessor
shall have knowledge of any claim or liability hereby indemnified against it
shall give prompt written notice thereof to the Lessee; provided, however,
that the failure of Lessor to give such notice shall not relieve the Lessee of
any of its obligations hereunder.
If Lessor shall obtain a recovery of all or any part of any Expense or
other amount which the Lessee shall have paid to Lessor or for which the
Lessee shall have reimbursed Lessor, pursuant to this Section 14(h), Lessor
shall pay to the Lessee an amount equal to the amount of such recovery,
adjusted as provided in Section 14(c).
(i) Payments. All amounts payable by the Lessee pursuant to
Section 14(h) shall (i) be payable on demand to Lessor, or at Lessor's written
request, payable directly to the parties entitled to indemnification and
(ii) be adjusted as provided for Taxes as provided for in Section 14(c)
hereof.
(j) Survival. All the indemnities contained in Section 14(h) shall
continue in full force and effect notwithstanding the expiration or other
termination of this Lease and shall, in that event, be enforceable by the
Lessor and each Indemnified Party. The Lessee's obligations under Section 14
shall be that of primary obligor irrespective of whether the Indemnified Party
shall also be indemnified with respect to the same matter under any other
agreement by any other Person.
(k) Contest Rights. If any claim is made against Lessor or Lessor is
otherwise liable, for any Taxes which Lessee is required to pay or indemnify
against pursuant to this Agreement, Lessor shall, promptly upon becoming aware
of the same, notify Lessee in writing. If reasonably requested by Lessee in a
written notice to Lessor, Lessor and Lessee shall (at the cost of Lessee) seek
the opinion of a reputable independent tax accountant or counsel in the
relevant jurisdiction or jurisdictions acceptable to Lessor. If in the
opinion of such accountant or counsel, a contest of the claim has merit and a
substantial chance of success, then to the extent that there are means
available by which to do so, Lessor shall in good faith take such action as
Lessee may reasonably request to contest (including pursuing all
administrative and one level of judicial appeals) the validity, applicability
or amount of such claim for taxes and shall:
(a) resist or seek postponement of payment thereof if available and
practicable;
(b) pay the same only under protest, if protest is necessary and
proper; or
(c) if payment shall be made, seek refund thereof in appropriate
administrative or judicial (including one level of judicial appeal)
proceedings;
Provided Always that:
(i) Lessee shall indemnify Lessor (and prior to Lessor taking
such action shall provide to Lessor security satisfactory to Lessor in respect
of any amounts so payable) against all losses, costs and expenses Lessor may
incur in connection with or as a result of contesting such claim or taking
such action, including, without limitation, all reasonable legal and
accountants' fees and disbursements, and the amount of any interest or
penalties which may be payable and any other loss or damage whatsoever which
may be incurred as a result of contesting such claim or taking such action;
(ii) if such contest is to be initiated by the payment of, and
the claiming of a refund for, such Taxes, Lessee shall have advanced to Lessor
sufficient funds (on an interest-free basis and, if such advance results in
taxable income to Lessor on an after-tax basis) to make such payment;
(iii) nothing herein shall require Lessor (acting reasonably and
in good faith) to disclose any information or provide any document Lessor
considers confidential to it or to any customer of it, or to take or refrain
from taking any action or doing anything which would (or might), in the
opinion of Lessor adversely affect either immediately or at any time in the
future in any respect of any of the business or commercial interest of Lessor
or any of its affiliates; and
(iv) Lessee shall give Lessor sufficient information concerning
such contest as they may request from time to time.
(l) Additional Contest Rights. Subject to (i) no Event of Default
having occurred and continuing, (ii) to the prior written approval of Lessor
(such approval not to be unreasonably withheld), and (iii) Lessee first
ensuring that Lessor is indemnified and secured to its satisfaction against
all costs, expenses and liabilities thereby incurred or to be incurred, Lessee
shall be entitled to take, in the name of Lessor, such action as Lessee shall
see fit to defend or avoid any such Expenses as are referred to in Section
14(h) or to recover the same from any third party; and so long as the
conditions described in clauses (i), (ii) and (iii) of this paragraph (l) are
continuing to be complied with, Lessor shall not without Lessee's prior
consent, which consent shall not be unreasonably withheld or delayed, settle,
compromise or pay any Expenses in respect of which Lessee is required to
indemnify Lessor pursuant to Section 14(h).
SECTION 15. EVENT OF DEFAULT.
The following events shall constitute Events of Default:
(a) The Lessee shall fail to make any payment of Rent, when due,
subject to a five business day grace period available once in each fiscal
quarter in each of Lessee's fiscal years during the Term; or
(b) There shall occur any failure of Lessee to procure any of the
insurance coverage required by Section 10 hereof or such insurance shall cease
to be in full force and effect; or
(c) Lessee shall fail to observe or perform any other of the
covenants, conditions, agreements or warranties to be performed or observed by
Lessee hereunder and such failure shall continue unremedied for the earlier to
occur of (i) a period of ten Business Days after written notice thereof by
Lessor, or (ii) a period of ten Business Days after any corporate officer of
Lessee who, in the normal course of his operational responsibilities, would
have knowledge of the matter and the requirements of this Lease with respect
thereto shall have obtained actual knowledge of such failure; provided,
however, removal of the Aircraft at any time from the continental limits of
the United States or Canada in a manner not permitted hereunder shall result
in an immediate Event of Default; or
(d) Any representation or warranty made by Lessee herein or any
document or certificate furnished Lessor pursuant hereto shall prove to have
been incorrect in any material respect when made and shall remain incorrect
and material; or
(e) Lessee shall consent to the appointment of or taking possession by
a receiver, assignee, custodian, sequestrator, trustee or liquidator (or other
similar official) of itself or of a substantial part of its property, or
Lessee shall fail to pay its debts generally as they come due (as provided in
11 U.S.C. s 303(h)(l)), or shall make a general assignment for the benefit of
its creditors, or Lessee shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under the Federal bankruptcy laws, as now or hereafter constituted
or any other applicable Federal or State bankruptcy, insolvency or other
similar law or shall consent to the entry of an order for relief in an
involuntary case under any such law or Lessee shall file an answer admitting
the material allegations of a petition filed against Lessee in any such
proceeding, or otherwise seek relief under the provisions of any now existing
or future Federal or State bankruptcy, insolvency or other similar law
providing for the reorganization or winding-up of corporations, or providing
for an agreement, composition, extension or adjustment with its creditors; or
(f) An order, judgment or decree shall be entered in any proceedings
by any court of competent jurisdiction appointing, without the consent of
Lessee, a receiver, trustee or liquidator of Lessee or of any substantial part
of its property, or any substantial part of the property of Lessee shall be
sequestered, and any such order, judgment or decree or appointment or
sequestration shall remain in force undismissed, unstayed or unvacated for a
period of 60 days after the date of entry thereof: or
(g) A petition against Lessee in a proceeding or case under the
bankruptcy laws or other insolvency laws (as now or hereafter in effect) shall
be filed and shall not be withdrawn or dismissed within 90 days thereafter,
or, in case the approval of such petition by a court of competent jurisdiction
is required, the petition as filed or amended shall be approved by such a
court as properly filed and such approval shall not be withdrawn or the
proceeding dismissed within 90 days thereafter, or a decree or order for
relief in respect of the Lessee shall be entered by a court of competent
jurisdiction in an involuntary case under the Federal bankruptcy laws, as now
or hereafter constituted, or any other applicable Federal or State bankruptcy,
insolvency or other similar law, as now or hereafter constituted, and such
decree or order shall remain unstayed in effect for a period of 90 days, or
if, under the provisions of any law providing for reorganization or winding-up
of corporations which may apply to Lessee, any court of competent jurisdiction
shall assume jurisdiction, custody or control of Lessee of any substantial
part of its property and such jurisdiction, custody or control shall remain in
force unrelinquished, unstayed or unterminated for a period of 90 days; or
(h) A final judgment or judgments by a court or courts or competent
jurisdiction for the payment of money in excess of $150,000, shall be rendered
against Lessee and the same shall remain undischarged for a period of 60 days
during which execution of such judgment shall not be effectively stayed,
provided, however, that Lessee has not provided for Lessor's benefit a bond or
has not placed cash or a cash equivalent in escrow, in each case sufficient to
pay the full amount of such judgment or judgments on terms reasonably
satisfactory to Lessor; or
(i) There occur, be continuing, and having been declared in writing by
the party in interest, an event of default under any other agreement between
Lessee or an affiliate thereof and Lessor, Owner Participant, Seller,
Manufacturer, Trident or any affiliate thereof, or any trustee acting on
behalf of any of them, or any lease or sublease with respect to a Leased
Aircraft or any sublease or lease of a Jetstream Model 3101, 3201, or 4101
Turboprop aircraft by Lessee or an affiliate of Lessee ("Other Agreements"),
such that pursuant to the terms of the Other Agreements the event of default
as defined therein shall permit the party in interest to terminate said Other
Agreement; or
(j) The code sharing agreement between Lessee or its affiliates, and
United Airlines, shall cease to be in full force and effect prior to its
expiration in accordance with its term or shall have been amended, modified or
supplemented and such amendment modification or supplement would materially
adversely affect the ability of Lessee or any affiliate or subsidiary of
Lessee to perform its obligations hereunder, provided, however, that nothing
contained herein shall preclude Lessee from entering into any code sharing
agreement with any other carrier, or
(k) If the Aircraft is flown without a valid certificate of
airworthiness or any other valid permit to fly issued by the FAA or the
registration of the Aircraft or recordation of this Lease is canceled except
where such cancellation is caused by the default or negligence of Lessor.
SECTION 16. REMEDIES.
Upon the occurrence of any Event of Default and at any time thereafter so long
as the same shall be continuing, Lessor may, at its option, declare by notice
to Lessee this Lease to be in default; and at any time thereafter so long as
Lessee shall not have remedied all outstanding Events of Default, Lessor may
do, and Lessee shall comply with, one or more of the following with respect to
the Airframe or any Engine or Propeller, as Lessor in its sole discretion
shall elect, to the extent permitted by, and subject to compliance with any
mandatory requirements of, Applicable Law then in effect:
(a) Repossession. Cause Lessee, upon the written demand of Lessor and
at Lessee's expense, to, and Lessee shall, promptly return the Airframe or any
Engine or Propeller as Lessor may demand to Lessor at such location in the
continental United States of America as selected by Lessor in the manner and
condition required by, and otherwise in accordance with all of the provisions
of, Section 13 hereof as if such Airframe, Engine or Propeller were being
returned at the end of the Term; or Lessor, at its option, may enter upon the
premises where the Airframe, Engine or Propeller is located or believed to be
located and take immediate possession of and peaceably remove such Airframe,
Engine or Propeller without the necessity for first instituting proceedings,
or by summary proceedings or otherwise, and Lessee shall comply therewith, all
without liability to Lessor for or by reason of such entry or taking
possession, whether for the restoration of damage to property caused by such
taking or otherwise;
(b) Keep Idle. Hold, use, operate, sublease to others or keep idle
all or any part of the Airframe, Engine or Propeller as Lessor, in its sole
discretion, may determine, in any such case free and clear of any rights of
Lessee except as hereinafter set forth in this Section 16 and without any duty
to account to Lessee with respect to such action or inaction or for any
proceeds with respect thereto;
(c) Rescission. Rescind this Lease as to the Airframe or any Engine
or Propeller; or
(d) Other Remedies. Exercise any other right or remedy which may be
available under applicable Law or proceed by appropriate court action to
enforce the terms hereof or to recover damages for the breach hereof.
In addition, Lessee shall be liable for any and all Supplemental Rent due
hereunder before or after any termination hereof, including all costs and
expenses (including reasonable attorney's fees and disbursements) incurred by
reason of the occurrence of any Event of Default or the exercise of Lessor's
remedies with respect thereto including all costs and expenses incurred in
connection with the return of any Airframe, Engine or Propeller in accordance
with the terms of Section 13 hereof or any appraisal of the Aircraft. No
remedy referred to in this Section 16 is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Lessor at law or in equity; and the exercise or
beginning of exercise by Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by Lessor of any or all such other
remedies. No express or implied waiver by Lessor of any Event of Default
hereunder shall in any way be or be construed to be, a waiver of any future or
subsequent Event of Default.
SECTION 17. LESSOR'S RIGHT TO PERFORM FOR LESSEE.
If Lessee fails to make any payment of Rent required to be made by it
hereunder or fails to perform or comply with any of its agreements contained
herein, Lessor may itself make such payment or perform or comply with such
agreement, and the amount of such payment and the amount of the reasonable
expenses of Lessor incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand. No such action shall be deemed a repossession
of any Airframe, Engine or Propeller, and no such payment or performance or
other act shall be deemed to relieve the Lessee from any default hereunder.
SECTION 18. COUNTERPARTS.
This Lease may be executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall, subject to the next
sentence and the legends appearing on the cover and signature page hereof, be
an original, but all such counterparts shall together constitute but one and
the same instrument. To the extent, if any, that this Lease constitutes
chattel paper (as the term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction), no security interest in this Lease may
be created through the transfer or possession of any counterpart other than
the "original" counterpart which shall be identified as the counterpart
containing the receipt therefor executed by the Security Trustee on the
signature page thereof.
SECTION 19. ASSIGNMENT.
(a) Assignment by Lessor or Owner Participant. Lessor or Owner
Participant may, without the consent of Lessee sell, assign or otherwise
transfer any or all of its rights in the Aircraft or any or all of its rights
or obligations hereunder or under the Trust Agreement. In the event of such
an assignment by Lessor, Lessee agrees to execute all amendments to this Lease
necessary to reflect the interests of such assignee.
(b) Assignment by Lessee. Lessee may not assign any of its rights
hereunder. The prohibition against assignment by the Lessee can by waived with
the prior written approval by Lessor. If an approval is granted to an
assignment for the remainder of the Term, the Lessee will be relieved of its
obligation under Section 22(a) to continue to operate as an operator of
commercial aircraft and of the Aircraft.
SECTION 20. MISCELLANEOUS.
(a) Applicable Law. This Lease shall in all respects be governed by,
and construed in accordance with, the laws of the Commonwealth of Virginia.
This Lease shall be effective for all purposes as of the date first above
written.
(b) Notices. Unless otherwise specifically provided herein, all
notices required or permitted by the terms hereof shall be in writing and
shall be deemed to have been duly given when delivered personally or otherwise
actually received or five days after being deposited in the United States
mail, registered, postage prepaid, addressed as follows:
If to the Lessee:
Atlantic Coast Airlines
515A Shaw Road
Sterling, Virginia 20166
Attn: Chief Financial Officer
Fax: 703-406-6294
If to the Lessor:
First Security Bank , National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Fax: 801-246-5053
Phone: 801-350-5630
If to the Owner Participant:
British Aerospace Asset Management, Inc.
15000 Conference Center Drive, Suite 200
Chantilly, Virginia 20151
Attn: Vice President and General Counsel
Fax: 703-227-1766
or at such other place as any such party may designate by notice given
in accordance with this Section to the other parties.
(c) Judicial Proceedings. Lessee and Lessor hereby each waive
personal service of process and consent that service of process upon each of
them may be made by certified or registered mail, return receipt requested, at
its address specified or determined in accordance with the provisions of
Section 20(b), and service so made shall be deemed completed on the third
Business Day after such service is deposited in the mail. Nothing herein shall
affect the right to serve process in any other manner permitted by law or
shall limit the right of the Lessor to bring proceedings against the Lessee in
the courts of any jurisdiction.
(d) Unenforceability. Any provision of this Lease which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(e) Residual Value. Nothing in this Lease shall be construed to be a
guarantee by Lessee of any particular residual value of the Aircraft,
provided, however, that this Section 20(e) shall not reduce Lessee's
obligations otherwise set forth in this Lease.
(f) Time of Essence. Time is of the essence of this Lease and of
every provision herein contained.
(g) Set-Off. Lessor shall be entitled to set-off or withhold from any
amount due and payable to Lessee by Lessor under this Lease, or any amount
standing to the credit of Lessee on any account between Owner Participant,
Lessee and Lessor, any amounts from time to time due and payable by Lessee to
Lessor or Owner Participant under any agreement in relation to the Leased
Aircraft or any spare parts for the Leased Aircraft or otherwise, and shall be
entitled to do so notwithstanding that any such amount or amounts may not be
expressed in the same currency.
Lessee agrees that, with respect to any claim which it may now or hereafter
have against Owner Participant, Lessor, Seller, Manufacturer, British
Aerospace Public Limited Company or any of their respective affiliates or
subsidiaries in connection with any other transaction whatsoever, Lessee shall
pursue any such claim independently of Lessee's obligations under this Lease
and Lessee agrees not to use any such claim as a defense against, set-off from
or counterclaim to Lessee's obligations hereunder.
(h) Integrated Agreement. This Lease means this Lease Agreement, the
Schedules and the Exhibits hereto, and embodies together with any letter
agreements dated of even date herewith the entire agreement and understanding
between Lessor and Lessee relating to the Lease of the Aircraft and other
items to be delivered hereunder. Any other previous oral or written
communications, representations, agreements or understandings between Lessor
and Lessee with respect to the leasing of the Aircraft are superseded and
canceled by this Lease.
(i) No Individual Liability. First Security Bank , National
Association is entering into this Lease solely as trustee under the Trust
Agreement and not in its individual capacity and in no case whatsoever shall
First Security Bank , National Association (or any entity acting as successor
trustee under the Trust Agreement) be personally liable on, or for any loss in
respect of, any of the statements, representations, warranties, agreements or
obligations of Lessor hereunder as to all of which Lessee, its successors and
assigns, agree with respect to First Security Bank , National Association (or
any entity acting as successor trustee under the Trust Agreement), to look
solely to the trust estate pursuant to the Trust Agreement referred to in this
Section 20(i), except for any loss caused by [First Security Bank , National
Association] in its individual capacity, and any of its past, present or
future stockholders, subscribers of capital stock, officers, directors or any
incorporators.
(j) Waivers, Headings. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought. This Lease shall constitute an
agreement of Lease, and nothing contained herein shall be construed as
conveying to Lessee any right, title or interest in the Aircraft except as a
Lessee only. The section and paragraph headings in this Lease and the table
of contents are for convenience or reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease.
SECTION 21. REPRESENTATIONS, WARRANTIES AND ASSURANCES OF LESSEE.
Lessee hereby makes the following representations and warranties on the
Delivery Date:
(a) Corporate Existence. Lessee is a corporation duly organized under
the laws of the State of California, validly existing and in good standing
under the laws of said state and is duly qualified and authorized, or is in the
process of obtaining such qualification and authorization, to do business as a
foreign corporation wherever the nature of its activities requires such
qualification and authorization.
(b) Corporate Authority. Lessee has full power and authority to
execute, deliver and perform its obligations under this Lease, the Acceptance
Supplement and all supporting documents, the same having been duly authorized
by all necessary corporate action of Lessee and duly executed and delivered by
the authorized officers of Lessee and constitute legal, valid and binding
obligations of Lessee and are enforceable in accordance with such terms, except
as enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally as well as by general principles of equity
regardless of whether enforcement is sought in a proceeding in equity or at
law.
(c) Consistency with Governing Documents and Law. The execution and
delivery of this Lease, the Lease Acceptance Supplement, and all supporting
documents and the performance by Lessee of its obligations under this Lease,
the Lease Acceptance Supplement, and all supporting documents will not be
inconsistent with its charter or by-laws, do not contravene any presently
existing law, governmental rule or regulation, judgment or order applicable or
binding on Lessee, and do not contravene any provision of, or constitute a
material default or result in the creation of any material lien or encumbrance
with respect to this Lease or the Aircraft under any presently existing
indenture, mortgage, contract or other instrument to which Lessee is a party or
by which it or any of its properties is bound.
(d) Consents. No consent of shareholders of Lessee or of any trustee
or holders of any presently existing indebtedness or obligations of Lessee or
of any other person and no consent or approval of, giving notice to, or any
filing or registration with any governmental authority, body, commission or
agency is or will be required as a condition to the validity of this Lease or
as a condition to or in connection with the authorization, execution, delivery
or performance hereof by Lessee except those which have been duly made or
obtained, certified copies of which have been or will be delivered to Lessor
prior to delivery of the Aircraft to Lessee. To Lessee's knowledge, this Lease
and its performance do not and will not violate or contravene any law,
regulation, order, judgment or other similar obligation imposed by any
government or regulatory agency, court, administrative or legislative body.
(e) Pending Legal Actions. There is no action, suit or proceeding
pending or, to Lessee's knowledge, threatened, against or affecting Lessee or
any of its subsidiaries or associated companies before any court or before any
governmental commission, arbitrator, board, authority or administrative agency
which might result in any material adverse effect on the ability of Lessee or
any of its subsidiaries or associated companies to perform its obligations
under this Lease, the Lease Acceptance Supplement or any related documents, or
upon on assets, liabilities, business, prospects, profit, condition or
operations, financial or otherwise, of Lessee or any of its subsidiaries or
associated companies.
(f) Covenants, Terms and Conditions. Lessee is fully familiar with all
the covenants, terms and conditions of this Lease and is not in default with
respect thereto.
(g) Financial Statements. All financial statements and tax returns
that have heretofore been provided to Lessor in conjunction with this
transaction fairly and accurately represent the financial condition and income
of Lessee as of the dates given and as of the date hereof and as of such date
such financial statements or tax returns do not contain any untrue statements
of a material fact, nor do they omit to state a material fact required to be
stated therein or necessary in order to prevent such financial statements or
tax returns from being misleading; and there is no fact, situation or event
which, so far as can be foreseen by Lessee, will materially adversely affect
the properties, business assets, income, prospects or conditions, financial or
otherwise, of Lessee.
(h) Taxes. All Federal, state and local tax returns required to be
filed by Lessee have, in fact, been filed, and all taxes which are shown to be
due and payable in such returns have been paid. No material controversy in
respect of additional income taxes due for which adequate reserves have not
been provided is, to Lessee's knowledge, pending or threatened, which
controversy if determined adversely would materially and adversely affect
Lessee's ability to perform its obligations hereunder. The provision for taxes
on the books of Lessee is adequate for all open years, and for its current
fiscal period.
(i) ERISA. Lessee is not engaged in any transaction in connection with
which it could be subjected to either a civil penalty assessed pursuant to
Section 502(c) of ERISA or any tax imposed by Section 4975 of the Code; no
material liability of the Pension Benefit Guaranty Corporation has been or is
expected by Lessee to be incurred with respect to any employee pension benefit
plan (as defined in Section 3 of ERISA) with respect to any such employee
pension benefit plan. There is no event of termination of any such employee
pension benefit plan by the Pension Benefit Guaranty Corporation; and no
accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Internal Revenue Code), whether or not waived, exists with respect
to any such employee pension benefit plan.
(j) No Defaults Under Other Agreements. Lessee is not in default under
any indenture, mortgage, loan agreement or other agreement or instrument, in
each case of a material nature to which Lessee is now a party or by which it or
any of its properties is bound, unless such default has been waived; nor is
Lessee in violation of any law, order, injunction, decree, rule or regulation
applicable to Lessee of any court or administrative body, which violation could
materially and adversely affect the business, property or assets, operations or
condition, financial or otherwise of Lessee; and no event has occurred and is
continuing which, under the provisions of any such indenture, mortgage, loan
agreement or other agreement or instrument, with the lapse of time or the
giving of notice or both, would constitute a material default thereunder.
(k) No Defaults Under this Lease. No Default or Event of Default has
occurred and is continuing.
(l) Chief Executive Offices. Lessee's chief executive office (as that
term is defined in Article 9 of the Uniform Commercial Code as in effect in the
Commonwealth of Virginia) is located at the address set forth in the heading of
this Lease.
(m) Certificated Air Carrier. Lessee is a Certificated Air Carrier and
Lessor, as lessor of the Aircraft to Lessee, is entitled to the benefits of
Section 1110 of Title 11 of the United States Code with respect to the
Aircraft.
(n) Citizen of the United States. Lessee is a "citizen of the United
States" as defined in 49 U.S.C. Section 40102(a)(15)(c).
SECTION 22. GENERAL UNDERTAKINGS OF LESSEE.
Lessee covenants with Lessor that from the date of this Agreement and until all
its liabilities under the Lease have been fully discharged it will do the
following:
(a) Operation of Business. Lessee will remain in and continue to
operate the business of providing commercial air transportation services
possessing all necessary consents, licenses and authorizations required under
Applicable Law, preserve its corporate existence, conduct its business in an
orderly and efficient manner, satisfy its debts and obligations as they
generally fall due and keep and maintain all of its assets in good working
order and condition (Lessee's obligations under this Section 22(a) with respect
to its operation of the business of providing commercial air transportation
services will apply only until the termination of the Lease Agreements or until
an assignment of the Lease Agreements which has been approved by Lessor,
although a subsequent Lessee will be responsible for similar obligations for
the remainder of the Term. Lessee will not change its chief executive office
(as that term is defined in Article 9 of the Uniform Commercial Code as in
effect for the Commonwealth of Virginia) from that described in the heading of
this Lease, unless it gives Lessor notice thereof;
(b) No Defaults. Lessee will not willfully cause any Event of Default
to occur or knowingly permit any Event of Default to occur and shall notify
Lessor immediately of the occurrence of any Default or Event of Default or of
any occurrence which might have an adverse effect upon Lessee's ability to
perform any of its obligations under the Lease and provide Lessor with full
details of any steps which Lessee is taking, or is considering taking, in order
to remedy or mitigate the effect of any such Default or Event of Default;
(c) Notification of Potential Insurance Claims. In addition to any
formal notices required under this Lease, Lessee will notify Lessor as soon as
practicable after becoming aware of:
(i) any Event of Loss with respect to the Aircraft or any part
thereof or any damage to the Aircraft or any part thereof the cost of repair of
which is expected to be in excess of US$100,000 or equivalent;
(ii) any loss, arrest, hi-jacking, confiscation, seizure,
requisitioning, impounding taking in execution, detention or forfeiture of the
Aircraft any part thereof;
(iii) any death, sickness or injury of, or any loss or damage to
any property of, any third party caused by or in connection with, the Aircraft
which might reasonably be expected to give rise to a loss or liability in
excess of US$100,000 or equivalent in any other currency; and
(iv) any event in respect of the Aircraft which might reasonably
be expected to involve the Insured Parties loss or liability in excess of
US$100,000 or equivalent in any other currency;
(d) Protection of Aircraft. Lessee will not do or knowingly permit to
be done or omit or knowingly permit to be omitted anything which might expose
the Aircraft to penalty, forfeiture, impounding, detention or destruction or
abandon any part of the Aircraft in any location;
(e) Operational Interests. Lessee will not represent or hold out
Lessor the Insured Parties as carrying goods or passengers on the Aircraft or
as being in any way connected or associated with any operation or carriage
(whether for hire or reward or gratuitously) which Lessee may undertake nor
represent or hold out the Insured Parties as having any operational interest in
the Aircraft or any part thereof;
(f) Pledge of Credit. Lessee will not pledge the credit of the Insured
Parties for any maintenance, overhauls, replacement, repairs or modifications
to the Aircraft any part thereof or otherwise in connection with the use or
operation of the Aircraft or any part thereof;
(g) Release of Aircraft. In the event of any arrest, confiscation,
seizure, requisitioning, impounding, taking in execution, detention or
forfeiture of the Aircraft or any part thereof not constituting a casualty
occurrence, Lessee will take all steps necessary to procure the release thereof
at the earliest time possible;
(h) Attachments/Discharge of Liens. Lessee will discharge any and all
fees, charges to any third party in relation to the use or operation of the
Aircraft or any part thereof during the Term or any premises where the Aircraft
or any part thereof is situated during the Term and will keep the Aircraft or
any part thereof from being detained for rent, taxes or other outgoings or in
any way attached;
(i) Power to Sell. Lessee will not attempt to hold itself out as
having any power to sublease (without the prior written consent of Lessor),
sell, or otherwise dispose of or create any security interest over the Aircraft
or any part thereof. Lessee shall not claim depreciation allowances,
deductions or other tax benefits associated with ownership or deemed ownership
of the Aircraft;
(j) Landing and Navigation Fees. Lessee will pay and discharge whether
during or after the Term within the normal period of payment from time to time
permitted by the authority to which such charges are owed:
(i) all landing fees and other similar airport charges imposed by
the authorities or any airport from or to which the Aircraft may fly; and
(ii) all charges, if any, in respect of air navigation incurred by
Lessee in respect of the Aircraft.
(k) Financial Statements and Operational Reports. Lessee will submit
to Lessor, at the times indicated, the following:
(i) Within 90 days after the end of each fiscal year, a
consolidated balance sheet and consolidated statements of income and cash flow
for said fiscal year, audited by BDO Seidman or other independent accounting
firm acceptable generally to Lessor and without qualification as to the scope
of the audit or as to generally accepted accounting principles;
(ii) Within 45 days after the end of each quarter, through the
Term, the previous quarter's actual results as reported on the Lessee's
profit/loss statement, balance sheet, and cash flow statement;
(iii) At the time of filing or delivery to third parties, copies of
all financial statements, proxy statements, notices and reports as it shall
send to its security holders and all registration statements (without exhibits)
which it files with the Securities and Exchange Commission or any securities
exchange, copies of all press releases and other statements made generally
available by Lessee to the public concerning material developments in the
Lessee's business; and
(iv) Such other cost, revenue, and operational and financial
performance information as the Lessor may reasonably request, provided Lessee
shall not be required to provide information that would directly or indirectly
disclose confidential financial or operational information with respect to
aircraft other than British Aerospace products. On a quarterly basis, the
Lessee's Chief Financial Officer shall provide a written attestation of the
authenticity and completeness of all of the information supplied by Lessee.
(l) Inspection. Lessee will permit Lessor, any Financier, the
FAA and any person designated by Lessor to visit and inspect the Aircraft and
the records maintained in connection therewith at Lessee's facilities or at a
third party's facilities all at reasonable times and as often as Lessor may
reasonably request, and to obtain copies of such records at such person's
expense, provided that Lessor shall not interfere with Lessee's or such third
party's operations. Each such visit to such third party's facilities shall be
arranged through Lessee. During the Term, Lessee shall furnish to Lessor such
additional information concerning the location, condition, use and operation
of the Aircraft, engines, and parts as Lessor may reasonably request, and
Lessee shall permit (but only in connection with the monitoring of Lessee's
performance of its obligations under this Lease) any qualified person
designated by Lessor to fly on board the Aircraft on any flight on which space
is available (the Lessee being under no obligation to displace a revenue
passenger to accommodate the Lessor's representative) and where permitted by
regulations, in the Lessee's reasonable judgment, to sit in the cockpit of the
Aircraft in order to observe the condition and performance of the Aircraft in
flight.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to be
duly executed by their authorized officers as of the day and year first above
written.
LESSOR:
FIRST SECURITY BANK ,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as trustee
under a trust created under a
Trust Agreement dated as
of __________, 199__
By:
Its: Vice President
LESSEE:
ATLANTIC COAST AIRLINES
By:
Its:
By: _______________________________
Its: _______________________________
EXHIBIT A TO LEASE AGREEMENT
Atlantic Coast Airlines
Jetstream Series 4100 Model _____
Aircraft S/N ______, U.S. Reg. _______
Lease Agreement Dated as of __________, 199__
LEASE ACCEPTANCE SUPPLEMENT
THIS LEASE ACCEPTANCE SUPPLEMENT, dated ____________, 199__ is executed and
agreed by and between First Security Bank , National Association, a national
banking association, not in its individual capacity but solely as Owner
Trustee under Trust Agreement dated as of __________, 199__ (hereinafter
referred to as "Lessor"), and Atlantic Coast Airlines, a California
corporation (hereinafter referred to as "Lessee").
W I T N E S S E T H:
1. Lessor and Lessee have heretofore entered into a Lease Agreement dated
as of __________, 199__, (the "Lease") providing for the execution and
delivery of this Lease Acceptance Supplement. The terms defined in the Lease
shall have the same meanings when used herein.
2. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
the Aircraft described in Schedule 1 hereto and made a part hereof (the
"Aircraft"). Lessee hereby acknowledges and agrees, respecting the Aircraft:
(A) That Lessee has inspected the Aircraft fully and completely as to
size, model, function and conformity to the specification,
(B) That the Aircraft is of a size, design, function and manufacture
selected by Lessee,
(C) That Lessee is satisfied that the same is suitable for its
intended purposes and any special purposes of Lessee,
(D) LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS".
LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR (FOR
THE PURPOSES OF THIS SECTION 2(d), IN ITS INDIVIDUAL CAPACITY OR OTHERWISE),
OWNER PARTICIPANT AND ANY FINANCIER: (i) THE AIRFRAME AND EACH ENGINE ARE OF A
SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE,
(ii) LESSEE IS SATISFIED THAT THE AIRFRAME AND EACH ENGINE ARE SUITABLE FOR
THEIR RESPECTIVE PURPOSES, AND (iii) NONE OF LESSOR, OWNER PARTICIPANT OR ANY
FINANCIER MAKE, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE
DEEMED TO HAVE EXPRESSLY DISCLAIMED, AND LESSEE HEREBY WAIVES, RELEASES AND
RENOUNCES, ANY WARRANTY, REPRESENTATION, GUARANTY, LIABILITY AND OBLIGATION OF
LESSOR, OWNER PARTICIPANT OR ANY FINANCIER, AND ANY RIGHT, CLAIM AND REMEDY OF
LESSEE AGAINST SUCH PARTIES, EXPRESS OR IMPLIED, ARISING BY OPERATION OF LAW,
COURSE OF PERFORMANCE, COURSE OF DEALING, USAGE OF TRADE OR OTHERWISE, AS TO:
THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR
ANY PARTICULAR PURPOSE OF THE AIRFRAME, ANY ENGINE, ANY PROPELLER, ANY PART,
ANY DATA OR ANY OTHER THING DELIVERED, SOLD OR TRANSFERRED HEREUNDER,
THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO
THE AIRFRAME, ANY ENGINE, ANY PROPELLER, ANY PART, ANY DATA OR ANY OTHER THING
DELIVERED, SOLD OR TRANSFERRED HEREUNDER,
THE ABSENCE OF LATENT OR ANY OTHER DEFECT OR NONCONFORMANCE
IN THE AIRFRAME, ANY ENGINE, ANY PROPELLER, ANY PART, ANY DATA OR ANY OTHER
THING DELIVERED, SOLD OR TRANSFERRED HEREUNDER, WHETHER OR NOT DISCOVERABLE,
OR
THE ABSENCE OF ANY ACTUAL OR ALLEGED INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT OR THE LIKE.
LESSEE FURTHER WAIVES, DISCLAIMS, RELEASES AND RENOUNCES ANY LIABILITY,
RIGHT, CLAIM, REMEDY OR OBLIGATION BASED ON TORT, INCLUDING STRICT LIABILITY,
WHETHER OR NOT ARISING FROM THE NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR
IMPUTED) EXCEPT FOR WILLFUL MISCONDUCT OR GROSS NEGLIGENCE, OF LESSOR, OWNER
PARTICIPANT OR ANY FINANCIER, ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY FOR LOSS OF OR DAMAGE TO THE AIRFRAME, ANY ENGINE, ANY PROPELLER, ANY
PART, ANY DATA OR ANY OTHER THING DELIVERED, SOLD OR TRANSFERRED HEREUNDER, OR
ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRFRAME, ANY ENGINE, ANY PROPELLER, ANY PART, ANY DATA OR ANY
OTHER PHYSICAL THING DELIVERED, SOLD OR TRANSFERRED HEREUNDER.
(E) That the Aircraft has been delivered to, is now in the possession
of, and is acceptable to Lessee.
(ii) Lessee hereby agrees to pay to Lessor as Basic Rent for the Aircraft the
amounts set forth in the Schedule of Rental Payments attached hereto as
Schedule 2.
(ii) In addition Lessee agrees to pay to Lessor when required by the Lease
the Stipulated Loss Value payments in the amounts set forth in Schedule 3
attached hereto and made a part hereof.
(ii) The date of delivery and acceptance of the Aircraft is the date of this
Lease Acceptance Supplement set forth in the opening paragraph hereof.
(ii) All of the rights and obligations hereunder, including matters of
construction, validity and performance shall be governed in the same manner
and under the same circumstances as the Lease.
(ii) Lessee hereby states that the Representatives, Warranties and Assurances
of Lessee in Section 21 of the Lease are valid and correct on the date hereof
and that no Default has occurred which is continuing.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have set their hands and seals on the
first day written above.
LESSOR:
FIRST SECURITY BANK ,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as
trustee under a trust created
under a Trust Agreement
dated as of __________, 199__
By: _________________________
Its: Vice President
LESSEE:
ATLANTIC COAST AIRLINES
By: __________________________
Its: __________________________
By: __________________________
Its: __________________________
EXHIBIT B TO LEASE AGREEMENT
Atlantic Coast Airlines
British Aerospace (Operations) Limited
Jetstream Series 4100 Model 4101 Aircraft
S/N ______, U.S. Reg. _______
Lease Agreement Dated as of __________, 199__
SCHEDULE OF LIFE-LIMITED COMPONENTS
MRB REF J41 COMPONENT INTERVAL
21-30-05 ELECTRIC-PNEUMATIC VALVE F/C3,900 HRS
21-30-06 ELECTRO-PNEUMATIC VALVE F/C6,000 HRS
21-30-08 CABIN AIR FILTER REPLACE 1,800 HRS
21-30-10 ALTITUDE SWITCH F/C1,500 HRS
23-71-02 COCKPIT VOICE RECORDER O/H6,000 HRS
23071-03/09 INERTIA SWITCH TEST 3 YRS
23-71-07 CVR LOCATOR BEACON BATTERY REPLACE 6 YRS
24-30-05 STANDBY POWER SUPPLY CAP CK 300 HR/12 MO
24-30-09 STARTER GENERATOR CMR O/H 600 HRS
24-002 GENERATOR CONTROL UNIT L/L 16,000 HRS
24-32-01 BATTERY DEEP CYC 3 MO
25-60-04 LIFEJACKETS INSP 30 DAYS
25-60-05 ELT BATTERY REPLACE 12 MO
26-21-01 FIRE BOTTLE CARTRIDGE REPLACE 10 YRS
26-21-07 FIRE BOTTLES (ENGINE) HYDRO 14 YRS
27-50-01 FLAP HYDRAULIC CONTROL UNIT F/C 3,000 HRS
29-10-04 MAIN/RETURN FILTER VALVE REPLACE 1,800 HRS
29-10-07 PRESSURE RELIEF VALVE B/C 6,000 HRS
29-20-04 EMERGENCY SELECTOR VALVE B/C 1,200 HRS
31-21-01/02 CLOCK BATTERY REPLACE 3 YRS
31-31-02 FLIGHT DATA RECORDER O/H 8,000 HRS
31-31-08 FDR LOCATOR BEACON BATTERY REPLACE 6 YRS
32-10-03 MAIN SHUT STRUT L/L 60,000 HRS
32-20-03 MAIN SHOCK STRUT L/L 60,000 HRS
MRB REF J41 COMPONENT INTERVAL
33-52-02 EMERGENCY LIGHT BATTERIES DEEP CYC 6 MO
35-10-05 CREW OXYGEN BOTTLE GAUGE CAL 3 YRS
35-10-06 CREW OXYGEN BOTTLE TEST 3 YRS
35-10-07 CREW OXYGEN MASKS F/C 3 YRS
35-20-05 ALTITUDE SWITCH F/C 1,800 HRS
35-20-06 ALT COMPENSATING REGULATOR CAL 1,800 HRS
35-20-08 PAX OXYGEN BOTTLE TEST 3 YRS
61-00-09 PROPELLER INSP 3,000 HRS
71-00-04 ISOLATOR ELASTOMERIC L/L 6,000 HRS
72-00-07 OIL FILTER REPLACE 300 HRS
72-00-11 GEARBOX INSP 3,000 HRS
72-00 12 COMPRESSOR INSP 3,000 HRS
72-00-13 HOT SECTION INSP 1,500 HRS
72-00-12 SHOULDERED TIE SHAFT L/L 20,000 CYC
72-00-12 COMPRESSOR STUB SHAFT L/L 20,000 CYC
72-00-14 1st COMPRESSOR IMPELLER L/L 10,000 CYC
P/N 3105129-1
72-00-14 1st COMPRESSOR IMPELLER L/L 30,000 CYC
P/N 3105129, 3104276-4
72-00-14 2nd COMPRESSOR IMPELLER L/L 30,000 CYC
P/N 3104204-6/-7
72-00-16 CENTER ROTATING SEAL PLATE L/L 20,000 CYC
P/N 3104189
72-00-15 1st STAGE TURBINE DISK L/L 20,000 CYC
P/N 3104026-7
72-00-15 2nd STAGE TURBINE DISK L/L 20,000 CYC
P/N 3104142-5
72-00-15 3rd STAGE TURBINE DISK L/L 20,000 CYC
P/N 3104108-6
76-00-06 FLEXIBLE CONTROL ASSYs REPLACE 6,000 HRS
76-00-07 CONTROL CABLES REPLACE 20,000 FLT
79-00-06 OIL TEMP SWITCH INSP 15,000 HRS
If a life-limited component is subsequently fitted to or on the Aircraft, such
life
limited component shall be incorporated by reference into this Exhibit B.
EXHIBIT C TO THE LEASE AGREEMENT
Atlantic Coast Airlines
British Aerospace (Operations) Limited
Jetstream Series 4100 Model 4101 Aircraft
S/N ______, U.S. Reg. _______
Lease Agreement Dated as of __________, 199__
SCHEDULE OF PRESENT INSURED PARTIES
Lessor/Owner-Trustee:
Owner Participant:
Seller:
Security Trustee, Facility
Agent and Banker:
Lenders:
Manufacturer
EXHIBIT D TO LEASE AGREEMENT
Atlantic Coast Airlines
British Aerospace (Operations) Limited
Jetstream Series 4100 Model 4101 Aircraft
S/N ______, U.S. Reg. _______
Lease Agreement Dated as of __________, 199__
*
[TWO PAGES OF CONFIDENTIAL MATERIALS OMITTED]
EXHIBIT E TO LEASE AGREEMENT
Atlantic Coast Airlines
British Aerospace (Operations) Limited
Jetstream Series 4100 Model 4101 Aircraft
S/N ______, U.S. Reg. _______
Lease Agreement Dated as of __________, 199__
BAAM, INC. Letterhead
SIDE LETTER RE: TERMINATION / EVENT OF LOSS PAYMENTS
The Side Letter Re: Termination/ Event of Loss Payments shall be as follows:
*
[TWO PAGES OF CONFIDENTIAL MATERIALS OMITTED]
EXHIBIT D-1
BACKSTOP FINANCING TERMS
*
[FIVE PAGES OF CONFIDENTIAL MATERIALS OMITTED]
EXHIBIT E
PAYMENT INSTRUCTIONS
All payments due to Seller under this Agreement shall be made to:
Banque Generale du Commerce
36, Rue Marbeuf
75008 PARIS
Bank Code: *
Branch Code: *
Account Number: *
Swift Code: CGENFRPP
All payments due to Buyer under this Agreement shall be made to:
Account Name: *
Account No: *
ABA No: *
Bank: Crestar Bank
Alexandria, VA
EXHIBIT F-3
Agreed Residual Value Table - New Aircraft
*
EXHIBIT G
*
[NINE PAGES OF CONFIDENTIAL MATERIALS OMITTED]
EXHIBIT H
CERTIFICATE OF ACCEPTANCE
IN ACCORDANCE WITH that certain Purchase Agreement dated
("Agreement"), by and between AERO INTERNATIONAL
(REGIONAL), acting as agent for and on behalf of British Aerospace
(Operations) Limited, ("Seller)", and the undersigned ATLANTIC COAST AIRLINES
("Buyer"), Buyer hereby accepts the below-described airframe, engines and
propellers ("Aircraft") and agrees that (a) the Aircraft has been delivered to
and accepted by Buyer in accordance with the conditions set forth in the
Agreement (b) any discrepancies listed below shall be rectified by Seller
subsequent to delivery and (c) there has been accepted with the Aircraft the
logs and other records required to be delivered pursuant to the Agreement:
Airframe
One (1) Jetstream Aircraft Ltd. Model Jetstream, Series 4100 aircraft,
with the following manufacturer's serial number and registration number:
Manufacturer's Serial Number FAA Registration Number
Engines
Two (2) Garrett AiResearch Model GPE331-14GR/HR engines with the
following manufacturer's serial numbers:
Propellers
Two (2) McCauley propellers with the following manufacturer's serial
numbers:
EXECUTED by a duly authorized representative of Buyer at
this day of ,
19 .
("Buyer")
By:
Name:
List of any Discrepancies to be Rectified by Seller subsequent to the Delivery
Date:
EXHIBIT I-1
AMENDMENT TO SUBLEASE AGREEMENT
Atlantic Coast Airlines
Jetstream 32 Aircraft
S/N ___, Reg. ______
THIS __________ AMENDMENT TO SUBLEASE AGREEMENT, dated as of ___________
__, ____, is entered into by and between Jet Acceptance Corporation,
("Sublessor"), and Atlantic Coast Airlines, a California corporation
("Sublessee").
WHEREAS, Sublessor and Sublessee are parties to a Sublease Agreement
dated as of __________ __, 19__ and to a Sublease Acceptance Supplement dated
__________ __, 19__, (such Sublease Agreement and Sublease Acceptance
Supplement, the "Sublease") providing for the sublease by Sublessor to
Sublessee of the aircraft (the "Aircraft") as identified above and as further
described in Schedule 1 to the Sublease Acceptance Supplement; and
WHEREAS, the Sublease was recorded by the Federal Aviation
Administration (the "FAA") as one instrument on ___________ __, ____ and was
assigned Conveyance No. ____________; and
WHEREAS, Sublessor and Sublessee have agreed to amend the Sublease as
hereinafter provided.
NOW THEREFORE, the parties hereto agree and do hereby amend the Sublease
as follows:
A. AMENDMENTS
1. Section 1 shall be amended to add the following definitions:
""Florida Engine" shall mean any engine delivered to Sublessee by
Sublessor or its affiliate pursuant to the Used J32 Agreement under any lease
or sublease, including each engine which at the time of such delivery was
mounted on any aircraft delivered to Sublessee pursuant to the Used J32
Agreement, each engine that was provided as a spare, and each Replacement
Engine."
""JACO Propeller" shall mean any propeller delivered to Sublessee by
Sublessor or its affiliate under any lease or sublease, including each
propeller that was provided as a spare, and each Replacement Propeller."
""Used J32 Agreement" shall mean the Used J32 Aircraft Agreement to
Lease dated as of October 30, 1992 by and between British Aerospace, Inc. and
Atlantic Coast Airlines."
2. Section 13 (a) shall be deleted in its entirety and replaced with the
following:
"Return of Aircraft. With respect to the Aircraft, at the expiration of
the Term, or upon the termination of this Sublease pursuant to Section 16,
Sublessee, at its own expense, shall, except as otherwise provided in Section
16, return such Aircraft by delivering the same to Sublessor at such place as
Sublessor may specify on Sublessee's route structure, or, at Sublessor's
expense, at any other location in the continental United States of America."
3. Section 13 (b) shall be deleted in its entirety and replaced with the
following:
"Return of Engines and Propellers. Upon return the Aircraft shall be
fully equipped with two Engines (or Florida Engines) duly installed on the
Airframe and two Propellers (or JACO Propellers) duly installed on such
Engines or Florida Engines. So long as Sublessee returns Engines or Florida
Engines and Propellers or JACO Propellers with each Airframe, free of liens
including Permitted Liens but excluding Lessor's Liens, Sublessee shall have
no obligation whether under this Section 13 (b) or otherwise, to take any
action or to incur or reimburse any expense with regard to title of Engines or
Florida Engines or Propellers or JACO Propellers. Sublessee shall, however,
cooperate with reasonable requests of the Sublessor with respect to the
documentation required to title such engines and propellers in the name of
Lessor or Sublessor as the case may be."
4. Section 13 (c) shall be amended to add the following ultimate sentence:
"Obligations with respect to the return of manuals shall not be imposed
on Sublessee to the extent the Sublessee would be required to acquire more
individual copies of manuals than it has previously been required to maintain
as part of the operation of its fleet of Jetstream 32 aircraft. Sublessee
shall be required to return to Sublessor such manuals as Sublessee has been
required to maintain to the extent that they become surplus to Sublessee as a
result of the return of aircraft."
5. Section 13 (d), shall be amended to add the following sentences to
paragraph one immediately after the first sentence:
"Prior to the return of the Aircraft, Sublessee shall be permitted to
remove any ACARS/FM equipment it has installed on the Aircraft, and will not
be required to provide substitute equipment to perform the tasks provided by
said equipment. It is expressly acknowledged that airframe checks are not
required under this Section 13."
6. Section 13 (d)(2), shall be amended to add the following proviso to the
first sentence:
", provided, however, that Sublessee shall not be required to repaint
the Aircraft or to replace any other customized equipment."
B. MISCELLANEOUS
1. Except as provided herein, nothing contained in this ______ Amendment to
Sublease Agreement shall be deemed to waive or release Sublessee from any of
its obligations or duties under the Sublease, including without limitation its
obligation to pay rent, all of which obligations and duties are hereby
expressly ratified and confirmed by Sublessee.
2. All capitalized terms used herein without definition shall have the
respective meaning assigned thereto in the Sublease. All references in the
Sublease to "this Agreement", "herein", "hereof" and the like shall be deemed
to refer to the Sublease as amended hereby.
3. Sublessee represents and warrants to Sublessor that (i) it has full
power and authority to execute, deliver and perform its obligations under this
______ Amendment to Sublease Agreement, (ii) the obligations herein constitute
the legal, valid and binding obligations of Sublessee and are enforceable in
accordance with their terms, (iii) the execution, delivery and performance of
this ______ Amendment to Sublease Agreement does not contravene any material
provision of or constitute a material default under any agreement or other
instrument to which Sublease is a party or by which it or its property is
bound, and (iv) Sublessee is not in default under the Sublease or any material
agreement or other instrument to which it is a party.
4. This ______ Amendment to Sublease Agreement shall in all respects be
governed by, and construed under the laws (without reference to the conflicts
laws) of the Commonwealth of Virginia, including all matters of construction,
validity and performance.
5. This ______ Amendment to Sublease Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this ______ Amendment to
Sublease Agreement to be executed as of the date first above written by their
officers or agents thereunto duly authorized.
SUBLESSOR: SUBLESSEE:
JET ACCEPTANCE CORPORATION ATLANTIC COAST AIRLINES
By:__________________________ By:___________________________
Its:__________________________
Its:___________________________
By:___________________________
Its:___________________________
ACKNOWLEDGED AND CONSENTED TO:
ATLANTIC COAST AIRLINES, INC.
as Guarantor
By:__________________________
Its:__________________________
EXHIBIT I-2
AMENDMENT TO SUBLEASE AGREEMENT
Atlantic Coast Airlines
Jetstream 32 Aircraft
S/N ___, Reg. ______
THIS __________ AMENDMENT TO SUBLEASE AGREEMENT, dated as of ___________
__, ____, is entered into by and between Jet Acceptance Corporation,
("Sublessor"), and Atlantic Coast Airlines, a California corporation
("Sublessee").
WHEREAS, Sublessor and Sublessee are parties to a Sublease Agreement
dated as of __________ __, 19__ and to a Sublease Acceptance Supplement dated
__________ __, 19__, (such Sublease Agreement and Sublease Acceptance
Supplement, the "Sublease") providing for the sublease by Sublessor to
Sublessee of the aircraft (the "Aircraft") as identified above and as further
described in Schedule 1 to the Sublease Acceptance Supplement; and
WHEREAS, the Sublease was recorded by the Federal Aviation
Administration (the "FAA") as one instrument on ___________ __, ____ and was
assigned Conveyance No. ____________; and
WHEREAS, Sublessor and Sublessee have agreed to amend the Sublease as
hereinafter provided.
NOW THEREFORE, the parties hereto agree and do hereby amend the Sublease
as follows:
A. AMENDMENTS
1. Section 1 shall be amended to add the following definitions:
""JACO Propeller" shall mean any propeller delivered to Sublessee by
Sublessor or its affiliate under any lease or sublease, including each
propeller that was provided as a spare, and each Replacement Propeller."
""Purchase Agreement" shall mean the Amended and Restated Stock
Purchase Agreement dated as of September 30, 1991 among WestAir Holding, Inc.,
WestAir Commuter Airlines, Inc. and Atlantic Coast Airlines, Inc."
""WestAir Engine" shall mean any engine delivered to Sublessee by
Sublessor or its affiliate pursuant to the Purchase Agreement under any
lease or sublease, including each engine which at the time of such delivery
was mounted on any aircraft delivered to Sublessee pursuant to the Purchase
Agreement, each engine that was provided as a spare, and each Replacement
Engine."
2. Section 13 (a) shall be deleted in its entirety and replaced with the
following:
"Return of Aircraft. With respect to the Aircraft, at the expiration of
the Term, or upon the termination of this Sublease pursuant to Section 16,
Sublessee, at its own expense, shall, except as otherwise provided in Section
16, return such Aircraft by delivering the same to Sublessor at such place as
Sublessor may specify on Sublessee's route structure, or, at Sublessor's
expense, at any other location in the continental United States of America."
3. Section 13 (b) shall be deleted in its entirety and replaced with the
following:
"Return of Engines and Propellers. Upon return the Aircraft shall be
fully equipped with two Engines (or WestAir Engines) duly installed on the
Airframe and two Propellers (or JACO Propellers) duly installed on such
Engines or WestAir Engines. So long as Sublessee returns Engines or WestAir
Engines and Propellers or JACO Propellers with each Airframe, free of liens
including Permitted Liens but excluding Lessor's Liens, Sublessee shall have
no obligation whether under this Section 13 (b) or otherwise, to take any
action or to incur or reimburse any expense with regard to title of Engines or
WestAir Engines or Propellers or JACO Propellers. Sublessee shall, however,
cooperate with reasonable requests of the Sublessor with respect to the
documentation required to title such engines and propellers in the name of
Lessor or Sublessor as the case may be."
4. Section 13 (c) shall be amended to add the following ultimate sentence:
"Obligations with respect to the return of manuals shall not be imposed
on Sublessee to the extent the Sublessee would be required to acquire more
individual copies of manuals than it has previously been required to maintain
as part of the operation of its fleet of Jetstream 32 aircraft. Sublessee
shall be required to return to Sublessor such manuals as Sublessee has been
required to maintain to the extent that they become surplus to Sublessee as a
result of the return of aircraft."
5. Section 13 (d), paragraph two shall be amended to add the following
proviso to the first sentence:
", provided, however, that Sublessee shall not be required to repaint
the Aircraft or to replace any other customized equipment."
6. Section 13 (d) shall be further amended to add the following penultimate
and ultimate sentences:
"Prior to the return of the Aircraft, Sublessee shall be permitted to
remove any ACARS/FM equipment it has installed on the Aircraft, and will not
be required to provide substitute equipment to perform the tasks provided by
said equipment. It is expressly acknowledged that airframe checks are not
required under this Section 13."
7. The third paragraph in Section 13 (e) shall be deleted in its entirety
and replaced with the following:
"For the purpose hereof the term "cycle life limited component" shall
mean the time controlled components fitted on the Aircraft as listed in
Schedule 4 to Exhibit A attached hereto."
B. MISCELLANEOUS
1. Except as provided herein, nothing contained in this ______ Amendment to
Sublease Agreement shall be deemed to waive or release Sublessee from any of
its obligations or duties under the Sublease, including without limitation its
obligation to pay rent, all of which obligations and duties are hereby
expressly ratified and confirmed by Sublessee.
2. All capitalized terms used herein without definition shall have the
respective meaning assigned thereto in the Sublease. All references in the
Sublease to "this Agreement", "herein", "hereof" and the like shall be deemed
to refer to the Sublease as amended hereby.
3. Sublessee represents and warrants to Sublessor that (i) it has full
power and authority to execute, deliver and perform its obligations under this
______ Amendment to Sublease Agreement, (ii) the obligations herein constitute
the legal, valid and binding obligations of Sublessee and are enforceable in
accordance with their terms, (iii) the execution, delivery and performance of
this ______ Amendment to Sublease Agreement does not contravene any material
provision of or constitute a material default under any agreement or other
instrument to which Sublease is a party or by which it or its property is
bound, and (iv) Sublessee is not in default under the Sublease or any material
agreement or other instrument to which it is a party.
4. This ______ Amendment to Sublease Agreement shall in all respects be
governed by, and construed under the laws (without reference to the conflicts
laws) of the Commonwealth of Virginia, including all matters of construction,
validity and performance.
5. This ______ Amendment to Sublease Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this ______ Amendment to
Sublease Agreement to be executed as of the date first above written by their
officers or agents thereunto duly authorized.
SUBLESSOR: SUBLESSEE:
JET ACCEPTANCE CORPORATION ATLANTIC COAST AIRLINES
By:__________________________ By:___________________________
Its:__________________________
Its:___________________________
By:___________________________
Its:___________________________
ACKNOWLEDGED AND CONSENTED TO:
ATLANTIC COAST AIRLINES, INC.
as Guarantor
By:__________________________
Its:__________________________
EXHIBIT I-3
AMENDMENT TO SUBLEASE AGREEMENT
Atlantic Coast Airlines
Spare Garrett AiResearch Engines
Serial Nos. P66010, P66034, P66082, P66096, P66183, P66216
THIS __________ AMENDMENT TO SUBLEASE AGREEMENT, dated as of ___________
__, ____, is entered into by and between Jet Acceptance Corporation,
("Sublessor"), and Atlantic Coast Airlines, a California corporation
("Sublessee").
WHEREAS, Sublessor and Sublessee are parties to a Sublease Agreement
dated as of September 30, 1991 and to a Sublease Acceptance Supplement dated
January 1, 1992, (such Sublease Agreement and Sublease Acceptance Supplement,
the "Sublease") providing for the sublease by Sublessor to Sublessee of six
engines (the "Engines") as identified above and as further described in
Schedule 1 to the Sublease Acceptance Supplement; and
WHEREAS, the Sublease was recorded by the Federal Aviation
Administration (the "FAA") as one instrument on ___________ __, ____ and was
assigned Conveyance No. ____________; and
WHEREAS, Sublessor and Sublessee have agreed to amend the Sublease as
hereinafter provided.
NOW THEREFORE, the parties hereto agree and do hereby amend the Sublease
as follows:
A. AMENDMENTS
1. Section 1 shall be amended to add the following definitions:
""Purchase Agreement" shall mean the Amended and Restated Stock
Purchase Agreement dated as of September 30, 1991 among WestAir Holding, Inc.,
WestAir Commuter Airlines, Inc. and Atlantic Coast Airlines, Inc."
""WestAir Engine" shall mean any engine delivered to Sublessee by
Sublessor or its affiliate pursuant to the Purchase Agreement under any lease
or sublease, including each engine which at the time of such delivery was
mounted on any aircraft delivered to Sublessee pursuant to the Purchase
Agreement, each engine that was provided as a spare, and any replacement for
any such engine."
2. Section 13 (a) shall be deleted in its entirety and replaced with the
following:
"Return of Engines. With respect to each Engine, at the expiration of
the Term, or upon the termination of this Sublease pursuant to Section 16,
Sublessee, at its own expense, shall, except as otherwise provided in Section
16, return each Engine by delivering the same to Sublessor at such place as
Sublessor may specify on Sublessee's route structure, or, at Sublessor's
expense, at any other location in the continental United States of America.
So long as Sublessee returns each Engine, or a WestAir Engine in lieu thereof,
free of liens including Permitted Liens but excluding Lessor's Liens,
Sublessee shall have no obligation whether under this Section 13 (a) or
otherwise, to take any action or to incur or reimburse any expense with regard
to title of Engines or WestAir Engines. Sublessee shall, however, cooperate
with reasonable requests of the Sublessor with respect to the documentation
required to title such engines in the name of Lessor or Sublessor as the case
may be."
3. Section 13 (c) shall be amended to add the following ultimate sentence:
"The obligations in this Section 13 (c) notwithstanding, Sublessee shall
not be required to acquire more individual copies of manuals than it has
previously been required to maintain as part of the operation of its fleet of
Jetstream 32 aircraft. Sublessee shall be required to return to Sublessor
such manuals as Sublessee has been required to maintain to the extent that
they become surplus to Sublessee as a result of the return of aircraft."
4. The first paragraph in Section 13 (e) shall be deleted in its entirety
and replaced with the following:
"Overhaul Payment. At the time of return of each Engine or WestAir
Engine the then current cost of overhaul or hot section inspection shall be
determined (Vo). An aggregate "half-life value", Vh, of the overhaul and hot
section inspection shall be determined by taking one-half (1/2) of the sum of
the current cost of overhaul and hot section inspection. Thereafter an
amount, Vi, shall be calculated with respect to each overhaul and hot section
inspection as follows:
Vi = t * Vo
tTOT
Where
Vi = the portion of the current cost of overhaul or hot section
inspection consumed to date;
t = hours, calendar time or number of landings, as the
case may be, since the last overhaul or hot
section inspection of each Engine or WestAir
Engine;
tTOT= the FAA mandated time between overhaul or hot section
inspection, as the case may be, under Sublessee's then
FAA approved maintenance program;
Vo = the then current cost of overhaul or hot section inspection
of that component.
If the aggregate total of Vi with respect to the overhaul and hot
section inspection is greater than the half-life value of the overhaul and hot
section inspection, Sublessee shall pay Sublessor they difference. If the
aggregate total of Vi with respect to the overhaul and hot section inspection
is equal or less than the half-life value, Vh, then Sublessee shall have no
obligation to make any payment to Sublessor with respect thereto."
B. MISCELLANEOUS
1. Except as provided herein, nothing contained in this ______ Amendment to
Sublease Agreement shall be deemed to waive or release Sublessee from any of
its obligations or duties under the Sublease, including without limitation its
obligation to pay rent, all of which obligations and duties are hereby
expressly ratified and confirmed by Sublessee.
2. All capitalized terms used herein without definition shall have the
respective meaning assigned thereto in the Sublease. All references in the
Sublease to "this Agreement", "herein", "hereof" and the like shall be deemed
to refer to the Sublease as amended hereby.
3. Sublessee represents and warrants to Sublessor that (i) it has full
power and authority to execute, deliver and perform its obligations under this
______ Amendment to Sublease Agreement, (ii) the obligations herein constitute
the legal, valid and binding obligations of Sublessee and are enforceable in
accordance with their terms, (iii) the execution, delivery and performance of
this ______ Amendment to Sublease Agreement does not contravene any material
provision of or constitute a material default under any agreement or other
instrument to which Sublease is a party or by which it or its property is
bound, and (iv) Sublessee is not in default under the Sublease or any material
agreement or other instrument to which it is a party.
4. This ______ Amendment to Sublease Agreement shall in all respects be
governed by, and construed under the laws (without reference to the conflicts
laws) of the Commonwealth of Virginia, including all matters of construction,
validity and performance.
5. This ______ Amendment to Sublease Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this ______ Amendment to
Sublease Agreement to be executed as of the date first above written by their
officers or agents thereunto duly authorized.
SUBLESSOR: SUBLESSEE:
JET ACCEPTANCE CORPORATION ATLANTIC COAST AIRLINES
By:__________________________ By:___________________________
Its:__________________________
Its:___________________________
By:___________________________
Its:___________________________
ACKNOWLEDGED AND CONSENTED TO:
ATLANTIC COAST AIRLINES, INC.
as Guarantor
By:__________________________
Its:__________________________
EXHIBIT J
ADDITIONAL PRODUCT SUPPORT
*
[THREE PAGES OF CONFIDENTIAL MATERIALS OMITTED]
EXHIBIT K
PURCHASE PRICE REVISION
*
EXHIBIT L
FORM OF CONFIRMATION OF SALE/LEGAL OPINION/EVIDENCE OF OWNERSHIP OF AIRCRAFT
1. CONFIRMATION OF SALE
By this Confirmation of Sale, by delivery, AERO INTERNATIONAL (REGIONAL) (the
"Seller") acting for and on behalf of British Aerospace (Operations) Limited
(the Manufacturer) acknowledges that on [ ] 199[ ] the Seller did deliver,
and Atlantic Coast Airlines, a California Corporation, (the "Buyer") did
accept delivery of physical possession of, one (1) British Aerospace aircraft
bearing Manufacturer's serial number [ ] with two AlliedSignal aircraft
engines bearing manufacturer's serial numbers [ ], and [ ] delivered
therewith (the Aircraft) pursuant to the Purchase Agreement dated
February 1997 between the Seller the Buyer (the Contract) and the
Buyer did pay to the Seller, in accordance with Clause 3.4 of the Contract,
the Purchase Price (as defined in the Contract) and that accordingly title to
the Aircraft had passed from the Manufacturer by delivery of the Aircraft from
the Seller to the Buyer in accordance with Clause 8.2 of the Contract.
The Manufacturer hereby warrants to Buyer, its successors and assigns, that
Manufacturer has conveyed to Buyer good title to the Aircraft, free and clear
of all liens and that the Manufacturer shall warrant and defend such title
forever against all claims and demands whatsoever; and that this Confirmation
of Sale is made and delivered pursuant to the provisions of the Contract,
dated as of [ ], between the Seller and Buyer.
Dated: , 199[ ]
For and on behalf of
BRITISH AEROSPACE (OPERATIONS) LIMITED
By
Title
2. LEGAL OPINION
, 199[ ]
Our Ref. /NWA
By Courier
Mr. Bob Peregrin, Esq.
Dougherty, Fowler and Peregrin
204 North Robinson
900 City Place
Oklahoma City, OK 73102
Dear Bob:
ATLANTIC COAST AIRLINES
Please find enclosed originals of the following documents:
1) British Aerospace (Operations) Limited Legal Opinion
2) Evidence of Ownership of Aircraft (executed in counterpart)
Yours sincerely,
Name:
Title:
Enclosur
, 199[ ]
Our Ref. /Buyer
FOR THE ATTENTION OF MR. J. STANDELL
Mike Monroney Aeronautical Center
Oklahoma City, Oklahoma, U.S.A.
Dear Sirs:
LEGAL CERTIFICATION
I am a Solicitor of [ } and Legal Advisor toBritish Aerospace
(Operations) Limited ("Manufacturer"), and I have reviewed the Purchase
Agreement ("Contract") between Atlantic Coast Airlines ("Buyer") and Aero
International (Regioinaal) dated .
Make
Model
Serial Number
FAA Registration Number
British Aerospace
Jetstream 4100
[ ]
[ ]
In this regard I have examined the instrument entitled Evidence of Ownership
of Aircraft executed by Seller on ,
a copy of which is attached.
Based upon my examination of the above-mentioned instrument, and assuming
execution by the Buyer, it is my opinion that, following the signing of the
Certificate of Acceptance by the Buyer, the receipt by the Seller of the
payment due under the Contract, and the delivery of physical possession of the
Aircraft at Prestwick, Scotland on ,
transfer of the title to the Aircraft from Manufacturer to Buyer was effected
and that as of the date of the said payment, title to the Aircraft was vested
in Buyer.
Yours faithfully,
Name:
Title:
3. EVIDENCE OF OWNERSHIP OF AIRCRAFT
Atlantic Coast Airlines, Inc. (Buyer), and Aero International (Regional)
(Seller) represent and certify that the following is an extract from that
Purchase Agreement between Buyer and Seller dated .
[Clause of Contract]
Buyer and Seller by these presents hereby represent and certify that the Buyer
signed the Certificate of Acceptance required by the above quoted paragraph,
on , and made the payment due and delivery of
physical possession took place on that date at Prestwick, Scotland, and that
all other conditions were met for the passage of title and risk from the
Manufacturer to the Buyer in the Aircraft, described as follows:
Make
Model
Serial Number
FAA Registration Number
British Aerospace
Jetstream 4100
[ ]
[ ]
The Buyer and Seller further represent and certify that as of the above date
hereof there are no other instruments of any nature affecting or conveying
title of the Aircraft and thus the provisions of the above quoted paragraph
constitute the only provisions in any instrument describing conveyance of
title to the Aircraft and that title to the Aircraft is in the Buyer.
This Certificate may be executed in counterparts, which taken together shall
constitute one and the same instrument, and the parties hereto may execute
this Certificate by signing any such counterpart.
Date:
Signed by
on behalf of the Seller
Title: Vice President - Legal
Signed by
on behalf of Buyer
Title:
EXHIBIT M
Dispute Resolution
*
[THREE PAGES OF CONFIDENTIAL MATERIALS OMITTED]
EXHIBIT N
JETSTREAM 32 AIRCRAFT
*
[FIVE PAGES OF CONFIDENTIAL MATERIALS OMITTED]
44
26
EXHIBIT 10.60
LEASE AGREEMENT
Dated as of _________________, 1996
BETWEEN
FINOVA CAPITAL CORPORATION
(Lessor)
AND
ATLANTIC COAST AIRLINES
(Lessee)
Concerning
(N____UE )
One Jetstream Series 4100 Model 4101 Airframe
Two Allied Signal Model TPE331-14GR-802H and TPE331-14HR-802H Engines
Two McCauley Propellers
Model B5JFR36C1101-B/C-114GCA-0 and C5JFR36C1102-B/C-L114GCA-0
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") dated as of __________, 1996, by
and between FINOVA Capital Corporation, a Delaware corporation ("Lessor") and
Atlantic Coast Airlines, a California corporation ("Lessee").
WHEREAS, Lessee desires to lease from Lessor and Lessor is willing
to lease to Lessee the Aircraft described herein upon and subject to the terms
of this Lease;
NOW, THEREFORE, in consideration of the mutual promises herein,
the Lessor and the Lessee agree as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise requires, the following terms shall
have the following meanings for all purposes of this Lease Agreement and shall
be equally applicable to both the singular and the plural forms of the terms
herein defined:
"Acceptance Certificate" means the certificate in substantially
the form of Exhibit A hereto to be executed by Lessee on the Delivery Date.
"Aeronautics Authority" shall mean, where applicable, the
Department of Transportation, the Federal Aviation Administration and/or the
Administrator of the Federal Aviation Administration ("FAA"), or any person,
governmental department, bureau, commission or agency succeeding to the
functions of any of the foregoing.
"Affiliate" means with respect to any Person, any other person
directly or indirectly controlling, controlled by or under common control with
such Person. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities, by contract or
otherwise.
"Aircraft" means the Airframe to be delivered and leased hereunder
together with the Engines and Propellers initially installed on such Airframe
when delivered and leased hereunder or any Engine or Propeller as defined
herein, all as more particularly described and identified in the Lease
Supplements pertaining thereto.
"Airframe" means: (A) the BAe Jetstream 4100 Model 4101 aircraft
designated in a Lease Supplement (except the Engines an Propellers and engines
and propellers from time to time installed on an Airframe) leased hereunder by
the Lessor to the Lessee and having the manufacturer's serial number and the
Federal Aviation Authority registration number as set forth in such Lease
Supplement, and (B) except as otherwise provided in Sections 9.2 and 9.4
hereof, any and all Parts so long as the same shall be incorporated or
installed in or attached to an Airframe, or so long as title thereto shall
remain vested in the Lessor in accordance with the terms of Article 9 hereof,
after removal from an Airframe.
"Appraisal Procedure" shall mean the procedure specified in this
paragraph for determining an amount or value. With respect to any other
amount or value, Lessor and Lessee shall consult for the purpose of
determining such amount or value by mutual agreement. In the absence of such
agreement on or before the 30th day following the commencement of the
Appraisal Procedure, either of such parties may give written notice to the
other requesting determination of such amount or value by appraisal, and in
such event the parties shall consult for the purpose of appointing a mutually
acceptable qualified independent appraiser. If the parties are unable to
agree on a single appraiser on or before the 20th day after such notice, such
amount or value shall be determined by a panel of three independent
appraisers, one of whom shall be selected by each of Lessee and Lessor on or
before the 10th day following the expiration of such 20-day period. If one
party appoints an appraiser pursuant to the immediately preceding sentence,
and the other party fails to appoint a second appraiser within the applicable
time limit, the appraisal shall be made by the first appointed appraiser
without the appointment of any other appraiser. If a second appraiser is duly
appointed, on or before the 10th day after appointment of the second
appraiser, a third appraiser shall be selected by agreement of the first two
appraisers, or if such two appraisers are unable to agree upon a third
appraiser by such date, such appointment shall be made by the American
Arbitration Association (or its successors). Lessee shall pay all the fees
and expenses of the Appraisal Procedure. Each appraiser appointed pursuant to
the foregoing procedure shall be experienced, shall be independent of Lessee,
Lessor and the manufacturers of any material components of the Aircraft, and
shall be instructed to determine such amount or value on or before the 30th
day after the appointment of the last of such appraisers to be appointed, and
such determination shall be final, binding and conclusive upon the parties.
If three appraisers shall be appointed, the determination shall be the average
of the three appraisals rendered by the appraisers. In the event, however,
that the lowest or the highest of the three appraisals, or both, varies by
more than ten percent from the middle appraisal, the appraisal or appraisals
so varying shall be disregarded. Except as otherwise specified in the Lease,
any estimate of an amount or value determined pursuant to the Appraisal
Procedure shall take into account a reasonable estimate of inflation or
deflation.
"Base Lease Commencement Date" for the Aircraft means the date
corresponding to the Commencement Date.
"Base Term" for the Aircraft shall have the meaning set forth in
Article 3 hereof.
"Basic Rent" means the rent payable throughout the Base Term and
the Renewal Term, if any, for an Aircraft pursuant to Section 4.1 and any
other provision of this Lease which treats any payment by the Lessee as Basic
Rent.
"Business Day" means any day other than a Saturday, Sunday or day
on which commercial banking institutions in New York, New York and Washington,
D.C. are authorized by law to be closed.
"Certified Air Carrier" means any Person (except the United States
Government) domiciled in the United States of America and holding a
Certificate of Public Convenience and Necessity issued under Chapter 411 of
Title 49 of the United States Code (or an exception from such requirement
issued under Title 49 of the United States Code, Section 40109 by the
Department of Transportation or any predecessor or successor agency thereto)
and an Air Carrier Operating Certificate issued under Section 44705 of Title
49 of the United States Code by the FAA or any successor agency thereto, or,
in the event such certificates shall no longer be issued, any Person (except
the United States Government) domiciled in the United States of America and
legally engaged in the business of transporting for hire passengers or cargo
by air, to, from or between points within the United States of America, and,
in either event, operating commercial jet aircraft.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor or replacement code thereto.
"Commencement Date" shall mean the Delivery Date.
"Default" shall mean any event or condition which with the lapse
of time or the giving of notice, or both, would constitute an Event of
Default.
"Delivery Date" for the Aircraft means the date of the Lease
Supplement for such Aircraft, which date shall be the date the Aircraft is
delivered by the Lessor and accepted by the Lessee, pursuant to the provisions
of Article 2 hereof.
"Engine" means: (A) any of the engines listed by manufacturer's
serial number in a Lease Supplement and installed on the Airframe covered by
such Lease Supplement on the Delivery Date therefor whether or not from time
to time thereafter installed on the Airframe or installed on any other
airframe or any other aircraft; (B) any engine which may from time to time be
substituted, or be a replacement or addition pursuant to Article 11 or 16
hereof, for any such Engine; and (C) except as otherwise provided in Sections
9.2 and 9.4 hereof, any and all Parts incorporated or installed in or attached
thereto or any and all Parts removed therefrom so long as title thereto shall
remain vested in the Lessor or its assignee in accordance with the terms of
Article 9 hereof after removal from any such Engine.
"Equipment Cost" or "Lessor's Cost" for the Aircraft means the
amount so described in the Lease Supplement for such Aircraft.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
"Event of Default" has the meaning specified in Article 17 hereof.
"Event of Loss" with respect to any Item of Equipment means any of
the following events with respect to such Item: (A) loss of such Item of
Equipment or the use thereof due to theft or disappearance for a period in
excess of 180 days, (B) loss of use due to destruction or damage beyond
repair; (C) any damage to such Item which results in an insurance settlement
with respect to such Item on the basis of a total loss or a constructive or
compromised total loss; (D) the condemnation, confiscation or seizure of, or
requisition of title to, or requisition of use of, such Item by (i) the
Government of the United States or any political subdivision thereof for a
period beyond the remaining Term of the Lease, or (ii) any foreign government
or any political subdivision thereof for a period of more than six months or,
if less, a period beyond the remaining Term of the Lease; or (E) as a result
of any rule, regulation, order or other action by the Aeronautics Authority,
or other governmental body having jurisdiction, the use of such Item in the
normal course of business of passenger air transportation shall have been
prohibited for a period of not less than six consecutive months unless the
Lessee, prior to the expiration of such six month period, has in good faith
commenced compliance (if such compliance is available) with such rule,
regulation, order or other action and shall be diligently performing all steps
necessary to permit normal use by Lessee, but in any event no longer than the
lesser of the remaining Term of the Lease or one (1) year. An Event of Loss
with respect to an Aircraft shall be deemed to have occurred if an Event of
Loss occurs with respect to the Airframe which is part of such Aircraft.
"Federal Aviation Act" shall mean Title 49 of the United States
Code (which, among other things, recodified the Federal Aviation Act of 1958,
as amended to the time of such recodification), as amended, and the rules and
regulations promulgated thereunder, as in effect on the date of this Lease,
and as modified or amended hereafter or any successor or substituted
legislation at the time in effect and applicable.
"Hourly Reserve Rate" means Garrett Engine Division of Allied
Signals then-current recommended hourly set-aside rate for the cost of major
and intermediate periodic inspections on the engines model TPE-331-14GR/HR
engine, adjustable as set forth below. If no recommended set-aside is
available, Hourly Reserve Rate shall be calculated by the sum of the estimated
costs for a major and an intermediate periodic inspection divided by the then
approved TBO. In the event that the engine is operated on an approved "on
condition" program, the Hourly Reserve Rate shall be calculated by dividing
the Lessee's fleet average cost of each comparable type of shop visit over the
previous twelve months by the Lessee's fleet average time between the shop
visits. If no such history is available, the amount shall be based on a rate
to be mutually agreed between Lessee and Lessor.
"Incentive Rate" shall be equal to the Prime Rate plus 2%, or the
maximum rate permitted by applicable law, whichever is less.
"Items of Equipment" or "Items" means any or all of the Aircraft,
the Airframe, the Engines, the Propellers and each Part, as such terms are
defined herein.
"Lease", "Lease Agreement", "This Lease Agreement", "This Lease",
"This Agreement", "herein", "hereunder", "hereby" and other like words mean
this Lease, as it may be amended, modified or supplemented pursuant to the
applicable provisions hereof, including, without limitation, supplementation
hereof by a Lease Supplement entered into pursuant to the applicable
provisions hereof.
"Lease Supplement" means a Lease Supplement, substantially in the
form of Exhibit B hereto, entered into between the Lessor and the Lessee for
the purpose of leasing the Aircraft under and pursuant to the terms of this
Lease Agreement, and any subsequent Lease Supplement entered into in
accordance with the terms hereof. Each Lease Supplement shall be deemed to
have been incorporated into this Lease Agreement to the same extent as if such
provisions were fully set forth herein.
"Lease Termination" shall mean that certain Lease Termination
Agreement dated as of the date hereof between Lessee and Seller as relating to
the Aircraft.
"Lessor's Cost" shall mean the amount set forth on Lease
Supplement No. 1.
"Lessor's Liens" shall mean the Liens referred to in clause (ii)
of Article 14 hereof.
"Lien" means any mortgage, pledge, lien, charge, encumbrance,
lease or security interest of any kind or nature whatsoever.
"Manufacturer" shall mean Jetstream Aircraft Ltd..
"Parts" means any and all appliances, parts, systems, components,
assemblies, rotables, instruments, appurtenances, accessories, furnishings,
seats and other equipment of whatever nature (other than Engines or engines or
Propellers or propellers), which (A) are from time to time incorporated or
installed in or attached to an Airframe, Engine or Propeller, or (B) having
been so installed or attached, are later removed therefrom, so long as title
thereto remains vested in Lessor in accordance with Article 9 hereof after
such removal from an Airframe, Engine or Propeller. "Part" means any one of
the Parts.
"Permitted Sublessee" means any Certified Air Carrier or United
States airframe or engine manufacturer or any entity domiciled in a country
listed on Exhibit D hereto, and in each case, consented to by Lessor (such
consent not to be unreasonably withheld or delayed, provided that Lessor
agrees that it will be unreasonable for Lessor to reject any proposed
sublessee if the creditworthiness of such proposed sublessee, as reasonably
determined by Lessor in its sole good faith discretion, is at least equivalent
to the creditworthiness of Lessee at the time that this Lease was entered
into).
"Prime Rate" means the interest rate announced by Citibank, or any
successor thereto, as its prime rate (or equivalent if "prime rate" is no
longer announced) from time to time at its principal office in New York, NY;
with each change in such rate to take effect immediately under this Lease and
any calculations performed in accordance herewith.
"Propeller" means: (A) any of the propellers listed by
manufacturer's serial number in a Lease Supplement and installed on an Engine
covered by such Lease Supplement on the Delivery Date therefor whether or not
from time to time thereafter installed on an Engine or installed on any other
engine or any other aircraft; (B) any propeller which may from time to time be
substituted, or be a replacement or addition pursuant to Article 11 or 16
hereof, for any such Propeller; and (C) except as otherwise provided in
Sections 9.2 and 9.4 hereof, any and all Parts incorporated or installed in or
attached thereto or any and all Parts removed therefrom so long as title
thereto shall remain vested in the Lessor or its assignee in accordance with
the terms of Article 9 hereof after removal from any such Propeller.
"Purchase Agreement" shall mean the Aircraft Purchase and Sale
Agreement (N302UE), dated as of ______________, 1996, between Seller, Trident
Turboprop (Dublin) Limited and Lessor.
"Renewal Term(s)" shall have the meaning described in Section 20.3
hereof.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Seller" shall mean First Security Bank, N.A., as owner trustee
for the benefit of Trident Turboprop (Dublin) Limited.
"Stipulated Loss Value" for the Aircraft as of any particular date
of computation shall mean an amount determined by multiplying the Equipment
Cost for the Aircraft by the percentage specified in Exhibit C attached hereto
opposite the appropriate determination date of Stipulated Loss Value for such
date (provided, however, that the Stipulated Loss Value for an Event of Loss
which occurs after expiration of the Term of this Lease and before expiration
of the storage period provided for in Section 16(j) hereof shall be based upon
the final amount set forth in Exhibit C).
"Supplemental Rent" means all amounts, liabilities and obligations
(other than Basic Rent) which the Lessee assumes or agrees to pay under this
Lease to the Lessor or others hereunder.
"Term" means the Base Term and the Renewal Terms for which an
Aircraft is leased hereunder pursuant to Article 3 hereof.
"Termination Value" for the Aircraft as of any particular date of
computation shall mean an amount determined by multiplying the Equipment Cost
for the Aircraft by the percentage specified in Exhibit C attached hereto
opposite the appropriate determination date of Termination Value for such
date.
"Wet Lease" means any arrangement whereby the Lessee (or any
Permitted Sublessee) agrees to furnish the Aircraft to any third party
pursuant to which such Aircraft (i) shall be operated solely by regular
employees of Lessee (or such Permitted Sublessee) possessing all necessary
certificates and licenses (except cabin attendants) and (ii) shall be
maintained by Lessee (or such Permitted Sublessee) in accordance with Section
6.5 of this Lease.
ARTICLE 2
DELIVERY AND ACCEPTANCE
2.1 Agreement to Lease. Lessor hereby agrees (subject to
satisfaction of the conditions hereinafter set forth) to lease to Lessee
hereunder, and Lessee hereby agrees to lease from Lessor hereunder, the
Aircraft, as evidenced by the execution by Lessor and Lessee of one or more
appropriate Lease Supplements leasing the Aircraft hereunder.
2.2 Title. At all times during the Term of this Lease, full
legal title to the Aircraft shall remain vested in Lessor (or its permitted
assignee), to the exclusion of Lessee, notwithstanding the delivery of the
Aircraft to, and the possession and use thereof by, Lessee.
2.3 Acceptance. The Lessor hereby authorizes one or more
persons designated by the Lessee, who shall be an employee or employees of the
Lessee, as the authorized representative or representatives of the Lessor, to
accept delivery of the Aircraft on behalf of Lessor from the Seller under the
Purchase Agreement. The Lessee hereby agrees that such acceptance of delivery
of an Aircraft by such authorized representative or representatives shall,
without further act, irrevocably constitute acceptance by the Lessee of such
Aircraft for all purposes of this Agreement.
2.4 Conditions Precedent. (A) Lessor's obligation to lease the
Aircraft to Lessee hereunder shall be subject to satisfaction on or before the
Commencement Date for such Aircraft of each and all of the following
conditions precedent:
(1) Lessor shall have received the following:
(a) resolutions of the Board of Directors of Lessee
or other written evidence of appropriate corporate action,
certified by the Secretary of the Lessee, duly authorizing the
lease of the Aircraft and the execution, delivery and performance
of this Lease, together with an incumbency certificate as to the
person or persons authorized to execute and deliver said documents
on behalf of Lessee;
(b) the following items with respect to the
Aircraft:
(i) a Lease Supplement, duly authorized and
executed by Lessee, covering such Aircraft, effective as of
the Commencement Date;
(ii) an Appraisal Report of Pro-Tech Advisors,
in form and scope satisfactory to Lessor;
(iii) a duly executed copy of each of the
Purchase Agreement;
(iv) a duly executed copy of the Acceptance
Receipt by Authorized Representative;
(v) a duly issued copy of the copy of FAA
Airworthiness Certification; and
(vi) a duly executed copy of each of the
Warranty Bill of Sale, the FAA Bill of Sale and the Lease
Termination.
(c) certificates signed by independent aircraft
insurance brokers as to the due compliance with the insurance
provisions of Article 12 hereof with respect to such Aircraft;
(d) a favorable opinion of counsel for Lessee, dated
the Commencement Date, to the effect that:
(i) Lessee has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the State of California, and has full corporate
power and authority to carry on its business in which it is
presently engaged and to perform its obligations under the
Lease, as supplemented by the Lease Supplement;
(ii) the execution and delivery of the Lease,
the Lease Supplement, the consummation by the Lessee of the
transactions therein contemplated and compliance by the
Lessee with the terms and provisions thereof do not and will
not result in the violation of the provisions of the
articles of incorporation or the code of regulations of the
Lessee as in effect on the date of such opinion; and to the
knowledge of such counsel do not and will not conflict with
or result in a breach of any terms or provisions of, or
constitute a default under, or result in the creation or
imposition of any lien, charge, or encumbrance upon, any
property or assets of the Lessee under any indenture,
mortgage, or other agreement or instrument to which the
Lessee is a party or by which it or any of its properties
are or may be bound, or any existing applicable law, rule or
regulation, or any judgment, order or decree then in effect,
of any government, governmental instrumentality or court
having jurisdiction over the Lessee or any of its activities
or properties;
(iii) the Lease and such Lease Supplement have
each been duly authorized, executed and delivered by the
Lessee, and each such instrument is a legal, valid,
enforceable and binding obligation of the Lessee, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general application
affecting the enforcement of creditors' rights and by
general principles of equity including, without limitation,
specific performance;
(iv) except for any filing or recording that
may be required under the Federal Aviation Act (and except
such other filings or recordings as such counsel shall
specify have been duly effected), no filing or recording of
any instrument or document (including the filing of any
financing statement) is necessary under the laws of the
United States or of any states other than the filing of a
financing statements) (including continuation statements) in
the States of Virginia in order for the Lease to constitute
a valid lease of record relating to the Aircraft;
(v) except as disclosed in the opinion, there
are no suits or proceedings pending or, to the knowledge of
such counsel, threatened against Lessee in any court or
before any regulatory commission, board or other
administrative governmental agency against or affecting
Lessee, which if determined adversely to Lessee may have a
material adverse effect on the financial condition or busi-
ness of Lessee;
(vi) no authorization, approval, consent,
license or order of, or registration with, or the giving of
notice to the Aeronautics Authority or any other regulatory
body or authority is required for the valid authorization,
execution, delivery and performance by the Lessee of the
Lease, including the Lease Supplement, except for any
filings or recordings with the FAA.
(2) on the Commencement Date the following statement shall be
true and Lessor shall have received a certificate satisfactory to Lessor
signed by a duly authorized officer of Lessee, dated such Commencement
Date, stating that:
(a) the representations and warranties contained in
Section 5.2 hereof are true and accurate on and as of the
Commencement Date as though made on and as of such date (except to
the extent that such representations and warranties relate solely
to an earlier date); and
(b) no Default or Event of Default has occurred and
is continuing, or would result from the lease of such Aircraft.
(3) On the Commencement Date no material adverse change shall
have occurred and be continuing in Lessee's financial condition as
compared to its financial condition as of ___________, 1996.
(4) The Delivery Date shall be no later than _____________,
1996.
(5) On the Commencement Date, each of the Lease, the Lease
Supplement, the FAA Bill of Sale, the FAA Aircraft Registration
Application, and the Lease Termination shall have been duly filed with
the FAA.
(6) On the Commencement Date, Precautionary State and Local UCC-
l Financing Statements shall have been delivered to Lessor to be filed
in Virginia, against the Lessee, as debtor, and Lessor, as secured
party; with file stamped copies thereof to be delivered post closing.
(7) All proceedings taken in connection with the transactions
contemplated by the Lease and all agreements, documents, instruments and
papers in connection therewith shall be in form and substance
satisfactory to Lessor and its counsel.
(B) Lessee's obligation to lease the Aircraft to Lessee hereunder
shall be subject to satisfaction on or before the Commencement Date for such
Aircraft of each and all of the following conditions precedent:
(1) Lessee shall have received the following:
(a) resolutions of the Board of Directors of Lessor
or other written evidence of appropriate corporate action,
certified by the Secretary of the Lessor, duly authorizing the
lease of the Aircraft and the execution, delivery and performance
of this Lease, together with an incumbency certificate as to the
person or persons authorized to execute and deliver said documents
on behalf of Lessor;
(b) the following items with respect to the
Aircraft:
(i) a Lease Supplement, duly authorized and
executed by Lessor, covering such Aircraft, effective as of
the Commencement Date;
(ii) a duly executed copy of each of the
Purchase Agreement, the Purchase Agreement Assignment and
the Manufacturer Consent;
(iii) a duly executed copy of the Appointment of
Authorized Representative by Lessor and the Acceptance
Receipt by Authorized Representative; and
(iv) a duly executed copy of each of the
Warranty Bill of Sale, the FAA Bill of Sale and the FAA
Aircraft Registration Application.
(2) on the Commencement Date the representations and warranties
contained in Section 5.2 hereof are true and accurate on and as of the
Commencement Date as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an
earlier date) and Lessee shall have received a certificate to that
effect satisfactory to Lessee signed by a duly authorized officer of
Lessor, dated such Commencement Date.
(3) On the Commencement Date, Trident Turboprop (Dublin) Limited
shall have received the Lessor's Cost of the Aircraft from Lessor.
(4) On the Commencement Date, each of the Lease, the Lease
Supplement, the FAA Bill of Sale, the FAA Aircraft Registration
Application, and the Lease Termination shall have been duly filed with
the FAA.
(5) All proceedings taken in connection with the transactions
contemplated by the Lease and all agreements, documents, instruments and
papers in connection therewith shall be in form and substance
satisfactory to Lessor and its counsel.
2.5 Recordation. Concurrently with the delivery of the Aircraft
hereunder, Lessor and Lessee will cause this Lease, and a Lease Supplement
substantially in the form of Exhibit B attached hereto, to be duly filed and
recorded with the Federal Aviation Administration at Lessee's expense.
2.6 Opinion of Counsel. On the Delivery Date for the Aircraft,
Lessee shall have provided Lessor with a favorable oral opinion of Daugherty,
Fowler & Peregrin, special counsel for Federal Aviation Administration
matters, to the effect that upon the filing for registration and recordation
of this Lease and the Lease Supplement, such Aircraft (including the Engines
and Propellers) will be free and clear of any mortgage, lease, pledge, lien,
charge or encumbrance of record except the Lease, and the Aircraft will be
owned as a matter of record solely by Lessor. Additionally, as soon as
practicable after the Delivery Date for the Aircraft, Lessee shall provide
Lessor with a favorable written opinion of Daugherty, Fowler & Peregrin
confirming the oral opinion referred to above in all respects.
ARTICLE 3
TERM
The Base Term for the Aircraft shall commence on the Delivery Date
and shall end on the date set forth in the Lease Supplement.
ARTICLE 4
RENT
4.1 Basic Rent. The Lessee covenants and agrees to pay the
Lessor Basic Rent for each Aircraft throughout the Base Term at the times and
in the amounts set forth in the Lease Supplement for the Aircraft. The Basic
Rent will accrue with respect to each rental period as set forth in such Lease
Supplement. Basic Rent for any Renewal Term shall be as provided in
Section 20.3 hereof.
If any installment of Rent is due on a day other than a Business
Day, such installment shall be payable on the next succeeding Business Day.
4.2 Supplemental Rent. The Lessee also agrees to pay to the
Lessor, or at the Lessor's direction to whomsoever shall be entitled thereto,
any and all Supplemental Rent promptly as the same shall become due and owing.
The Lessee will also pay to Lessor, as Supplemental Rent, interest at the
Incentive Rate (all computations of interest under this Lease to be made on
the basis of a 365-day year) on any part of any installment of Basic Rent not
paid on the due date thereof for any period for which the same shall be
overdue and on any payment of Supplemental Rent not paid when due for the
period until the same shall be paid.
4.3 Place of Payment. All Rent payable by the Lessee to the
Lessor under this Lease shall be paid by wire transfer of immediately
available funds consisting of lawful currency of the United States of America,
in such manner that the Lessor receives the full amount of such payments on
the due dates at the location to be designated within the United States as the
Lessor may designate in writing to the Lessee.
4.4 Prohibition Against Setoff, Counterclaim, Etc. Except as
provided in Section 19.5, the Lessee's obligation to pay all Rent payable
hereunder shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation: (A) any setoff, counterclaim,
recoupment, defense or other right which the Lessee may have against the
Lessor, the manufacturers of the Aircraft or anyone else for any reason
whatsoever, (B) any defect in the title, airworthiness, condition, design,
operation or fitness for use of, or any damage to or loss or destruction of,
any Item of Equipment or any interruption or cessation in the use or
possession thereof by the Lessee for any reason whatsoever, or any loss of
eligibility for registration in the United States, (C) any insolvency,
bankruptcy, reorganization or similar proceedings by or against the Lessor or
the Lessee, (D) any breach by the Lessor of any representation, warranty or
covenant of the Lessor made herein or in connection herewith, or (E) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
4.5 Waiver of Certain Rights of the Lessee. The Lessee hereby
waives, to the extent permitted by applicable law, all rights now or hereafter
conferred upon it by statute or otherwise to terminate or surrender this Lease
or the Aircraft or any Part or to any abatement, suspension, deferment,
diminution or reduction of the Rent. Each payment of Rent shall be absolutely
final and net to the Lessor, so that this Lease will yield to the Lessor the
full amount of the installments of such Rent throughout the Term without
deduction. Nothing contained in this Section 4.5 or Section 4.4 shall prevent
Lessee from maintaining a separate action against Lessor in connection with
the breach by Lessor of any of its obligations hereunder or the exercise of
any rights which Lessee may have against Lessor.
4.6 Transaction Costs; Adjustment of Rent. If the Lessor shall
have acquired the Aircraft and leased it to the Lessee as contemplated by this
Agreement, the Lessor will pay the following expenses relating to such
transactions (collectively "Transaction Costs"): (a) the fee of Babcock &
Brown, the Lessee's advisor; (b) the fees and expenses Thelen, Marrin, Johnson
& Bridges, special counsel for the Lessee, and Daugherty, Fowler & Peregrin,
special FAA counsel; (c) the fees and expenses of counsel to the Lessor, and
(d) the cost of the appraisal required by Section 2.4(A)(1)(b)(ii). The
Lessee and the Lessor agree that the Basic Rent, Stipulated Loss Value, the
Termination Value and the purchase price pursuant to Section 20.1(b) as set
forth in the Lease Supplement have been calculated on the assumption that the
Transaction Costs are 1.5% of Lessor's Cost.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 No Representations and Warranties.
(A) AS BETWEEN LESSOR AND LESSEE, THE LESSOR LEASES THE AIRCRAFT
HEREUNDER "AS-IS", "WHERE-IS" AND THE LESSOR SHALL NOT BE DEEMED TO HAVE MADE
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, CONDITION, VALUE, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS
FOR USE OR FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT INCLUDING LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT THERETO, and any risks with respect thereto
shall be assumed by the Lessee. Lessee acknowledges that, pursuant to a Lease
Agreement, dated as of May 28, 1993 between Seller and Lessee, Lessee has
prior to and up to the Delivery Date possessed and operated the Aircraft. So
long as no Event of Default has occurred and is continuing, the Lessor hereby
authorizes the Lessee to enforce in its own name such rights as the Lessor may
have with respect to any Item of Equipment under any warranty, service policy
or product agreement of the manufacturer thereof, the maintenance and overhaul
agencies of the Aircraft and the Engines, or any subcontractor or supplier or
vendor thereof to the extent that the same may be assigned or otherwise made
available to the Lessee and, to the extent that the same may not be so
assigned or otherwise made available to Lessee, Lessor agrees to exercise
reasonable diligence at Lessee's expense, to enforce such rights as Lessor may
have with respect thereto for the benefit of Lessee; provided, however, that
upon any Event of Default and receipt of notice from Lessor, all such rights
shall immediately revert to the Lessor including all claims thereunder whether
or not perfected.
(B) Notwithstanding the foregoing, Lessor represents and
warrants that on the Delivery Date for the Aircraft it will receive and hold
whatever title to such Aircraft as is conveyed to it by the Seller.
5.2 Lessee's Representations and Warranties. The Lessee
represents, warrants and covenants that:
(A) the Lessee (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, (ii)
has duly qualified and is authorized to do business and is in good standing as
a foreign corporation in each jurisdiction where failure to qualify could have
a direct material adverse effect on the business or financial condition of
Lessee, and (iii) has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations under this
Lease;
(B) the Lessee is a Certified Air Carrier, and holds all
licenses, certificates, permits and franchises from the appropriate agencies
of the United States of America and/or all other governmental authorities
having jurisdiction, necessary to authorize the Lessee to engage in air
transportation of passengers and to carry on its business as presently
conducted and to be conducted with the Aircraft;
(C) the execution, delivery and performance of this Lease
(including any Lease Supplements) have been duly authorized by all necessary
corporate action on the part of the Lessee, do not require any shareholder
approval, or approval or consent of any trustee or holders of any indebtedness
or obligations of the Lessee (except for approval or consent previously
obtained) and do not and will not contravene any law, governmental rule,
regulation or order binding on the Lessee or the articles of incorporation or
code of regulations of the Lessee or contravene the provisions of, or
constitute a default under, or result in the creation of any Lien (other than
as permitted under this Lease) upon the property of the Lessee under any
indenture, mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, contract or other agreement to which it may be a party or by
which its property may be bound;
(D) neither the execution and delivery by the Lessee of this
Lease (including any Lease Supplements), nor the consummation of any of the
transactions by the Lessee contemplated hereby requires the consent or
approval of, the giving of notice to, or the registration with, or the taking
of any other action in respect of, any Aeronautics Authority, or any other
Federal or state governmental authority or agency, including any judicial body
or any other person, entity or corporation, except for the registration and
recordation of this Lease, including any Lease Supplements, with the FAA;
(E) this Lease has been duly authorized, executed and delivered
by the Lessee and constitutes, and the Lease Supplements when entered into and
delivered will constitute, valid, enforceable and binding obligations of the
Lessee in accordance with their respective terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other laws of general
application affecting the enforcement of creditors' rights and by general
principles of equity;
(F) except as disclosed in Lessee's opinion of counsel required
by Section 2.4 (A)(4), there are no suits or proceedings pending or, to the
knowledge of the Lessee, threatened against or affecting the Lessee in any
court or before any regulatory commission, board or other administrative
governmental agency, which if determined adversely to Lessee would have a
material adverse effect on the financial condition or business of the Lessee
or the ability of the Lessee to perform its obligations under this Lease;
(G) except (A) the registration in lessor's name of the Aircraft
pursuant to the Federal Aviation Act and (B) for the filing for registration
and recordation of this Lease and the Lease Supplements with the FAA and UCC
financing statements in Virginia, no further filing or recording of this Lease
or any Lease Supplement or of any other document is necessary under the
Federal Aviation Act, or under the laws of any other jurisdiction in order to
fully protect, establish and perfect in all applicable jurisdictions in the
United States, Lessor's title to and leasehold interest in the Aircraft as
against Lessee and any third parties;
(H) for the purposes of the Federal Aviation Act, the Lessee is
a "citizen of the United States" as defined in Section 40102(a)(15) of the
Federal Aviation Act and the regulations pursuant to such Section;
(I) its chief executive office (as that term is used in Article
9 of the Uniform Commercial Code) and the place where it keeps its corporate
records concerning the Aircraft, all its interest in the Lease and related
documents, are located in Sterling, Virginia;
(J) there has been no material adverse change in the financial
condition of Lessee since ___________, 1996;
(K) no event exists which constitutes a Default or an Event of
Default on the Delivery Date; and
(L) all of the financial information contained in the Form 10Q
of Lessee's parent filed with the Securities and Exchange Commission for the
period ending ______________, 1996 is true and correct as of the date thereof.
5.3 Lessor's Representations and Warranties. The Lessor
represents and warrants that:
(A) the Lessor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and,
(ii) has the corporate power and authority to carry on its business as
presently conducted and to perform its obligations under this Lease;
(B) the execution, delivery and performance of this Lease have
been duly authorized by all necessary corporate action on the part of the
Lessor, do not require any shareholder approval, or approval or consent of any
trustee or holders of any indebtedness or obligations of the Lessor and do not
and will not contravene the certificate of incorporation or bylaws of the
Lessor or contravene the provisions of, or constitute a default under, or
result in the creation of any Lien (other than as permitted under this Lease)
upon the property of the Lessor under any indenture, mortgage, deed of trust,
conditional sales agreement, bank loan, or credit agreement, contract or other
agreement to which it may be a party or by which its property may be bound;
(C) this Lease has been duly authorized, executed and delivered
by the Lessor and constitutes, and the Lease Supplements when entered into and
delivered will constitute, valid, enforceable and binding obligations of the
Lessor in accordance with their respective terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other laws of general
application affecting the enforcement of creditors' rights;
(D) for the purposes of the Federal Aviation Act, the Lessor is
a "citizen of the United States" as defined in Section 40102(a)(15) of the
Federal Aviation Act and the regulations pursuant to such Section, and Lessor
covenants and agrees with Lessee that throughout the Term Lessor shall
continue to be a "citizen of the United States" as defined in Section
40102(a)(15) of the Federal Aviation Act;
(E) the performance by Lessor of its obligations under this
Lease, the Lease Supplement and each document relating to the Aircraft to
which it is a party, will not subject the Aircraft to any Lien under any
indenture, mortgage, contract or other instrument to which it is a party or by
which it or any of its properties is bound;
(F) Lessor shall, at its own cost and expense, promptly take
such action as may be necessary to discharge all Lessor Liens on any part of
the Aircraft, other than Liens to finance the purchase of the Aircraft which
are subordinate to the Lease;
(G) the Lessor has a tangible net worth of not less than Fifty
Million Dollars ($50,000,000); and
(H) no part of the funds to be used by the Lessor to purchase the
Aircraft constitutes assets of any Employee Benefit Plan as defined in Section
3(3) of Employee Retirement Income Security Act of 1974, as amend ("ERISA"),or
Section 4975 of the Code (other than a governmental plan within the meaning of
Section 414(d) of the Code) as such term "plan assets" is interpreted by the
Internal Revenue Service and United States Department of Labor in Regulations,
Rulings, Releases or Bulletins and by decisions of courts in cases arising
under ERISA or the Code.
ARTICLE 6
POSSESSION, USE, LAWFUL INSURED OPERATIONS,
MAINTENANCE, REGISTRATION AND INSIGNIA
6.1 Possession. The Lessee shall not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, relinquish or
transfer possession of any Item of Equipment; provided, however, that, so long
as no Event of Default shall have occurred and be continuing and so long as
the Lessee shall comply with the provisions of Article 12 hereof, the Lessee
may deliver possession of an Item of Equipment for service, repair,
maintenance or overhaul work, or for alterations or modifications in or
additions to an Item of Equipment to the extent required or not otherwise
prohibited by the terms hereof, and Lessee, without the prior written consent
of Lessor, may also:
(A) install an Engine on an airframe or a Propeller on an engine
owned by or leased to the Lessee or purchased by the Lessee subject to a
conditional sale or other security agreement, provided that such airframe or
engine is free and clear of all Liens except the rights of the parties to the
lease or conditional sale or other security agreement covering such airframe
or engine; and provided further, that the lease or conditional sale or other
security agreement covering such airframe or engine by its terms expressly
provides that neither such lessor nor secured party nor its successor or
assigns will acquire or may claim any right, title or interest in any Engine
or Propeller by reason of such Engine or Propeller being installed on such
airframe or engine at any time while such Engine or Propeller is subject to
this Lease or owned by Lessor or its permitted successors or assigns.
So long as Lessee strictly complies with the provisions of this
Section 6.1(A), Lessor agrees that it will not acquire or claim (as against
the owner, lessor, or lienholder of an airframe, engine or propeller) any
right, title or interest in such airframe or engine or propeller by reason of
an engine being installed on an Airframe or such propeller being installed on
an Engine. Nothing contained in this Section 6.1(A) shall in any way
discharge or diminish any of Lessee's obligations to Lessor or constitute a
waiver of any Lessor's rights and remedies under this Lease.
(B) subject any Engine to normal interchange or pooling
agreements or arrangements, in each case customary in the airline industry and
entered into by the Lessee in the ordinary course of its business with any
Certified Air Carrier provided that (1) no such agreement or arrangement
contemplates or requires the transfer of title to any Engine, and (2) if the
Lessor's title to any such Engine shall be divested under any such agreement
or arrangement, such divestiture shall be deemed to be an Event of Loss with
respect to such Engine and the Lessee, concurrently with such divestiture,
shall comply with Article 11 in respect thereof; provided, that the rights of
any transferee who receives possession by reason of a transfer permitted by
this Section 6.1 (other than the transfer of an Engine which is deemed an
Event of Loss) shall be subject and subordinate to all the terms of this
Lease, including, without limitation, the restrictions on the use of an
Aircraft contained in Section 6.3 and the Lessor's right to terminate this
Lease upon an Event of Default and to obtain possession of the Engine without
regard to any such agreement, lease or sublease, and the Lessee shall remain
primarily liable hereunder for the performance of all of the terms of this
Lease to the same extent as if such transfer had not occurred. No interchange
agreement or other relinquishment of possession of any Engine shall in any way
discharge or diminish any of the Lessee's obligations to the Lessor hereunder.
(C) subject (or permit any sublessee to subject) the Airframe,
or any Engine or Propeller to the Civil Reserve Air Fleet Program and transfer
possession of such Airframe, Engine or Propeller to the United States of
America or any instrumentality or agency thereof pursuant to the Civil Reserve
Air Fleet Program, so long as Lessee shall promptly notify Lessor upon
transferring possession of the Airframe or any Engine or any Propeller to the
United States of America or any agency or instrumentality thereof pursuant to
such program and provide Lessor with the name and address of the Contracting
Office Representative for the Military Aircraft Command of the United States
Air Force to whom notice must be given in the event Lessor desires to give
notice as provided in Article 18 hereof.
(D) enter into a Wet Lease for the Aircraft with any third
party.
(E) enter into any sublease with any Permitted Sublessee which
is not then subject to bankruptcy, reorganization or insolvency proceedings;
provided, however, that any sublease entered into pursuant to this clause (E)
shall (i) not extend beyond the expiration date of the Base Term or any
Renewal Term, if any, hereunder; (ii) if to a Permitted Sublessee which is a
foreign air carrier, not commence on or before December 31, 2003; (iii) shall
contain express provisions that it is subject and subordinate to the terms of
this Lease and may be terminated by the Lessor upon an Event of Default
hereunder; (iv) if to a sublessee which is a foreign government or political
subdivision thereof, provide for sublessee to waive sovereign immunity, (v)
provide for maintenance of the Aircraft in accordance with an FAA or
manufacturer's approved maintenance program, (vi) if applicable, require all
necessary filings and recordings in any foreign jurisdiction necessary to
protect and preserve the title and interest of Lessor in and to the Aircraft
and Lease; (vii) prohibit any further subleasing by the sublessee without the
prior written consent of Lessor; (viii) If such Permitted Sublessee is a
foreign air carrier, the United States maintains diplomatic relations with the
country in which such proposed Permitted Sublessee is principally based at the
time such sublease is entered into and (ix) in the event that such Permitted
Sublessee is a foreign air carrier, Lessor shall have received an opinion of
counsel to Lessee to the effect that (I) the terms of the proposed sublease
will be legal, valid, binding and (subject to customary exceptions in foreign
opinions generally) enforceable against the proposed Permitted Sublessee in
the country in which the proposed Permitted Sublessee is principally based,
(II) there exist no possessory rights in favor of the Permitted Sublessee
under such Sublease under the laws of such Permitted Sublessee's country of
domicile that would, upon bankruptcy or insolvency of or other default by
Lessee and assuming at such time such Permitted Sublessee is not insolvent or
bankrupt, prevent the return or repossession of the Aircraft in accordance
with the terms of this Lease, (III) the laws of such Permitted Sublessee's
country of domicile require fair compensation by the government of such
jurisdiction payable in currency freely convertible into Dollars for the loss
of use of the Aircraft in the event of the requisition by such government of
such use, and (IV) the laws of such Permitted Sublessee's country of domicile
would give recognition to Lessor's title to the Aircraft, to the registry of
the Aircraft in the name of the Lessor (or Lessee, as "lessee", or the
proposed Sublessee, as "sublessee", as appropriate). Prior to the
commencement of any such Sublease, Lessee shall deliver to Lessor a certified
copy off the executed Sublease and a certificate of an independent insurance
broker to the effect that the insurance required to be maintained by Section
12 will be in full force and effect on the commencement of such sublease.
Upon the request of Lessor for any sublease in excess of three (3) years,
Lessee shall assign its rights in and to such sublease to Lessor as security
pursuant to an assignment in form and substance satisfactory to Lessor and
Lessee. No sublease permitted hereunder shall be deemed to relieve Lessee of
any duties or obligations under this Lease except as otherwise specifically
agreed to by Lessor.
6.2 Assignment by Lessee. Unless the Lessee first obtains
Lessor's prior written consent, this Lease and all or any part of Lessee's
rights hereunder or in any Item of Equipment shall not be assigned by Lessee
to any person, firm or corporation, and any such purported assignment,
sublease or conveyance shall be void ab initio except as permitted by Section
6.1 hereof.
6.3 Use. Lessee shall not use or permit the use of the Aircraft
for any purpose for which the Aircraft is not designed or otherwise reasonably
suitable.
6.4 Lawful Insured Operations. Lessee will not permit the
Aircraft or any Item to be maintained, used or operated in violation in any
material respect of any applicable law, treaty, statute, rule, regulation or
order of any government or governmental authority having jurisdiction
(domestic or foreign), or contrary in any material respect to any
manufacturer's operating manuals, instructions, and airworthiness directives,
or in violation of any applicable airworthiness certificate, license or
registration relating to the Aircraft or Engines issued by any such authority.
In the event that any such laws, rules, regulations or orders require
alteration of any Item of Equipment, Lessee shall conform thereto at its sole
expense and shall maintain the Item of Equipment in proper condition for
operation under such laws and rules. Lessee agrees not to operate any
Aircraft or suffer such Aircraft to be operated, (A) unless such Aircraft is
covered by insurance as required by the provisions of Article 12 hereof, (B)
contrary to the terms of such insurance as required by the provisions of
Article 12 hereof, or (C) in any area of the world (i) where there are ongoing
hostilities or (ii) where the United States has terminated diplomatic
relations due to the outbreak of hostilities or (iii) where Lessor and Lessee
agree threatened hostilities exist; provided, however, the failure of Lessee
to comply with the provisions of this sentence shall not result in an Event of
Default hereunder where such failure is attributable to extraordinary
circumstances involving hijacking, medical emergency, equipment malfunction,
weather conditions, navigational errors or similar acts.
6.5 Maintenance. The Lessee, at its own cost and expense shall:
(i) service, repair, maintain and overhaul, test or cause the same to be done
to the Aircraft (A) so as to keep such Aircraft in as good an operating
condition and appearance as when delivered to the Lessee hereunder, ordinary
wear and tear excepted, (B) so as to keep such Aircraft in compliance with all
maintenance manuals initially furnished with the Aircraft, as amended by
applicable subsequent amendments or supplements to such manuals issued by the
manufacturer from time to time, and the Lessee's FAA approved maintenance
program all so-called "mandatory" service bulletins and comparable notices
issued or supplied by or available through the manufacturer of such Aircraft,
(C) so as to keep such Aircraft in such operating condition as may be
necessary to enable the airworthiness certification of such Aircraft to be
maintained in good standing at all times under the applicable rules and
regulations of the Aeronautics Authority, and (D) in the same general manner
and with the same degree of care exhibited by the Lessee with respect to the
same type of Aircraft maintained by Lessee; (ii) maintain all records, logs
and other materials required by the Aeronautics Authority to be maintained in
respect of such Aircraft, and (iii) promptly furnish to the Lessor upon the
Lessor's request such information as may be required to enable the Lessor to
file any reports required to be filed with any governmental authority because
of the Lessor's interest in the Aircraft.
6.6 Registration and Insignia. (a) The Lessee shall cause the
Aircraft to be registered in the name of Lessor on the Delivery Date and shall
not take any act or fail to perform any act which would cause such
registration not to remain in effect at all times during the Term of this
Lease; provided, however, that on or after the seventh anniversary of the
Delivery Date, the Aircraft may be registered in a country of registry listed
on Exhibit D hereto (or such other country as the Lessor approves) so long as
the following conditions are met: (i) the United States maintains normal
diplomatic relations with the country of registry of the Aircraft; and (ii)
the Lessor shall have received favorable opinions (subject to customary
exceptions) from counsel of recognized reputation qualified in the laws of the
relevant jurisdiction to the effect that: (A) the Lessor's ownership interest
in the Aircraft shall be recognized under the laws of such jurisdiction,
(B) the obligations of Lessee, and the rights and remedies of the Lessor,
under the Lease shall remain valid, binding and (subject to customary
bankruptcy and equitable remedies exceptions and to other exceptions customary
in foreign opinions generally) enforceable under the laws of such jurisdiction
(or the laws of the jurisdiction to which the laws of such jurisdiction would
refer as the applicable governing law), (C) after giving effect to such change
in registration, Lessor's right, title and interest in and to the Aircraft and
the Lease shall continue and all filing, recording or other action necessary
to protect the same shall have been accomplished, (D) it is not necessary,
solely as a consequence of such change in registration and without giving
effect to any other activity of the Lessor (or any Affiliate thereof), for the
Lessor to qualify to do business in such jurisdiction, (E) there is no tort
liability on passive lessor's of an aircraft not in possession thereof under
the laws of such jurisdiction (it being agreed that, in the event such latter
opinion cannot be given in a form satisfactory to the Lessor, such opinion
shall be waived if insurance reasonably satisfactory to the Lessor is provided
to cover such risk), and (F) (unless Lessee shall have agreed to provide
insurance covering the risk of requisition of use of such Aircraft by the
government of such jurisdiction so long as such Aircraft is registered under
the laws of such jurisdiction) the laws of such jurisdiction require fair
compensation by the government of such jurisdiction payable in currency freely
convertible into Dollars for the loss of use of such Aircraft in the event of
the requisition by such government of such use. In addition, as a condition
precedent to any such change in registration, Lessee shall furnish to the
Lessor an Officer's Certificate to the effect that the insurance required by
Section 12 of the Lease shall be in full force and effect at the time of such
change in registration after giving effect to such change in registration and
that the new country of registry imposes aircraft maintenance standards are
materially differently from those of the United States, France, Germany,
Japan, the Netherlands or the United Kingdom. Lessee shall pay all costs,
expense, fees recording and registration taxes, including the reasonable fees
and expenses of counsel to Lessor, and other charges in connection with any
such change in registration.
(b) On the Commencement Date (or as soon as practical
thereafter), the Lessee, at its own expense, shall permanently affix in the
cockpit of each Aircraft in a location reasonably adjacent to and not less
prominent than the airworthiness certificate for the Aircraft, and on each
Engine in a prominent location, a plate bearing the following legend:
"Title to this Aircraft [Engine] is owned by
FINOVA Capital Corporation,
Lessor"
Without the written consent of Lessor, the Lessee will not allow the name of
any other person, association or corporation to be placed on the Airframe or
any Engine as a designation that might be interpreted as a claim of ownership
or of any interest therein; provided, however, that the Lessee may cause the
Airframe to be lettered or otherwise marked in a customary manner for
convenience of identification of the interest of the Lessee therein, including
but not limited to the customary logo of the Lessee.
6.7 Records. Throughout the Term, Lessee shall keep accurate,
complete and current records (complying with the requirements of the
Aeronautics Authority and with good commercial airline practice) of all
maintenance carried out with respect to an Aircraft and shall permit Lessor or
any authorized representative of Lessor to examine such records at Lessor's
expense at any reasonable time.
ARTICLE 7
INSPECTION; FINANCIAL INFORMATION
7.1 Inspection. Lessee shall provide the following information
at Lessor's written request which may be made once each calendar quarter (as
set forth on the form attached hereto as Exhibit F) and at any time following
the occurrence of an Event of Default and so long as the same is continuing:
(i) if any Engine or Propeller is not attached to the Aircraft,
to provide Lessor with, to the best of its knowledge, the current
location of such Engine or Propeller (in the event that an Engine or
Propeller is attached to another aircraft, Lessee shall provide Lessor
with information identifying such aircraft, and if such aircraft is
subject to a lease, Lessee shall inform Lessor of the name and address
of the lessor thereunder and the term of such lease and such other
information as is reasonably requested by Lessor regarding the location
of such Engine or Propeller)
(ii) the total number of hours and cycles with respect to the
Engines, Propellers and Airframe,
(iii) the number of Flight Hours remaining on the Airframe until
the next scheduled Heavy Check;
(iv) the number of cycles remaining with respect to each Engine
and Propeller prior to the next scheduled removal for maintenance of
such Engine or Propeller;
(v) the terms on which any Heavy Check or "C" Check is scheduled
with respect to the Airframe and on which any shop visit is scheduled
with respect to any Engine and Propeller; and
(vi) whether the FAA has during the period following the last
report hereunder conducted an inspection of Lessee's facilities and
records under the National Aviation Safety Inspection Program ("NASIP")
or any successor program administered by the FAA or any other agency
having jurisdiction over Lessee's aircraft operations and, if such NASIP
inspection occurred during such period, a report on the results thereof.
The Lessor may reasonably request, and the Lessee shall permit any person
designated by the Lessor in writing, at the Lessor's expense, to visit and
inspect any Aircraft, its condition, use and operation and the records
maintained in connection therewith and to make copies of such records at the
Lessor's expense, any such inspection to occur only during regularly scheduled
maintenance shop visits (unless an Event of Default exists) not more than once
each year during the Term (unless an Event of Default exists), and so long as
such inspection does not interfere with Lessee's operation and maintenance of
the Aircraft. Any such inspection shall be limited to a visual walk around
inspection including boarding the Aircraft but shall not include opening any
panels, bays or similar inspections. The Lessor shall have no duty to make
any such inspection and shall not incur any liability or obligation by reason
of not making any such inspection.
7.2 Financial Information. The Lessee also agrees to furnish
the Lessor during the Term:
(A) within sixty (60) days after the end of the first three
calendar quarters of each of its fiscal years, and within 120 days after the
close of each of its fiscal years, consolidated financial statements of
Lessee's parent and its subsidiaries (unless the Lessee is not the sole
subsidiary of its parent, in which case financial statements of Lessee shall
be provided), consisting of a balance sheet, an income statement and such
other statements as may be reasonably required by Lessor prepared as of the
close of the period ended, in each case certified by its chief financial
officer or controller as having been prepared in accordance with generally
accepted accounting principles, consistently applied, and as complete and
correct, and in the case of annual financial statements, its independent
auditors who must be of recognized national standing;
(B) together with each set of annual financial statements and
reports referred to in clause (A) above, a certificate of the Lessee, signed
by an authorized officer of the Lessee, to the effect that the signer has
made, or caused to be made under his supervision, a review of the financial
condition of the Lessee during the accounting period covering such financial
statement, and that such review has not disclosed the existence nor, after due
inquiry, does the signer have any knowledge of the existence as of the date of
such certificate, of any condition or event which constitutes a Default or an
Event of Default, or, if such condition or event existed or exists, specifying
the nature and period of existence thereof and what action the Lessee has
taken or is taking or proposes to take with respect thereto; and
(C) from time to time, such other information as the Lessor may
reasonably request.
ARTICLE 8
LESSEE'S COVENANTS
The Lessee covenants and agrees that, during the Term hereof:
8.1 Maintenance of Corporate Existence. The Lessee will
preserve and maintain (a) its corporate existence except as otherwise
permitted by Section 8.4, and (b) all of its material rights, privileges and
franchises in every jurisdiction in which the character of the property owned
or the nature of the business transacted by it from time to time makes
licensing or qualification necessary where failure to qualify could materially
adversely affect Lessee's ability to perform hereunder or operate the
Aircraft.
8.2 Notice of Litigation, Etc. If not otherwise communicated
pursuant to Section 7.2, the Lessee will promptly give to the Lessor a notice
in writing of any proceeding before any governmental agency which would, if
determined adversely to Lessee, materially adversely affect the Lessee's
ability to perform under this Lease or any related documents.
8.3 Payment of Taxes. The Lessee will pay or cause to be paid
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income and profits, or upon any property belonging to it, prior to
the date on which penalties attach thereto and all lawful claims, which, if
not paid, might become a Lien or charge upon the property of the Lessee;
provided, however, that the Lessee shall not be required to pay any such tax,
assessment, charge, levy or claim the payment of which is being contested in
good faith and by appropriate proceedings, but only so long as such
proceedings do not involve any material risk of the sale, forfeiture or loss
of an Aircraft or any Item or interest therein; provided further, that the
Lessee will pay or cause to be paid all such taxes, assessments, charges,
levies or claims forthwith upon the commencement of proceedings to foreclose
any Lien which attaches as security therefor.
8.4 Consolidation, Merger or Sale. Lessee will not merge or
consolidate with or into any other corporation or entity or sell, lease, or
otherwise dispose of all or substantially all of its properties unless (i) the
successor or survivor assumes in writing pursuant to an agreement in form and
substance satisfactory to Lessor the obligations of Lessee hereunder; (ii) the
tangible net worth of the successor or survivor is, under generally accepted
accounting principles, equal to or greater than 75% of the tangible net worth
of the Lessee as of _________, 1996, and (iii) no Event of Default shall have
occurred and be continuing; (iv) such successor or survivor is a corporation
incorporated under the laws of a state of the United States and shall be a
Certified Air Carrier; (v) such successor or survivor makes such recordings
and filings, and takes such other action with respect to this Lease, as shall
be necessary or advisable in the reasonable opinion of Lessor to protect the
interest of Lessor in the Aircraft and the Lease, and (vi) such successor or
survivor cause to be delivered to the Lessor such legal opinions (which may be
from in-house counsel) as it may reasonably request in connection with the
matters specified in the preceding clauses (i), (iv) and (v). Upon any
consolidation or merger in accordance with this Section, the successor
corporation, if any, shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee under this Lease with the same
effect as if such successor corporation had been named as Lessee herein. Upon
satisfaction of the foregoing conditions in connection with any such merger or
such sale, lease or other disposition of all or substantially all of the
properties of Lessee, the Lessee shall be released from its liability in
respect of this Lease.
ARTICLE 9
REPLACEMENT OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
9.1 Replacement of Parts. The Lessee, at its own cost and
expense, will promptly replace all Parts which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair
or permanently rendered unfit for use for any reason whatsoever. In addition,
in the ordinary course of maintenance, service, repair, overhaul or testing,
the Lessee may remove any Parts, whether or not worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use, provided that the Lessee shall replace such Parts as promptly
as practicable except Parts deemed obsolete by Lessee which shall not exceed,
during the Term, One Hundred Thousand Dollars ($100,000) in aggregate original
cost ("Obsolete Parts"). All replacement Parts shall be free and clear of all
Liens and shall be in as good an operating condition as, and shall have a
value and utility at least equal to, the Parts replaced, assuming such
replaced Parts were in the condition and repair required to be maintained by
the terms hereof.
9.2 Title to Replaced Parts. All Obsolete Parts owned and
leased by the Lessor hereunder at any time removed from any Item of Equipment,
except Obsolete Parts shall remain the property of the Lessor and subject to
this Lease, no matter where located, until such time as such Parts shall be
replaced by Parts which have been incorporated or installed in or attached to
such Item and which meet the requirements for replacement Parts specified
above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to an Item as above provided, without further act,
(A) title to the replaced Part shall thereupon vest in the Lessee, free and
clear of all rights of the Lessor and shall no longer be deemed a Part
hereunder; (B) title to such replacement Part shall thereupon vest in the
Lessor; and (C) such replacement Part shall become subject to this Lease and
be deemed part of such Item for all purposes hereof to the same extent as the
Parts originally incorporated or installed in or attached to such Item.
9.3 Alterations, Modifications and Additions. The Lessee, at
its own expense, shall make alterations and modifications in and additions to
an Item of Equipment as may be required from time to time under any law, rule,
directive, bulletin, regulation or order of the Aeronautics Authority, or
other governmental authority having jurisdiction or issued by the manufacturer
of such Item of Equipment. In addition, the Lessee, at its own expense, may
from time to time make such alterations and modifications in and additions to
each Item as the Lessee may deem desirable in the proper conduct of its
business, provided that no such alteration, modification or addition
diminishes the value, utility or remaining useful life, airworthiness and
condition of such Item below the value, utility or remaining useful life,
airworthiness and condition thereof immediately prior to such alteration,
modification or addition, assuming that such Item is in the condition required
hereunder.
9.4 Title to Parts. Subject to the provisions hereof, title to
all Parts incorporated or installed in or attached or added to any Item as the
result of any alteration, modification or addition made as contemplated in
Section 9.3 hereof shall, without further act, vest in Lessor.
Notwithstanding the foregoing, Lessee may remove such Part; provided, that (A)
such Part is in addition to, and not in replacement of or in substitution for,
any Part originally incorporated or installed in or attached to such Item at
the time of delivery thereof hereunder or any Part in replacement of, or
substitution for, any such original Part; (B) such Part is not required to be
incorporated or installed in or attached or added to such Item pursuant to the
terms of section 6.5 hereof or the first sentence of Section 9.3; and (C) such
Part can be removed from such Item without diminishing or impairing the value,
utility or airworthiness which such Item would have had at such time had such
alteration, modification or addition not occurred. Upon removal by Lessee,
Title to such Part shall vest in Lessee. Any Part not removed by the Lessee
as above provided prior to the return of the Item to the Lessor hereunder
shall remain the property of the Lessor, without further act.
9.5 No Liability for Alteration, Modification or Addition;
Grounding. In no event shall the Lessor bear any liability or cost whatsoever
for (A) any alteration, modification, addition, or (B) any grounding of an
Aircraft, or (C) suspension of certification of an Aircraft, or (D) for loss
of revenue suffered by the Lessee for any reason whatsoever.
ARTICLE 10
GENERAL TAX INDEMNITY
10.1 (A) Indemnity. Lessee agrees to pay and, on written demand,
to indemnify, protect, save and hold Lessor and its successors and permitted
assigns harmless from all license and registration fees, sales and use taxes,
personal property taxes and any and all other taxes, levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever together with
any penalties, additions to tax, fines or interest thereon (collectively,
"Taxes") upon or in connection with or relating to (A) the construction,
financing, refinancing, purchase, acquisition, acceptance, rejection,
delivery, nondelivery, transport, ownership, registration, reregistration,
insuring, assembly, possession, repossession, operation, location, use,
control, conditions, maintenance, repair, sale, return, abandonment,
installation, storage, redelivery, replacement, manufacture, leasing,
subleasing, modification, rebuilding, importation, transfer of title, transfer
of registration, exportation or other application or disposition of the
Aircraft, the Airframe, any Engine, any Propeller or any Part thereof or
interest therein, (B) the rentals, receipts or earnings from the Aircraft, the
Airframe, any Engine, any Propeller or any Part, (C) any amount paid or
payable pursuant to this Lease or any document related thereto, (D) the
Aircraft, the Airframe, any Engine, any Propeller or any Part, (E) this Lease,
and any other documents contemplated hereby or thereby and amendments and
supplements hereto and thereto or the execution, delivery or performance of
any thereof or the issuance, acquisition, modification, holding or subsequent
transfer thereof, or (F) otherwise with respect to or in connection with the
transactions contemplated by this Lease; by (i) any Federal, state or local
government or taxing authority in the United States or (ii) by any taxing
authority or governmental subdivision of a foreign country or international
organization ("Foreign Tax Jurisdiction") to the extent such Taxes are imposed
as a result of the activities in the Foreign Tax Jurisdiction of the Lessee or
any person who acquires from the Lessee, directly or indirectly, possession or
control or right to use the Aircraft or any part thereof (an "Aircraft User").
Lessor agrees to consult with Lessee prior to the payment by Lessor of any
Taxes (other than Taxes excluded from this indemnity under Section 10.1(b))
imposed by any United States or Foreign Tax Jurisdiction, subject to Lessee's
right to contest, as set forth in Section 10.3 hereof. In addition, and
without limiting the foregoing, Lessee shall hold harmless and indemnify
Lessor against any trade sanctions, tariffs or other taxes which may be
imposed on the importation of any Aircraft into the United States.
(B) Limitation on Indemnity. Notwithstanding the provisions of
paragraph (a) of this Section 10. 1, Lessee shall have no obligation
thereunder as to (x) Taxes based on or measured by the net income of Lessor
imposed by the United States of America or by any of its state or local taxing
authorities or by any Foreign Tax Jurisdiction; provided, however, Lessee
shall be liable for Taxes based on or measured by Lessor's net income if, but
only if, (a) such taxes are in lieu of Taxes on an Aircraft which the Lessee
would otherwise be required to pay hereunder, or (b) are taxes on net income
which are imposed as a result of the use or operation of the Aircraft by the
Lessee or an Aircraft User within the jurisdiction of such taxing authority
but only to the extent the amount of such net income taxes exceed the amount
of net income taxes that would have been imposed by such taxing authority had
the Aircraft not been operated or used within the jurisdiction of such taxing
authority after giving credit for any savings in respect to any Taxes by
reasons of deductions, credits or allowances with respect to the payment or
accrual of the amount indemnified against hereunder; (y) Taxes imposed with
respect to any period after the later of the applicable dates of (1) return of
possession of the Aircraft to Lessor or the placement of the Aircraft in
storage at the request of Lessor, (2) the termination of the Lease Term, or
(3) the discharge in full of the Lessee's obligation to pay the Termination
Value or the Stipulated Loss Value and all other amounts due, if any, under
Section 11 or 20.2, as the case may be, provided that the exclusion set forth
in this clause (y) shall not apply to Taxes to the extent such Taxes relate to
events occurring or matters arising prior to or simultaneously with the
applicable date, or (z) Taxes which become payable as a result of a sale,
assignment, transfer or other disposition (whether voluntary or involuntary)
by Lessor of all or any portion of its interest in the Aircraft or any part
thereof or the Lease or rights created thereunder other than as a result of
the substitution, modification or improvement of the Aircraft or any part
thereof or a disposition which occurs as the result of the exercise of
remedies for a Lease Event Default, any disposition which occurs during the
continuance of a Lease Event of Default or a purchase of the Aircraft pursuant
to the Lease; provided, that, notwithstanding the foregoing but subject to
Section 21 hereof, Lessee shall not be obligated to indemnify Lessor with
respect to net income taxes imposed within the United States as the result of
a sale, assignment, transfer or other disposition by Lessor or any Taxes
imposed as a result of the status of Lessor as other than a resident of the
United States for tax purposes. If an indemnification payment is made under
Article 21 hereof, the same event giving rise to such payment shall not also
result in an indemnification payment under this Article 10 for the taxes
indemnified in Article 21. Notwithstanding the above, Lessee shall have no
obligation to indemnify Lessor for any Taxes imposed as a result of events
occurring after the expiration or other termination of this Lease or return of
physical possession to Lessor.
10.2 After-Tax Nature of Indemnity. The Lessee further agrees
that, with respect to any payment or indemnity hereunder, such payment or
indemnity shall include any amount necessary to hold Lessor harmless on an
after-tax basis (at a rate for Lessor's applicable tax bracket (as reasonably
determined by the Lessor)) from all taxes required to be paid by Lessor with
respect to such payment or indemnity under the laws of any Federal, state or
local government or taxing authority in the United States, or under the laws
of any Foreign Tax Jurisdiction; provided that, if Lessor realizes a tax
benefit by reason of such payment or indemnity (whether such tax benefit shall
be by means of a depreciation deduction or otherwise), Lessor shall pay the
Lessee an amount equal to the net value to Lessor of such tax benefit when,
as, if and to the extent realized (such payments not to exceed in the
aggregate the amount of the related indemnity paid by Lessee), but not before
the Lessee shall have made all payments or indemnities to Lessor required
pursuant to this Article 10; provided further, however, that if Lessor loses
such tax benefit subsequent to any payment to the Lessee with respect thereto,
the Lessee shall indemnify Lessor with respect to such loss pursuant to the
provisions of this Article 10. Lessor shall in good faith use reasonable
diligence in filing its tax returns and in dealing with taxing authorities to
seek and claim any such tax benefit.
10.3 Contest. If written claim is made against Lessor for any
Taxes referred to in this Article 10, Lessor shall promptly notify the Lessee
(it being understood and agreed that failure to provide such notice shall not
adversely affect or otherwise prejudice any Lessor's right to indemnity under
this Article 10 except to the extent such failure has a materially adverse
effect on the ability to contest such claim). If reasonably requested by the
Lessee in writing within 30 days after such notification, Lessor shall upon
receipt of indemnity satisfactory to it and at the expense of the Lessee
(including, without limitation, all costs, expenses, losses, legal and
accountants' fees and disbursements, penalties and interest) in good faith
contest the validity, applicability or amount of such Taxes by either (i)
resisting payment thereof if practicable, or (ii) if payment is made, using
reasonable efforts to obtain a refund thereof in appropriate administrative
and judicial proceedings and will take such action in contesting any claim as
Lessee shall request from time to time; provided, however, that the Lessor
shall not be required to take any action to contest a claim unless Lessee
provides with such written request an opinion of independent counsel,
satisfactory both as to counsel and substance, to the effect that there is a
reasonable basis for such contest. If Lessor determines to pay such Taxes and
seek a refund, Lessee will either pay such Taxes on Lessor's behalf or will
promptly indemnify Lessor for such Taxes pursuant to Sections 10.1 and 10.2.
If Lessor shall obtain a refund of all or any part of such Taxes paid by the
Lessee, Lessor shall pay the Lessee the amount of such refund; provided that
such amount shall not be payable before such time as the Lessee shall have
made all payments of indemnities to Lessor then due under this Article 10. If
in addition to such refund Lessor shall receive an amount representing
interest on the amount of such refund, the Lessee shall be paid that
proportion of such interest which is fairly attributable to the Taxes paid by
the Lessee prior to the receipt of such refund. In case any report or return
is required to be made with respect to any obligation of the Lessee under this
Article 10 or arising out of this Article 10, the Lessee will promptly notify
Lessor of such requirement and will inform Lessor whether Lessee (i) will file
such report or return in such manner as will show the ownership in Lessor of
each Item of Equipment and send a copy of such report or return to the Lessor
or (ii) will make such report or return for filing by Lessor in such manner as
shall be satisfactory to the Lessor. In the event of a contest of any Taxes
hereunder, the Lessor shall apprise the Lessee of all material developments
with respect to such contest, shall forward copies of all material submissions
made in such contest, shall take such action concerning the conduct of any
such contest as Lessee shall request from time to time and shall not settle or
concede any such contest without the prior written consent of the Lessee.
10.4 Survival. The indemnification provided herein shall survive
the assignment, expiration or other termination of this Lease for indemnities
resulting or arising in any manner from or in connection with acts or
omissions occurring prior to or concurrent with such expiration or other
termination.
ARTICLE 11
DAMAGE, DESTRUCTION, REQUISITION OR CONDEMNATION
11.1 Event of Loss with Respect to an Airframe or an Airframe and
the Engines and Propellers Installed Thereon. Upon the occurrence of an Event
of Loss with respect to an Airframe or to an Airframe and the Engines and
Propellers then installed on such Airframe, the Lessee shall forthwith (and in
any event within 7 days after such occurrence) give the Lessor written notice
of such Event of Loss. The Lessee shall either (x) within one hundred twenty
days after the Event of Loss, convey or cause to be conveyed to Lessor as a
replacement for the Airframe or the Airframe and Engines and Propellers with
respect to which such Event of Loss occurred, title to another airframe or
airframe, engines and propellers of the same make and model as the Airframe or
Airframe, Engines and Propellers or an equivalent or an improved model free
and clear of all Liens (other than Liens excepted from Article 14 hereof in
clause (ii), clause (iii) (solely as to taxes not yet due) and clause (iv)
(but only to the extent such payment therein described is not yet
delinquent)), and having a value and utility and remaining useful life at
least equal to that of the Airframe or Airframe, Engines and Propellers with
respect to which such Event of Loss occurred (assuming such Airframe, or
Airframe, Engine and Propellers were, immediately prior to such Event of Loss,
in the condition and repair required hereunder), or (y) pay or cause to be
paid to the Lessor in immediately available funds on the earlier to occur of
(i) fifteen days after the date Lessee receives insurance proceeds from such
Event of Loss or (ii) one hundred twenty days after the Event of Loss (A) an
amount equal to the Stipulated Loss Value in respect of such Aircraft
determined as of the next immediately succeeding monthly anniversary date of
the Delivery Date following such payment date, and (B) all Rent due prior, and
all arrears rent due on or prior to such payment date; provided, however, that
payment of the Stipulated Loss Value shall be made within thirty days if the
Event of Loss occurs after the expiration of the Term of this Lease and before
termination of the storage period provided for in Section 16(j) hereof. At
such time as the Lessor has received the sum of (A) and (B) above, the
obligation of the Lessee to pay all Rent hereunder with respect to such
Aircraft shall terminate, and the Lessor shall transfer to the Lessee all the
Lessor's right, title, and interest, as-is, where-is, without recourse or
warranty, express or implied, except as to the absence of Liens described in
Article 14(ii), in and to (1) such Airframe, Engines and Propellers, (2) all
claims for damage to such Items, if any, against third persons arising from
the Event of Loss (unless any insurance carrier requires that such claims be
assigned to it), and (3) all rights to any insurance claims under all
insurance maintained by the Lessee hereunder except liability insurance,
without representation, recourse or warranty of any kind whatsoever except as
herein provided.
At the time Lessee exercises its right to replace the Airframe as
contemplated by this Section 11.1, in addition to the requirements set forth
above Lessee will, at its expense:
(A) furnish Lessor with a full warranty (as to title) Bill of
Sale (in form and substance reasonably satisfactory to Lessor) and FAA Bill of
Sale duly conveying to Lessor the replacement airframe and any replacement
engine(s), and replacement propellers, together with such other evidence of
title as Lessor reasonably requests;
(B) delivery to Lessor of an executed Lease Supplement
subjecting such replacement airframe and any replacement engine(s) and
replacement propellers to this Lease, duly executed by Lessee, and, upon
execution by the parties thereto, cause that Lease Supplement together with an
FAA Bill of Sale and an application for aircraft registration (on AC form
8050-1), each such document covering the replacement airframe and replacement
engine(s) and replacement propellers, if any, to be duly filed for recordation
wit the FAA;
(C) furnish Lessor with such evidence of compliance with the
insurance provisions of Section 12 with respect to such replacement airframe,
replacement engine and replacement propellers, as Lessor shall reasonably
request;
(D) cause a financing statement or statements with respect to
such substituted property to be filed in such place or places as are deemed
necessary or desirable by Lessor to perfect its interest therein and herein;
(E) furnish Lessor with an opinion of counsel reasonably
satisfactory to Lessor to the effect that title to such replacement aircraft
has been duly conveyed to Lessor free and clear of all Liens (other than Liens
excepted from Article 14 hereof, in clause (ii), clause (iii) (solely as to
taxes not yet due) and clause (iv) (but only to the extent such payment
therein described is not yet delinquent)) and, with respect to replacement of
the Airframe only, that Lessor will be entitled to the benefits of Section
1110 of the U.S. Bankruptcy Code with respect to the replacement aircraft;
(F) furnish to Lessor and take such other action as Lessor may
reasonably request in order that title to such replacement airframe and/or
replacement engines and/or replacement propellers is duly and properly vested
in Lessor, leased hereunder to the same extent as the Airframe and Engines, if
any, and Propellers, if any, being replaced thereby; and
(G) furnish to Lessor a certificate from a firm of independent
aircraft appraisers satisfactory to Lessor confirming that the fair market
value of the replacement airframe is not less than the then fair market value
of the Airframe (assuming such Airframe was in the condition and repair
required to be maintained under this Lease).
Promptly after the registration of any such replacement aircraft
and the recordation of a Lease Supplement covering any such replacement
airframe and any replacement engine(s) and replacement propeller(s) pursuant
to the Federal Aviation Act, Lessee, at its expenses, will cause to be
delivered to Lessor, an opinion of counsel reasonably satisfactory to Lessor
as to the due registration of the replacement aircraft and the due recordation
of such Lease Supplement pursuant to the Federal Aviation Act, and to the
further effect that the substituted property will be leased hereunder to the
same extent as the property replaced thereby.
For all purposes hereof, the property so substituted shall after
such transfer be deemed part of the property leased hereunder and shall be
deemed an "Aircraft", or "Airframe", and "Engine", and "Propeller", as the
case may be, as defined herein. No Event of Loss with respect to the Airframe
or the Airframe and the Engines and the Propellers or engines and propellers
then installed thereon for which substitution has been elected pursuant to
Section 11.1 hereof shall result in any reduction in Basic Rent.
11.2 Event of Loss with Respect to an Engine or Propeller. Upon
the occurrence of an Event of Loss with respect to an Engine or Propeller not
then installed on an Airframe or Engine, or an Event of Loss with respect to
an Engine or Propeller installed on an Airframe not involving an Event of Loss
with respect to the Airframe, the Lessee shall give the Lessor prompt written
notice thereof and the Lessee shall replace such Engine or Propeller as soon
as practicable after the occurrence of such Event of Loss by duly conveying to
the Lessor as a replacement for said Engine or Propeller, title to another
engine or propeller of the same make and of the same or an improved model and
suitable for installation and use on the Airframe or Engine, which engine or
propeller shall be free and clear of all Liens, and shall have a value and
utility at least equal to, and be in as good an operating condition as, the
Engine or Propeller with respect to which such Event of Loss occurred (without
regard to hours or cycles remaining until maintenance checks), assuming such
replaced Engine or Propeller was of the value and utility and remaining useful
life and in the condition and repair as required by the terms hereof
immediately prior to the occurrence of such Event of Loss. Such replacement
engine or propeller, after approval and acceptance by the Lessor, shall be
deemed an Engine or Propeller as defined herein, for all purposes hereunder.
The Lessee agrees to take such action as the Lessor may reasonably request to
ensure that any such replacement Engine or Propeller shall be duly and
properly titled in the name of Lessor and leased hereunder to the same extent
as any Engine or Propeller replaced thereby. Prior to or at the time of any
such conveyance, the Lessee, at its own expense, will promptly (i) furnish the
Lessor with a warranty bill of sale, in form and substance satisfactory to the
Lessor, with respect to such replacement Engine or Propeller, (ii) cause a
supplement hereto, in form and substance satisfactory to the Lessor,
subjecting such replacement Engine or Propeller to this Lease, to be duly
executed by the Lessee, and recorded pursuant to the Federal Aviation Act, and
(iii) furnish the Lessor with such evidence of compliance with the insurance
provisions of Article 12 hereof with respect to such replacement Engine or
Propeller as the Lessor may reasonably request. Upon full compliance with
this Section 11.2, the Lessor shall transfer to the Lessee all the Lessor's
right, title and interest, as-is, where-is, without recourse or warranty,
express or implied, except for a warranty as to the absence of Liens described
in Article 14 (ii) on such Engine or Propeller, in and to (1) the Engine or
Propeller with respect to which such Event of Loss occurred, (2) all claims
for damage to such Engine or Propeller, if any, against third persons arising
from the Event of Loss (unless any insurance carrier requires that such claims
be assigned to it), and (3) all rights to any insurance claims under all
insurance maintained by the Lessee hereunder except liability insurance. No
Event of Loss with respect to such Engine or Propeller under the circumstances
contemplated by the terms of this Section 11.2 shall result in any reduction
in Rent or in the Lessee's obligation to pay Basic Rent hereunder.
11.3 Application of Payments from Governmental Authorities for
Requisition of Title. Any payments (other than insurance proceeds the
application of which is provided for in Article 12 hereof) received at any
time by the Lessor or the Lessee from any governmental authority or other
entity with respect to an Event of Loss resulting from the condemnation,
confiscation, or seizure or requisition of title to or use of an Aircraft,
Airframe, Engines or Propellers, will be applied as follows:
(A) If such payments are received with respect to an Event of Loss
relating to an Airframe and installed Engines or Propellers, (i) unless the
same are replaced pursuant to Section 11.1(x), only so much of such payments
as shall not exceed the amounts due under Section 11.1(A) and (B) shall be
applied in reduction of the Lessee's obligation to pay such amounts, if not
already paid by the Lessee, or if already paid by the Lessee, shall be applied
to reimburse the Lessee for its payment of such amounts, and the balance, if
any, of such payments remaining thereafter will be paid over to or retained by
the Lessee or (ii) if such property is replaced pursuant to Section 11.1(x),
such payments shall be paid over to, or retained by, Lessee, at such time as
Lessee shall have replaced such property in accordance with the provisions of
Section 11.1(x); and
(B) If such payments are received with respect to an Engine or
Propeller under the circumstances described in Section 11.2, all such payments
shall be paid over to the Lessee, at such time as the Lessee shall have
replaced such Engine or Propeller in accordance with the provisions of said
Section 11.2.
Any amount referred to in clause (A) or (B) above which is payable to
Lessee shall not be paid to the Lessee if at the time of such payment an Event
of Default shall have occurred and be continuing, but shall be held by the
Lessor as security for the obligations of Lessee under this Lease and such
amount shall be paid to Lessee at such time as there no longer exists any
Event of Default.
ARTICLE 12
INSURANCE
12.1 Public Liability and Property Damage Liability Insurance.
The Lessee will carry, at its own expense, comprehensive airline liability
insurance, passenger legal liability insurance, property damage liability
insurance, and public liability insurance during the Term hereof in an amount
not less than $200,000,000 combined single limit, with respect to each
Aircraft. Such liability insurance policy shall not contain a provision for
deductible or self-insurance amounts. In any event all such policies shall be
(A) in amounts which are not less than the public liability and property
damage insurance applicable to similar aircraft and engines which may at any
time during the Term hereof comprise the Lessee's fleet on which the Lessee
carries insurance; and (B) maintained in effect with insurers of recognized
reputation and responsibility. Any policies of insurance carried in
accordance with this Section 12.1 and any policies taken out in substitution
or replacement of any of such policies: (1) shall name the Lessor as owner and
as additional insured (but without imposing upon Lessor, any obligations
imposed on the insured, including without limitation the liability to pay
premiums); (2) shall provide that in respect of the interest of the Lessor,
such policies of insurance shall not be invalidated by any action or inaction
of the Lessee and shall insure Lessor, regardless of any breach or violation
of any warranty, declarations or conditions contained in such policies by the
Lessee; and (3) shall provide that if the insurers cancel such insurance for
any reason whatever, or the same is allowed to lapse for nonpayment of
premium, or if there is any material change in policy terms or conditions,
such cancellation, lapse or change shall not be effective for thirty (30) days
after receipt by the Lessor of written notice by such insurers to the Lessor
of such cancellation, lapse or change (other than war risk insurance, in which
case seven days' notice shall be given) . Each liability policy (i) shall be
primary without right of contribution from any insurance which is carried by
the Lessor (ii) shall expressly provide that all of the provisions thereof,
except the limits of liability, shall operate in the same manner as if there
were a separate policy covering each insured, (iii) shall waive any rights of
set-off, counterclaim or other deduction against each insured, and (iv) shall
waive any rights of subrogation the insurers have or may acquire against
Lessor. The Lessee shall arrange for evidence of appropriate coverage as to
each Aircraft and as to the satisfaction of the requirements set forth above
in this Section 12.1 to be furnished to the reasonable satisfaction of Lessor
on or before the Delivery Date for the Aircraft.
12.2 Insurance Against Loss or Damage to the Aircraft. The
Lessee shall maintain in effect, at its own expense, with insurers of
recognized reputation and responsibility and reasonably satisfactory to the
Lessor: (A) all-risk ground, taxiing and flight aircraft hull insurance
covering the Aircraft; (B) all risk spare parts and engines coverage
(including transit) with respect to any Engines, Propellers or Parts while
removed from an Aircraft while such items are not installed on the Aircraft
and are not insured by the Aircraft hull and risk insurance; (C) limited war
risk perils covering hijacking (air piracy), and (D) at the reasonable request
of Lessor, war risk and governmental confiscation and expropriation and
related insurance, but only to the extent (i) such insurance is maintained by
Lessee with respect to other aircraft operated by Lessee on the same routes as
the Aircraft, or (ii) the custom in the United States airline industry is to
carry such insurance with respect to aircraft operated on the same routes as
the Aircraft.
All such insurance shall be in full force and effect throughout
any geographical areas at any time traversed by the Aircraft, shall be payable
in dollars in the United States and shall during the Term hereof be for an
amount not less than the Stipulated Loss Value for such Aircraft. Any hull
insurance carried in accordance with this Section 12.2 may contain a provision
for a deductible or self-insurance which complies with industry standards.
Any policies carried in accordance with this Section 12.2 covering the
Aircraft and any policies taken out in substitution or replacement for any
such policies: (1) shall name the Lessor as owner and as loss payee (but
without imposing on Lessor any obligations imposed upon the insured, including
without limitation the liability to pay premiums); (2) shall provide that if
such insurance is canceled or materially changed for any reason whatever, or
the same is allowed to lapse for non-payment of premium, such cancellation,
change or lapse shall not be effective as to the Lessor for thirty (30) days
after receipt by the Lessor of written notice by such insurers of such
cancellation or lapse or material change in policy terms and conditions (other
than war risk insurance, in which case seven days' notice shall be given); (3)
shall provide that losses shall be adjusted with the Lessor and Lessee as
their interests may appear and be payable to Lessor in the event of any damage
or loss, for any one occurrence, in excess of $1,000,000 (without
consideration of any deductible); (4) shall provide that in respect of the
interest of the Lessor in such policies the insurance shall not be invalidated
by any action or inaction of the Lessee or any other person and shall insure
the Lessor regardless of any breach or violation of any warranties,
declarations or conditions contained in such policies by the Lessee or any
other person; (5) shall waive any right of set-off, counterclaim or other
deduction against each insured; (6) shall be primary without right of
contribution from any insurance which is carried by the Lessor, and; (7) shall
waive any and all rights of subrogation which the insurers have or may acquire
against Lessor. The Lessee shall arrange for evidence of appropriate coverage
for each Aircraft and to the satisfaction of the requirements set forth above
to be given to the Lessor on or before the Delivery Date for each Aircraft by
its insurance broker.
12.3 Application of Proceeds in an Event of Loss. Except as
limited by clause (C) hereof, it is agreed that all insurance payments
received as the result of the occurrence of an Event of Loss with respect to
an Airframe and installed Engines or any Engine will be applied as follows:
(A) So much of such payments as shall not exceed the amount required
to be paid by the Lessee pursuant to Section 11.1 shall be applied in
reduction of the Lessee's obligation to pay such amount if not already paid by
the Lessee or, if already paid by the Lessee, shall immediately be applied to
reimburse the Lessee for its payment of such amount, and the balance, if any,
of such payment remaining thereafter will be paid over to, or retained by, the
Lessee; and
(B) If such payments are received with respect to an Engine under the
circumstances contemplated by Section 11.2, such payments shall immediately be
paid over to, or retained by, the Lessee, provided that the Lessee shall have
fully performed the terms of Section 11.2 with respect to the Event of Loss
for which such payments are made.
(C) Any amount referred to in clause (A) or (B) above which is payable
to Lessee shall not be paid to the Lessee if at the time of such payment an
Event of Default shall have occurred and be continuing, but shall be held by
the Lessor as security for the obligations of Lessee under this Lease and such
amount shall be paid to Lessee at such time as there no longer exists any
Event of Default.
12.4 Application of Proceeds in the Absence of an Event of Loss.
As between Lessor and Lessee, the insurance payments of any property damage
loss to an Airframe or any Engine not constituting an Event of Loss with
respect thereto will be applied in payment for repairs or for replacement
property in accordance with the terms of Articles 6 and 9, if not already paid
for by the Lessee (or to reimburse the Lessee for such repairs or replacements
already paid for by the Lessee), and any balance remaining after compliance
with such Articles with respect to such loss shall immediately be paid to the
Lessee. Any amount referred to in the preceding sentence which is payable to
Lessee shall not be paid to the Lessee if at the time of such payment an Event
of Default shall have occurred and be continuing, but shall be held by the
Lessor as security for the obligations of Lessee under this Lease and such
amount shall be paid to Lessee at such time as an Event of Default no longer
exists.
12.5 Reports, etc. On the Delivery Date for each Aircraft and
upon each renewal of the insurance coverages (but not less frequently than
annually), the Lessee shall furnish to the Lessor a certificate from the
Lessee's insurance broker describing in reasonable detail the insurance then
carried and maintained on the Aircraft including a listing of the special
provisions required by Sections 12.1 and 12.2, and a statement certifying that
such insurance complies with the terms hereof. The Lessee will advise the
Lessor in writing promptly of any default in the payment of any premium and of
any other act or omission on the part of the Lessee which might invalidate or
render unenforceable, in whole or in part, any insurance on an Aircraft. In
the event that the Lessee shall fail to maintain insurance as herein provided,
the Lessor may at its sole option provide such insurance and, in such event,
the Lessee shall thereupon reimburse the Lessor as Supplemental Rent for the
cost thereof; provided, however, that no exercise by the Lessor of said option
shall affect the provisions of this Lease, including the provisions that
failure by the Lessee to maintain the prescribed insurance shall constitute an
Event of Default.
12.6 Endorsements. All policies of insurance required by this
Lease shall be in conformance with the provisions of this Article 12.
12.7 Lessor's Additional Insurance. The Lessor may at its option
and at its sole expense carry insurance covering its interest in the Aircraft,
in addition to that required to be provided and maintained by the Lessee
pursuant to this Article 12, provided that no such insurance shall have the
effect of suspending, impairing, defeating, invalidating or rendering
unenforceable or reducing, in whole or part, the coverage of or the proceeds
payable under any insurance now or hereafter maintained by the Lessee.
ARTICLE 13
INDEMNITIES
13.1 General Indemnification. The Lessee agrees to assume
liability for, and does hereby indemnify, protect, save and keep harmless the
Lessor and its successors, assigns, agents and servants (the "Indemnitees")
from and against any and all claims, damages, losses, liabilities (including,
but not limited to, any claim or liability for strict liability in tort or
otherwise imposed including, without limitation, liability arising under any
applicable environment or noise or pollution control statute, rule or
regulation), obligations, demands, suits, penalties, judgments or causes of
action and all legal proceedings, whether civil or criminal, penalties, fines
and other sanctions, and any costs and expenses in connection therewith
including, without limitation, legal fees and expenses of whatever kind and
nature (whether or not also indemnified against by any other person under any
other document), which may result from or grow or arise in any manner out of
this Lease, or the condition, ownership, manufacture, construction, design
(including, without limitation, latent and other defects whether or not
discoverable by Lessee or Lessor and any claim for patent, trademark or
copyright infringement), acceptance, rejection, delivery, lease, maintenance,
overhaul, testing, possession, return, disposition, use or operation (in each
and every case) of the Aircraft or any Item of Equipment either in the air or
on the ground (except claims (i) attributable to (A) any representation or
warranty by such Indemnitee in this Lease being incorrect in any material
respect, or (B) the failure by such Indemnitee to perform or observe any
agreement, covenant or condition in this Lease, or (C) the willful misconduct
or the gross negligence of such Indemnitee (other than gross negligence
imputed to such Indemnitee solely by reason of its interest in the Aircraft),
or (D) with respect to the Lessor, a disposition (voluntary or involuntary) by
the Lessor of all or any part of its interest in the Airframe or any Engine or
Propeller (other than as contemplated by the Lease), (ii) attributable to acts
or events occurring after the expiration or other termination of the Term
(unless Lessee has failed to return the Aircraft, and then until return of the
Aircraft hereunder), (iii) for taxes (whether or not indemnified by the Lessee
under Sections 10.1(a) or 21.2 hereof), or (iv) attributable to amendments to
the documents not requested or consented to by Lessee, or arising from the
material or any article used therein or from the design, testing or use
thereof or from any maintenance, service, repair, overhaul or testing of any
Aircraft or any Item regardless of when such defect shall be discovered,
whether or not such Aircraft or any Item is at the time in the possession of
the Lessee and whether it is in the United States of America or any other
country. The indemnities contained in this Section shall continue in full
force and effect notwithstanding the assignment, expiration or other
termination of this Lease for indemnities resulting or arising in any manner
from or in connection with acts, omissions or events occurring prior to or
concurrent with such expiration or other termination, or during any holdover
by the Lessee contrary to the terms of this Lease.
13.2 Lessee Waiver. The Lessee hereby waives and releases any
claim now or hereafter existing against the Lessor and its successors or
assigns, agents and servants on account of any and all claims, demands, suits,
judgments or causes of action for or on account of or arising or in any way
connected with injury to or death of personnel of the Lessee or loss or damage
to property of the Lessee or the loss of use of any property which may result
from or grow or arise in any manner out of the condition, use or operation of
the Aircraft or any Item, either in the air or on the ground during the Term
hereof, or which may be caused during the Term hereof by any defect (whether
latent or patent) in the Aircraft or any Item from the material or any article
used therein or from the design, testing or use thereof or from any
maintenance, service, repair, overhaul or testing of the Aircraft or any Item
regardless of when such defect shall be discovered, whether or not such
Aircraft or any Item is at the time in the possession of the Lessee and
whether it is in the United States of America or any other country (except
claims resulting from the gross negligence or willful misconduct of Lessor or
its successor or assigns).
13.3 Payments; Subrogation. The Lessee further agrees that, with
respect to any payment or indemnity hereunder, such payment or indemnity shall
include any amount necessary to hold the recipient of the indemnity harmless
on an after-tax basis from all taxes required to be paid (or which would have
been required to be paid by Lessor with respect to such payment or indemnity
had Lessor had sufficient gross income within the meaning of section 61 of the
Code actually to pay tax at the highest marginal rate) by such recipient with
respect to such payment or indemnity under the laws of any Federal, state or
local government or taxing authority in the United States, or under the laws
of any taxing authority or governmental subdivision of a foreign country in
which Lessee operates; provided that, if any recipient of a payment or
indemnity realizes a tax benefit by, reason of such payment or indemnity
(whether such tax benefit shall be by means of a depreciation deduction or
otherwise), such recipient shall pay the Lessee an amount equal to the sum of
such tax benefit plus any tax benefit realized as the result of any payment
made pursuant to this proviso, when, as, if and to the extent realized; but
not before the Lessee shall have made all payments or indemnities to such
recipient with respect to such loss pursuant to the provisions of this Article
13. Each such recipient shall in good faith use reasonable efforts in filing
its tax returns and in dealing with taxing authorities to seek and claim any
such tax benefit.
Lessee shall be subrogated to Lessor's rights in any matter with
respect to which Lessee has actually reimbursed Lessor for amounts expended by
it or has actually paid such amounts directly pursuant to Section 13.1.
In case any action, suit or proceeding is brought against Lessor
in connection with any claim indemnified against hereunder, Lessor will,
promptly after receipt of notice of the commencement of such action, suit or
proceeding, notify Lessee thereof, enclosing a copy of all papers served upon
Lessor; provided that the failure to provide such notice shall not release
Lessee from any of its obligations to indemnify hereunder except to the extent
that Lessee is prejudiced as a result of the failure to given such notice in a
timely fashion. Lessee may, and upon Lessor's request will, at Lessee's
expense, resist and defend such action, suit or proceeding, or cause the same
to be resisted or defended by counsel selected by Lessee and reasonably
satisfactory to Lessor and in the event of any failure by Lessee to do so,
Lessee shall pay all costs and expenses (including, without limitation,
attorney's fees and expenses) incurred by Lessor in connection with such
action, suit or proceeding. So long as Lessee has acknowledged in writing its
responsibility for such claim hereunder (unless such claim is covered by the
exceptions set forth in Section 13.1, except that such acknowledgment does not
apply if the decision of a court or arbitrator provides that Lessee is not
liable hereunder), Lessee shall have the right (A) in any judicial or
administrative proceeding that involves solely a claim for one or more claim,
to assume responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for one or more claim and other
claims related or unrelated to the transactions contemplated by, to assume
responsibility for and control of such claim to the extent that the same may
be and is severed from such other claims (and such Indemnitee shall use its
reasonable efforts to obtain such severance), and (C) in any other case, to be
consulted by such Indemnitee with respect to judicial proceedings subject to
the control of such Indemnitee and to be allowed, at Lessee's sole expense, to
participate therein. The Indemnitee may participate at its own expense and
with its own counsel in any judicial preceding controlled by Lessee pursuant
to the preceding provisions. Notwithstanding any of the foregoing, Lessee
shall not be entitled to assume responsibility for and control of any such
judicial or administrative proceedings if any Event of Default shall have
occurred and be continuing or if such proceedings will involve a material risk
of the sale, forfeiture or loss of, or the creation of any Lien (other than a
Permitted Lien) on the Aircraft unless Lessee shall have posted a bond or
other security reasonably satisfactory to the relevant Indemnities in respect
to such risk.
ARTICLE 14
LIENS
The Lessee shall not directly or indirectly create, incur, assume
or suffer to exist any Lien on or with respect to any Aircraft or title
thereto or any interest therein, or in this Lease, except (i) the respective
rights of the Lessor and the Lessee as herein provided; (ii) Liens which
result from the Lessor's own acts or from claims against the Lessor not to be
paid or indemnified against by the Lessee hereunder; (iii) Liens for taxes
either not yet due or being contested in accordance with Article 10 hereof;
and (iv) inchoate materialmen's, mechanics', workmen's, repairmen's,
employees' or other like liens arising in the ordinary course of business and
for amounts the payment of which is either not yet delinquent or is being
contested in good faith (and for the payment of which adequate reserves have
been provided) by appropriate proceedings so long as such proceedings do not
involve any danger of sale, forfeiture or loss of any Aircraft or any interest
therein. The Lessee shall promptly, at its own expense, take such action as
may be necessary to duly discharge any such Lien not excepted above if the
same shall arise at any time with respect to an Aircraft leased hereunder.
ARTICLE 15
RECORDATION AND FURTHER ASSURANCES
15.1 Recordation. The Lessee shall, at its expense, cause this
Lease, all Exhibits hereto, the Lease Supplements and any and all additional
instruments which shall be executed pursuant to the terms hereof (other than
as may be required as a result of a voluntary act by Lessor not required by an
act or in connection with a default by Lessee) so far as permitted by
applicable law or regulations, to be kept, filed and recorded and to be re-
executed, refiled, and re-recorded at all times in the office of the
Aeronautics Authority, pursuant to the Federal Aviation Act, and in such other
places or with such other governmental authorities as the Lessor may
reasonably request to perfect and preserve the Lessor's rights hereunder.
15.2 Foreign Filings. Without limiting the foregoing, the Lessee
shall do or cause to be done, at the Lessee's cost and expense, any and all
acts and things which may be required under the terms of the Convention for
the International Recognition of Rights in Aircraft, signed (ad referendum) at
Geneva, Switzerland, on June 19, 1948, to perfect and preserve the Lessor's
interest in and to the Aircraft within the jurisdiction of any signatory State
which has ratified said Convention and in the territory of which the Lessee
may operate the Aircraft as the Lessor may reasonably request. The Lessee
shall also do or cause to be done, at its own expense, any and all acts and
things which may be required under the terms of any other agreement, treaty,
convention, pact or by any practice, custom, or understanding recognized as
having wide application or control involving any jurisdiction in which the
Lessee may operate, or any and all other acts and things which the Lessor may
reasonably request and which are necessary, to perfect and preserve the rights
of the Lessor hereunder, in and to any Aircraft within any such jurisdiction.
15.3 Further Assurances. In addition, the Lessee will promptly
and duly execute and deliver to the Lessor such further documents and
assurances and take such further action as the Lessor may from time to time
reasonably request in order to more effectively carry out the intent and
purpose of this Lease and to establish and protect the rights and remedies
created or intended to be created in favor of the Lessor hereunder, including,
without limitation, if requested by the Lessor, at the expense of the Lessee,
the execution and delivery of supplements or amendments hereto, in recordable
form, subjecting to this Lease any 'replacement or substituted engine and the
recording or filing of counterparts hereof, or of financing statements with
respect hereto, in accordance with the laws of such jurisdictions as the
Lessor may reasonably deem advisable.
ARTICLE 16
RETURN OF AIRCRAFT AND RECORDS
At the expiration of the Term, or upon the termination of this
Lease pursuant to Section 18, Lessee, at its own expense, shall, except as
otherwise provided in Section 18 hereof, return the Aircraft in accordance
with the terms and provisions set forth on Exhibit E attached hereto.
ARTICLE 17
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether
such events shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) Lessee fails to make any payment of Basic Rent within ten
(10) Business Days of when due or fails to make any payment of
Supplemental Rent to the Lessor when due, and such failure to pay
Supplemental Rent continues for a period of fifteen (15) Business Days
after Lessor gives written notice to Lessee that Supplemental Rent is
due; or
(b) Lessee fails to procure property or liability insurance,
such insurance shall lapse or Lessee shall operate the Aircraft without
the insurance coverage required pursuant to Article 12 hereof, provided
that any failure to cover a lapse of such insurance shall not constitute
an Event of Default so long as the Aircraft is not flown during the
period of such lapse and insurance coverage remains in effect while the
Aircraft is grounded; or
(c) Lessee fails to perform or observe in any material respect
any other of the covenants, conditions, or agreements to be performed or
observed by it hereunder and such failure continues for a period of
thirty (30) days after written notice thereof from the Lessor to the
Lessee; provided, however, that if such failure is curable in Lessee's
reasonable judgment, Lessee shall have undertaken to cure any such
failure and, notwithstanding the reasonable diligence of Lessee in
attempting to cure such failure, such failure is not cured within said
thirty (30) day period but is curable with future due diligence, there
shall exist no Event of Default under this Article 17 for such further
time not to exceed 180 days as may reasonably be required to effect such
cure, so long as Lessee is proceeding with due diligence to cure such
failure; or
(d) Any representation or warranty made by the Lessee herein or
in any material document or certificate furnished the Lessor in
connection herewith or pursuant hereto proves to be incorrect in any
material respect and shall remain material and uncured at the time
discovered, and shall not have been cured or the adverse effect
eliminated within 30 days after receipt by Lessee of written notice,
provided such representation or warranty may be cured or the adverse
effect eliminated; or
(e) Lessee consents to the appointment of a receiver, trustee or
liquidator of itself or of a substantial part of its property, or Lessee
admits in writing its inability to pay its debts generally as they
become due, or makes a general assignment for the benefit of creditors,
or Lessee files a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization in a proceeding under any
bankruptcy laws (as now or hereafter in effect) or an answer admitting
the material allegations of a petition filed against the Lessee in any
such proceeding, or Lessee by voluntary petition, answer or consent
seeks relief under the provisions of any other now existing or future
bankruptcy or other similar law providing for the reorganization or
winding-up of corporations, or providing for an agreement, composition,
extension or adjustment with its creditors; or
(f) An order, judgment or decree is entered in any proceedings
by any court of competent jurisdiction appointing, with or without the
consent of the Lessee, a receiver, trustee or liquidator of the Lessee
or of any substantial part of its property, or any substantial part of
the property of the Lessee is sequestered, and any such order, judgment
or decree of appointment or sequestration remains in force undismissed,
unstayed or unvacated for a period of sixty (60) days after the date of
entry thereof; or
(g) A petition against the Lessee in a proceeding under the
bankruptcy laws or other insolvency laws (as now or hereafter in effect)
is filed, and any decree or order adjudging the Lessee a bankrupt or
insolvent in such proceeding remains in force undismissed or unstayed
for a period of sixty (60) days after such adjudication or, in case the
approval of such petition by a court of competent jurisdiction is
required, the petition as filed or amended shall be approved by such a
court as properly filed and such approval shall not be withdrawn or the
proceeding dismissed within sixty (60) days thereafter, or if, under the
provisions of any law providing for reorganization or winding-up of
corporations which may apply to the Lessee, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the Lessee
or of any substantial part of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed or
unterminated for a period of sixty (60) days; or
(h) an "Event of Default" shall have occurred under, and as
defined in, any other aircraft lease agreement between the Lessee and
the Lessor (or an affiliate of the Lessor).
ARTICLE 18
REMEDIES
18.1 Remedies. Upon the occurrence of any Event of Default and
at any time thereafter so long as the same shall be continuing, the Lessor
may, at its option, declare this Lease to be in default and at any time
thereafter, so long as the Lessee shall not have remedied all outstanding
Events of Default, the Lessor may exercise one or more of the following
remedies with respect to all or any part of any Aircraft, Airframe, Engine or
Propeller as the Lessor, in its sole discretion, shall elect, to the extent
available and permitted by applicable law then in effect:
(1) Terminate this Lease and demand that the Lessee, and the
Lessee shall upon the written demand of the Lessor and at the Lessee's
expense, forthwith return the Aircraft and all Items of Equipment to the
Lessor in the manner and condition required by, and otherwise in
accordance with all of the provisions of, Article 16 hereof as if such
Aircraft were being returned at the end of the Term; or the Lessor, at
its option and to the extent permitted by applicable law, may enter upon
the premises where any Airframe, any Engine or Propeller or any Item of
Equipment is located and take immediate possession of and remove the
same by summary proceedings or otherwise, all without liability accruing
to the Lessor for or by reason of such entry or taking of possession
whether for the restoration of damage to property caused by such taking
or otherwise.
(2) Sell or cause to be sold any Airframe, any Engine, Propeller
or any Item of Equipment at public or private sale, as the Lessor may
determine, or otherwise dispose of, hold, use, operate or lease to
others the Aircraft or any Item of Equipment as the Lessor in its
discretion may determine, all free and clear of any rights of the
Lessee.
(3) Whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under Section 18.1(1)
or 18.1(2) above with respect to the Aircraft or any Item, the Lessor,
by written notice to the Lessee specifying a payment date not earlier
than ten (10) days from such written notice, may demand that the Lessee
pay to the Lessor and the Lessee shall pay to the Lessor, on the payment
date specified in such notice, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Rent for the Item due
for periods commencing on or after the date specified for payment in
such notice), any unpaid Basic Rent for the Aircraft due for periods
prior to the payment date specified in such notice plus whichever of the
following amounts the Lessor, in its sole discretion, shall specify in
such notice: (A) an amount equal to the excess, if any, of the present
worth of the aggregate unpaid Rent due under this Lease for such
Aircraft discounted at the rate of eight percent (8%) per annum to the
date specified in said notice over the aggregate fair market rental
value (computed as hereafter in this Article provided) of such Aircraft
for the remainder of the Term for such Aircraft after discounting such
fair market rental value to present worth as of the payment date
specified in such notice at the rate of eight percent (8%) per annum; or
(B) an amount equal to the excess, if any, of the Stipulated Loss Value
for such Aircraft computed as of the date specified for payment in such
notice over the fair market sales value (computed as hereafter in this
Article provided) as of the date specified in the notice, or (C) an
amount equal to the excess, if any, of the Stipulated Loss Value for the
Aircraft computed as of the date specified for payment in such notice
over the fair market rental value (computed as hereafter provided in
this Article) of the Aircraft for the remainder of the Term after
discounting such fair market rental value to present value as of the
payment date specified in such notice at the rate of eight percent (8%)
per annum. The amount specified in said notice shall bear interest at
the Incentive Rate from the payment date specified in said notice until
receipt of payment by the Lessor.
(4) In the event the Lessor, pursuant to Section 18.1(2) above,
shall have sold or caused to have sold, any Aircraft, the Lessor in lieu
of exercising its rights under Section 18.1(3) above with respect to
such Aircraft, may, if it shall so elect, demand that the Lessee pay the
Lessor and the Lessee shall pay to the Lessor, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic Rent for
such Aircraft due after such sale occurs), any unpaid Basic Rent for
such aircraft due for periods up to the time of sale plus the amount by
which the Stipulated Loss Value of such Item computed as of the date of
such sale exceeds the net proceeds of such sale, together with interest
at the Incentive Rate on the sum of such excess and such unpaid Rent
from date of sale to the date such payment is received by the Lessor.
(5) Proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by the Lessee of the applicable
covenants of this Lease and to recover damages for the breach thereof,
or to rescind this Lease as to any Aircraft.
(6) In addition, the Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Rent due hereunder before or
during the exercise of any of the foregoing remedies and for all legal
fees and other costs and expenses incurred by reason of the occurrence
of any Event of Default or the exercise of the Lessor's remedies with
respect thereto, including without limitation all costs and expenses
incurred in connection with the return of any Aircraft in accordance
with the terms of Article 16 hereof or in placing such Aircraft in the
condition and with airworthiness certificates as required by said
Article.
(7) For the purpose of Section 18.1(3) above, the "fair market
rental value" or the "fair market sales value" of any Aircraft shall be
as specified in an appraisal by a nationally recognized independent
aircraft appraiser, chosen by the Lessor, who shall determine such
value(s) on the basis of the lesser of the actual location and condition
of the Aircraft or the location and condition required upon the return
thereof pursuant to this Lease. At any sale of any Aircraft pursuant to
this Article 18, Lessor, or any assignee, successor or affiliate of
Lessor, may bid for and purchase such property.
18.2 Cumulative; Waiver. Except as otherwise expressly provided
above, no remedy referred to in this Article is intended to be exclusive, but
each shall be cumulative and in addition to any other remedy referred to above
or otherwise available to the Lessor at law or in equity; and the exercise or
beginning of exercise by the Lessor of any one or more of such remedies shall
not preclude the simultaneous or later exercise by the Lessor of any or all of
such other remedies. No express or implied waiver by the Lessor of any Event
of Default shall in any way be, or be construed to be, a waiver of any future
or further Event of Default.
18.3 Bankruptcy. Notwithstanding any provision herein or
elsewhere contained to the contrary, it is understood and agreed among the
parties hereto that the transactions contemplated by this Lease are expressly
intended to be, shall be and should be construed so as to be, entitled to the
full benefits of 11 U.S.C. Section 1110, as amended from time to time, and any
successor provision thereto.
ARTICLE 19
MISCELLANEOUS
19.1 Construction and Applicable Law. Any provision of this
Lease which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. No term or
provision of this Lease may be changed, waived, discharged or terminated
orally, but only by a written instrument signed by the party against which the
enforcement of the change, waiver, discharge or termination is sought. This
Lease shall constitute an agreement of lease, and nothing herein shall be
construed as conveying to the Lessee any right, title or interest in any Item
of Equipment except as a lessee only. The captions in this Lease are for
convenience of reference only and shall not define or limit any of the terms
or provisions hereof. This Lease is being delivered in the State of Virginia
and shall in all respects be governed by, and construed in accordance with,
the laws of the State of New York, including all matters of construction,
validity and performance. This Lease shall be effective for all purposes as
of the date first above written.
19.2 Notices. All notices provided for herein shall be in
writing and shall be deemed to have been given (unless otherwise required by
the specific provisions hereof in respect of any matter) when delivered
personally or after being deposited in the United States mail, certified
(return receipt requested), postage prepaid, or sent by telecopier, or by
prepaid courier service addressed as follows:
If to the Lessee Atlantic Coast Airlines
One Export Drive
Sterling, Virginia 20164
Attn: Chief Financial Officer
If to the Lessor: FINOVA Capital Corporation
1850 North Central Avenue
Phoenix, Arizona 85002
Attn: Ms. Pamela Hart
or to any party at such other address as the party may designate by notice
duly given in accordance with this Section.
19.3 Lessor's Right to Perform for Lessee. If the Lessee fails
to make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein or in related
documents, the Lessor may itself make such payment or perform or comply with
such agreement, and the amount of such payment and the amount of the
reasonable expenses of the Lessor incurred in connection with such payment or
the performance of or compliance with such agreement, as the case may be,
together with interest thereon at the Incentive Rate, shall be deemed
Supplemental Rent, payable by the Lessee upon demand.
19.4 Counterparts. This Lease may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19.5 Quiet Enjoyment. The Lessor covenants that as long as, the
Lessee keeps and performs each and every covenant and agreement to be
performed or observed by it hereunder, the Lessee shall quietly enjoy the
Aircraft without hindrance or disturbance by the Lessor or by any other person
lawfully claiming the Aircraft through the Lessor.
19.6 Legal Fees and Other Expenses. It is understood and agreed
that in any litigated action, proceeding, controversy or dispute of any kind
whatever in connection with the enforcement of rights under this Lease, the
prevailing party shall be entitled to recover its expenses, including
reasonable attorneys' fees, from the other party.
19.7 Assignment by Lessor. (a) Lessee acknowledges and agrees
that Lessor shall have the absolute right to transfer or assign to any person,
firm, corporation or other entity any or all of Lessor's rights, obligations,
benefits and interests under this Lease provided that such assignee or
transferee (i) is a "citizen of the United States" as defined in Section
40102(a)(15) of the Federal Aviation Act and the regulations pursuant to such
Section, (ii) has a net worth of at least $50,000,000, (iii) assumes the
obligations of the Lessor hereunder and under any related documents pursuant
to an agreement in form and substance satisfactory to Lessee, and (iv) is not,
without the consent of Lessee, an air taxi operator or carrier or other
operator of aircraft, or an Affiliate of any of the foregoing, including,
without limitation, the right to receive Rent or any other payment due under
this Lease, the right to transfer or assign title to any Aircraft or to
transfer or assign the right to purchase any Aircraft and the right to make
all waivers and agreements, to give all notices, consents and releases, to
take all action upon the occurrence of an Event of Default, or to do any and
all other things which Lessor is or may become entitled to do under this
Lease. Lessee acknowledges that, if Lessor should sell or transfer to a third
party all of Lessor's rights and obligations under this Lease and in the
Aircraft, Lessor shall thereupon be relieved of all of its obligations
hereunder and Lessor's transferee (and, if the transferee is a trust, the
beneficial owners of such trust) shall succeed to all of Lessor's rights,
interests and obligations under this Lease as though Lessor's transferee had
been the initial lessor hereunder.
(b) Without limiting the generality of paragraph (a), Lessee
acknowledges and agrees that the terms and conditions of this Lease have been
agreed to by Lessor in anticipation of its being able to assign its rights
unto and interests in this Lease and its rights in the Aircraft and/or its
being able to grant a security interest in all or any of its rights and
interest under this Lease and in the Aircraft to one or more lenders, to an
agent or trustee representing such lenders, or to any other party having an
interest in any Aircraft or participation in the transaction which is the
subject of this Lease, any or all of which may rely on and shall be entitled
to the benefit of the provisions of this Section 19.7(b). Lessee shall, upon
the written instruction of Lessor and compliance with Section 19.7(b) : (a)
recognize any such assignment, (b) accept the directions or demands of such
assignee in place of those of Lessor, (c) surrender any leased property only
to such assignee, (d) pay all Rent payable hereunder and do any and all things
required of Lessee hereunder, and not terminate this Lease, notwithstanding
any default by Lessor or the existence of any other liability or obligation of
any kind or character on the part of Lessor to Lessee whether or not arising
hereunder, (e) so long as Lessor remains obligated hereunder, not require any
assignee of this Lease to perform any duty, covenant or condition required to
be performed by Lessor under the terms of this Lease, all rights of Lessee in
any such connection aforesaid being hereby waived as to any and all such
assignees, and (f) execute any documents which Lessor may reasonably request
in order to effectuate the foregoing.
19.8 Survival. The representations; warranties, indemnities and
agreements of the Lessee provided for in this Lease, and the Lessee's
obligations under any and all provisions thereof, shall survive the expiration
or other termination of this Lease to the extent required for full performance
and satisfaction hereof.
19.9 Successors and Assigns. This Lease shall be binding on and
shall inure to the benefit of Lessee, Lessee's permitted successors and
assigns, Lessor and Lessor's permitted successors and assigns.
ARTICLE 20
RENEWAL AND PURCHASE OPTIONS; VOLUNTARY TERMINATION
20.1 Purchase Option. Provided that no Event of Default shall
have occurred and be continuing, the Lessee shall have the options,
exercisable in either case upon not less than 60 days prior written notice to
the Lessor, to purchase the Aircraft, on an "as-is, where-is" basis without
representation or warranty except a warranty as to the absence of Liens
described in Article 14(ii), on the date set forth in the Lease Supplement
(assuming that all payments of Basic Rent have been made except any payments
of Basic Rent in advance) for the Aircraft for a price equal to (i) the amount
set forth in the Lease Supplement therefor, plus (ii) all Supplemental Rent
due and payable on or before such date (including any applicable taxes
excluding taxes based on or measured by Lessor's net income), plus (iii) all
unpaid Basic Rent due and payable on or before such date (other than advance
Basic Rent payable on such date).
20.2 Voluntary Termination.
(A) So long as no Event of Default exists, Lessee shall have the
right at its option, on at least one hundred eighty (180) days prior written
notice to Lessor, to terminate this Lease with respect to the Aircraft on any
rent payment date (the "Termination Date") on or after the seventh anniversary
of the Delivery Date during the Base Term; provided such Airframe and the
Engines or engines then installed on such Airframe and the Propellers or
propellers then attached to such Engine or engines shall have become obsolete
or surplus with respect to Lessee's requirement. During the period from the
giving of such notice (which notice shall identify the Aircraft and specify
the effective date of termination and the reasons for termination) until the
effective date of termination, Lessee, as agent for Lessor shall use its best
efforts to obtain bona fide bids for the purchase of the Aircraft. Lessee
shall certify to Lessor in writing the terms and amount of each bona fide bid
received by Lessee and the name and address of the Person (who shall not be
Lessee or any Person acting for or affiliated with Lessee) submitting such
bid. Lessor may also independently obtain bids for such purchase and certify
them to Lessee as provided in the next preceding sentence. On or before the
effective date of termination, Lessee will provide Lessor with a copy of
resolutions of Lessee's Board of Directors stating that such Airframe and
Engines or engines and Propellers or propellers are obsolete or surplus to
Lessee's requirements, as the case may be. On or before the effective date of
termination, Lessee shall deliver such Airframe and Engines or engines and
Propellers or propellers to Lessor, and duly transfer title to Lessor of any
such engines or propellers not owned by Lessor. on the effective date of
termination (or such earlier date as may be agreed to in writing by Lessor and
Lessee) Lessor shall sell such Airframe, Engines or engines, and Propellers or
propellers for cash to whosoever shall have submitted the highest bid prior to
such date. The total sales price realized at such sale shall be retained by
Lessor and, in addition, on or before the date of such sale Lessee shall pay
to Lessor the sum of (A) the amount, if any, by which (i) the Termination
Value for the Aircraft computed as of the date of payment, exceeds (ii) the
sales price of the Aircraft sold by Lessor less all expenses incurred by
Lessor, in connection with such sale, (B) any amounts of unpaid Basic Rent for
the Aircraft, except any payments of Basic Rent due on such date and payable
in advance and (C) all other amounts whether Rent or otherwise owing by Lessee
to Lessor hereunder. Upon such payment Lessor will transfer to Lessee,
without recourse or warranty, except as to the absence of Liens specified in
Article 14(ii) of this Lease, all of Lessor's right, title and interest in and
to any Engines or Propellers constituting part of the Aircraft which were not
sold with the Aircraft. Lessee's obligations under this Lease shall continue
until Lessee shall have satisfied all of its obligations under this Section.
If no sale shall have occurred on the effective date of termination, or within
one year after receipt of the notice of termination, this Lease shall continue
in full force and effect as to such Aircraft. Lessor shall be under no duty
to solicit bids, to inquire into the efforts of Lessee to obtain bids or
otherwise take action in connection with any such sale other than to transfer
to the purchaser named in the highest bid certified by Lessee to Lessor,
against payment therefor, without recourse or warranty (except as to the
absence of Liens specified in Article 14(ii) of this Lease), all Lessor's
right, title and interest in and to such Aircraft. Lessee shall have the
right to revoke the notice of termination delivered in accordance with this
Section 20.2(A) at any time prior to 15 days prior to the Termination Date
except following delivery of the notice to Lessee under Section 20.2(B)
hereof.
(B) Notwithstanding Section 20.2(B), Lessor may elect to retain
title to the Aircraft. If Lessor so elects, Lessor may, at any time within 30
days after it shall have received such termination notice from Lessee, give
written notice to Lessee that Lessor elects irrevocably to terminate the Lease
with respect to such Aircraft on the effective date specified in the notice
previously given by Lessee, and Lessee shall have no further obligations under
this Section 20.2. Effective on Lessee's full payment of all amounts of Rent
due and payable, except any payments of Basic Rent due on such date and
payable in advance, this Lease shall terminate with respect to such Aircraft
(provided that this Lease shall continue as to the Aircraft unless such
amounts are paid in full). If this Lease shall so terminate, Lessee shall
deliver the Aircraft to or at the direction of Lessor in the same manner as if
delivery were made to Lessor pursuant to Article 16 hereof, and shall duly
transfer to Lessor title to any such engines installed on the Airframe and to
any such propellers attached to such Engines on such termination date now
owned by Lessor.
20.3 Renewal Option. At the expiration of the Base Term of this
Lease or then effective Renewal Term, as applicable, for the Aircraft, so long
as no Event of Default shall have occurred and be continuing, Lessee shall
have the option, exercisable upon not less than 120 days prior written notice
to Lessor, to renew this Lease for the Aircraft for four (4) additional terms
of one year (the "Renewal Term") each from the expiration of such Base Term or
then effective Renewal Term, as applicable, as specified in such notice on the
same terms and conditions as the Base Term, other than the payment of the then
fair market rental value, as determined by the mutual written agreement of
Lessee and Lessor or, in the absence of such agreement, the Appraisal
Procedure, ("Renewal Rent") as Basic Rent during such Renewal Term. If at any
time Lessee fails to exercise the option to renew for an additional one year
period, Lessee shall return the Aircraft to Lessor pursuant to the terms of
Article 16 hereof at the end of the current one year period. "Stipulated Loss
Value" and "Termination Value" during any Renewal Term for the Aircraft shall
be the fair market value of the Aircraft on the date of determination, as
determined by the mutual written agreement of Lessee and Lessor or, in the
absence of such agreement, the Appraisal Procedure.
ARTICLE 21
CHARACTERIZATION AS LEASE AND TAX INDEMNITY
It is the intent of the parties that this Lease be a true lease
and that Lessor shall at all times be considered the owner of the Aircraft for
purposes of all federal, state and local income or franchise taxes measured by
net income, and that this Lease conveys no right, title or interest in the
Aircraft to Lessee, except as lessee. Lessee represents, warrants and
covenants that neither it nor any person controlled by it, in control of it,
or under common control with it, directly or indirectly, will at any time take
any action or file any return or other document inconsistent with the
foregoing and that each of such persons will file such returns, take such
actions and execute such documents as may be reasonable and necessary to
facilitate accomplishment of the intent hereof.
21.1 Tax Assumptions. The Lessor and the Lessee acknowledge that
this Lease has been entered into on the assumption that (i) for Federal income
tax purposes the Lease will be treated as a "true lease", (ii) for Federal
income tax purposes Lessor will depreciate Lessor's Cost as modified
accelerated cost recovery deductions under Section 168(b) of the Code
commencing on the Delivery Date, with respect to each Aircraft as "seven-year
property", (iii) the United States federal income tax rate applicable to
Lessor will be 35%, (iv) the Lessor will compute its taxable income under the
accrual method of accounting, (v) Lessor will have sufficient taxable income
to utilize the depreciation deductions, (vi) the Lessor will not be subject to
the Alternative Minimum Tax, and (vii) the Aircraft will be placed in service
on or before the Commencement Date. Such tax assumptions are hereinafter
referred to as the "Tax Benefits".
21.2 Tax Representations. Lessee represents and warrants to
Lessor that (i) on the Delivery Date, the Aircraft will not require
improvements, modifications or additions in - order to be rendered complete
for its intended use by Lessee, (ii) the Aircraft will not be used by a "tax
exempt entity" as defined in Section 168(h)(2) of the Code, and (iii) prior to
the end of the taxable year of Lessor that includes the eighth anniversary of
the Delivery Date, the Aircraft will not be used predominantly outside the
U.S. within the meaning of Section 168(g)(1)(A) of the Code.
21.3 Tax Indemnity. If for any taxable year of Lessor during
which the Lease is in effect as a result of (i) any act or omission by or on
behalf of the Lessee or an Affiliate of Lessee or any person who acquires from
the Lessee, directly or indirectly, possession or control or the right to use
the Aircraft (other than any act or omission that is required by this
Agreement), or (ii) the inaccuracy of any representation by the Lessee set
forth in Section 21.2 herein Lessor shall lose (upon audit, by being unable to
claim, through recapture, or by not receiving the benefit of, or otherwise)
all or any portion of any of the Tax Benefits, the Lessee shall pay to Lessor
an amount which, after deduction of all taxes required to be paid (as computed
using the Assumed Effective Tax Rate as hereinafter defined) by Lessor in
respect of the receipt of such sum under the laws of any Federal, state or
local government or taxing authority in the United States (after giving credit
for any savings in respect to any such taxes by reason of deductions, credits
or allowances in respect of the payment or accrual of the amount indemnified
against), shall be equal to the sum of any additional Federal, state or local
income taxes payable by Lessor as a result of the loss of such Tax Benefits
(as computed using the Assumed Effective Tax Rate as hereinafter defined),
plus the amount of any interest, additions to tax (including, without
limitation, an addition to tax by reason of any underpayments of any estimated
taxes), fines or penalties which are payable by Lessor in connection with the
loss of such Tax Benefits, provided that the Lessee shall not be required to
make any of the foregoing indemnity payments to the extent the loss of the Tax
Benefits is the result of (a) a determination that the Lease does not
constitute a "true lease" for Federal, state or local income tax purposes
except as a result of an act or omission of Lessee or inaccuracy in any of the
representations of Lessee contained in Section 21.2, (b) any event whereby
Lessee is required by the terms of the Lease to pay, and shall have paid in
full, the Stipulated Loss Value for the Aircraft with respect to which the
loss of Tax Benefits arose; (c) Lessor's voluntary or involuntary transfer of
legal title to all or any part of the interest in such Aircraft, unless such
transfer occurs by reason of exercise of Lessor's remedies under the Lease
upon an Event of Default; (d) the failure of Lessor to have sufficient gross
income against which to apply any Tax Benefit which may be taken as a
deduction; (e) the failure of Lessor to claim any Tax Benefit in its income
tax returns for the appropriate year (unless supported by an opinion of
counsel to the effect that there is no reasonable basis to make such claim) or
to follow proper procedure in claiming any Tax Benefit in such tax returns for
such year; (f) the failure of Lessor to take timely action in contesting a
claim made by any taxing authority with respect to the disallowance of any Tax
Benefits in accordance with Section 21.4 hereof if such failure shall preclude
the right of Lessor to contest such claim and if such failure was not caused
by Lessee's failure to request action by the Lessor after receipt of notice
from the Lessor or to otherwise comply with the obligations under the contest
provisions of this Section; (g) any act (whether voluntary or involuntary),
omission or misrepresentation of Lessor other than any action or omission
contemplated in the Lease Agreement or any related agreements or otherwise
taken by Lessor in the exercise of any remedies or the enforcement of any
rights against Lessee under any of such agreements; (h) as a result of any
changes, modifications or additions to the Code or Regulations promulgated
thereunder, which are adopted, enacted or become effective at any time
subsequent to the Delivery Date; (i) the applicability of Section 467 of the
Code; (j) a change in the nature of the business of Lessor; (k) a short
taxable year of Lessor or application of the Mid Quarter Convention within the
meaning of Section 168(a)(4)(C) of the Code; or (1) application of the
Alternative Minimum Tax to Lessor.
In calculating the amount of any indemnity payable to Lessor
pursuant to Section 21.3, it shall be assumed all ordinary income of Lessor
attributable to payments hereunder is subject to tax at a combined Federal,
state and local income tax rate of 38.38% (the "Assumed Effective Tax Rate").
Except as otherwise provided in the immediately following
paragraph, the liability of the Lessee to make any indemnity payments
hereunder shall become fixed at the later of (i) a Final Determination, as
defined below, and (ii) the time the Lessor makes payment of the tax
attributable to the portion of the Tax Benefits lost, or if the Lessor is not
required to make payment of tax with respect to the portion of the Tax
Benefits lost, the date on which the Lessor files its tax return for the
taxable year in which such loss occurs, and shall be due and payable within 15
days after receipt by Lessee of written notice from Lessor as to the
determination of such liability. Lessee shall pay interest at the Incentive
Rate on any indemnity payment not made when due.
If, as a direct result of a loss of Tax Benefits to Lessor for
which Lessee has paid an indemnity under this paragraph, the aggregate
federal, state and local income tax thereafter paid by the Lessor for any
taxable year shall be less than the amount of such taxes which would have been
payable by the Lessor had such loss of Tax Benefits not occurred, then the
Lessor shall pay to the Lessee the amount of such difference in taxes plus any
additional Tax Benefits realized by the Lessor with respect to taxes imposed
under the laws of any federal, state or local government or other taxing
authority; provided, however, that the Lessor shall have no obligation to make
any such payment to the Lessee if an Event of Default has occurred and is
continuing.
If any indemnity payment is made by Lessee under Section 21.3, the
Lessor shall not report such amounts as taxable income on its federal income
tax returns, provided Lessee shall have secured an opinion of counsel
(together with case law, revenue rulings and other support for such opinion)
directed to Lessor and acceptable to Lessor stating that a substantial basis
exists for such treatment, and Lessee shall hold Lessor harmless from any
claims or penalties made or imposed on Lessor arising out of such reporting
position with respect to such amounts (subject to Section 10.3 and 21.4
hereof).
21.4 Contest.
(A) In the event a claim shall be made by the Internal Revenue
Service which, if successful, would result in a loss for which Lessee would
have liability to Lessor pursuant to this Article 21 of the Lease, Lessor
hereby agrees to contest such claim, provided, that: (i) within thirty (30)
days after notice by Lessor to the Lessee of such claim, the Lessee shall have
requested that such claim be contested; (ii) Lessor at its sole option, may
forego any and all administrative appeals, proceedings, hearings and
conferences with the relevant taxing authority in respect to such claim and
may, at its sole option, either pay the tax claimed and sue for a refund in
the appropriate forum selected by Lessor or contest such claim in the
appropriate forum selected by Lessor; (iii) within thirty (30) days after
notice by Lessor to Lessee of such claim, the Lessee shall have furnished
Lessor with an opinion of independent tax counsel chosen by the Lessee and
acceptable to Lessor, both as to counsel and substance, to the effect that
there is a reasonable basis to contest the claim; (iv) the Lessee shall
reimburse Lessor on demand, for all costs, expenses and liability which Lessor
may incur in contesting such claim, and to pay all reasonable costs and
expenses which Lessor may incur in contesting claim; (v) the Lessor shall not
be obligated to contest any claim unless the amount of such claim exceeds
Twenty Five Thousand Dollars ($25,000); and (vi) the Lessor shall not be
obligated to contest any claim if an Event of Default has occurred and is
continuing.
In the event that at any time Lessor shall pay the tax claimed and
then seek a refund, the Lessee shall pay to Lessor (as a "prior payment") the
amount of such tax and interest, additions to tax and penalties thereon, if
any, but not in excess of the amount which the Lessee would be obligated to
pay in respect of the related loss under this Article of the Lease. Upon
Final Determination of the liabilities of Lessor, or the receipt of a refund
by Lessor, Lessor shall offset the amount of such prior payment against the
full amount due, if any, pursuant to the provisions of this Article and either
(i) the Lessee shall pay to Lessor within 30 days after notice thereof, any
excess of such full amount due, if any, over such prior payment, or (ii)
Lessor shall repay to the Lessee within 30 days after the later of a receipt
of such refund or notice of such Final Determination, any excess of such prior
payment over such full amount due. Any interest received by Lessor in connec-
tion with any refund which is allocable to the indemnified taxes paid by
Lessor in respect of which the Lessee had made a prior payment shall be for
the account of the Lessee.
(B) In the case of any such claim, Lessor agrees to notify the
Lessee promptly in writing of such claim, agrees not to make payment of the
tax or other liability claimed for at least thirty (30) days after the giving
of such notice (unless specifically required to do so at an earlier date by
the Internal Revenue Service), and agrees to cooperate with the Lessee in good
faith in order that such claim may be contested effectively. The Lessee and
its counsel shall maintain confidentiality with respect to all such
information insofar as is possible, consistent with the conduct of a contest
hereunder.
(C) Lessor shall not enter into a settlement or other compromise
with respect to, or otherwise concede, any claim without the written consent
of Lessee, which consent shall not be unreasonably withheld, unless Lessor
waives its right to be indemnified with respect to such claim (but not with
respect to any future claims) under this Article of the Lease. Lessee shall
not be considered to have unreasonably withheld such consent if such consent
shall be withheld as a result of Lessee's reasonable evaluation of the merits
of the basis for contesting such claim and Lessee shall not be required to
consider any issue or dispute not directly related to such claim.
(D) If Lessee requests Lessor to contest a claim and otherwise
complies with its obligations under this Section 21.4, it shall have no
obligation to pay any indemnity under this Article of the Lease resulting from
such claim (except pursuant to Section 21.4(A)(iv) or a prior payment) until a
Final Determination occurs regarding the liability of Lessor in respect of the
claim. Lessee's obligation to pay the indemnity shall become fixed upon such
Final Determination and unless otherwise provided in this Section 21.4 shall
be payable within 30 days after receipt by Lessee of written notice from
Lessor as to the occurrence of a Final Determination. In all other cases, the
liability of Lessee shall become fixed and payable as provided in Section 21.3
of the Lease.
(E) For purposes of this Section 21.4, "Final Determination"
shall mean a decision of a court of original jurisdiction with respect to such
claim, (provided that the time for filing an appeal of such decision has
expired) or other disposition of such claim in the manner contemplated herein.
Lessor shall not be required to contest any claim after receipt of an adverse
Final Determination unless Lessor shall have received an opinion of
independent tax counsel, chosen by Lessee and acceptable to Lessor, stating
that it is more likely than not that a further contest will be successful.
21.5 [RESERVED].
21.6 Survival. The indemnification provided herein shall survive
the assignment, expiration or other termination of this Lease.
21.7 Consolidated Return. For purposes of this Article 21, the
term "Lessor" shall mean and include the affiliated group of corporations and
each member thereof, within the meaning of Section 1504 of the Code, of which
Lessor is a member, if such group is filing a consolidated United States
Federal income tax return, and it shall also mean any consolidated or combined
group of corporations of which Lessor is a member which is treated as such for
state franchise tax purposes.
21.8 Lessee Reporting Requirements. Lessee agrees promptly to
provide Lessor with sufficient information as is requested by Lessor and is
reasonably necessary to allow Lessor properly to file any return or report
required in connection with this Lease. Lessor and Lessee agree that neither
they, nor any of their Affiliates, will file any federal, and to the extent
permitted by law, state and local income tax return which is inconsistent with
the provisions of this Article 21.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused
this Lease to be duly executed by their authorized officers as of the day and
year first above written.
FINOVA CAPITAL CORPORATION, as Lessor
By:
Name:
Title:
ATLANTIC COAST AIRLINES, as Lessee
By:
Name:
Title:
EXHIBIT B
LEASE SUPPLEMENT NO. 1
THIS LEASE SUPPLEMENT NO. 1, dated _____________, 1996, between
FINOVA Capital Corporation ("Lessor") and Atlantic Coast Airlines ("Lessee");
W I T N E S S E T H
WHEREAS, Lessor and Lessee have heretofore entered into that
certain Lease Agreement dated as of _____________, 1996 (herein called the
"Lease" and the terms defined therein being herein used with the same
meaning), which Lease provides for the execution and delivery from time to
time of Lease Supplements each substantially in the form hereof for the
purpose of leasing the Aircraft under the Lease as and when delivered by the
Lessor to the Lessee in accordance with the terms thereof;
NOW, THEREFORE, in consideration of the premises and other good
and sufficient consideration, and pursuant to Article 2 of the Lease, the
Lessor and the Lessee hereby agree as follows:
1. The Lessor hereby delivers and leases to the Lessee, and the
Lessee hereby accepts and leases from the Lessor, under the Lease Agreement,
as herein supplemented, the following:
(i) Airframe: One Jetstream Aircraft Limited Jetstream Series
4100, model 4101 aircraft bearing FAA Registration Mark
N____UE and manufacturer's serial no. _____;
(ii) Engines: Two Allied Signal model TPE331-14GR-802H and
TPE331-14HR-802H engines bearing manufacturer's serial nos.
______ (Port) and ________ (Starboard), respectively (each
of which Engines has 750 or more rated takeoff horsepower or
the equivalent); and
(iii) Propellers: Two McCauley model B5JFR36C1101-B/C-114GCA-0
and C5JFR36C1102-B/C-L114GCA-0 propellers bearing
manufacturer's serial nos. _________ (Port) and _________
(Starboard), respectively (each of which Propellers is
capable of absorbing 750 or more rated takeoff shaft
horsepower or the equivalent).
All the foregoing is hereinafter referred to as the "Delivered
Aircraft."
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessor's Cost for the Delivered Aircraft (including
Airframe, Engines, and Propellers) is as set forth on Schedule A attached
hereto.
4. The purchase price pursuant to Section 20.1 of the Lease is
$____________ and the date on which the Lessee may purchase the Aircraft
pursuant to Section 20.1 of the Lease is as set forth on Schedule A attached
hereto.
5. The Base Term for the Delivered Aircraft shall commence on
the Base Lease Commencement Date therefor and shall conclude on June 30, 2007.
6. The Lessee hereby confirms its agreement to pay the Lessor
Basic Rent and Supplemental Rent for the Delivered Aircraft, throughout the
Term therefor in accordance with the Lease. Basic Rent shall be payable on
the dates and in the amounts set forth in Schedule A hereto. The Basic Rent
for the Delivered Aircraft shall be payable in quarterly installments for the
Base Term, payable in advance.
All payments of Rent under the Lease shall be paid to Lessor by
wire transfer of immediately available funds on or before the due dates there
for to the account of Citibank, New York, NY, ABA No.: 021-000-089, Acct. No.:
4068-0522, Acct. Name: FINOVA, Ref.: ZQX34419ZQX.
7. The Lessee hereby confirms to the Lessor that it will, as
soon as practicable, mark the Delivered Aircraft as showing all interests
thereto in accordance with the terms of the Lease and that the Lessee has
accepted the Delivered Aircraft for all purposes hereof and of the Lease,
including its being airworthy, in accordance with specifications, in good
working order and repair and without defect in title, condition, design,
operation or fitness for use, whether or not discoverable by Lessee on the
date hereof, and free and clear of all Liens, except for those contemplated by
the Lease, provided, however, that nothing contained herein or in the Lease
shall in any way diminish or otherwise affect any right the Lessee or the
Lessor may have with respect to the Delivered Aircraft against the
manufacturer thereof, or any subcontractor or supplier of the manufacturer
thereof.
8. This Lease Supplement shall in all respects be governed by,
and construed in accordance with, the laws of the State of New York, including
all matters of construction, validity and performance.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed by their authorized officers as of the day and
year first above written.
FINOVA CAPITAL CORPORATION, as Lessor
By:
Name:
Title:
ATLANTIC COAST AIRLINES, as Lessee
By:
Name:
Title:
EXHIBIT D
SCHEDULE OF PERMITTED COUNTRIES
Any airframe or engine manufacturer or foreign air carrier domiciled in
the United Kingdom, Canada, Australia, New Zealand, Austria, Belgium, Denmark,
Finland, France, Germany, Iceland, Ireland, Luxembourg, The Netherlands,
Norway, Sweden and Switzerland.
EXHIBIT E
RETURN PROVISIONS
16.1 Return. At the expiration of the Term for the Aircraft or
upon the termination of this Lease pursuant to Article 18, the Lessee, at its
own expense, shall return the Aircraft by delivering the same forthwith to the
Lessor at such airport within the Lessee's then existing route system as may
be designated in writing by the Lessor. At the time of such return, the
Airframe shall have installed thereon two Engines, or the make and same or
improved model engines owned by the Lessee suitable for installation and use
on the Airframe. The Aircraft, upon redelivery pursuant hereto, (i) shall be
free and clear of all Liens, other than this Lease and Liens described in
Article 14(ii), (ii) shall be in the same operating condition, ordinary wear
and tear excepted, as when originally delivered to Lessee under the Lease
Agreement, dated as of _______________ between Seller and Lessee, and (iii)
shall satisfy all the following conditions:
(1) Certification.
The Aircraft shall have a valid Certificate of Airworthiness issued by
the U.S. FAA and shall be in compliance with the requirements of the Airframe,
Engine and Propeller manufacturers' approved maintenance programs or the
Lessee's FAA approved maintenance program for Airframe, Engine, Propeller and
Parts, and shall be in full compliance with the provisions of Federal Aviation
Regulations, Part 135 or Part 121 if at the time of return Lessee is
conducting operations under such Part, and shall be in compliance with all
applicable noise, corrosion, environmental and aging aircraft requirements.
Lessee agrees that it shall not discriminate against the Aircraft with respect
to the use and operation thereof in order to avoid or reduce compliance by
Lessee with this Section 16.1(1), except any reduced use or operation
reasonably necessary during the last 6 months of the Term to comply with the
provisions of this Article 16.
(2) Overhaul and Repair.
The Airframe, all Parts, Engines and Propellers shall be documented to
have been repaired or overhauled by certified repair stations acceptable to
the Aeronautics Authority and in such a manner so that such Airframe, Parts,
Engines and Propellers are approved by the Aeronautics Authority for use in
the United States.
All overhaul and repair procedures shall be further verified to meet all
U.S. FAA requirements for quality and documentation necessary for operation
within the continental limits of the United States under Federal Aviation
Regulation Part 135 or Part 121 if at the time of return Lessee is conducting
operations under such Part.
(3) Repairs.
The Lessee shall ensure that all major repairs performed since the
Delivery Date and which still are in existence on the Aircraft has been
approved by or are immediately eligible to receive U.S. FAA approval, if so
required. All such repairs shall be accompanied by all data and documentation
necessary to substantiate their certification, approval and methods of
compliance, as required.
(4) Modifications.
All modifications performed since the Delivery Date which deviate from
the certified configuration and which are still in existence on the Aircraft
shall have U.S. FAA approval or certification if required. All such
modifications shall be accompanied by complete data and documentation
necessary to substantiate their certification and approval and methods of
compliance.
(5) Airworthiness Directives.
All U.S. FAA Airworthiness Directives and amendments or changes to the
Federal Aviation regulations applicable to the Aircraft, Engines, or Parts
requiring terminating compliance prior to the end of the Term shall have been
accomplished in compliance with the issuing agency's specific instructions.
(6) Records.
All records necessary and required by the U.S. FAA to certify and place
the Aircraft on an FAA approved maintenance program shall be delivered with
the Aircraft in English. If hard, non-computerized, copies of maintenance
records are not available, then the Lessee shall take action with pertinent
regulatory agencies to ensure that the Lessor and the U.S. FAA are provided
with all requested guarantees of methods of compliance, component overhaul and
management, scheduling, quality control, serial number verification, etc.
These records shall be all inclusive to the Airframe, Engines, Propellers and
Parts, and as a minimum, extend to include all activities associated with each
of the last completed maintenance checks, repairs, scheduled inspections and
functional tests, and overhauls performed to the Lessee is approved
maintenance programs.
All Parts identified with safe life limits shall be identified with
their service histories, accumulated cycles or flight hours as applicable and
remaining service lives on a separate listings.
All documentation, flight, and maintenance records as specified by the
applicable sections of U.S. Federal Aviation Regulations Part 135 or Part 121
if at the time of return Lessee is conducting operations under such Part,
which normally accompany the transfer of an aircraft which has been operating
in regulated commercial air service, shall be delivered to the Lessor with
each Aircraft.
In the event that any records are missing, incomplete, or unacceptable
in accordance with FAA standards, the Lessee shall re-accomplish the tasks
necessary to produce such records in accordance with its approved maintenance
programs prior to delivery of the Aircraft.
All documentation and records shall be made available in English to the
Lessor for review at a central location a minimum of fifteen Business Days
prior to the required date of Aircraft delivery to the Lessor.
(7) Scheduled Maintenance - Airframe.
The Lessee will be responsible for ensuring that the Airframe meets the
following conditions:
C Checks: The Airframe shall have completed the next due phase of the
system/power plant/zonal C Check per the Lessee's
approved maintenance program within twenty (20) days
prior to redelivery.
Structure
Program: The Airframe shall not have accumulated more than one-half
(1/2) time until the next scheduled structural
program-inspection C Check.
In the event that this check is performed in phases in conjunction
with the system/ power plant/zonal C check, the
current phase shall be performed with the required
return condition C Check phase.
Airworthiness
Limitations: All airworthiness limitations checks which are due
before the next phase check shall be accomplished. In
the event that these checks are performed in phases in
conjunction with the system/power plant/zonal C check,
the current phase shall be performed with the required
return condition C Check phase.
(8) Scheduled Maintenance - Engines; Propellers and Components.
For the purpose of this Section, time remaining, with respect to any
Engine, shall mean the number of hours remaining before it shall be necessary
to conduct an Engine overhaul or CAM, as applicable.
In the event the Lessee's FAA-approved maintenance program is not based
on engine condition trend monitoring or an on-condition maintenance program or
a comparable program, each Engine shall have not less than one-half (1/2) time
remaining until overhaul or CAM, based on the manufacturer's recommended fixed
maintenance schedule TBO for aircraft operating in commercial service at the
time of return and not less than one-half (1/2) time remaining until the next
scheduled Hot Section Inspection (HSI). In the event the Lessee's FAA-
approved maintenance program is based on engine condition trend monitoring or
an on-condition maintenance program or a comparable program, all time limited
or life limited components of an Engine on average shall have not less than
one-half (1/2) time remaining (provided that no individual component shall
have less than one-quarter (1/4) time remaining). Any overhaul CAM and HSI
accomplished preceding the time of return shall be conducted in accordance
with the manufacturer's overhaul specification or CAM. If, according to the
Lessee's FAA approved engine maintenance program, CAM's and HSI's are based on
engine condition trend monitoring or an on-condition maintenance program in
accordance with the engine manufacturer's trend monitoring program, each
engine shall have satisfactorily completed, immediately prior to return, a
borescope inspection in accordance with the trend monitoring program and
Lessee shall provide or cause to be provided all trend data for each Engine.
No trend shall be evidenced where "action should be taken as soon as possible"
in order to prevent serious engine deterioration resulting in high cost
component replacement or serious engine damage. Lessee is responsible for any
corrective action required as indicated by the trend monitoring program.
All Propellers on average shall have not less than one-half (1/2) time
remaining until overhaul (provided that no individual Propellers shall have
less than one-quarter (1/4) time remaining until overhaul), based on the
manufacturer's approved maintenance program.
All components of each undercarriage on average shall have not less than
one-half (1/2) time remaining until overhaul or life limited, as applicable
(provided that no individual component shall have less than one-quarter (1/4)
time remaining until overhaul or life limited, as applicable), based on the
manufacturer's recommended time between overhaul and calendar life.
All other time controlled components on average shall have not less than
one-half (1/2) time remaining (provided that no individual time controlled
component shall have less than one-quarter (1/4) time remaining), based on the
Lessee's approved maintenance program.
(9) Deferred Maintenance.
There shall be no open, outstanding, or deferred maintenance items,
scheduled or unscheduled, against the Aircraft including those identified in
pre-delivery inspections or test flights.
(10) Pre-Return Inspections.
The Lessor shall be permitted to perform a maximum of two physical
inspections of the Aircraft inclusive of test flights. One inspection will be
performed immediately prior to return. The inspection shall include, but not
be limited to, ground evaluation and system functional tests including engine
runs if deemed necessary by the Lessor. The Lessee shall provide a qualified
technician to assist the Lessor in the performance of the inspection.
(11) Acceptance Flight.
The Lessee shall provide for acceptance flights as necessary to
demonstrate the airworthiness of the Aircraft and the proper functioning of
all systems and components in accordance with the manufacturer's flight
functional procedures. The Lessee shall permit the Lessor's representatives
on board during any flight tests as direct observers of the functional tests.
(12) Manuals.
All manuals incorporating the latest revisions necessary for the
operation, maintenance and support of the Aircraft shall be delivered with the
Aircraft. These shall include but not be limited to: overhaul manuals,
illustrated parts catalog (IPC), wiring diagrams, FAA approved flight manual
(AFM), flight crew operating manual (FCOM), and weight and balance manual.
(13) General Appearance.
The Aircraft shall be clean, cosmetically acceptable consistent with
ordinary wear and tear, interior complete and prepared to be placed into U.S.
scheduled revenue airline operations.
16.2 Equivalency Charge. In the event that any of the Engines
does not meet the conditions set forth in Clause 8 of Section 16.1 above,
Lessee shall pay Lessor an amount equal to 100% of the sum of (i) for each
Engine, the product of the manufacturer's then current estimated cost of the
next scheduled hot section inspection (including in such estimated cost all
required replacements of life-limited parts), multiplied by a fraction, the
numerator of which shall be the remainder (zero (0) if negative) of (x) the
actual number of hours of operation since the previous hot section inspection,
minus (y) 50% of the total operating hours allowable between hot section
inspections, and the denominator of which shall be the total operating hours
allowable between hot section inspections, and (ii) for each Engine, 100% of
the product of the manufacturer's then current estimated cost of the next
scheduled major overhaul (including in such estimated cost all required
replacements of life-limited parts), multiplied by a fraction, the numerator
of which shall be the remainder (zero (0) if negative) of (x) the actual
number of hours of operation since the previous major overhaul, minus (y) 50%
of the total operating hours allowable between major overhauls, and the
denominator of which shall be the total operating hours allowable between
major overhauls (provided, however, that if the cost for an overhaul used in
this clause (ii) includes the cost of a hot section inspection, only the
amount in clause (ii) and not the amount in clause (i) shall be due). All
prorated inspection and/or overhaul charges, if any, shall be payable as
Supplemental Rent and shall be due upon presentation to Lessee of an invoice
setting forth in reasonable detail the calculation of such amounts due.
In the event that Lessee does not meet the conditions in 16.1,
paragraph 7 with respect to the Airframe, Lessee shall pay Lessor the product
of: the then current estimated cost of the next scheduled structural program
inspection C Check (including in such estimated cost, all required replacement
of life limited parts) multiplied by the fraction wherein the numerator shall
be the remainder (zero (0) if negative) of (x) the actual number of respective
operating hours of operation since the previous structural program inspection
C Check, minus (y) 50% of the respective total operating hours of operation
allowable between such inspections, and the denominator shall be the
respective total operating hours of operation allowable between such
inspections. All prorated inspection and/or overhaul charges, if any, shall
be payable as Supplemental Rent and shall be due upon presentation to Lessee
of an invoice setting forth in reasonable detail the calculation of such
amounts due including the names of all sources used for the required cost
estimates. (Unless both Lessor and Lessee agree to alternative source(s), the
manufacturer of the Airframe shall be used as the sources for all cost
estimates).
16.3 [RESERVED].
16.4 Engines and Propellers. In the event any engine or
propeller not owned by the Lessor shall be returned with the Airframe, such
engine or propeller shall be of the same or improved model as the Engines and
Propellers and suitable for installation and use on the Airframe, and be in as
good an operating condition as, such Engines and Propellers, assuming such
Engines and Propellers were in the condition and repair as required by the
terms hereof immediately prior to such termination, and the Lessee will, at
its own expense and concurrently with such return, furnish the Lessor with a
bill of sale, in form and substance satisfactory to the Lessor, with respect
to each such engine or propeller together with evidence of the Lessee's title
to such engine or propeller (including, if requested, an opinion of the
Lessee's counsel) and shall take such other action as the Lessor may
reasonably request in order that such engine or propeller shall be duly and
properly titled in the name of Lessor, and upon passage of title to such
engine or propeller to the Lessor, such engine or propeller shall be deemed to
be an Engine or Propeller for all purposes of this Lease. Upon full
compliance with the terms of this Section, the Lessor will transfer to the
Lessee the Lessor's interest in any Engine or Propeller replaced by an engine
or propeller pursuant to the preceding sentence without any representation,
warranty or recourse of any kind whatsoever, express or implied other than a
warranty of no Liens of the type described in Article 14 (ii) .
16.5 Storage. Upon any expiration or termination of this Lease
for the Aircraft, at the written request of the Lessor, the Lessee will assist
the Lessor in arranging outdoor storage for the Aircraft at the airport where
the Aircraft is returned for a period not exceeding 60 days at the cost of the
Lessor. The Lessee will maintain in effect during such storage period
insurance covering the Aircraft pursuant to Section 12.2 hereof to the extent
such insurance is available at reasonable commercial rates and in amounts and
against such risks as would be customarily carried in similar circumstances by
a reasonably prudent lessor, with such insurance being paid for by Lessor.
Lessee shall be responsible, at Lessor's expense, for preparing the Aircraft
for storage, maintenance during the storage period and for returning the
Aircraft to service upon the request of Lessor.
16.6 Special Markings. Upon the termination or expiration of
this Lease for an Aircraft, the Lessee shall, at its cost, remove from the
exterior of the Aircraft all insignias. This provision will not require the
Lessee to strip or repaint the Aircraft, but shall require that Lessee cause
areas where insignias have been removed to be refinished to match adjacent
areas.
16.7 Survival. The obligations of the Lessee to comply with the
terms of this Article 16 shall survive the expiration or other termination of
this Lease.
D-18
DOCS_NY #15119 v7 /BNZ07!.DOC
EXHIBIT 11.1 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
(in thousands, except for earnings per 1996 1995 1994
share data)
<S> <C> <C> <C> <C> <C> <C>
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
Share calculation:
Average number of common shares outstanding 8,445 8,445 8,330 8,330 6,858 6,858
Common stock equivalents due to assumed
exercise of options 518 578 406 514 - -
Common stock equivalents due to assumed
exercise of preferred stock - - - 546 - -
Total common shares and common stock 8,963 8,963 8,736 9,390 6,858 6,858
equivalents
Adjustments to net income:
Net income $ $ $ $ $ $
19,158 19,158 12,902 12,902 (25,136 (25,136
) )
Less: Preferred dividend requirements
based on average
number of preferred - - (335) - - -
shares
Net income available to common $ $ $ $ $ $
shareholders 19,158 19,158 12,567 12,902 (25,136 (25,136
) )
Earnings per share $ $ $ $ $ $
2.14 2.14 1.44 1.37 (3.67) (3.67)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<MULTIPLIER>1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 21,470
<SECURITIES> 0
<RECEIVABLES> 15,961
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,744
<PP&E> 16,157
<DEPRECIATION> 0
<TOTAL-ASSETS> 64,758
<CURRENT-LIABILITIES> 23,962
<BONDS> 0
0
0
<COMMON> 170
<OTHER-SE> 34,467
<TOTAL-LIABILITY-AND-EQUITY> 64,758
<SALES> 179,370
<TOTAL-REVENUES> 182,484
<CGS> 0
<TOTAL-COSTS> 162,221
<OTHER-EXPENSES> 655
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,013
<INCOME-PRETAX> 19,608
<INCOME-TAX> 450
<INCOME-CONTINUING> 19,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,158
<EPS-PRIMARY> 2.137
<EPS-DILUTED> 2.137
</TABLE>