Exhibit 10(31)
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LOAN AGREEMENT
dated as of
July 15, 1998
between
TOWER AIR, INC.,
Borrower,
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
Lender
One Boeing 747-238B Aircraft
Manufacturer's Serial ▇▇. ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇
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TABLE OF CONTENTS
Page
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1. DEFINITIONS; REFERENCES.................................................................................. 1
1.01. Definitions..................................................................................... 1
1.02. Usage........................................................................................... 3
2. LOAN; ISSUANCE OF NOTES; REPLACEMENT NOTES............................................................... 3
2.01. Making the Loan................................................................................. 3
2.02. Procedure for Making the Loan................................................................... 4
2.03. Replacement Notes............................................................................... 4
3. SECURITY FOR BORROWER'S OBLIGATIONS...................................................................... 4
3.01. Security Interest in Collateral................................................................. 4
4. PAYMENTS BY BORROWER..................................................................................... 4
4.01. How Payments Are Made........................................................................... 4
4.02. Right to Prepay................................................................................. 4
4.03. Mandatory Prepayments........................................................................... 5
4.04. Interest on Past Due Amounts.................................................................... 5
4.05. Limit on Interest Payable....................................................................... 5
5. BORROWER'S REPRESENTATIONS AND WARRANTIES................................................................ 5
5.01. Corporate Standing.............................................................................. 5
5.02. Corporate Powers................................................................................ 5
5.03. Binding Effect.................................................................................. 5
5.04. Litigation...................................................................................... 5
5.05. Financial Statements............................................................................ 6
5.06. Taxes........................................................................................... 6
5.07. Citizenship, Air Carrier and Section 1110 status................................................ 6
5.08. Location of offices............................................................................. 6
5.09. Governmental Consents........................................................................... 6
5.10. Condition of Aircraft........................................................................... 6
5.11. Absence of ERISA Liability...................................................................... 6
5A. LENDER'S REPRESENTATIONS AND WARRANTIES.................................................................. 6
5A.01. Corporate Standing.............................................................................. 7
5A.02. Corporate Powers................................................................................ 7
6. AFFIRMATION COVENANTS.................................................................................... 7
6.01. Financial Statements............................................................................ 7
6.02. Inspection of Collateral and Records............................................................ 8
6.03. Corporate Existence............................................................................. 8
6.04. Merger, etc..................................................................................... 8
6.05. Citizenship and Air Carrier Status.............................................................. 9
6.06. Compliance with ERISA........................................................................... 9
6.07. Certificate of No Default....................................................................... 9
6.08. UCC Location.................................................................................... 9
7. CONDITIONS PRECEDENT..................................................................................... 9
7.01. Conditions Precedent............................................................................ 9
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8. EVENTS OF DEFAULT; REMEDIES............................................................................. 11
8.01. Events of Default.............................................................................. 11
8.02. Remedies....................................................................................... 12
9. BORROWER'S INDEMNITIES.................................................................................. 12
9.01. General Indemnity.............................................................................. 13
9.02. Taxes.......................................................................................... 14
9.03. Survival....................................................................................... 18
10. MISCELLANEOUS........................................................................................... 18
10.01. No Waivers; Cumulative Remedies................................................................ 18
10.02. Notices........................................................................................ 18
10.03. Transaction Expenses........................................................................... 18
10.04. Amendments..................................................................................... 18
10.05. Successors and Assigns......................................................................... 18
10.06. Governing Law; Jurisdiction; Jury Trial Waiver................................................. 19
10.07. Further Assurances; Performance by Lender...................................................... 19
10.08. Headings....................................................................................... 20
10.09. Execution in Counterparts...................................................................... 20
10.10. Survival of Representations and Warranties..................................................... 20
10.11. Severability................................................................................... 20
EXHIBIT A PROMISSORY NOTE
EXHIBIT B SECURITY AGREEMENT AND CHATTEL MORTGAGE
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LOAN AGREEMENT
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This Loan Agreement is entered into as of July 15, 1998 between Tower Air,
Inc. ("Borrower") and The CIT Group/Equipment Financing, Inc. ("Lender").
Borrower and Lender agree as follows:
1. DEFINITIONS; REFERENCES.
1.01. Definitions. Terms defined in the Mortgage and not in this
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Agreement have the same meanings herein as in the Mortgage. The following
terms, when capitalized as below, have the following meanings:
"Agreement": this Loan Agreement.
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"Aircraft": the Boeing 747-238B aircraft to be financed under this
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Agreement, as more particularly described in the Mortgage Supplement.
"Basic Documents": the Purchase Agreement, this Agreement, the Mortgage,
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the Note, the Mortgage Supplement and each other document, agreement, instrument
and certificate entered into in connection with the transactions contemplated
hereby.
"Business Day": any day, other than a Saturday or Sunday, on which
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commercial banks are open for business in New York, New York.
"Closing Date": the date on which Borrower purchases the Aircraft from
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Seller and Lender makes the Loan hereunder to Borrower.
"Code": the Internal Revenue Code of 1986, as amended.
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"Collateral": defined in the Mortgage.
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"Default": any event or condition that would become an Event of Default
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upon the giving of notice or lapse of time or both, or any Event of Default.
"Dollars" and "$": United States dollars.
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"ERISA": defined in Section 5.11.
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"Event of Default": defined in Section 8.01.
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"Event of Loss": defined in the Mortgage.
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"FAA": the Federal Aviation Administration of the United States, or any
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instrumentality of the United States succeeding to its function.
"Financed Amount": $7,519,468.79
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"Financial Default": a Default of the type described in Section 8.01 (a),
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(k) or (1) hereof, or an Event of Default.
"GAAP": generally accepted accounting principles as in effect in the United
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States and
applied on a basis consistent with that used in the preparation of the financial
statements referred to in Section 5.05, except for changes therein with which
Borrower's independent public accountants concur that are disclosed in the notes
to the relevant financial statements.
"Indemnitee": Lender, or any agent, employee, officer, director, successor,
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or permitted assign of Lender.
"Interest Period": each period beginning on a Payment Date and ending on
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(but excluding, for purposes of computing interest) the following Payment Date.
"Interest Rate": 3% over the Treasury Yield, based on a 360-day year of 12
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30-day months.
"Lease Termination Agreement": Lease Termination Agreement dated the
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Closing Date between Seller and Borrower.
"Liabilities": defined in Section 9.01.
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"Lien": any mortgage, pledge, assignment, encumbrance, lien (statutory or
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other), or other security interest or claim of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, or any lease
in the nature thereof).
"Loan": the loan to be made by Lender to Borrower pursuant to Section 2.01
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hereof, such loan to be equal to the Financed Amount.
"Materially Adverse Change" or "Materially Adverse Effect": any event, act,
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condition, or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding)
that, singly or in conjunction with any other event(s), act(s), condition(s), or
occurrences), whether or not related, results in a materially adverse change in,
or has a materially adverse effect upon, any of (a) the financial condition,
operations, business, properties, or prospects of Borrower and its consolidated
subsidiaries, taken as a whole, (b) the rights and remedies of Lender under the
Basic Documents, or Borrower's ability to perform its obligations under the
Basic Documents, or (c) the legality, validity, or enforceability of any Basic
Document, giving due consideration to any insurance coverage available to
Borrower for such event, act, condition, or occurrence.
"Mortgage": the Security Agreement and Chattel Mortgage between Borrower
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and Lender, substantially in the form of Exhibit B.
"Mortgage Supplement": defined in Section 3.01.
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"Note": Borrower's promissory note, in the form of Exhibit A, or a note
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issued in exchange or replacement for such a note.
"Officer's Certificate": a certificate signed in the name of Borrower (or,
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with respect to Section 6.04(c), of the Successor) by the chairman of the board,
the president, or the chief financial officer of Borrower (or the Successor).
"Payment Date": the eighteenth (18th) day of each calendar month following
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the Closing Date, except that any Payment Date that falls on a day which is not
a Business Day shall instead occur on the following Business Day.
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"Permitted Lessee": defined in the Mortgage.
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"Permitted Lien": defined in the Mortgage.
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"Person": any individual, corporation, limited liability company,
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partnership, joint venture, or other legal or governmental entity.
"Prior Lease": the Aircraft Lease Agreement dated as of October 22, 1992
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between Seller and Borrower.
"Purchase Agreement": the Aircraft Purchase Agreement dated as of September
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15, 1998 between Seller and Borrower.
"Related Lease": the Aircraft Lease Agreement dated as of September 30,
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1992 between Seller and Borrower in respect of one Boeing 747-212B aircraft
bearing manufacturer's serial no. 21439 and U.S. registration no. N6186.
"Section 1110 Person": defined in Section 5.07.
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"Secured Obligations": defined in the Mortgage.
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"Seller": C.I.T. Leasing Corporation.
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"Successor": defined in Section 6.04(a).
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"Taxes": defined in the last sentence of Section 9.02(a).
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"Taxing Authorities": defined in the first sentence of Section 9.02(a).
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"Treasury Yield" shall mean the yield as quoted by the Telerate U.S.
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Treasury Yield Money Markets page 5 or any successor or alternate publication
then reporting yields on U.S. Treasury Notes and Bonds, at the close of business
two Business Days prior to the Closing Date, on actively traded U.S. Treasury
Notes and Bonds with maturities approximately equal to the weighted average life
of the Note.
"Verifying Firm": defined in the last paragraph of Section 9.01.
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1.02. Usage. Any agreement or instrument referred to in Section 1.01
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means such agreement or instrument as from time to time supplemented and
amended. References to sections, exhibits, and the like refer to those in or
attached to -this Agreement unless otherwise specified. "Including" means
"including but not limited to". "Or" means one or more, or all, of the
alternatives listed or described. "Herein", "hereof", "hereunder", etc. mean
in, of, or under, etc. this Agreement (and not merely in, of, under, etc. the
section or provision where that reference appears).
2. LOAN; ISSUANCE OF NOTES; REPLACEMENT NOTES
2.01. Making the Loan. Subject to the satisfaction of the conditions in
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Section 7, and on the terms and conditions in this Section 2, on the Closing
Date, Borrower shall issue the Note to Lender, and Lender shall disburse the
proceeds of the Loan to Seller, on Borrower's
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behalf, to enable Borrower to acquire the Aircraft. The Note shall be issued for
its face amount, and the face amount of the Note shall equal the Financed
Amount. The term, interest rate and amortization schedule for the Note shall be
as set forth in the form of Note in Exhibit A, with the first Payment Date being
the 18th of October 1998.
2.02. Procedure for Making the Loan. At Lender's offices at 1211 Avenue
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of the Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or such other location as Lender
shall designate in writing) , not later than 2:00 p.m. (New York City time) on
the Closing Date, upon fulfillment of the conditions in Section 7, Lender will
disburse the proceeds of the Loan, and Borrower will issue the Note, as set
forth in Section 2.01.
2.03. Replacement Notes. If (a) the Note becomes mutilated, defaced,
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lost, stolen, or destroyed, (b) a successor lender buys the Note, or (c) Lender
otherwise reasonably requests, then, upon Lender's request and at Lender's
expense, Borrower shall promptly execute and deliver to Lender a replacement
Note, and Lender shall surrender to Borrower, in exchange for such replacement
Note, the Note being replaced (if not lost, stolen, or destroyed). The
replacement Note shall have the same terms as the Note that it replaces.
3. SECURITY FOR BORROWER'S OBLIGATIONS.
3.01. Security Interest in Collateral. To secure Borrower's obligations
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to Lender under the Note and the other Basic Documents to which Borrower is or
becomes a party, Borrower shall execute and deliver to Lender, on the Closing
Date, a supplement to the Mortgage (a "Mortgage Supplement"), substantially in
the form of Schedule A to the Mortgage, granting to Lender a perfected purchase
money security interest in the Aircraft.
4. PAYMENTS BY BORROWER
4.01. How Payments Are Made. Borrower shall make its payments and
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prepayments of principal and interest due on the Note, and all other amounts
payable by Borrower to Lender under the Basic Documents, to The Chase Manhattan
Bank (ABA # 021-000-021) at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, for
credit to The CIT Group Account No. 116-003855, Reference: Tower N607PE (or at
such other place or account as Lender from time to time notifies Borrower), in
immediately available funds and in Dollars, no later than 1:00 pm (New York City
time) on the date when due. Any payment made by Borrower to Lender after 1:00
PM (New York City time) on any day shall be deemed to have been made on the
following Business Day. If any payment due under the Basic Documents comes due
on a day which is not a Business Day, such payment shall instead be made on the
following Business Day.
4.02. Right to Prepay. Borrower shall have the right to prepay (in full
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or in part), without any prepayment premium, the outstanding principal amount of
the Note. Borrower shall give to Lender at least 10 days' prior written notice
(which notice shall be irrevocable) of such prepayment. Upon any prepayment of
the Note, in full, under this Section 4.02 or under Section 4.03 or 8.02,
Borrower shall pay all accrued and unpaid interest on the principal of the Note
to the date of prepayment, plus all other Secured Obligations then due to
Lender. Partial prepayments shall reduce the outstanding principal amount of
each remaining installment under the Note (and interest thereon) on a pro rata
basis. Upon any partial prepayment, Lender shall provide Borrower with a
replacement Note reflecting the new amortization, and Borrower shall execute and
deliver that Note to Lender, all at Borrower's expense.
4.03. Mandatory Prepayments. Following the occurrence of an Event of Loss
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to the Aircraft, Borrower shall prepay the Note in accordance with Section 6.01
of the Mortgage,
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without any prepayment premium. Upon acceleration of the Note pursuant to
Section 8.02, Borrower shall prepay the Note. Following the occurrence of an
Event of Loss solely with respect to an Engine, unless Lender has required the
replacement of such Engine pursuant to Section 6.02 of the Mortgage, Borrower
shall prepay the Note in part in accordance with Section 4.02 hereof and Section
6.02 of the Mortgage.
4.04. Interest on Past Due Amounts. Any amounts past due (by acceleration
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or otherwise) and at any time outstanding under the Note or from Borrower under
any other Basic Document shall (to the extent permitted by law) bear interest,
payable on demand, from the due date until payment in full, at a rate per annum
equal to 2% over the Interest Rate.
4.05. Limit on Interest Payable. The amount of interest due or payable
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under this Agreement or the Note shall not in any event exceed the maximum
allowable by applicable law, and this sentence shall override any contrary
provision in this Agreement or the Note.
5. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.01 Corporate Standing. Borrower is a corporation duly organized, and
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existing in good standing, under the laws of Delaware, has the corporate power
and legal authority to own or lease its properties and to carry on its business
as now conducted, and is duly qualified to do business in all jurisdictions
wherein such qualification is necessary (except in any jurisdictions in which
the failure to qualify would have no Materially Adverse Effect).
5.02 Corporate Powers. Borrower's execution, delivery, and performance
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of the Basic Documents to which it is (or is to become) a party are within
Borrower's corporate powers; and the Basic Documents to which it is (or is to
become) a party have been duly authorized by all necessary corporate action on
Borrower's part, and do not contravene, result in a breach of, or require any
consent under any law, judgment, decree, order, or contractual restriction
binding on Borrower or any agreement or instrument to which Borrower is a party
or to which it or any of its property is subject.
5.03 Binding Effect. The Basic Documents to which Borrower is (or is to
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become) a party are (or will be when executed and delivered) legal, valid, and
binding obligations of Borrower enforceable against Borrower in accordance with
their terms, except as may be limited by bankruptcy, insolvency, or other
similar laws affecting enforcement of creditors, rights generally and by general
principles of equity.
5.04 Litigation. There are no pending or (to the best of Borrower's
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knowledge after due inquiry of Borrower's officers, employees and counsel)
threatened actions or proceedings before any court or administrative agency
which may be expected to have a Materially Adverse Effect after the exhaustion
of all appeals or which seek to question or set aside any of the transactions
herein contemplated except as specifically set forth in the opinion of counsel
to Borrower delivered pursuant to Section 7.01(a)(7).on Appendix A attached
hereto.
5.05 Financial Statements. Borrower's audited balance sheet as of
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December 31, 1997, and the related results of operations for the year and
quarter then ended, have been prepared in accordance with GAAP and fairly
present Borrower's financial condition as of such date and results of operations
for such period, and since December 31, 1997, there has been no Materially
Adverse Change other than as previously disclosed in writing to Lender.
5.06 Taxes. Borrower has filed or caused to be filed all federal, state,
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material local,
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and material foreign tax returns which (after giving effect to any extensions of
time to file properly claimed) it is or was required to file, and has paid all
taxes shown to be due and payable on those returns or any assessment received by
it, except such taxes of Borrower, if any, (x) that are being contested
diligently in good faith, and by appropriate proceedings, if the failure of such
contest to succeed could not result in any Materially Adverse Effect, or (y) as
to which adequate reserves have been provided in accordance with GAAP.
5.07 Citizenship, Air Carrier, and Section 1110 status. Borrower is a
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"citizen of the United States" as that term is used in 49 U.S.C. (S)40102 (a)
(15), and is an air carrier holding a valid air carrier operating certificate
issued pursuant to 49 U.S.C. Chapter 447 for aircraft capable of carrying 10 or
more individuals (a "Section 1110 Person"). Under current law, Lender would be
entitled to the benefit of 11 U.S.C. (S)1110, with respect to the Aircraft, for
all Borrower's obligations under the Note, if Borrower were to become a debtor
under 11 U.S.C. Chapter 11.
5.08 Locations of offices. Borrower's chief executive office and
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principal place of business, and the place where Borrower keeps its financial
records concerning the Collateral, is located at its address set forth in
Section 9.04 of the Mortgage.
5.09 Governmental Consents. Borrower's execution, delivery, and
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performance of the Basic Documents do not require the consent or approval of,
giving of notice to, registration with, or taking of any other action in respect
of any federal, state, or foreign governmental authority or Agency (including
any judicial body) except for (a) the filing and recording of the Mortgage, the
Mortgage Supplement, and the FAA ▇▇▇▇ of sale and the FAA application for
registration for the Aircraft with the FAA; (b) the filing and recording of UCC-
1 financing statements with the New York Secretary of State and the County Clerk
of Queens County, New York; (c) the registration of the Aircraft with the FAA
pursuant to 49 U.S.C. subtitle VII; and (d) any that have been previously
obtained or accomplished.
5.10 Condition of Aircraft. On the Closing Date, Borrower shall have
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good and marketable title to the Aircraft, subject to Lender's Lien under the
Mortgage.
5.11 Absence of ERISA Liability. Each employee person benefit plan (as
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defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as from time to time amended ("ERISA")) of Borrower is in compliance with the
applicable provisions of ERISA and of the Internal Revenue Code of 1986, as from
time to time amended, in all respects, except to the extent that noncompliance
would not have any Materially Adverse Effect.
5A. LENDER'S REPRESENTATIONS AND WARRANTIES
Lender represents and warrants as follows:
5A.01 Corporate Standing. Lender is a corporation duly organized, and
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existing in good standing, under the laws of Delaware, has the corporate power
and legal authority to own or lease its properties and to carry on its business
as now conducted, and is duly qualified to do business in all jurisdictions
wherein such qualification is necessary (except in any jurisdictions in which
the failure to qualify would have no Materially Adverse Effect).
5A.02 Corporate Powers. Lenders's execution, delivery, and performance of
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the Basic Documents to which it is (or is to become) a party are within Lender's
corporate powers; and
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the Basic Documents to which it is (or is to become) a party have been duly
authorized by all necessary corporate action on Lender's part, and do not
contravene, result in a breach of, or require any consent under any law,
judgment, decree, order, or contractual restriction binding on Lender or any
agreement or instrument to which Lender is a party or to which it or any of its
property is subject
6. AFFIRMATIVE COVENANTS
So long as the Note, or any amount owed by Borrower under any other Basic
Document, remains outstanding or unpaid:
6.01. Financial Statements. Borrower shall furnish to Lender:
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(a) within 45 days (or such longer period, not to exceed a total of
60 days, as is permitted for such filings under the federal securities
laws) after the end of each of the first three quarters in each fiscal
year, Borrower's Form 10-Q for such quarter (or, if Borrower is not then an
SEC-reporting company, consolidated statements of operations of Borrower
and its consolidated subsidiaries for the period from the beginning of the
then-current fiscal year to the end of such quarterly period, and balance
sheets of Borrower and its consolidated subsidiaries, on a consolidated
basis, as of the end of such quarter prepared in accordance with GAAP and
setting forth in each case in comparative form figures for the
corresponding period in the preceding year, all in reasonable detail and
certified by the Chief Financial Officer of Borrower, subject to changes
resulting from year-end adjustments);
(b) within 90 days (or such longer period, not to exceed a total of
120 days, as is permitted for such filings under the federal securities
laws) after the end of each fiscal year, Borrower's Form 10-K for such year
(or, if Borrower is not then an SEC-reporting company, consolidated
statements of operations of Borrower and its consolidated subsidiaries, for
such year, and the balance sheets of Borrower and its consolidated
subsidiaries, on a consolidated basis, as of the end of such year, setting
forth in each case in comparative form corresponding figures from the
preceding annual audit, all in reasonable detail, and certified to Borrower
by its independent certified public accountants and to Lender by Borrower's
Chief Financial Officer, as presenting fairly the financial position and
results of operations of Borrower and its consolidated subsidiaries and as
having been prepared in accordance with GAAP);
(c) within five Business Days after the president, chairman of the
board, or chief financial officer of Borrower obtains actual knowledge of
any Default, an Officer's Certificate specifying its nature, the period of
its existence, and what action Borrower proposes to take with respect to
it; and
(d) promptly upon request, such other data or information (financial
or otherwise) regarding Borrower or the Collateral as Lender from time to
time reasonably requests.
6.02. Inspection of Collateral and Records. Borrower shall permit any
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person(s) from time to time designated by Lender, at Lender's expense (or at
Borrower's expense if a Default exists at the time), to visit and inspect any of
the Collateral and Borrower's (or those of any other user of the Aircraft)
records with respect to the Collateral, at such times as Lender reasonably
requests. No such inspection shall unreasonably interfere with Borrower's (or
any other user's) operations or maintenance. Lender shall not have any duty to
make any such
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inspection, and Lender shall not incur any liability or obligation by reason of
not making any such inspection. Upon Lender's request, Borrower shall promptly
notify Lender of the maintenance operations then scheduled on the Aircraft for
the six-month period following such request.
6.03. Corporate Existence. Except as permitted by Section 6.04, Borrower
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shall maintain its corporate existence in good standing in the state of its
incorporation and in all jurisdictions where qualification is then necessary
(except in any jurisdiction in which the failure to qualify would have no
Materially Adverse Effect). Borrower shall preserve and renew its rights
(charter and statutory), patents, and franchises, unless the preservation
thereof is no longer necessary or desirable in the conduct of its business and
the loss thereof will not have any Materially Adverse Effect.
6.04. Merger, etc. Unless Lender gives its prior written consent (which
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shall not be unreasonably withheld) to such transaction, Borrower shall not
consolidate or merge with any other corporation, or convey, transfer, or lease
all or substantially all of its assets as an entirety to any Person, unless:
(a) the corporation formed by or surviving after such consolidation
or merger or the Person who acquires by conveyance, transfer, or lease all
or substantially all of Borrower's assets as an entirety (the "Successor")
(i) is a corporation organized and existing under the laws of the United
States of America or any state or the District of Columbia, (ii) is a
Section 1110 Person, and (iii) has a tangible net worth (one day after such
consolidation, merger, conveyance, transfer, or lease) of not less than $__
million, and not less than __% of that of Borrower one day before such
consolidation, merger, conveyance, transfer, or lease; and the Successor,
(x) executes and delivers to Lender an agreement, in form and substance
satisfactory to Lender, containing an assumption by the Successor of the
due and punctual performance and observance of all Borrower's obligations
under the Basic Documents to which Borrower is then a party, and (y) makes
such filings and recordings, including any filing or recording with the FAA
pursuant to 49 U.S.C. subtitle VII or any filing under the UCC, as are
necessary or reasonably requested by Lender to evidence such consolidation,
merger, conveyance, transfer, or lease with or to the Successor;
(b) immediately after giving effect to such transaction, no Default
exists, and such transaction will not cause any Materially Adverse Change
to occur; and
(c) Borrower or the Successor delivers to Lender, promptly upon
consummation of such transaction, an Officer's Certificate stating that the
conditions precedent set forth in clause (a) have been complied with and an
opinion of counsel for Borrower or for the Successor, in form and substance
reasonably satisfactory to Lender, stating that the agreements entered into
to effect such consolidation, merger, conveyance, transfer, or lease and
such assumption agreements have been duly authorized, executed, and
delivered by the Successor and that they (and the Basic Documents so
assumed) constitute legal, valid, and binding obligations of the Successor,
enforceable in accordance with their terms (to the same extent as the Basic
Documents so assumed were enforceable against Borrower immediately prior to
such transaction).
Upon any such consolidation, merger, conveyance, transfer, or lease,
the Successor shall succeed to, shall be substituted for, and may exercise
every right and power of Borrower under the Basic Documents to which
Borrower is a party, with the
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same effect as if the Successor had been named as Borrower therein. No such
conveyance, merger, transfer, or lease shall have the effect of releasing
Borrower (or any Successor) from its liability under the Basic Documents to
which it is a party. Nothing in this section shall permit any lease,
sublease, or other arrangement for the use, operation, or possession of the
Aircraft except in compliance with the applicable provisions of this
Agreement and the Mortgage.
6.05. Citizenship and Air Carrier Status. Borrower will at all times
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remain a Section 1110 Person.
6.06. Compliance with ERISA. Within five Business Days after the
---------------------
occurrence of any event or circumstance, including any event which is classified
as a "Reportable Event" under ERISA, in connection with any employee benefit
plan to which it is a party, that might constitute grounds for termination of an
employee benefit plan to which Borrower is a party by the Pension Benefit
Guaranty Corporation or might result in the appointment of a trustee by a United
States District Court under Section 4042 of ERISA to administer such employee
benefit plan, Borrower will provide Lender with an Officer's Certificate
describing the event or circumstance, stating the reasons for any such action by
the Pension Benefit Guaranty Corporation or a United States District Court, and
specifying the action Borrower proposes to take with respect thereto.
6.07. Certificate of No Default. Along with Borrower's delivery of the
-------------------------
quarterly financial statements required by Section 6.01(b), Borrower shall
furnish to Lender a certificate of Borrower's Chief Financial Officer certifying
that to the best of his or her knowledge no Default exists (or, if a Default
does exist, a statement as to its nature and the action that Borrower proposes
to take with respect to it).
6.08. UCC Location. If Borrower changes the location of its chief
------------
executive office or principal place of business from its address set forth in
Section 9.04 of the Mortgage, it shall give prior notice thereof to Lender,
specifying Borrower's new address for UCC filing purposes.
7. CONDITIONS PRECEDENT
7.01. Conditions Precedent. Lender's obligation to make the loan
--------------------
hereunder on the Closing Date is subject to the satisfaction of the following
conditions on or before the Closing Date:
(a) Lender shall have received the following, each dated as of the
Closing Date, in form and substance satisfactory to Lender:
(1) the Note executed by Borrower
(2) the Mortgage executed by Borrower,
(3) the Mortgage Supplement executed by Borrower,
(4) a certificate of Borrower's secretary, dated the Closing
Date, certifying attached copies of the resolutions of Borrower's
board of directors evidencing approval of the transactions
contemplated by the Purchase Agreement and the Basic Documents to
which it is (or is to become) a party, and showing the names and
specimen signatures) (or copies thereof) of Borrower's officer(s)
authorized to sign this Agreement and the related
9
documents to which it is (or is to become) a party,
(5) an Officer's Certificate to the effect that: (x) Borrower's
representations and warranties in this Agreement are true and accurate
as though made the Closing Date, and (y) no Default exists or will
result from Lender's making the Loan contemplated by this Agreement,
(6) a certificate of insurance describing the insurance
maintained by Borrower with respect to the Aircraft, and stating that
such insurance conforms to the requirements of the Mortgage,
(7) one or more opinions from Borrower's counsel as to the
legality and binding nature of the transaction, Section 1110, and
other matters as Lender may reasonably request,
(8) an opinion from McAfee & ▇▇▇▇, special FAA counsel; and
(9) such additional opinion(s) and document(s) as Lender
reasonably requests;
(b) Lender shall have received copies of the Purchase Agreement, the
FAA Application for Aircraft Registration, FAA ▇▇▇▇ of Sale and the Lease
Termination Agreement pertaining to the Aircraft, in each case, executed by
Borrower and/or Seller, as applicable;
(c) Borrower's representations and warranties in the Basic Documents
shall be true and accurate as though made on and as of the Closing Date;
(d) no Default shall exist or shall result from Lender's making the
loan contemplated by this Agreement;
(e) all filings, recordings, and other actions necessary to
establish, protect, preserve, and perfect Lender's interests under the
Mortgage shall have been duly made or taken and Lender shall have received
satisfactory evidence thereof; and
(f) in Lender's reasonable judgment, since December 31, 1997, no
Materially Adverse Change, other than as previously disclosed in writing to
Lender, shall have occurred.
8. EVENTS OF DEFAULT; REMEDIES
8.01. Events of Default. Each of the following shall constitute an "Event
-----------------
of Default":
(a) Borrower fails to make any payment due from Borrower on the Note
or under any other Basic Document (including any amount due under Section
4.04 hereof) when due, and such failure continues for three Business Days
after written notice;
(b) any representation or warranty made by Borrower in the Basic
Documents, or in any certificate or other document that it furnishes
pursuant to the Basic Documents, is incorrect in any material respect when
made; provided, that if all material effects of such misrepresentation or
false warranty are reasonably curable by Borrower within 30 days after
receiving written notice of such incorrectness, then
10
Borrower shall have 30 days after receiving written notice from Lender to
cure such incorrectness;
(c) Borrower fails to maintain the insurance required by the terms of
the Mortgage;
(d) Borrower fails to keep the Aircraft registered with the FAA;
(e) Lender fails or ceases to have a perfected first priority security
interest in the Aircraft (unless directly attributable to any willful
misconduct or negligence of Lender or any voluntary transfer of its
interest);
(f) a Lien (other than a Permitted Lien) on the Aircraft exists;
(g) Borrower ceases to be a Section 1110 Person;
(h) Borrower fails to provide Lender with the Officer's Certificate
required by Section 6.01 (c) or 6.06 within the time frame required
therein;
(i) any violation of Section 6.04 hereof or Section 3.02 of the
Mortgage occurs;
(j) Borrower fails in any material respect to perform any other
covenant or agreement in the Basic Documents, and (if remediable) such
failure to perform continues for 30 days after Borrower's receipt of
written notice of such default from Lender;
(k) Borrower (1) applies for or consents to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of
itself or of all or a majority of its property, (2) makes a general
assignment for the benefit of its creditors, (3) commences a voluntary case
under the federal Bankruptcy Code (as now or hereafter in effect), (4)
files a petition seeking to take advantage (as debtor) of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, or (5) fails to controvert in a
timely manner, or acquiesces in writing to, any petition filed against it
in an involuntary case under the federal Bankruptcy Code;
(1) a proceeding or case is commenced, without Borrower's
application or consent, in any court of competent jurisdiction,
seeking (1) its liquidation, reorganization, dissolution, or winding-
up, or the composition or readjustment of its debts,
(2) the appointment of a trustee, receiver, custodian, liquidator,
or the like of Borrower or of all or a majority of its assets, or (3)
similar relief in respect of Borrower under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case continues
undismissed, or an order, judgment, or decree approving or ordering
any of the foregoing is entered and continues unstayed and in effect,
for a period of 60 days; or an order for relief against Borrower is
entered in an involuntary case under the federal Bankruptcy Code;
(l) loan, lease, or deferred purchase obligations of Borrower are in
default
11
the expiration of any applicable grace period, if the effect of such
default is to cause a total of more than $____ million of such obligations
to be accelerated or otherwise declared to be due and payable prior to
their stated maturity, or Borrower defaults (after giving effect to any
applicable grace period) in the payment when due of more than $_____
million of loan, lease, or deferred purchase obligations, or Borrower
defaults (after giving effect to any applicable grace period) in the
payment of any amount when due under the terms of any financing with Lender
or any affiliate thereof, provided such financing was, at any time, for an
amount in excess of $__ million, or any "event of default" occurs under the
Related Lease;
(m) one or more judgment(s) is/are rendered by one or more court(s) of
competent jurisdiction against Borrower for a total of more than $___
million and is/are not stayed or discharged, or fully bonded against,
within 30 days of the date of entry; or
(n) any "Reportable Event" under ERISA shall have occurred, or any
finding or determination shall be made with respect to an employee benefit
plan to which Borrower is a party under Section 4041(c) or (e) of ERISA, or
any fact or circumstance shall occur with respect to an employee benefit
plan to which Borrower is a party, that, in Lender's counsel's opinion,
provides grounds for the commencement of any proceeding under Section 4042
of ERISA, or any proceeding shall be commenced under Section 4042 of ERISA
with respect to an employee benefit plan to which Borrower is a party.
8.02. Remedies. If an Event of Default (other than under Section 8.01(k))
--------
exists, Lender may declare the Note to be immediately due and payable, whereupon
the Note shall become and be immediately due and payable without presentment,
demand, protest, or other notice of any kind, all of which Borrower hereby
waives. If an Event of Default under Section 8.01(k) which Borrower hereby
waives. Upon the occurrence of any Event of Default, Lender may exercise any of
its rights and remedies under the Basic Documents, and all other rights and
remedies available at law or in equity.
9. BORROWER'S INDEMNITIES
9.01. General Indemnity. Borrower assumes liability for, and agrees to
-----------------
indemnify each Indemnitee against, and on written demand to pay, or to reimburse
each Indemnitee for the payment of, any and all Liabilities.
"Liabilities" means any and all liabilities, obligations, losses, damages,
penalties, claims (including claims involving strict liability in tort), suits,
actions, costs, expenses, and disbursements, including reasonable legal fees and
expenses, of whatsoever kind and nature imposed on, incurred by, or asserted
against: any Indemnitee relating to or arising out of any Basic Document, the
enforcement against Borrower of any of the terms of the Basic Documents, or any
lease or relinquishment of possession of the Aircraft or any part thereof or any
action or inaction of Borrower or of any lessee, assignee, or transferee of
Borrower in connection therewith, the purchase of the Aircraft by Borrower, the
ownership of the Aircraft, the acquisition, delivery, nondelivery, acceptance,
nonacceptance, rejection, registration, deregistration, insuring, storage,
manufacture, assembly, transportation, importation, exportation, maintenance,
condition, modification, testing, repair, fitness for use, merchantability,
sale, abandonment, lease, sublease, assignment, transfer, transfer of title,
possession, repossession, use, operation, return, or other application or
disposition of the Aircraft or any component thereof, including latent or other
defects, whether or not
12
discoverable, loss of or damage to any property or the environment, death or
injury of any person, and any claim for patent, trademark, copyright, or mask
work infringement and the violation or infringement by Borrower of any laws,
rules, or regulations.
However, this Section 9.01 shall not require Borrower to pay or indemnify
any Indemnitee under this section (i) for any Liability to the extent resulting
from any Indemnitee's acts of gross negligence or willful misconduct; (ii) for
any Taxes (Borrower's duties in respect of Taxes being set forth in Section
9.02) or for any cost or expense relating to the preparation, execution,
deliverer, or enforcement of the Basic Documents (Borrower's duties in respect
of such costs and expenses being set forth in Section 10.03); (iii) for any
Liability that such Indemnitee incurs to the extent resulting from its breach of
any of its representations, warranties, or covenants in any Basic Document; (iv)
for any Liability with respect to transfer taxes or other expenses payable with
respect to the transfer of the Note, other than a transfer after the occurrence
of an Event of Default; (v) for any violation or purported violation of any law
relating to usury or the charging or collecting of excess interest or finance
charges, or (vi) for any Liability giving rise to a Permitted Lien, so long as
such Lien is a Permitted Lien.
If any Indemnitee obtains knowledge of any claim or liability required to
be indemnified against under this Section 9.01, such Indemnitee shall promptly
notify Borrower, but the failure to do so shall not relieve Borrower from any
liability that it otherwise would have to such Indemnitee under this section
(except to the extent that such failure to notify materially impairs Borrower's
ability to contest such claim or liability). Subject to the rights of insurers
under policies of insurance required to be maintained by Borrower under the
Mortgage, Borrower shall, at its expense, have the right to investigate, and (so
long as Borrower shall have acknowledged to Lender in writing its obligation to
provide indemnification with respect to such Liability), the right to
participate in or assume the defense of or compromise any Liability for which
indemnification is sought under this Section 9.01 with counsel selected by
Borrower and reasonably satisfactory to Lender; provided, that Borrower shall
not be entitled to control the defense of or compromise any Liability (i) if a
Default shall exist, (ii) if such Liability involves the risk of imposition of
criminal liability upon any Indemnitee, (iii) if, in the reasonable opinion of
such Indemnitee, actual or potential material conflict of interest exists where
the defense of such Indemnitee cannot be properly conducted by Borrower and it
is therefore advisable for such Indemnitee to be represented by separate
counsel, or (iv) if such Liability involves a material risk of the sale, loss,
or forfeiture of any of the Collateral or the creation of any Lien (other than a
Permitted Lien) thereon and Borrower shall not have complied with a reasonable
request by Lender for bonding or other security satisfactory to Lender in
connection with such Liability. Where Borrower undertakes the defense of an
Indemnitee in accordance with the terms hereof, no additional fees or expenses
of such Indemnitee in connection therewith will be indemnified hereunder unless
such fees and expenses were incurred at the request of Borrower (or its
insurers); provided, that if (a) Borrower is not entitled to control the defense
of any Liability hereunder and an Indemnitee elects to conduct such defense, the
fees and expenses (including reasonable attorneys' fees) of such Indemnitee
shall be borne by Borrower, and (b)(i) in the reasonable opinion of such
Indemnitee, an actual or potential material conflict of interest exists where
the defense of such Indemnitee cannot be properly conducted by Borrower and it
is therefore advisable for such Indemnitee to be represented by separate
counsel, or (ii) such Indemnitee may be subject to criminal liability, at such
Indemnitee's request, the fees and expenses of such Indemnitee's separate
counsel will be borne by Borrower. An Indemnitee may participate at its expense
(except as provided above) in any proceeding-controlled by Borrower in
accordance herewith, and such participation shall not constitute a waiver of the
indemnification provided in this Section 9.01. Nothing in this Section 9.01
shall be deemed to require an Indemnitee to contest any Liability or assume
responsibility for or control of any proceeding with respect thereto.
13
Borrower shall be obligated under this Section 9.01 irrespective of whether
the Indemnitee is also indemnified with respect to the same matter under any
other Basic Document or other document by any other Person, and the Indemnitee
may proceed directly against Borrower under this Section 9.01 without first
resorting to any such rights of indemnification. Upon the payment in full of
any indemnities due and owing under this Section 9.01, Borrower shall be
subrogated to any right of the Indemnitee in respect of the matter for which
payment has been made. Borrower's indemnities in this section shall survive
expiration or termination of the Mortgage and payment in full of the Note.
Any payment or indemnity pursuant to this Section 9.01 shall include the
amount, if any, necessary to hold the Indemnitee harmless on an after-tax basis
from all taxes required to be paid by such recipient with respect to such
payment or indemnity. The amount of any payment or indemnity required under
this section shall be determined by the Indemnitee reasonably and in good faith,
and subject to verification (if requested) in accordance with the terms of this
paragraph) that determination shall be conclusive. The Indemnitee will provide
Borrower with a summary explanation of the bases for the Indemnitee's
computations. Within 30 days after Borrower receives that summary explanation,
Borrower may request that a "Big 6" accounting firm selected by Lender (the
"Verifying Firm") verify whether the calculations submitted by Lender are based
on the correct assumptions and are mathematically correct. The Verifying Firm
shall be requested to make its determination within 30 days. If the Verifying
Firm determines that such computations are inaccurate or based on incorrect
assumptions, then the Verifying Firm shall determine what it believes to be the
appropriate computations. Such verification shall be final and binding on the
parties hereto. The costs and expenses of such verification shall be paid by
Borrower (unless, according to such verification, Lender's computation should be
reduced by __% or more, in which case the costs and expenses of such
verification shall be paid by Lender).
9.02. Taxes.
-----
(a) Indemnity. Except as provided in Section 9.02 (b), Borrower agrees
---------
to indemnify each Indemnitee against, and on written demand to pay or reimburse
each Indemnitee for the payment of, any and all Taxes imposed upon or asserted
against any Indemnitee, the Aircraft or any part thereof or interest therein,
any Basic Document, any lease of the Aircraft or any part thereof, or the
rentals received under such a lease, by any federal, state, or local government
or other taxing authority in the United States (including any territory or
possession of the United States) or by any foreign government or any political
subdivision or taxing authority thereof where any part of the Aircraft is
located, used, or registered ("Taxing Authorities") upon or with respect to (1)
the mortgaging, financing, refinancing by or at the request of Borrower,
purchase, acquisition, acceptance, nonacceptance, rejection, delivery,
nondelivery, transport, insuring, ownership, registration, deregistration,
assembly, possession, repossession, operation, use, condition, maintenance,
modification, repair, fitness for use, merchantability, testing, return,
abandonment, storage, manufacture, leasing, subleasing, importation,
exportation, sale, assignment, transfer, transfer of title, return, or other
disposition of, or the imposition of any Lien or the occurrence of any liability
to refund or pay over any amount as a result of any Lien on the Aircraft or any
part thereof or interest therein, (2) any amount paid or payable by Borrower
under the Basic Documents or the receipts or earnings arising from or received
with respect to the Aircraft or any part thereof or interest therein, (3) the
Aircraft or any part thereof or interest therein, (4) any of the Basic Documents
and any other documents contemplated thereby or the execution, sale, delivery,
acquisition, or filing of any of the Basic Documents, or (5) otherwise with
respect to or in connection with the transactions effected under the Basic
Documents. The term "Taxes" shall
mean any and all fees, taxes, levies, imposts, duties, charges, assessments, or
withholdings of any nature whatsoever, together with any and all penalties,
fines, additions to tax, and interest thereon or computed by reference thereto.
(b) Exclusions from Indemnity. The provisions of Section 9.02 (a) shall
-------------------------
not apply to:
(1) any Tax based on, or measured by, gross or net income, gross
receipts, capital, franchise, or net worth (other than taxes in the nature
of sales, use, property, or value-added taxes), including related
surcharges and withholding taxes, or any withholding taxes on an
Indemnitee's gross income, to the extent that such withholding taxes are
imposed solely because that Indemnitee has a place of business outside the
United States or holds the Note outside the United States; provided, that
the provisions of this clause (b)(1) shall not apply to any Taxes imposed
in respect of the receipt or accrual of any indemnity payment made or
payable pursuant to this Section 9.02;
(2) any Tax imposed on an Indemnitee as a result of a transfer or
other disposition, by such Indemnitee or any of its predecessors in
interest, of any interest in the Aircraft or any Basic Document, unless
such transfer or disposition occurs after the occurrence of an Event of
Default;
(3) any Tax in the nature of a penalty, an addition to tax, interest,
or fines resulting from the negligence or misconduct of the Indemnitee in
connection with the preparation or filing of (or failure to prepare or
file) tax returns, or the payment of or failure to pay its taxes, but in
each case not if in any way attributable to Borrower's failure to notify
such Indemnitee of its obligations to prepare and file its returns in
respect of Taxes indemnified pursuant to this Section 9.02, to the extent
Borrower shall have actual knowledge of such obligations, or to provide any
information necessary for the preparation or filing of such returns or the
conduct of such proceedings or otherwise to perform its duties and
responsibilities pursuant to the Basic Documents;
(4) any Tax imposed on an Indemnitee to the extent that such tax
results from that Indemnitee's gross negligence, willful misconduct, or bad
faith;
(5) any Tax that would not have been imposed but for any failure of an
Indemnitee to file proper and timely reports or returns or to pay any Tax
when due, if Borrower has actual knowledge of such Tax and specifically
notifies that Indemnitee in a timely manner of the pertinent filing or
payment requirement;
(6) any Tax imposed on an Indemnitee with respect to any period
commencing after the payment of all Secured Obligations (but not excluding
penalties, fines, additions to tax, and interest on or computed by
reference to indemnifiable Taxes);
(7) any Tax that is not yet due or that is being contested under
Section 9.02(c);
(8) any Tax imposed on an Indemnitee that is, or is in the nature of,
an intangible or similar tax upon or with respect to the value of such
Indemnitee's interest in the Note; or
(9) any Tax imposed by Code Section 4975 or under Part 4 or Part 5 of
15
subtitle B of ERISA.
(c) Contest. Borrower shall be entitled, at its expense, to require the
-------
imposition of any Tax for which it is obligated to indemnify hereunder to be
contested, and (after notice to the pertinent Indemnitee) to withhold payment of
any Tax not theretofore paid by an Indemnitee, during pendency of such contest
unless prior payment is a condition to such contest. At an Indemnitee's
election, such contest shall be conducted by Borrower in Borrower's name, but
only if Borrower is permitted as a matter of law so to contest such Tax. If any
claim is made or any proceeding is commenced against: any Indemnitee for any Tax
as to which Borrower has an indemnity obligation pursuant to this Section 9.02,
such Indemnitee shall promptly notify Borrower of any such claim or proceeding,
but the failure to provide such notice shall not release Borrower from its
indemnity obligation hereunder (except to the extent that Borrower's contest of
that claim is precluded by such failure). If an Indemnitee is requested by
Borrower in writing to contest an indemnifiable Tax, so long as no Financial
Default exists, such Indemnitee shall in good faith, with due diligence, and at
Borrower's expense, contest the validity, applicability, or amount of such Tax
by, in such Indemnitee's sole discretion (but after consulting with Borrower),
(a) resisting payment thereof, (b) not paying the same except under protest, if
protest is necessary and proper, or (c) if payment is made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings; provided, that the Indemnitee shall not be required to take any
action pursuant to this sentence unless and until (aa) Borrower provides to that
Indemnitee a written acknowledgment that Borrower is liable to indemnify such
Indemnitee for the contested Taxes to the extent that the contest is
unsuccessful; (bb) Borrower provides to that Indemnitee, upon request, an
opinion of tax counsel, selected by Borrower and reasonably satisfactory to such
Indemnitee, to the effect that such contest has a reasonable possibility of
success under applicable law and the standards of ABA Formal Opinion 85-352
(and, in the case of any appeal, that there is "substantial authority" (within
the meaning of Code Section 6662) for such appeal: ; and (cc) Borrower shall
have agreed to pay (and shall actually pay) on demand to such Indemnitee all
reasonable costs and expenses (including reasonable attorneys, fees) that such
Indemnitee may incur in contesting such claim. If any such contest involves
payment of the Tax in question, Borrower shall either (x) make such payment
directly to the appropriate authority, or (y) furnish to such Indemnitee
sufficient funds (on an interest-free basis) to make such payment, and indemnify
such Indemnitee, in a manner satisfactory to such Indemnitee, against any
adverse tax consequence resulting from such interest-free advance.
An Indemnitee shall not settle any contest required by this Section 9.02
without Borrower's prior written consent, unless (1) that Indemnitee foregoes
its right to be indemnified for the Tax being contested, or (2) Borrower
unreasonably withholds or delays such consent.
If any Indemnitee obtains a refund attributable to any Tax paid or
indemnified by Borrower, such Indemnitee shall (if no Financial Default exists)
pay to Borrower an amount equal to the amount of such refund, plus any interest
received or credited and attributable thereto, plus any net tax benefit (and
minus any net tax detriment) realized (or sustained) by such Indemnitee as a
result of any refund received and payment by such Indemnitee made pursuant to
this sentence. Such amount shall be payable not later than 30 days after such
refund or interest is received.
Nothing contained in this 9.02(c) shall require any Indemnitee to contest
or permit Borrower to contest a claim which it would otherwise be required to
contest pursuant to this Section 9.02 if such Indemnitee shall (a) waive payment
by Borrower of any Amount that might otherwise be payable by Borrower under this
Section 9.02 by way of indemnity in
16
respect of such claim, and (b) repay to Borrower any amounts paid by Borrower
pursuant to the penultimate sentence of the first paragraph of this Section
9.02(c).
(d) Calculation of General Tax Indemnity Payments. Any payment which
---------------------------------------------
Borrower is required to make to or for the account of any Indemnitee with
respect to any Tax which is subject to indemnification under this Section 9.02
shall be made on a net basis, taking into account offsetting credits or
deductions available to such Indemnitee as a result of the payment of such Tax,
and shall include the amount necessary to hold such Indemnitee harmless on an
after-tax basis from the net amount of all Taxes required to be paid by such
Indemnitee as the result of such payment (including any Taxes imposed on such
indemnity payment) pursuant to the laws of any Taxing Authority. The amount of
any payment or indemnity required under this section shall be determined by the
Indemnitee reasonably and in good faith, and (subject to verification in
accordance with the terms of this paragraph) that determination shall be
conclusive. The Indemnitee will provide Borrower with a summary explanation of
the basis for the Indemnitee's computations. Within 30 days after Borrower
receives that summary explanation, Borrower may request that the Verifying Firm
verify whether the calculations submitted by Lender are based on the correct
assumptions and are mathematically correct. The Verifying Firm shall be
requested to make its determination within 30 days. If the Verifying Firm
determine that such computations are inaccurate or based on incorrect
assumptions, then the Verifying Firm shall determine what it believes to be the
appropriate computations. Such verification shall be final and binding on the
parties hereto. The costs and expenses of such verification shall be paid by
Borrower (unless, according to such verification, such Indemnitee's computation
should be reduced by 5% or more, in which case the costs and expenses of such
verification shall be paid by such Indemnitee).
(e) Reports. Borrower shall timely file any report, return, or statement
-------
required to be filed with respect to any Tax which is subject to indemnification
under this Section 9.02, except for any such report, return, or statement which
an Indemnitee has notified Borrower that it intends to file. Borrower shall file
such report, return, or statement, and shall send a copy to Lender and each
Indemnitee if such Lender or Indemnitee would be liable for the Tax covered by
such report, return, or statement. Each Indemnitee shall promptly forward to
Borrower any notice, ▇▇▇▇, or advice received by it concerning any Tax.
9.03. Survival. The requirements in this Section 9 shall survive
--------
termination of this Agreement and the other Basic Documents and the payment of
the Note.
10. MISCELLANEOUS
10.01. No Waivers; Cumulative Remedies. No failure or delay in exercising
-------------------------------
any power or right under any Basic Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude
other or further exercise thereof or the exercise of any other right or power
under any Basic Document. No notice to or demand on any party in any case
shall, of itself, entitle such party to any other or further notice or demand in
similar or other circumstances.
10.02. Notices. All communications and notices provided for under this
-------
Agreement shall be given, and shall become effective, in the manner specified in
the Mortgage.
10.03. Transaction Expenses.
--------------------
(a) Borrower will pay on demand all reasonable out-of-pocket expenses in
connection with the preparation, execution, delivery, administration (excluding
routine administration), and enforcement of the Basic Documents, or in
connection with any scheduled
17
closing that is postponed or cancelled, including (i) all fees and expenses of
McAfee & ▇▇▇▇, special FAA counsel; (ii) all FAA and UCC filing and lien search
fees; (iii) all fees and expenses (including legal fees and expenses) of Lender
in connection with actual or proposed amendments, waivers, or consents to or
under this Agreement or the other Basic Documents (unless requested by Lender
and unconnected with a Default); and (iv) all fees and expenses (including legal
fees and expenses) of Lender in connection with the actual or proposed
enforcement of any Basic Document against Borrower or Lender's protection of its
rights thereunder, or in connection with any bankruptcy, reorganization,
liquidation, insolvency, or similar proceeding involving Borrower or any Item
(including relief-from-stay motions, cash collateral disputes,
assumption/rejection motions, and disputes concerning any proposed disclosure
statement or plan proposed during a case).
(b) Lender shall be entitled to receive reimbursement, within five Business
Days after its request, for all reasonable expenses incurred or made by it in
accordance with this Agreement or any other Basic Document.
10.04. Amendments. Any provision of the Basic Documents, may be amended,
----------
terminated, waived, or otherwise modified only in writing and signed by Borrower
and Lender.
10.05. Successors and Assigns. This Agreement shall bind and benefit
----------------------
Lender and Borrower and their successors and assigns, except that Borrower may
not assign or transfer its rights under this Agreement without Lender's prior
written consent which shall not be unreasonably withheld. Lender shall have a
free right to assign, convey, or otherwise transfer any of its interest in the
Basic Documents, or offer to do any of the foregoing, to any bank, credit
company, finance company, insurance company, or other financial institution (but
in any event not to an airline in direct competition with Borrower), except in
any manner that would result in a violation of 49 U.S.C. subtitle VII, the
Securities Act of 1933, as amended, or ERISA.
10.06. Governing Law; Jurisdiction; Jury Trial Waiver. This Agreement
----------------------------------------------
shall be governed by the laws of the state of New York (excluding any conflict-
of-laws rule that would apply the laws of any other jurisdiction). Any legal
action or proceeding with respect to the Basic Documents may be brought in such
of the courts of competent jurisdiction of the State of New York in the City of
New York or in the United States District Court for the Southern District of New
York and by execution and delivery of this Agreement, each of Borrower and
Lender irrevocably submits to the non-exclusive jurisdiction of such courts, and
to appellate courts therefrom, for purposes of legal actions and proceedings
hereunder and, in the case of any such legal action or proceeding brought in the
above-named New York courts, hereby irrevocably consents, during such time, to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered mail,
postage prepaid, at their respective addresses as provided in the Mortgage, or
by any other means permitted by applicable law. To the extent permitted by law,
final judgment (a certified copy of which shall be conclusive evidence of the
fact and of the amount of any indebtedness of Borrower to Lender) in any such
legal action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on an unsatisfied judgment. Each of Borrower and Lender
hereby irrevocably waives and agrees not to assert, by way of motion, as a
defense, or otherwise, in any legal action or proceeding brought hereunder in
any of the above-named courts, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts, (b) that it or any of its
property is immune from the legal process described in this paragraph (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, or otherwise), (c) that such action or proceeding is brought in
18
an inconvenient forum, that venue for the action or proceeding is improper, or
that any Basic Document may not be enforced in or by such courts, or (d) any
defense that would hinder or delay the levy, execution, or collection of any
amount to which either party hereto is entitled pursuant to a final judgment of
any court having jurisdiction, after exhaustion of all available appeals.
Nothing in this Section 10.06 shall limit any right to bring actions, suits, or
proceedings in the courts of any other jurisdiction. Borrower expressly
acknowledges that the foregoing waiver is intended to be irrevocable. Each of
Borrower and Lender hereby waives any right which it may have to request a trial
by jury in any action relating to the Basic Documents.
10.07. Further Assurances; Performance by Lender. (a) Borrower shall
-----------------------------------------
execute and deliver to Lender from time to time, upon Lender's reasonable
request, all such documents and instruments, and take all such other action, as
Lender deems necessary or proper to perfect or otherwise preserve and protect
its interests under the Basic Documents or to enable Lender to obtain the full
benefit of the Basic Documents and the rights and powers herein and therein
granted. Borrower hereby irrevocably constitutes and appoints Lender as
Borrower's attorney in fact, while an Event of Default exists, with full power
of attorney and full power of substitution, in Lender's discretion and without
any further act of Borrower, to execute and deliver in the name and on behalf of
the Borrower any and all documents and take any or all action to perfect and
otherwise protect and preserve the interests created under the Basic Documents.
Lender shall not be obligated to do any of the acts or exercise any of the
powers authorized in this Section 10.07, but if Lender elects to do any such act
or exercise any such powers, it shall not be accountable for more than it
actually receives as a result of such exercise of power, and it shall not be
responsible to Borrower except for Lender's gross negligence, willful
misconduct, or breach of Section 3. 07 of the Mortgage. All powers conferred
upon Lender by this Agreement, being coupled with an interest, shall be
irrevocable so long as any Secured obligations remain unpaid or unperformed.
(b) If Borrower fails at any time to comply with any of its obligations
under the Basic Documents, Lender may, at is option, take any action it may deem
necessary for the maintenance, preservation, or protection of the Collateral or
otherwise in furtherance of the performance of Borrower's unperformed
obligations, including discharging taxes or other Liens at any time levied or
placed on the Collateral or paying insurance premiums or filing fees. All money
advanced and all expenses (including legal fees) incurred by Lender in
connection with any such action, together with interest thereon at the rate
described in Section 4.64 of this Agreement, shall be repaid to Lender upon
demand. The making of any such advance by Lender shall not cure any breach by
Borrower until the full amount of any such advance and interest thereon shall
have been repaid to Lender and such breach shall have otherwise been cured.
10.08. Headings. Section headings in this Agreement are for convenience
--------
only and are not a substantive part of this Agreement.
10.09. Execution in Counterparts. This Agreement may be executed in
-------------------------
separate counterparts.
10.10. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties in this Agreement or made in writing in connection with this
Agreement shall survive the execution and delivery of this Agreement and the
Mortgage.
10.11. Severability. If any part of any provision in this Agreement, or
------------
any document contemplated hereby, is or becomes invalid or unenforceable under
applicable law, that part shall be ineffective to the extent of such invalidity
only, without in any way affecting the
19
remaining parts of that provision or the remaining provisions.
[The remainder of this page has been intentionally left blank.]
20
IN WITNESS WHEREOF, Borrower and Lender have executed this Loan Agreement.
TOWER AIR, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------
Title: VP - Legal
----------------------
THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------
Title: Vice President
-------------------------
EXHIBIT A
TOWER AIR, INC.
PROMISSORY NOTE
(Issued in Connection with
Boeing 747-238B Aircraft
Bearing U.S. Registration No. N607PE)
New York, New York
$7,519,468.79 September __, 1998
For value received, Tower Air, Inc. ("Borrower"), a Delaware
corporation, promises to pay to the order of The CIT Group/Equipment Financing,
Inc. ("Lender") the principal sum of Seven Million Five Hundred Nineteen
Thousand Four Hundred Sixty-Eight and 79/100 Dollars ($7,519,468.79), and to pay
interest on the unpaid principal balance thereof from and including the date of
this Note to but excluding the date payment in full of the principal amount of
this Note is made, at a rate of 8.5%. per annum (based on a 360-day year of 12
30-day months), on each Payment Date beginning on October 18, 1998. Payments
not made when due (including payments due because of an acceleration) shall, to
the extent permitted by law, bear interest, payable upon demand, at a rate equal
to 10.5% per annum. The amount of interest due or payable under this Note or
the Loan Agreement shall not in any event exceed the maximum allowable by
applicable law.
All payments due under this Note shall be made to The Chase Manhattan
Bank (ABA # 021-000-021), at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, for
credit to The CIT Group Account No. 116-003855, Reference: Tower N607PE (or at
such other place as the holder hereof may from time to time notify Borrower in
writing), in the United States, not later than 1:00 pm (New York City time) on
the due date thereof in United States dollars in funds immediately available in
New York City.
Payments on this Note shall be made in eight (8) consecutive
installments of interest only followed by 22 consecutive installments of
principal and interest, due on the Payment Dates from October 18, 1998 through
April 18, 2001, as shown on the attached schedule; provided, that the final
installment shall in any event be an amount sufficient to pay all then-
outstanding principal amount of this Note and all then-unpaid interest accrued
on this Note.
Interest accrued on the principal amount of this Note shall be paid on
each Payment Date, and on the date the principal hereof is paid in full, except
that interest accrued on overdue principal or interest payments shall be payable
on demand.
Borrower waives presentment, demand, protest, and notice of dishonor,
and any and all other notices or demands in connection with the delivery,
acceptance, performance, default or enforcement of this Note and hereby consents
to any extensions of time, renewals, releases of any party to this Note, waivers
or modifications that may be granted or consented to by the holder of this Note.
This Note is the Note referred to in, and is subject to, the Loan
Agreement, which provides for the acceleration of the maturity of this Note upon
the occurrence of an Event of
Loss to the Aircraft or an Event of Default (each as defined in the Loan
Agreement), and which provides for the prepayment of this Note. This Note is
also entitled to benefits under the Mortgage (such term being defined in the
Loan Agreement).
As used in this Note, the following terms shall have the following
meanings:
"Business Day": any day, other than a Saturday or Sunday, on which
commercial, banks are open for business in New York, New York.
"Loan Agreement": the Loan Agreement dated as of July 15, 1998 between
Borrower and Lender, as from time to time amended.
"Payment Date": the 18th day of each month after the date of this Note,
through April 18, 2001, except that any Payment Date that falls on a day which
is not a Business Day shall instead occur on the following Business Day.
This Note shall be governed by, and construed in accordance with, the laws
of the state of New York (excluding any conflict-of-laws rule that would apply
the laws of any other jurisdiction).
TOWER AIR, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------
Title: V.P. - Legal
----------------------
2
EXHIBIT B
SECURITY AGREEMENT AND CHATTEL MORTGAGE
dated as of July 15, 1998
between
TOWER AIR, INC.,
Borrower,
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
Lender.
One Boeing Model 747-238B Aircraft
Manufacturer's Serial ▇▇. ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇
SECURITY AGREEMENT AND CHATTEL MORTGAGE
This Security Agreement and Chattel Mortgage is entered into as of July 15,
1998, by and between Tower Air, Inc. ("Borrower") and The CIT Group/Equipment
Financing, Inc. ("Lender").
Recitals: Borrower and Lender have entered into the Loan Agreement, which
provides for a loan to Borrower by Lender, to be used to purchase the Aircraft.
Borrower and Lender are entering into this Mortgage so that Borrower will grant
to Lender, through the Mortgage Supplement, a purchase money security interest
in the Collateral as security for the payment of the Note and of other sums
owing under this Mortgage or the Loan Agreement and as security for Borrower's
performance of its obligations under the Basic Documents to which it is a party.
Borrower and Lender agree as follows:
1. DEFINITIONS; REFERENCES
1.01. Definitions. The following terms, when capitalized as below, have
the following meanings:
"Aircraft": the Airframe and the four Engines.
--------
"Airframe": the Boeing model 747-238B aircraft listed by U.S. registration
--------
number and manufacturer's serial number on the Mortgage Supplement (except for
any Engines or engines from time to time installed thereon), including all Parts
incorporated in such airframe.
"Basic Documents": the Purchase Agreement, this Mortgage, the Loan
---------------
Agreement, the Note, the Mortgage Supplement and each other document, agreement,
instrument and certificate entered into in connection with the transactions
contemplated hereby.
"Business Day": any day, other than a Saturday or Sunday, on which
------------
commercial banks are open for business in New York, New York.
"Closing Date": the date of this Mortgage.
------------
"Collateral": defined in Section 2.01.
----------
"Default": any event or condition that would become an Event of Default
-------
upon the giving of notice or lapse of time or both, or any Event of Default.
"Dollars" or "$": United States dollars.
------- -
"Engine": any of the four ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT9D-7J engines listed by
------
manufacturer's serial numbers in the Mortgage Supplement, whether installed on
the Airframe or on any other airframe, including any Replacement Engine
substituted for an Engine under this Mortgage, and including all Parts
incorporated in such engine.
"Event of Default": defined in Section 8.01.
----------------
"Event of Loss": with respect to any Item, any of the following events: (i)
-------------
the
destruction or damage beyond economic repair of such Item or rendition of such
Item permanently unfit for normal use for any reason whatsoever; (ii) any damage
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 (as agreed between
Borrower and the underwriter); (iii) the condemnation, confiscation, or
requisition of title to such Item; (iv) the loss, theft, disappearance,
confiscation, or seizure of such Item for a continuous period of at least 60
days; or (v) the requisition of use of such Item, by any Person other than the
Government, for a continuous period of at least 6 months. An Event of Loss with
respect to the Aircraft shall be deemed to have occurred if an Event of Loss
occurs with respect to the Airframe.
"FAA": the United States Federal Aviation Administration, and any
---
instrumentality of the United States succeeding to its function.
"Financial Default": a Default of the type described in Section 8.01
-----------------
(a),(k), or (1) of the Loan Agreement, or an Event of Default.
"Government": the federal government of the United States, or any
----------
instrumentality or agency thereof.
"incorporated in": incorporated or installed in, attached to, or otherwise
---------------
made a part of.
"Insured Value": with respect to the Aircraft, $25,000,000 and, with
-------------
respect to an Engine, while such Engine is off-wing, $3,500,000, but in any
event a maximum of $25,000,000.
"Item": the Airframe or an Engine.
----
"Lien": any mortgage, pledge, assignment, encumbrance, claim of ownership,
----
lien (statutory or other) , or other security interest of any kind or nature
whatsoever (including any conditional sale or other title retention agreement,
or lease in the nature thereof).
"Loan Agreement": the Loan Agreement dated as of July 15, 1998 between
--------------
Borrower and Lender.
"Mortgage": this Security Agreement and Chattel Mortgage.
--------
"Mortgage Supplement": a supplement to this Mortgage, substantially in the
-------------------
form of Schedule A hereto.
"Note": the promissory note issued by Borrower to Lender in connection with
----
the Aircraft.
"Parts": all appliances, parts, instruments, appurtenances, accessories,
-----
furnishings and other equipment of whatever nature (other than complete Engines
or engines) which are from time to time incorporated in the Airframe or any
Engine, or having been so incorporated are later removed therefrom, so long as
they are subject to this Mortgage pursuant to Section 4.02.
"Payment Date": the eighteenth (18th) day of each month occurring after the
------------
Closing Date, except that any Payment Date that falls on a day which is not a
Business Day shall instead occur on the following Business Day.
"Permitted Air Carrier": any Person who, at the time that a lease to it is
---------------------
entered into, is
2
a Section 1110 Person, is not in bankruptcy, and (to the best of Borrower's
knowledge) is generally paying its financial obligations as they become due.
"Permitted Lease": a lease permitted under Section 3.02(a).
---------------
"Permitted Lessee": a lessee under a Permitted Lease.
----------------
"Permitted Lien": any Lien referred to in clauses (a) through (f) of
--------------
Section 7.01 that is not guaranteed by any "insider" (as defined in Bankruptcy
Code Section 101(30)) of Borrower.
"Person": any individual, corporation, limited liability company,
------
partnership, joint venture, or other legal or governmental entity.
"Purchase Agreement": the Aircraft Purchase Agreement dated as of July 15,
------------------
1998 between C.I.T. Leasing Corporation and Borrower.
"Records": defined in Section 4.05.
-------
"Replacement Engine": a ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT9D-7J engine having a value and
------------------
utility at least equal to the engine replaced (determined without regard to
hours or cycles remaining until the next scheduled overhaul, but assuming that
the engine replaced was in the condition required by this Mortgage), and which
is suitable for installation and use on the Airframe, which is substituted for
an Engine hereunder pursuant to Section 3.06 or Section 6.02.
"Section 1110 Person": a "citizen of the United States" (within the meaning
-------------------
of 49 U.S.C. (S)40102 (a) (15)) who is an air carrier holding a valid air
carrier operating certificate issued pursuant to 49 Chapter 447 for aircraft
capable of carrying 10 or more individuals.
"Secured Obligations": all of Borrower's obligations (of whatever nature)
-------------------
under the Basic Documents, whether such obligations exist now or arise in the
future.
"Term": the period commencing on the Closing Date and ending on the date
----
all Secured Obligations are paid in full.
1.02. Usage. Any agreement or instrument referred to in Section 1.01
-----
means such agreement or instrument as from time to time supplemented and
amended. References to sections, schedules, and the like refer to those in or
attached to this Mortgage unless otherwise specified. "Including" means
"including but not limited to". "Or" means one or more, or all, of the
alternatives listed or described. "Herein", "hereof", "hereunder", etc. mean
in, of, or under, etc. this Mortgage (and not merely in, of, under, etc. the
section or provision where that reference appears).
2. GRANT OF SECURITY INTEREST
2.01. Grant of Security Interest. To secure payment and performance of
--------------------------
the Secured obligations, Borrower hereby grants to Lender a purchase money
security interest in the following property (the "Collateral"):
(a) all Borrower's right, title, and interest in and to the Aircraft
(including the Engines), which shall be specifically subjected to the Lien
of this Mortgage on the Closing Date by means of the Mortgage Supplement;
3
(b) the Records;
(c) all Borrower's right, title, and interest in, to, and under the
Purchase Agreement;
(d) all Borrower's right, title, and interest in, to, and under any
lease, sublease, pooling, or interchange agreement with respect to the
Aircraft;
(e) all money and securities deposited or required to be deposited
with Lender pursuant to any Basic Document or required to be held by Lender
hereunder; and
(f) all proceeds of any nature (including insurance) in respect of
the foregoing.
3. POSSESSION AND USE OF THE AIRCRAFT
3.01. Use of the Aircraft. Borrower shall not operate any Item, or permit
-------------------
any Item to be operated, in violation of any law, rule, regulation, or order of
any governmental authority having jurisdiction (domestic or foreign) or in
violation of any airworthiness certificate, license, or registration relating to
any Item issued by any such authority.
3.02. Possession. Borrower shall not, without Lender's consent, which
----------
shall not be unreasonably withheld, sell, lease, or otherwise in any manner
deliver, transfer, or relinquish possession of any Item, or install any Engine,
or permit any Engine to be installed, on any airframe other than the Airframe;
provided, that so long as no Default exists at the beginning of such lease,
delivery, transfer, relinquishment, or installation, Borrower may, without such
consent:
(a) (i) wet lease the Aircraft or (ii) lease any Item to any
Permitted Air Carrier, if (1) a copy of such lease is submitted to Lender
at least five Business Days before the Item is delivered to the lessee
thereunder, (2) such lease (x) is expressly subject and subordinate to the
Lien of this Mortgage and to all the rights of, and remedies available to,
Lender under this Mortgage, (y) is specifically assigned to Lender as
additional security for the payment and performance of the Secured
Obligations, with the chattel paper original delivered to Lender, and (z)
provides that, upon notice to the lessee thereunder by Lender that a
Financial Default then exists under this Mortgage, the lessee will make all
payments under such lease directly to Lender (provided, that the lessee may
make all payments under such lease directly to Borrower so long as the
lessee has not received any such notice), (3) the lease does not permit the
sublease of any Item, and (4) the lease requires that the lessee provide
Lender with semi-annual certificates of an appropriate officer of the
lessee, certifying that each leased Item is being maintained in accordance
with Section 4.01 of Mortgage;
(b) deliver or permit any Permitted Lessee to deliver possession
of any Item to any organization for testing, service, repair, maintenance,
or overhaul work or for permitted alterations, modifications, or additions;
(c) transfer or permit any Permitted Lessee to transfer possession
of any Item to the United States or any instrumentality or agency thereof;
(d) install or permit any Permitted Lessee to install an Engine on
an airframe
4
owned by Borrower or such Permitted Lessee free and clear of all Liens,
except (i) Permitted Liens and Liens that do not apply to such Engine, (ii)
the rights of air carriers under normal interchange or pooling agreements
which are customary in the airline industry and do not contemplate, or
require, the transfer of title to such Engine, and (iii) Liens pursuant to
agreements that effectively provide that the secured party thereunder will
not acquire any interest in such Engine by reason of its installation on
such airframe at any time that such Engine is required to be subject to
this Mortgage;
(e) (i) install or permit any Permitted Lessee to install an Engine
on an airframe leased to Borrower or such Permitted Lessee or owned by
Borrower or such Permitted Lessee subject to a conditional sale or other
title retention agreement or to a security agreement, if such airframe is
free and clear of all Liens except the rights of the parties to the lease
or conditional sale or other title retention agreement, or security
agreement covering such airframe and except Liens of the type permitted by
clause (d) of this Section 3.02, and
(ii) Borrower or such Permitted Lessee has received, from the
lessor, conditional vendor, or secured party of such airframe, a written
agreement (which may be the lease or conditional sale or other security
agreement covering such airframe) , whereby such lessor, conditional
vendor, or secured party effectively agrees that it will not acquire any
interest in any Engine by reason of its installation on such airframe at
any time that such Engine is required to be subject to this Mortgage;
(f) install or permit a Permitted Lessee to install an Engine on an
airframe owned by Borrower or such Permitted Lessee, leased to Borrower or
such Permitted Lessee, or subject to a conditional sale or other security
agreement under circumstances where neither clause (d) nor clause (e) of
this Section 3.02 applies; provided, that such installation shall be deemed
an Event of Loss with respect to such Engine and Borrower shall comply with
Section 6.02 with respect to such Event of Loss;
(g) transfer, or permit a Permitted Lessee to transfer, possession of
any Engine to any Person for the purpose of shipment; or
(h) subject or permit any Permitted Lessee to subject any Engine to a
pooling or borrowing arrangement or any reciprocal leasing arrangement in
the nature thereof, in Bach case customary in the United States airline
industry entered into by Borrower or such Permitted Lessee in the ordinary
course of its business with one or more air carriers or the manufacturer of
the Engines.
Borrower shall remain primarily liable hereunder for the performance of the
terms of this Mortgage to the same extent as if no such lease, sublease,
pooling, interchange, installation, or transfer had occurred. No pooling or
interchange agreement, lease, or other relinquishment of possession of any Item
shall in any way discharge or diminish Borrower's obligations to Lender
hereunder. If Borrower or a Permitted Lessee shall have received, from the
lessor, conditional vendor, or secured party of any airframe or engine leased to
or operated or purchased by Borrower or such Permitted Lessee subject to a
lease, conditional sale, or other security agreement, a written agreement
complying with clause (ii) of Section 3. 02 (e) , Lender hereby agrees for the
benefit of such lessor, conditional vendor, or secured party that Lender will
not acquire or claim, as against such lessor, conditional vendor, or secured
party, any interest in any such engine as the result' of its installation on the
Airframe.
3.03. Pooling of Parts. Any Part may be removed from any Item and
----------------
subjected to a normal pooling arrangement customary in the airline industry
entered into in the ordinary
5
course of Borrower's or a Permitted Lessee's business, if that Part is replaced
with a Part that complies with the provisions of Section 4.02 as promptly as
practicable after the removal of such removed Part. Any replacement Part when
incorporated in an Item in accordance with Section 4.02 may be owned by an air
carrier subject to such a normal pooling arrangement if Borrower, at its
expense, as promptly as practicable either (i) causes title to such replacement
Part to vest in Borrower in accordance with Section 4.02 or (ii) replaces such
replacement Part by incorporating in such Item a further replacement Part owned
by Borrower free and clear of all Liens except Permitted Liens.
3.04. Transfer of Parts. Borrower and any Permitted Lessee may install
-----------------
Parts in airframes or engines (other than the Airframe or an Engine) operated by
it or such lessee or sublessee, provided that any Parts so installed are
replaced as promptly as practicable as required by Section 4.02.
3.05. Operation and Location. Borrower shall not permit any Item to be
----------------------
operated or located at any place or under any condition outside the geographical
limits of or otherwise excluded from coverage by any insurance required under
this Mortgage. Without limiting the generality of the foregoing, Borrower will
not permit any Item to be operated or located in any recognized or, in Lender's
judgment (if communicated to Borrower in accordance with Section 9. 04) ,
threatened area of hostilities, unless covered by war-risk insurance in
accordance with the requirements of Section 5 or unless such Item is used by or
under contract with the Government under which use or contract the Government
assumes liability for any damage, loss, destruction, or failure to return
possession of such Item at the end of the term of such use or contract and for
injury to persons or damage to property of others.
3.06. [Intentionally Omitted.]
3.07. Quiet Enjoyment. If and so long as no Event of Default exists,
---------------
neither Lender nor any of its successors and assigns shall disturb the
possession or use of the Aircraft by Borrower or any Permitted Lessee, except as
permitted by the Basic Documents.
3.08. Registration. Borrower shall at all times cause the Aircraft to
------------
remain effectively registered in the name of Borrower with the FAA pursuant to
49 U.S.C. subtitle VII.
3.09. Nameplate; Ownership Markings. Borrower will not allow the name of
-----------------------------
any Person other than Borrower to be placed on any Item as a designation that
might be interpreted as a claim of ownership, except that Borrower may allow any
Item (1) to be lettered, painted, or marked in an appropriate manner for
convenience of identification of the interest therein of any Permitted Lessee
(including customary colors and insignia of such Permitted Lessee) , (2) to be
painted with advertising logo on the exterior of the Airframe, and (3) to bear
insignia plates or other markings identifying the supplier or manufacturer of
such Item or any Parts thereof. Borrower shall affix (and maintain at all
times), in the cockpit of the Airframe and on each Engine, a durable nameplate
or stencil bearing the inscription "Owned by Tower Air, Inc., and mortgaged to
The CIT Group/Equipment Financing, Inc." (such nameplate or stencil to be
replaced, if necessary, with a nameplate or stencil reflecting the name of any
successors) in interest to Lender).
4. MAINTENANCE AND OPERATION
4.01. Maintenance. Borrower shall (or shall cause a Permitted Lessee to)
-----------
maintain, service, repair, overhaul, alter, modify, add to, and test each Item,
and each other engine installed from time to time on the Airframe, in accordance
with Borrower's or such Permitted
6
Lessee's FAA-approved maintenance program for the Aircraft, Airframes, or
Engines, or its substantial equivalent, so as to keep each Item in good
operating condition and in such condition as required to enable a Standard
Airworthiness Certificate (Transport Category) for the Aircraft to be maintained
in good standing at all times under 49 U.S.C. subtitle VII. Borrower will (or
shall cause a Permitted Lessee to) comply with all mandatory service,
inspection, maintenance, repair, and overhaul regulations, directives, and
instructions for United States operators of Boeing model 747-200 aircraft and
▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT9D-7J engines, and agrees that the Airframe and Engines will
not be maintained in violation of any law, rule, regulation, or order of any
government or governmental authority having jurisdiction (domestic or foreign).
4.02. Replacement of Parts. Except as provided in Section 4.03, Borrower
--------------------
shall promptly replace (or cause to be replaced) all Parts which from time to
time are incorporated in any Item and which 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, if
Borrower removes (or permits to be removed) in the ordinary course of
maintenance, service, repair, overhaul, or testing any Part, whether or not worn
out, destroyed, damaged beyond repair, or permanently rendered unfit for use, or
subjects any Part to a pooling arrangement described in Section 3.03, Borrower
shall replace (or cause to be replaced) such Part as promptly as practicable
with a replacement Part, except as provided in Section 4.03. Each such
replacement Part shall be free and clear of all Liens (except Permitted Liens
and pooling arrangements to the extent permitted by Section 3.03), shall have at
least the same value and utility as the replaced Part, and shall be in good
operating condition. All Parts at any time removed from any Item as herein
provided shall remain subject to this Mortgage, no matter where located, until
such time as such Parts are replaced by Parts which have been incorporated in
the Aircraft and which meet the requirements for replacement Parts (as specified
in this section). Immediately upon any replacement Part's becoming incorporated
in any Item as provided in this section, without further act, such replacement
Part shall become subject to this Mortgage and be deemed a part of such Item for
all purposes hereof to the same extent as the Part replaced, and the replaced
Part shall no longer be subject to this Mortgage and shall no longer be deemed a
Part hereunder.
4.03. Alterations and Modifications. Borrower shall make or cause to be
-----------------------------
made all alterations and modifications in and additions to the Aircraft as are
required from time to time to meet the requirements of the FAA or (except to the
extent being contested by Borrower in good faith and by appropriate proceedings,
and only so long as non-compliance does not pose any material risk of the loss,
forfeiture, or grounding of the Aircraft) other governmental authority having
jurisdiction over any Item or Borrower. In addition, Borrower or any Permitted
Lessee may from time to time make alterations and modifications in and additions
to any Item as it deems desirable in the proper conduct of its business,
provided that no such alteration, modification, or addition (i) decreases the
value, utility, or remaining useful life of the Aircraft in any material respect
below its then-current value, utility, and remaining useful life assuming that
the Aircraft is at such time in the condition and repair as required by the
terms hereof (unless such alteration, modification, or addition is required to
comply with the first sentence of this Section 4.03) or (ii) adversely affects
the eligibility of the Aircraft for a Standard Airworthiness Certificate
(Transport Category). Lender shall not bear any liability whatsoever for the
alteration or modification of or addition to the Aircraft, whether in the event
of grounding or suspension of certificates or for any other cause whatsoever.
All Parts incorporated in the Aircraft as the result of such alteration,
modification, or addition (other than Parts referred to in the following
provisions and Parts that are subject to a pooling arrangement permitted by
Section 3.03), without further act, shall bear any subject to the Lien of this
Mortgage; provided, that so long as no Financial Default exists, Borrower may
remove
7
and not replace any such Part that (x) is in addition to, and not in replacement
of or in substitution for, any Part incorporated in such Item on the Closing
Date (or any Part in replacement of or substitution for any such Part), (y) is
not required to be incorporated in such Item pursuant to the terms of Section
4.02 or any other provision of this Mortgage, and (z) can be removed from such
Item without diminishing the value, utility, or remaining useful life that such
Item would have had at such time had such alteration, modification, or addition
not occurred. Upon the removal by Borrower of any such Part as above provided,
such Part shall not be subject to the Lien of this Mortgage and shall not be a
Part hereunder.
4.04. Compliance with Law. Borrower shall comply (and shall cause each
-------------------
Permitted Lessee to comply) with all laws, of the jurisdictions in which the
Collateral is operated and with all laws, rules, regulations, orders, and
airworthiness directives of the FAA and any other legislative, executive,
administrative, or judicial body having jurisdiction over Borrower or any
Permitted Lessee to the extent that noncompliance with such laws, rules,
regulations, orders, and airworthiness directives would have any material
adverse effect on the operation, service, repair, overhaul, testing,
maintenance, or use of the Aircraft or Borrower's ability to fulfill its duties
and obligations under this Mortgage or any other Basic Document.
4.05. Records. Borrower shall maintain or cause to be maintained, in
-------
English, all logs, manuals, certificates, data, and inspection, modification,
and restoration records and other materials so long as required by any
governmental authority having jurisdiction over the Collateral to be maintained
in respect of the Collateral ("Records"). If any Item is repossessed pursuant
to Section 8, Borrower shall forthwith deliver all Records to Lender.
5. INSURANCE
5.01. Borrower to Maintain Insurance. Borrow maintain, or cause to be
------------------------------
maintained, on the Aircraft, the Airframe and each Engine, policies of insurance
in such form, of such and with insurers as maintained with respect to other
property of similar type in Borrower's fleet and in any event not less than as
follows:
(a) Borrower will at all times carry and maintain comprehensive aircraft
liability, passenger liability, products liability, cargo and contractual
liability, and property damage liability insurance, with insurers of recognized
responsibility, with respect to the Aircraft, the Airframe, and each Engine, and
acceptable to Lender, in an amount not less than that carried by Borrower on
similar items owned or leased by Borrower but in no event less than $500,000,000
combined single limit per occurrence. Such insurance shall be of the type
usually carried by corporations engaged in the same or a similar business as
that served by the Aircraft, similarly situated with Borrower and owning and
operating similar aircraft and engines in such business, and covering risks of
the kind customarily insured against by such corporations. Borrower may self -
insure portions of any of the risks described in this Section 5.01(a) to the
extent acceptable to Lender. The Aircraft may be insured under a ground risk
policy acceptable to Lender while the Aircraft is grounded or not operational.
Any policies of insurance carried in accordance with this Section 5.01(a)
shall (1) name Lender as an additional insured, (2) provide that in respect of
the interest of Lender in such policies the insurance shall not be invalidated
by any action or inaction of Borrower (or any Permitted Lessee) and shall insure
Lender regardless of any breach or violation by Borrower (or any Permitted
Lessee) of any warranty, declaration, or condition contained in such policies,
(3) provide that if such insurance is to be cancelled for any reason whatsoever,
or any change is to be made in the coverage which adversely affects the interest
of Lender, or such insurance is allowed to lapse for nonpayment of premium, such
cancellation, change, or lapse shall not
8
be effective as to Lender for 30 days (or the maximum notice period available;
seven days or such other period as is then generally available in the case of
any war risk and allied perils coverage) after Lender receives written notice
from such insurers of such cancellation, change, or lapse, (4) be effective with
respect to domestic and international operation, (5) provide that Lender shall
have no liability for premiums, commissions, calls, or assessments, or
warranties or representations to underwriters, with respect to such policies,
and (6) provide that the insurers shall waive any right to any set-off or
counterclaim or any other deduction, by attachment, or otherwise, with respect
to any liability of Lender. Each liability policy shall be primary without right
of contribution from any other insurance which is carried by Lender with respect
to its interest in the Aircraft.
(b) Borrower shall maintain, or cause to be maintained, with insurers of
recognized responsibility acceptable to Lender, all-risk aircraft hull insurance
covering the Aircraft (including ground, flight, and taxiing) and all-risk
coverage, on a replacement cost basis, with respect to any Engine or Part while
not installed on the Aircraft (including war-risk insurance covering hijacking
and acts of terrorism exposures), which is of the type and form, and in an
amount not less than that, carried by Borrower on similar items owned or leased
by Borrower and is in an aggregate amount not less than the Insured Value as the
"agreed value" for the Aircraft. Each Engine, after removal, shall be insured
for not less than the Insured Value applicable to an Engine under a ground risks
policy reasonably acceptable to Lender. If and to the extent that Borrower or a
Permitted Lessee operates the Aircraft outside the United States or Canada,
Borrower shall maintain or cause to be maintained in effect, with respect to the
Aircraft, war risks coverage against the additional exposures of confiscation,
expropriation, nationalization, and seizure (including confiscation by the
government of registry, if other than the United States), in an amount not less
than Insured Value as the "agreed value" for the Aircraft. With respect to the
insurance described in this Section 5.01 (b), Borrower or a Permitted Lessee may
self -insure, by way of deductible or premium adjustment provisions in insurance
policies or otherwise, the risks required to be insured against in an amount not
more than $500,000 per occurrence.
Any policies maintained in accordance with this Section 5. 01(b) shall (1)
provide that all payments up to but not exceeding Insured Value shall be payable
to Lender, as sole payee, for application in accordance with the Loan Agreement
(provided, that (x) unless Lender shall have notified such insurers that a
Default then exists, any payment for a loss not in excess of $100,000 and not
involving an Event of Loss to the Aircraft, and any excess over Insured Value,
shall be paid directly by insurers to Borrower, and (y) if Lender shall have so
notified such insurers that a Default then exists, or if the payment exceeds
$100,000, or if an Event of Loss to the Aircraft is involved, then the amount,
up to Insured Value, of all payments shall be payable to Lender, as sole payee,
for application in accordance with the Loan Agreement); (2) be effective with
respect to domestic and international operation; (3) provide that Lender shall
have no liability for premiums, commissions, calls, assessments, or advances, or
warranties or representations to underwriters, with respect. to such policies;
(4) provide that if such insurance is to be cancelled for any reason whatever,
or any change is to be made in the coverage which adversely affects Lender's
interest, or such insurance may be allowed to lapse for nonpayment of premium,
such cancellation, change, or lapse shall not be effective as to Lender for 30
days (or the maximum notice period available; seven days or such other period as
is then generally available in case of any war-risk and allied perils coverage)
after Lender receives written notice from such insurers of such cancellation,
change, or lapse; (5) provide that, in respect of the interests of Lender in
such policies, the insurance shall not be invalidated by any action or inaction
of Borrower (or any Permitted Lessee) and shall insure Lender regardless of any
breach or violation by Borrower (or any Permitted Lessee) of any warranty,
declaration, or condition contained in such policies; and (6) provide that the
insurers shall
9
waive any right to any set-off or counterclaim or any other deduction, by
attachment or otherwise, with respect to any liability of Lender or Borrower.
Each all-risk hull insurance policy shall be primary without right of
contribution from any other insurance which is carried by Lender with respect to
its interest in the Aircraft.
5.02. Insurance Certificates. Borrower agrees to furnish to Lender, prior
----------------------
to the Closing Date and prior to each policy expiration or replacement until the
Secured Obligations are paid in full, an original insurance certificate signed
by an independent insurance broker (who may be the broker regularly retained by
Borrower or any Permitted Lessee) of recognized national standing, reasonably
acceptable to Lender, certifying that the insurance required by this Section 5
is in full force and effect, stating that in such broker's opinion such
insurance being carried by Borrower (or any Permitted Lessee) complies with the
requirements of this Section 5, and specifically referring to this Section 5.
Such insurance certificate shall provide that (a) the broker will notify Lender
in writing promptly of any default in the payment of any premium and of any
other act or omission on the part of Borrower of which such broker has knowledge
and which might invalidate or render unenforceable in whole or in part any
insurance on the Aircraft, and (b) no insurance provided pursuant to this
Section 5 shall expire or terminate, or change in a manner adverse to Lender,
prior to 30 days (or the maximum notice period available; or, with respect to
war risk and allied perils insurance, seven days or such other period as is :hen
generally available) after Lender has received written notice thereof.
5.03. Insurance Proceeds. Subject to Section 6.03, any proceeds of
------------------
insurance received by Lender as a result of an Event of Loss (a) with respect to
the Aircraft shall be applied in accordance with Section 6. 01, or (b) with
respect to an Engine only, shall be applied in accordance with Section 6.02. Any
proceeds of insurance required to be maintained hereunder which are received by
Lender as the result of any property damage or loss not constituting an Event of
Loss shall be paid to Borrower unless a Default exists.
5.04. Indemnification by United States Government. Lender agrees to
-------------------------------------------
accept, in lieu of insurance against any risk with respect to the Aircraft,
indemnification from the Government against such risk in an amount which, when
added to the amount of any insurance against such risk maintained by or for the
benefit of Borrower (including permitted deductibles) with respect to the
Aircraft, shall be at least equal to the amount of insurance against such risk
otherwise required by this Section 5.
5.05. Industry Standards. In the event of a dispute with respect to
------------------
applicable industry standards for insurance coverage, to the extent not
specifically addressed in this Section 5, such standards shall be determined, at
the expense borne equally by Borrower and Lender, by a consensus opinion of two
nationally recognized aviation insurance brokers, one selected by Borrower and
one selected by Lender. If such insurance brokers do not reach a consensus,
such brokers shall select a third nationally recognized aviation insurance
broker to determine at Borrower's expense the applicable industry standards for
insurance coverage.
6. EVENT OF LOSS
6.01. Event of Loss to the Airframe. Upon the occurrence of an Event of
-----------------------------
Loss to the Airframe, Borrower shall within five days after such occurrence give
to Lender written notice of such event and shall, on or before the earlier of
(a) the 91st day following the date of occurrence of such Event of Loss, and (b)
five days following the receipt of insurance proceeds with respect to such Event
of Loss, pay to Lender an amount that, when added to the insurance and other
proceeds held by Lender in connection with such Event of Loss, will be
sufficient to
10
prepay the Note and all other Secured Obligations in full.
6.02. Event of Loss to an Engine. In the case of an Event of Loss solely
--------------------------
with respect to an Engine, Borrower shall within five days after such occurrence
give to Lender written notice of such event and shall, on or before the earlier
of (a) the 91st day following the date of occurrence of such Event of Loss, and
(b) five days following the receipt of insurance proceeds with respect to such
Event of Loss, pay to Lender an amount that, when added to the insurance and
other proceeds held by Lender in connection with such Event of Loss, will be
sufficient to prepay the Note in part in an amount equal to the product obtained
by multiplying the then outstanding principal amount of the Note by a fraction
the numerator of which is the Insured Value of such Engine and the denominator
of which is the Insured Value of the Aircraft, together with all accrued and
unpaid interest on such portion of the Note to be prepaid and any other Secured
Obligations then due to Lender. Notwithstanding the foregoing, Lender may, in
its sole discretion, require Borrower to replace such Engine as promptly as
practicable (but in any event within 60 days after such Event of Loss, or such
longer period (if any) as Lender may agree to after receiving full cash
collateral for such Engine on terms acceptable to Lender) with a Replacement
Engine. Borrower shall cause such Replacement Engine to be subject to the first
and prior security interest created by this Mortgage, free and clear of all
Liens other than Permitted Liens. In addition, Borrower will, not later than
the date on which the Replacement Engine is substituted hereunder, (a) furnish
Lender with a copy of the ▇▇▇▇ of sale pursuant to which Borrower acquired title
to the Replacement Engine or other evidence of ownership reasonably acceptable
to Lender, (b) execute a supplement to this Mortgage, in scope and substance
satisfactory to Lender, subjecting the Replacement Engine to the terms of this
Mortgage, and cause such supplement to be recorded pursuant to 49 U.S.C.
subtitle VII, (c) furnish Lender with such evidence as it requests of compliance
by Borrower with the terms of the Basic Documents with respect to the
Replacement Engine, including Section 5, (d) furnish to Lender a certificate of
an officer of Borrower, and if reasonably requested by Lender, an independent
aircraft appraisal, certifying that the Replacement Engine is of at least equal
value and utility, and in as good operating condition, as the Engine being
replaced (determined without regard to hours or cycles remaining until the next
scheduled overhaul, but assuming that the Engine replaced was in the condition
required by this Mortgage), and (e) upon Lender's request, cause to be delivered
an opinion of independent counsel to Borrower, selected by Borrower and
reasonably satisfactory to Lender, to the effect that the Replacement Engine has
been conveyed to Borrower free and clear of all Liens of record (other than
Permitted Liens), and that Lender has a duly perfected first priority security
interest on the Replacement Engine under this Mortgage. Such Replacement Engine
shall thereafter be an "Engine" for all purposes of this Mortgage. Upon such
replacement, Lender shall (at Borrower, s expense) take all actions reasonably
requested by Borrower to release its security interest in the Engine suffering
the Event of Loss. If Lender has received any proceeds in connection with such
Event of Loss, Lender shall pay such loss proceeds to Borrower promptly upon
such replacement. However if a Default exists, Lender shall hold such loss
proceeds as security for the Secured Obligations, and if and when no Default
exists and Borrower has completed such replacement, the loss proceeds remaining
after the curing of all Defaults shall be promptly paid to Borrower.
6.03. Investment of Proceeds. If an Event of Loss occurs to an Engine and
----------------------
Section 6.02 applies, then, upon Borrower's written request (and so long as no
Default exists) , Lender shall use its reasonable efforts to invest, at
Borrower's request, direction, and risk, any payments received with respect to
such Engine from any insurer under insurance maintained hereunder, from
Borrower, or from any governmental authority or other party with respect to the
applicable Event of Loss or otherwise. Any such investments shall be in
obligations of the Government, obligations guaranteed as to principal and
interest by the Government, or
11
commercial paper issued by The CIT Group, Inc., in each case having a stated
maturity not later than one year from the date of acquisition. All profits on
such investments shall become part of the Collateral, and (if no Default then
exists) shall be paid to Borrower promptly upon completion of the replacement
or' repairs involved, and Borrower will promptly pay to Lender on demand the
amount of any loss realized as the result of such investment (together with any
fees, commissions, and other expenses (including any taxes) incurred in
connection with such investment). In order to make the payments provided for in
Section 6, Lender may sell any obligations so purchased, and shall not be
required to make such payments to Borrower until after having had a reasonable
tine to sell such obligations and to obtain the sale proceeds therefrom.
7. LIENS
7.01. Liens. Borrower will not directly or indirectly create, incur,
-----
assume, or suffer to exist any Lien on or with respect to the Aircraft or this
Mortgage except: (a) the rights of the parties to the Basic Documents, including
the Lien created by this Mortgage; (b) the rights of others under agreements or
arrangements to the extent permitted by the terms of Section 3 or Section 4; (c)
Liens for taxes, assessments, or other governmental charges either not yet due
or 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 the sale, forfeiture, loss, or loss of use of the
Aircraft; (d) materialmen's, mechanics', workers', repairers', employees', or
other like Liens arising in the ordinary course of business for amounts the
payment of which is not yet due; (e) Liens arising out of any judgment or award
that is, within 30 days after entry thereof, discharged, vacated, or appealed
with execution thereof stayed pending appeal; and (f) a transferee's rights
resulting from Lender's transfer of its rights in the Aircraft or under this
Mortgage. Borrower will promptly take (or cause to be taken) such action at its
own expense as may be necessary duly to discharge any such Lien not excepted
above.
8. EVENTS OF DEFAULT AND REMEDIES
8.01. Events of Default. The following shall constitute Events of Default
-----------------
hereunder:
(a) Borrower fails to make any payment due from Borrower on the
Note, or any other payment due under any Basic Document, when due, and such
failure continues for three Business Days after written notice; or
(b) any default exists under any Basic Document, if the effect of
such default is to permit Borrower's obligations under the Loan Agreement
or under the Note to be accelerated or otherwise declared to be, or become,
due before their stated maturity.
8.02. Action upon Event of Default. If the unpaid balance of the Secured
----------------------------
Obligations has become (by declaration or otherwise) immediately due and payable
pursuant to Section 8.02 of the Loan Agreement, Lender may exercise any or all
of the rights and powers and pursue any or all of the remedies permitted by this
Section 8, and may (without notice, hearing, or posting bond or other security,
except as otherwise required by the terms hereof or by applicable law) take
possession of all or any part of the Collateral and may exclude Borrower and all
Persons claiming under or through Borrower wholly or partly therefrom.
8.03. Remedies. If the unpaid balance of the Secured Obligations has
--------
become (by declaration or otherwise) immediately due and payable pursuant to
Section 8.02 of the Loan Agreement, then, and in every such case, Lender may
exercise any or all of the rights and
12
powers and pursue any and all of the remedies available to it hereunder or
available to a secured party under the Uniform Commercial Code or any other
provision of law, and may sell, assign, transfer, and deliver the whole, or from
time to time, to the extent permitted by law, any part of the Collateral or any
interest therein, at any private sale or public auction with or without demand,
advertisement, or notice (except as herein required or as may be required by
law) of the date, time, and place of sale and any adjournment thereof, for cash
or Loan or other property, for immediate or future delivery and for such price
or prices and on such terms as Lender in its discretion determines or as are
required by law. It is agreed that 10 days' notice to Borrower of the date,
time, and place (and terms, in the case of a private sale) of any proposed sale
by Lender of the Collateral (or any part thereof or interest therein) is
reasonable.
8.04. Return of Collateral, etc.
--------------------------
(a) If the unpaid balance of the Secured Obligations has become (by
declaration or otherwise) immediately due and payable pursuant to Section 8.02
of the Loan Agreement, at Lender's request, Borrower shall promptly execute and
deliver to Lender such instruments of title and other documents as Lender deems
necessary or advisable to enable Lender (or an agent or representative
designated by Lender), at such time (s) and place (s) as Lender may specify, to
obtain possession of all or any part of the Collateral that Lender shall-at the
time be entitled to possess hereunder. If Borrower fails to execute and deliver
any such instrument(s) or documents) after such demand by Lender, Lender may (1)
obtain a judgment conferring on Lender the right to immediate possession of the
Collateral and requiring Borrower to deliver such instrument(s) or document(s)
to Lender, or (2) pursue all or any part of such Collateral wherever it may be
found and enter any of the premises of Borrower (or lessee from Borrower)
wherever such Collateral may be or may be supposed to be and search for such
Collateral and take possession of and remove such Collateral.
(b) Upon every such taking of possession, Lender may from time to time,
but shall have no obligation to, make all such expenditures for maintenance,
insurance, repairs, replacements, and alterations to and of the Collateral as it
deems necessary or advisable in order to dispose of the Collateral properly, and
all such expenditures shall be Secured Obligations. In each such case, Lender
shall have the right to use, operate, store, or manage the Collateral as Lender
deems best, including the right to enter into any and all such agreements with
respect to the maintenance, operation, leasing, storage, or disposition of the
Collateral or any part thereof as Lender deems appropriate; and Lender shall be
entitled to collect and receive all rents, revenues, income, and profits of the
Collateral and every part thereof, without prejudice, however, to the right of
Lender under any provision of this Mortgage to collect and receive all cash held
by, or required to be deposited with, Lender hereunder. Such rents, revenues,
income, and profits shall be applied to pay Lender's expenses of holding and
operating the Collateral, and of all maintenance, repairs, replacements, and
alterations effected by or on behalf of Lender, and to make all payments which
Lender is required or elects to make, if any, for taxes, assessments, insurance,
or other proper charges upon the Collateral or any part thereof (including the
employment of engineers and accountants to examine, inspect, and make reports
upon the Collateral and the books and records of Borrower relating thereto) ,
and all other payments which Lender is required or authorized to make under any
provision of the Basic Documents, as well as just and reasonable compensation
for the services of Lender (including fees and commissions for remarketing or
arranging financing (if such financing is provided by a Person not affiliated
with Lender) for the Collateral), and of all persons properly engaged and
employed by Lender, and any balance shall be applied to the Secured Obligations
in such order as Lender shall determine in its discretion, and thereafter as
required by law.
13
8.05. Remedies Cumulative. Each and every right, power, and remedy given
-------------------
to Lender in the Basic Documents shall be cumulative and shall be in addition to
every other right, power, and remedy in the Basic Documents now or hereafter
existing at law, in equity, or by statute, and each and every right, power, and
remedy may be exercised from time to time and as often and in such order as
Lender deems expedient, and the exercise or the beginning of the exercise of any
right, power, or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power, or remedy. No
delay or omission by Lender in exercising or pursuing any right, remedy, or
power shall impair any such right, power, or remedy or be construed to be a
waiver of any default on the part of Borrower or to be an acquiescence therein.
8.06. Discontinuance of Proceedings. If Lender has proceeded to enforce
-----------------------------
any right, power, or remedy under this Mortgage by foreclosure, entry, or
otherwise, and such proceeding has been discontinued or abandoned for any reason
or has been determined adversely to Lender, Borrower and Lender shall be
restored to their former positions and rights hereunder with respect to the
Collateral, and all rights, remedies, and powers of Lender shall continue as if
no such proceedings had been taken.
9. MISCELLANEOUS
9.01. Termination of Mortgage. This Mortgage and the security interests
-----------------------
created hereby shall terminate and this Mortgage shall be of no further force or
effect upon the payment in full of the Secured Obligations. Upon any such
payment in full, Lender shall pay all excess money or other properties or
proceeds constituting part of the Collateral to Borrower, this Mortgage and the
security interests created hereby shall terminate and shall be of no further
force or effect, and Lender shall (at Borrower's expense) execute and deliver
any instrument evidencing such termination as Borrower reasonably requests.
9.02. Amendments, Waivers, Consents, etc. No amendment, waiver, consent,
----------------------------------
or supplement to this Mortgage shall be effective unless in writing and signed
by Borrower and Lender.
9.03. Successors and Assigns. The provisions of this Mortgage shall bind
----------------------
and benefit the parties hereto and their successors and assigns.
9.04. Notices. All notices provided for under this Mortgage shall be in
-------
writing (including telecopy), shall be in English, and shall become effective
when delivered. Any notice shall be mailed by certified mail (return receipt
requested) or delivered (including by telecopy) as follows:
(a) if to Borrower:
Tower Air, Inc.
Hangar ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chairman
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
14
Hewes, Gelband, ▇▇▇▇▇▇▇ & ▇▇▇▇, P.C.
Suite 300
The Flour Mill
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Lender:
The CIT Group/Equipment Financing, Inc.
c/o The CIT Group/Capital Finance, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as such party designates by notice given in accordance
with this section.
9.05. Headings. The section headings herein have been inserted for
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convenience only and are not a substantive part of this Mortgage.
9.06. Counterparts. This Mortgage may be executed in several
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counterparts.
9.07. Severability. Any provision hereof prohibited by or unlawful or
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unenforceable under any applicable law of any jurisdiction shall be ineffective
in such jurisdiction without modifying the remaining provisions of this mortgage
or its effectiveness in any other jurisdiction. Where, however, the provisions
of such applicable law may be waived, they are hereby waived by Lender and
Borrower to the full extent permitted by law, to the end that this Mortgage
shall be a valid and binding agreement enforceable in accordance with its terms.
9.08. Governing Law. This Mortgage is being delivered in the state of New
-------------
York, and shall in all respects be governed by and construed in accordance with
the laws of the state of New York (excluding any conflict-of-laws rule that
would apply the laws of any other jurisdiction).
15
IN WITNESS WHEREOF, Borrower and Lender have executed this Security
Agreement and Chattel Mortgage.
TOWER AIR, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------
Title: V.P. - Legal
----------------------------
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Vice President
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Schedule A to Mortgage
Mortgage Supplement No. 1
This Mortgage Supplement (this "Supplement") is entered into on September
__, 1998 to supplement the Security Agreement and Chattel Mortgage dated as of
July 15, 1998 (the "Mortgage") between Tower Air, Inc. ("Borrower") and The CIT
Group/Equipment Financing, Inc. ("Lender").
Terms that are defined in the Mortgage have the same meanings when used in
this Supplement.
Borrower has executed and delivered the Mortgage to cover one Boeing model
747-238B aircraft and other collateral described in the Mortgage, to secure
Borrower's payment and performance of the Secured Obligations.
The Mortgage and this Supplement are being filed for recordation with the
FAA under the Act as one document.
The Mortgage provides for the execution and delivery of a supplement to the
Mortgage, substantially in the form of this Supplement, for the purpose of
specifically subjecting to the Lien of the Mortgage the Aircraft financed under
the Loan Agreement.
NOW, THEREFORE, to secure the payment and performance of the Secured
Obligations, and in consideration of Lender's purchase of the Note, Borrower
hereby grants to Lender a purchase money security interest under the Uniform
Commercial Code in the following Aircraft:
one Boeing model 747-238B aircraft, bearing U.S. registration no. N607PE
and manufacturer's serial no. 20011, including four ▇▇▇▇▇ & ▇▇▇▇▇▇▇ JT9D-7J
engines (each of which has 750 or more rated takeoff horsepower or its
equivalent) bearing manufacturer's serial nos. 663047, 685779, 689579 and
663054.
This Supplement forms a part of the Mortgage. Except as supplemented by
this Supplement, the Mortgage is hereby ratified, approved, and confirmed.
This Supplement is being delivered in the state of New York and shall be
governed by the laws of the state of New York (excluding any conflict-of-laws
rule that would apply the laws of any other jurisdiction).
IN WITNESS WHEREOF, Borrower has executed this Mortgage Supplement No. 1.
TOWER AIR, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------
Title: V.P. - Legal
--------------------------