LOAN AGREEMENT
LOAN AGREEMENT (this "Agreement"), is made and entered into as of the 5th
day of February 1999, by and between FINE AIR SERVICES CORP., a Delaware
corporation (the "Lender"); INTERNATIONAL AIR LEASES OF PR, INC., a corporation
organized and existing under the laws of the Commonwealth of Puerto Rico (the
"Borrower"); and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual ("▇▇▇▇▇").
W I T N E S S E T H :
WHEREAS, the Borrower and ▇▇▇▇▇ have entered into a stock purchase
agreement dated as of November 12, 1998 (the "Acquisition Agreement") with
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇▇▇"), pursuant to which the Borrower
has agreed to purchase from ▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇▇ has agreed to sell to the
Borrower for $475.0 million, all of the shares of capital stock of International
Air Leases, Inc., a Delaware corporation ("IAL"), Aircraft Leasing, Inc., a
Delaware corporation ("ALI") and N304 Corp., a Delaware corporation ("N304");
and
WHEREAS, through their direct and indirect Subsidiaries, IAL, ALI and N304
(collectively referred to herein as the "Companies") are engaged in the business
of owning, leasing, operating and otherwise dealing in airframes, aircraft
engines, components, rotables, accessories and parts for aircraft, airframes and
aircraft engines of all types and descriptions, and, through the Arrow Air, Inc.
("Arrow") subsidiary of Air Flite Operations, Inc., operating a cargo airline
(collectively, the "Business Operations"); and
WHEREAS, on February 5, 1999, the Borrower and ▇▇▇▇▇ entered into a stock
purchase agreement with the Lender (the "Stock Purchase Agreement"), pursuant
and subject to the terms and conditions of which, the Lender agreed to purchase
from Air Flite Operations, Inc., the sole stockholder of Arrow and a Subsidiary
of IAL (the "Stockholder") 100% of the capital stock of Arrow (the "Arrow
Stock") for $5.0 million, and the Borrower and ▇▇▇▇▇ agreed (subject only to
consummation of the transactions contemplated by the Acquisition Agreement) to
cause the Stockholder to sell the Arrow Stock to the Lender; and
WHEREAS, on February 5, 1999, the Borrower and ▇▇▇▇▇ entered into an
agreement of purchase and sale of assets with the Lender (the "Asset Purchase
Agreement"), pursuant and subject to the terms and conditions of which, the
Lender agreed to purchase from the Borrower, the Companies and such other direct
and indirect Subsidiaries of the Companies, including AAA Interair, Inc. ("AAA
Interair") who shall own record and beneficial title to the "Assets," as defined
in such Asset Purchase Agreement (the "Asset Owners"), for $110.0 million, and
the Borrower and ▇▇▇▇▇ agreed (subject only to consummation of the transactions
contemplated by the Acquisition Agreement) to cause the Asset Owners to sell the
Assets to the Lender; and
WHEREAS, the Borrower and the Guarantors have requested the Lender provide
to the Borrower a deposit against and advance of the purchase prices for the
Arrow Stock and Assets, in the form of a short-term loan in the aggregate amount
of $115,000,000 (the "Loan"), the
proceeds of which Loan will be used by the Borrower to pay a portion to the
purchase price to ▇▇▇▇▇▇▇▇▇ under the Acquisition Agreement; and
WHEREAS, it is the intention of the Borrower, the Guarantors and the
Lender that the Loan shall be deemed to have been fully repaid by Borrower upon
the delivery at the "Transaction Closing" (hereinafter defined) of the Arrow
Stock and the Assets to the Lender, free and clear of all Liens and otherwise in
accordance with the provisions of the Stock Purchase Agreement and the Asset
Purchase Agreement; which Transaction Closing is conditioned only upon early
termination of the waiting period under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act") or the consent of the
Federal Trade Commission or Department of Justice (as the case may be) to
consummation of such Transaction Closings; and
WHEREAS, the Lender is willing and able to make such Loan to the Borrower
on the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
I. DEFINITIONS
Section 1.01 Defined Terms. In addition to the other terms defined
elsewhere in this Agreement, as used herein, the following terms shall have the
following meanings:
"Affiliate" shall mean, with respect to any Person, any other Person
in control of, controlled by, or under common control with the first Person, and
any other Person who has a substantial interest, direct or indirect, in the
first Person or any of its Affiliates, including, without limitation, any
officer or director of the first Person or any of its Affiliates; for the
purpose of this definition, a "substantial interest" shall mean the direct or
indirect legal or beneficial ownership of more than five (5%) percent of any
class of stock or similar interest.
"Agreement" shall mean this Loan Agreement as it may from time to
time be amended and/or supplemented.
"Agreement Date" shall mean the date this Agreement is executed by
the Lender, being the date set forth opposite the signature of the Lender on the
signature page hereof.
"Applicable Law" shall mean all applicable provisions of all (a)
constitutions, statutes, ordinances, rules, regulations and orders of all
governmental and/or quasi-governmental bodies, (b) Government Approvals, and (c)
order, judgments and decrees of all courts and arbitrators.
"▇▇▇▇▇▇▇▇▇ Collateral Agreements" shall mean, collectively, the
Mortgage and Security Agreement, the $125.0 million Series A Secured Promissory
Note, the Irrevocable and Unconditional Guaranty and the Pledge and Security
Agreement, all dated of even date herewith, which have been delivered by the
Borrower, the Guarantor and/or the Companies or their direct
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or indirect Subsidiaries to and in favor of ▇▇▇▇▇▇▇▇▇ pursuant to the
Acquisition Agreement, and all other agreements and instruments executed and
delivered pursuant to the Acquisition Agreement to secure deferred obligations
of the Borrower and the Guarantor to ▇▇▇▇▇▇▇▇▇ pursuant to the terms thereof.
"▇▇▇▇▇▇▇▇▇ Debt" shall mean all indebtedness for money borrowed and
other liabilities of the Borrower and ▇▇▇▇▇ to ▇▇▇▇▇▇▇▇▇ under the Acquisition
Agreement and/or the ▇▇▇▇▇▇▇▇▇ Collateral Agreements.
"Borrower Stockholders" shall mean the collective reference to
▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and the other Persons listed on Exhibit A
annexed hereto and made a part hereof, who collectively are the record and
beneficial owners of 100% of the issued and outstanding capital stock of the
Borrowers, all in the amounts set forth on such Exhibit A.
"Business Day" shall mean a day other than (a) a Saturday, (b) a
Sunday, or (c) in the case of a day on which any payment hereunder is to be made
in the State of New York, a day on which commercial banks in the State of New
York are authorized or required by law to close.
"Capital Expenditures" shall mean with respect to any Person, all
expenditures of such Person for tangible assets which are capitalized, and the
fair value of any tangible assets leased by such Person under any lease which
would be a Capitalized Lease, determined in accordance with GAAP, including all
amounts paid or accrued by such Person in connection with the purchase (whether
on a cash or deferred payment basis) or lease (including Capitalized Lease
Obligations) of any machinery, equipment, tooling, real property, improvements
to real property (including leasehold improvements), or any other tangible asset
of the Borrower which is required, in accordance with GAAP, to be treated as a
fixed asset on the consolidated balance sheet of such Person.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee thereunder in accordance with
GAAP.
"Capitalized Lease Obligation" shall mean with respect to any
Person, the amount of the liability which reflects the amount of future payments
under all Capitalized Leases of such Person as at any date, determined in
accordance with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, and the rules
and regulations promulgated thereunder, as in effect from time to time.
"Contract" shall mean any indenture, agreement (other than this
Agreement), other contract lease, license, instrument, or certificates of
incorporation, in which the Borrower, any of the Companies or any direct or
indirect Subsidiary of any of the Companies is a party, a lessor, lessee, or
licensee.
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"Default" shall mean any of the events specified in Article VII
hereof, whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"DOT" shall mean the United States Department of Transportation.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as in effect from time to time.
"ERISA Affiliate" shall mean, with respect to any Person, any other
Person which is under common control with the first Person within the meaning of
Section 414(b) or 414(c) of the Code.
"Event of Default" shall mean any of the events specified in Article
VII hereof, provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"FAA" shall mean the Federal Aviation Authority.
"Fiscal Year" shall mean the fiscal year of the Borrower and its
consolidated Subsidiaries which ends on December 31st of each year.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, consistently applied, unless the context otherwise
requires, with respect to any financial terms, ratios or covenants contained
herein, as then in effect with respect to the preparation of financial
statements.
"Guarantors" shall mean ▇▇▇▇▇ and the other Persons who shall have
executed the Guaranty in favor of the Lender.
"Guaranty" shall mean the unconditional and irrevocable guaranty
executed by each of (a) ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, individually and
collectively, and as the record and beneficial owners of 49%, 2% and 49%,
respectively, of the issued and outstanding shares of capital stock of the
Borrower, (b) the Companies, and (c) each of the other direct and indirect
Subsidiaries of the Companies, all in the form of Exhibit B annexed hereto and
made a part hereof.
"Government Approval" shall mean an authorization, consent,
non-action, approval, license or exemption of, registration or filing with, or
report to, any governmental or quasi-governmental department, agency, body or
other unit, including without limitation, approval by the governmental authority
having jurisdiction over the Borrower's HSR Act filing and approval of the FAA
and the DOT.
"Guaranteed" or to "Guarantee", as applied to any Indebtedness or
Liability, shall mean and include: (a) a guaranty, directly or indirectly, in
any manner, including by way of endorsement (other than endorsements of
negotiable instruments for collection in the ordinary
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course of business), of any part or all of such obligation, and (b) an
agreement, contingent or otherwise, and whether or not constituting a guaranty,
assuring, or intended or the practical effect of which is to assure, the payment
or performance (or payment of damages in the event of non-performance) of any
part or all of such obligation whether by (i) the purchase of securities or
obligations, (ii) the purchase, sale or lease (as lessee or lessor) of property,
or the purchase or sale of services, primarily for the purpose of enabling the
obligor with respect to such obligation to make any payment or performance (or
payment of damages in the event of non-performance) of or on account of any part
or all of such obligation, or to assure the owner of such obligation against
loss, (iii) the supplying of funds to or in any other manner investing in the
obligor with respect to such obligation, (iv) the repayment of amounts drawn
down by beneficiaries of letters of credit not arising out of the import of
goods, (v) the supplying of funds to or investing in a Person on account of all
or any part of such Person's obligation under a Guaranty of any such obligation
or indemnifying or holding harmless, in any way, such Person against any part or
all of such obligation, or (vi) otherwise.
"Investment", as applied to the Borrower or any Subsidiary, shall
mean: (a) any shares of capital stock, assets, evidence of Indebtedness or other
security issued by any other Person to the Borrower or any Subsidiary, (b) any
loan, advance or extension of credit to, or contribution to the capital of, any
other Person, other than credit terms extended to customers in the ordinary
course of business, (c) any Guaranty of any indebtedness or liability of any
other Person, (d) any obligation owed to the Borrower or any Subsidiary secured
by a Lien on, or payable out of the proceeds of production from, any property of
any other Person, whether or not such obligation shall have been assumed by such
Person, (e) any other investment by the Borrower or any Subsidiary in any assets
or securities of any other Person, and (f) any commitment to make any
Investment.
"Joinder and Assumption Agreement" shall mean the Joinder and
Assumption Agreement to be entered into on the date of the Transaction Closings
between the Lender and the Companies, AAA Interair and the other Asset Owners
who are Subsidiaries of the Borrower.
"Lien", as applied to the property or assets (or the income or
profits therefrom) of the Borrower or any Subsidiary, shall mean (in each case,
whether the same is consensual or nonconsensual or arises by contract, operation
of law, legal process or otherwise): (a) any mortgage, lien, pledge, attachment,
assignment, deposit arrangement, encumbrance, charge, lease constituting a
Capitalized Lease Obligation, conditional sale or other title retention
agreement, or other security interest or encumbrance of any kind in respect of
any property (including, without limitation, stock of any Subsidiary) of the
Borrower or any Subsidiary, or upon the income or profits therefrom, (b) any
arrangement, express or implied, under which any property of the Borrower or any
Subsidiary is transferred, sequestered or otherwise identified for the purpose
of subjecting or making available the same for the payment of indebtedness or
the performance of any other liability in priority to the payment of the
general, unsecured creditors of the Borrower or any Subsidiary, (c) any
indebtedness which remains unpaid more than five (5) calendar days after the
same shall have become due and payable and which, if unpaid, might by law
(including but not limited to bankruptcy or insolvency laws) or otherwise be
given any priority whatsoever over the general, unsecured creditors of the
Borrower or any Subsidiary, (d) any agreement (other
5
than this Agreement) or other arrangement, express or implied, which, directly
or indirectly, prohibits the Borrower or any Subsidiary from creating or
incurring any Lien on any of its properties or assets or which conditions the
ability to do so on the security, on a pro rata or other basis, of indebtedness
other than indebtedness outstanding under this Agreement, and (e) any
arrangement, express or implied, under which any right or claim of the Borrower
or any Subsidiary is subject or subordinated in any way to any right or claim of
any other Person.
"Loan" shall mean the loan in the principal amount of $115,000,000
to be made by the Lender to the Borrower pursuant to this Agreement.
"Loan Documents" shall mean the collective reference to this
Agreement, the Note, the Guaranty, the Mortgage and Security Agreement and the
Pledge Agreement.
"Management Agreement" shall mean the Management Agreement to be
entered into on the date of the Transaction Closings between the Lender and the
Borrower and certain Subsidiaries of the Borrower.
"Maturity Date" shall mean the earlier to occur of (a) the date on
which the Transaction Closings shall occur, or (b) April 1, 1999.
"Mortgage and Security Agreements" shall mean the Mortgage and
Security Agreements, dated of even date herewith, among those of the Companies
and the Asset Owners who own title to the Assets, granting to the Lender a first
priority Lien on the Assets and the Additional Assets (as defined in the Asset
Purchase Agreement), all in the form of Exhibit C annexed hereto and made a part
hereof.
"Note" shall mean the Promissory Note, dated the Agreement Date, in
the principal amount of $115,000,000 issued by the Borrower and payable to the
order of the Lender, to represent the Loan, in substantially the form of Exhibit
D annexed hereto, as same may be amended or supplemented from time to time in
accordance therewith.
"Obligations" shall mean the collective reference to all
indebtedness and other liabilities and obligations of every kind and description
owed by the Borrower, the Guarantors, the Companies and/or the Asset Owners to
the Lender from time to time under or pursuant to this Agreement, the Note, the
Stock Purchase Agreement, the Asset Purchase Agreement any exhibit or schedule
hereto and thereto, however evidenced, created or incurred, fixed or contingent,
now or hereafter existing, due or to become due.
"Permitted Liens" shall mean those Liens expressly permitted
pursuant to Section 6.02 below.
"Person" shall mean any individual, partnership, corporation,
limited liability company, banking association, business trust, joint stock
company, trust, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
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"Pledge Agreement" shall mean the Pledge Agreement between each of
the Borrower Stockholders, the Borrower and the record owners of 100% of the
shares of capital stock of the Subsidiaries of the Borrower, as pledgors, and
the Lender, as pledgee, substantially in the form of Exhibit E annexed hereto
and made a part hereof.
"Subsidiary" or "Subsidiaries" shall mean the individual or
collective reference to any corporation, limited liability company or other
entity of which 50% or more of the outstanding shares of stock or other equity
interests of each class having ordinary voting power and/or rights to profits
(other than stock having such power only by reason of the happening of a
contingency) is at the time owned by the Borrower, directly or indirectly
through one or more Subsidiaries of the Borrower.
"Transaction Closings" shall mean the date of the Closings of the
Lender's purchase of the Arrow Stock and the Assets following the date hereof,
in accordance with the provisions of the Stock Purchase Agreement and the Asset
Purchase Agreement; which Transaction Closings shall be conditioned only upon
receipt of written notice of early termination of the applicable waiting period
under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act") or the consent of the Federal Trade Commission or Department of
Justice (as the case may be) to consummation of such Transaction Closings (the
"HSR Condition").
"Transaction Security Agreement" shall mean the Mortgage and
Security Agreements, to be dated the date of the Transaction Closings, and to be
delivered under the Asset Purchase Agreement, in substantially the form of
Exhibit D to the Asset Purchase Agreement.
Section 1.02 Use of Defined Terms. All terms not otherwise defined in this
Agreement shall have their defined meanings when used in the Asset Purchase
Agreement and all certificates, reports or other documents made or delivered
pursuant to his Agreement, unless otherwise defined therein or unless the
specific context shall otherwise require.
Section 1.03 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.
II. GENERAL TERMS
Section 2.01 The Loan.
(a) Subject at all times to all of the terms and conditions of
this Agreement, the Lender hereby agrees to make a single loan to the Borrower,
in the principal amount of $115,000,000. The entire principal balance of the
Loan shall be due and payable in a single payment (together with any unpaid
accrued interest) on the Maturity Date, except to the extent sooner due and
payable in accordance with any other provisions of this Agreement.
(b) The Borrower shall pay the Lender interest on the Loan at the
rate(s) per annum as in effect from time to time in accordance with the Note.
Such interest shall be payable, in accordance with the Note, monthly in arrears
on the last day of each calendar month
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commencing February 28, 1999 (or sooner as provided in the Note), and shall be
computed on the unpaid principal balance of the Loan, based on a three hundred
sixty (360) day year counting the actual number of days in each month.
(c) The Borrower shall have the right to prepay the Loan in whole
or in part, without premium or penalty, at any time and from time to time. Each
such prepayment shall be accompanied by payment of all unpaid accrued interest
on the principal amount being prepaid, accrued to the date of prepayment. Any
amounts prepaid may not be reborrowed.
(d) Subject to the requirement of earlier payment by reason of an
Event of Default, the Borrower shall pay the Note in full, together with all
accrued interest thereon, on or prior to the Maturity Date.
(e) The Loan shall be evidenced by the Note, the terms and
conditions of which are hereby incorporated herein by reference and made a part
hereof.
Section 2.02 Use of Proceeds. The Borrower shall utilize the proceeds of
the Loan solely to pay a portion of the purchase price for the capital stock of
IAL, ALI and N304 from ▇▇▇▇▇▇▇▇▇ pursuant to the Acquisition Agreement.
Section 2.03 Further Obligations. With respect to all Obligations for
which the interest rate is not otherwise specified herein (whether such
Obligations arise hereunder, pursuant to the Note, or otherwise), such
Obligations shall bear interest at the rate(s) in effect from time to time
pursuant to the Note.
Section 2.04 Obligations Unconditional. The payment and performance of the
Note and all other Obligations shall constitute the absolute and unconditional
obligations of the Borrower and the Guarantors, and shall be independent of any
defense or rights of set-off, recoupment or counterclaim which the Borrower or
any of the Guarantors might otherwise have against the Lender. All payments
required to be paid to the Lender under this Agreement and/or the Note, the
Stock Purchase Agreement or the Asset Purchase Agreement shall be paid free of
any deductions or withholdings and without abatement, diminution or set-off,
except as otherwise provided in the Note.
Section 2.05 Reversal of Payments. To the extent that any payment or
payments made to or received by the Lender pursuant to this Agreement or the
Note are subsequently invalidated, declared to be fraudulent or preferential,
set aside, or required to be repaid to any trustee, receiver or other person
under any state or federal bankruptcy or other such law, then, to the extent
thereof, such amounts shall be revived as Obligations and continue in full force
and effect hereunder as if such payment or payments had not been received by the
Lender.
III. REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes, on behalf of itself and each of the Guarantors,
the following representations and warranties to the Lender, all of which
representations and warranties shall
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survive the Agreement Date, the delivery of the Note and the making of the Loan,
and are as follows:
Section 3.01 Financial Matters.
(a) The Borrower has heretofore furnished to the Lender audited
consolidated financial statements (including balance sheets, statements of
income and statements of cash flows) of the Companies and their Subsidiaries as
at December 31, 1996 and December 31, 1997, and the internal unaudited
consolidated financial statements of the Companies and their Subsidiaries as of
September 30, 1998 and for the nine (9) months then ended (collectively, the
"Financial Statements").
(b) The Financial Statements have been prepared in accordance with
GAAP on a consistent basis for all periods (subject, in the case of unaudited
statements, to the absence of full footnote disclosures, and to normal audit
adjustments which are not expected to be material), are complete and correct in
all material respects, and fairly present the consolidated financial condition
of the Companies and their Subsidiaries as at said dates, and the results of
their operations for the periods stated. The books of account and other
financial records of the Borrower and its Subsidiaries have been maintained in
accordance with sound business practices.
(c) The Borrower, the Companies and their Subsidiaries do not have
any liabilities, obligations or commitments of any kind or nature whatsoever,
whether absolute, accrued, contingent or otherwise (collectively "Liabilities
and Contingencies"), including, without limitation, Liabilities and
Contingencies under employment agreements and with respect to any "earn-outs",
stock appreciation rights, or related compensation obligations, except: (i)
Liabilities and Contingencies disclosed in the Financial Statements or footnotes
thereto, (ii) Liabilities and Contingencies owed to ▇▇▇▇▇▇▇▇▇, all of which are
disclosed in the Acquisition Agreement and exhibits thereto (true copies of
which have been furnished to Lender); (iii) Liabilities and Contingencies not
incurred in the ordinary course of the Business Operations, all of which (and
the amounts thereof, to the extent determinable), to the extent in excess of
$500,000 in the aggregate as to all such Liabilities and Contingencies, are
disclosed on Schedules to this Agreement or to the Asset Purchase Agreement,
(iv) Liabilities and Contingencies incurred in the ordinary course of business
and consistent with past practice since the date of the most recent Financial
Statements, which are not required to be disclosed on Schedules to this
Agreement, or (v) those Liabilities and Contingencies which are not required to
be disclosed under GAAP.
(d) Since the date of the most recent Financial Statements and
except as set forth on Schedule 1 annexed hereto, there has been no material
adverse change in the condition (financial or otherwise), assets, liabilities,
reserves, business, prospects, management or Business Operations of the
Borrower, the Companies or any of their Subsidiaries, including, without
limitation, the following:
(i) there has been no change, claim, fine, levy, injunction,
grounding or other action taken, made or asserted against the Borrower, any of
the Companies or any of
9
their Subsidiaries by the FAA, the DOT or any other federal or state agency
regulating the aviation industry or the Business which has not been fully paid
or satisfied;
(ii) no debts, other than intercompany debts, have been
cancelled, no claims or rights of substantial value have been waived and no
properties or assets (real, personal or mixed, tangible or intangible) have been
sold, transferred, or otherwise disposed of by the Borrower, the Companies or
any Subsidiary except in the ordinary course of business and consistent with
past practice;
(iii) there has been no change in any method of accounting or
accounting practice utilized by the Borrower, the Companies or any Subsidiary;
(iv) no material casualty, loss or damage has been suffered by
the Borrower, the Companies or any Subsidiary, regardless of whether such
casualty, loss or damage is or was covered by insurance; and
(v) no action described in this Section 3.01(e) has been
agreed to be taken by the Borrower or any Subsidiary.
Section 3.02 Organization; Corporate Existence.
(a) The Borrower (i) is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Puerto Rico,
(ii) has all requisite corporate power and authority to own its properties and
to carry on its business as now conducted and as proposed hereafter to be
conducted, (iii) is not required to be qualified to do business as a foreign
corporation in any jurisdiction in which the failure to be so qualified would
have a material adverse effect on the business, operations, properties, assets
or condition, financial or otherwise, of the Borrower or any Subsidiary, and
(iv) has all requisite corporate power and authority to execute and deliver, and
perform all of its obligations under, this Agreement and the Note. True and
complete copies of the Certificate of Incorporation of the Borrower and each
Subsidiary, as amended and restated to date, and the By-Laws of the Borrower and
each Subsidiary, together with all amendments thereto, have been furnished to
the Lender.
(b) Schedule 2 annexed hereto sets forth, with respect to each
Subsidiary on the Agreement Date, (i) its proper legal name, (ii) its
jurisdiction of incorporation or formation, (iii) the jurisdictions in which it
is qualified to do business as a foreign entity, (iv) the number of shares of
capital stock or ownership interests outstanding, and (v) the owner(s) of such
outstanding capital stock or other ownership interests. Each of the Subsidiaries
(A) is an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, (B) has all
requisite power and authority to own its properties and to carry on its business
as now conducted and as proposed hereafter to be conducted, and (C) and is not
required to be qualified to do business as a foreign entity in any jurisdiction
in which it is not so qualified and the failure to be so qualified would
reasonably be expected to have a material adverse effect on the business,
financial condition, assets or properties of such Subsidiary. True
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and complete copies of the organizational documents of each Subsidiary, together
with all amendments thereto to the date hereof, have been furnished to the
Lender.
Section 3.03 Authorization. The execution, delivery and performance by
the Borrower and each of the Guarantors of their respective Obligations under
each of the Loan Documents have been duly authorized by all requisite corporate
action and will not, either prior to or as a result of the consummation of the
transactions contemplated by this Agreement: (a) violate any provision of
Applicable Law, any order of any court or other agency of government, any
provision of the Certificate of Incorporation or By-Laws of the Borrower or any
organizational document of any of the Subsidiaries, or any Contract, indenture,
agreement or other instrument to which the Borrower or any of the Subsidiaries
is a party, or by which the Borrower or any of the Subsidiaries or any of its
assets or properties are bound, or (b) be in conflict with, result in a breach
of, or constitute (after the giving of notice of lapse of time or both) a
default under, or, except as may be provided in this Agreement, result in the
creation or imposition of any Lien of any nature whatsoever upon any of the
property or assets of the Borrower or any of the Subsidiaries pursuant to, any
such Contract, indenture, agreement or other instrument. Neither the Borrower
nor any of the Subsidiaries is required to obtain any Government Approval,
consent or authorization from, or to file any declaration or statement with, any
governmental instrumentality or agency in connection with or as a condition to
the execution, delivery or performance of the Loan Documents.
Section 3.04 Litigation. Except as disclosed on Schedule 3 annexed
hereto, there is no action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or other agency now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of the Subsidiaries or any of their respective assets, which, if adversely
determined, would have a material adverse effect on any of such assets or on the
business, operations, properties, assets or condition, financial or otherwise,
of the Borrower or any Subsidiary.
Section 3.05 Material Contracts.
(a) Except as disclosed on Schedule 4 annexed hereto, neither the
Borrower nor any of the Subsidiaries is a party to any Contract, agreement or
instrument or subject to any charter or other corporate or organizational
restriction materially adversely affecting its business, properties, assets,
operations or condition, financial or otherwise, or subject to any liability or
obligation under or relating to any collective bargaining agreement, or in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contract, agreement or instrument to
which it is a party or by which any of its assets or properties is bound, which
default, individually or in the aggregate, would materially adversely affect the
assets or properties of the Borrower or such Subsidiary.
(b) Without limitation of Section 3.05(a), there does not exist
any "Default" or "Event of Default" in connection with payment of the ▇▇▇▇▇▇▇▇▇
Debt or under and as defined in the ▇▇▇▇▇▇▇▇▇ Collateral Agreements.
11
(c) Each of the Stock Purchase Agreement and the Asset Purchase
Agreement are in full force and effect, and there is no existing default
thereunder on the part of any party thereto.
Section 3.06 Title to Properties. The Borrower and each of the
Subsidiaries has good and marketable title to all of its properties and assets,
free and clear of all mortgages, security interests, restrictions, encumbrances
or other Liens of any kind, except for restrictions on the nature of use thereof
imposed by Applicable Law, and except for (a) those Liens in favor of ▇▇▇▇▇▇▇▇▇
on the specific assets and properties of Borrower and its Subsidiaries which are
listed on Schedule 5 annexed hereto, and Permitted Liens, none of which
materially interfere with the use and enjoyment of such properties and assets in
the normal course of the Business Operations as presently conducted, or
materially impair the value of such properties and assets for the purpose of
such business.
Section 3.07 Real Property. Schedule 6 annexed hereto sets forth a correct
and complete list of all Real Properties currently owned, leased or occupied by
the Borrower and/or any of the Subsidiaries. Neither the Borrower nor any of the
Subsidiaries owns any Real Properties. The Borrower and each Subsidiary has a
valid lessee's interest in each Real Property currently leased or occupied by
the Borrower or such Subsidiary. Neither the Borrower, any Subsidiary, or, to
the Borrower's or each Subsidiary's knowledge, any other party thereto, is in
material breach or violation of any requirements of any such lease; and such
Real Properties are adequate for the current and proposed businesses of the
Borrower and the Subsidiaries.
Section 3.08 Machinery and Equipment. To the best of Borrower's knowledge,
the aircraft, engines, other personal property used in the Business, including
the machinery and equipment owned and/or used by the Borrower and the
Subsidiaries is, as to each individual material item of machinery and equipment,
and in the aggregate as to all such machinery and equipment, in good and usable
condition and in a state of good maintenance and repair (reasonable wear and
tear excepted), and adequate for its use in the Business Operations.
Section 3.09 Capitalization. Except as set forth in Schedule 7 annexed
hereto, the Borrower does not, directly or indirectly, own any capital stock of
or any form of equity interest in any other Person.
Section 3.10 Solvency. The borrowing made or to be made by the Borrower
under this Agreement does not and will not render the Borrower insolvent or with
unreasonably small capital for its business; the fair saleable value of all of
the assets and properties of the Borrower does now, and will, upon the funding
of the Loan and the other ▇▇▇▇▇▇▇▇▇ Debt contemplated hereby and pursuant to the
Acquisition Agreement, exceed the aggregate consolidated liabilities and
Indebtedness of the Borrower (including contingent liabilities); neither the
Borrower nor any Subsidiary is contemplating either the filing of a petition
under any state or federal bankruptcy or insolvency law, or the liquidation of
all or any substantial portion of its assets or property; the Borrower has no
knowledge of any Person contemplating the filing of any such petition against
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the Borrower or any Subsidiary; and the Borrower reasonably anticipates that it
and each of its Subsidiaries will be able to pay their respective debts as they
mature.
Section 3.11 Full Disclosure. No statement of fact made by or on behalf of
the Borrower in this Agreement, or in any information memorandum, business
summary, agreement, certificate, schedule or other statement (written or oral)
furnished to the Lender pursuant hereto, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary to make any statements contained herein or therein not misleading.
Except for matters of a general economic or political nature which do not affect
the Borrower or any Subsidiary uniquely, there is no fact presently known to the
Borrower or any Subsidiary which has not been disclosed to the Lender, which
materially adversely affects, or so far as the Borrower or any Subsidiary can
foresee, will materially adversely affect, the Borrower's or any Subsidiary's
property, business, operations or condition (financial or otherwise).
Section 3.12 No Investment Company. The Borrower is not an "investment
company", or a company "controlled" by an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended.
Section 3.13 Margin Securities. The Borrower does not own or have any
present intention of acquiring any "margin security" within the meaning of
Regulation G (12 CFR Part 207), or any "margin stock" within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve
System (herein called "margin security" and "margin stock"). None of the
proceeds of the Loan will be used, directly or indirectly, for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any margin
security or margin stock or for any other purpose which might constitute the
transactions contemplated hereby a "purpose credit" within the meaning of said
Regulation G or Regulation U, or cause this Agreement to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities Exchange Act of 1934, as amended, or any rules or regulations
promulgated under such statutes.
Section 3.14 ERISA. Neither the Borrower nor any ERISA Affiliate of the
Borrower maintains or has any obligation to make any contributions to any
pension, profit sharing or other similar plan providing for deferred
compensation to any employee. With respect to any such plan(s) as may now exist
or may hereafter be established by the Borrower or any ERISA Affiliate of the
Borrower, and which constitutes an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA (a) the Borrower or the subject ERISA Affiliate
has paid and shall cause to be paid when due all amounts necessary to fund such
plan(s) in accordance with its terms, (b) except for normal premiums payable by
the Borrower to the Pension Benefit Guaranty Corporation ("PBGC"), the Borrower
or the subject ERISA Affiliate has not taken and shall not take any action which
could result in any Liability to the PBGC, or any of its successors or assigns,
(c) the present value of all accrued benefits thereunder shall not at any time
exceed the value of the assets of such plan(s) allocable to such accrued
benefits, (d) there have not been and there shall not be any transactions such
as would cause the imposition of any tax or penalty under Section 4975 of the
Code or under Section 502 of ERISA, which would adversely affect the funded
benefits attributable to the Borrower or the subject ERISA Affiliate, (e) there
has not
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been and there shall not be any termination or partial termination thereof
(other than a partial termination resulting solely from a reduction in the
number of employees of the Borrower or an ERISA Affiliate of the Borrower, which
reduction is not anticipated by the Borrower), and there has not been and there
shall not be any "reportable event" (as such term is defined in Section 4043(b)
of ERISA) on or after the effective date of Section 4043(b) of ERISA with
respect to any such plan(s) subject to Title IV of ERISA, (f) no "accumulated
funding deficiency" (as defined in Section 412 of the Code) has been or shall be
incurred on or after the effective date of Section 412 of the Code, (g) except
as otherwise reflected on Schedule 6, such plan(s) have been and shall be
determined to be "qualified" within the meaning of Section 401(a) of the Code,
and have been and shall be duly administered in compliance with ERISA and the
Code, and (h) the Borrower is not aware of any fact, event, condition or cause
which might adversely affect the qualified status thereof. As respects any
"multi-employer plan" (as such term is defined in Section 3(37) of ERISA) to
which the Borrower or any ERISA Affiliate thereof has heretofore been, is now,
or may hereafter be required to make contributions, the Borrower or such ERISA
Affiliate has made and shall make all required contributions thereto, and there
has not been and shall not be any "complete withdrawal" or "partial withdrawal"
(as such terms are respectively defined in Sections 4203 and 4205 of ERISA)
therefrom on the part of the Borrower or such ERISA Affiliate.
Section 3.15 Compliance with Laws. The Borrower and the Subsidiaries are
in compliance in all material respects with all occupational safety, health,
wage and hour, employment discrimination, environmental, flammability, labeling
and other Applicable Law which are material to the Business Operations, and
neither the Borrower nor any Subsidiary is aware of any state of facts, events,
conditions or occurrences which may now or hereafter constitute or result in a
violation of any of such Applicable Law, or which may give rise to the assertion
of any such violation, the effect of which could have a material adverse effect
on the Borrower or any Subsidiary.
Section 3.16 Licenses and Permits. The Borrower and each Subsidiary has
all federal, state and local licenses and permits required to be maintained in
connection with and material to the Business Operations, including, without
limitation, all DOT Route Certificates and FAA Certifications to own and operate
an airline which may be required to be possessed by Arrow to operate its
business, and all such licenses and permits are valid and in full force and
effect. There is no circumstance or condition that would cause or permit any of
such licenses or permits to be voided, revoked or withdrawn.
Section 3.17 Environmental Laws.
(a) The Borrower and each Subsidiary has complied in all material
respects with all Environmental Laws relating to its business and properties,
and there exist no Hazardous Substances or underground storage tanks on any
properties now owned or occupied by the Borrower or any Subsidiary the existence
of which would have a material adverse effect on the business, properties,
assets, operations or condition, financial or otherwise, of the Borrower or any
Subsidiary, except those that are stored and used in compliance with Applicable
Laws.
14
(b) To the best of the Borrower or any Subsidiary's knowledge,
there exist no past or present violations of Environmental Laws which will
result in a material adverse effect on the business, operations, prospects,
assets, property or condition (financial or otherwise) of the Borrower or any
Subsidiary.
(c) During the term of this Agreement, and for so long as any
Obligations remain outstanding, the Borrower shall, and shall cause each
Subsidiary to, comply in all material respects with all applicable Environmental
Laws, and shall, in addition, promptly notify the Lender of any and all claims,
demands or Notices received under any Environmental Laws and the Borrower's or
any Subsidiary's response thereto.
(d) As used in this Section 3.18 and in Section 5.11 below, the
following terms have the following meanings:
"Environmental Laws" include all federal, state, and local laws,
rules, regulations, ordinances, permits, orders, and consent decrees agreed to
by the Borrower or any Subsidiary, relating to health, safety, and environmental
matters applicable to the business and property of the Borrower or any
Subsidiary. Such laws and regulations include but are not limited to the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss.6901 et seq., as
amended; the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), 42 U.S.C. ss.9601 et seq., as amended; the Toxic Substances
Control Act ("TSCA"), 15 U.S.C. ss.2601 et seq., as amended; and the Clean Water
Act, 33 U.S.C. ss.1331 et seq., as amended.
"Hazardous Substances", "Release", "Respond" and "Response" shall
have the meanings assigned to them in CERCLA, 42 U.S.C. ss.9601, as amended.
"Notice" means any summons, citation, directive, information
request, notice of potential responsibility, notice of violation or deficiency,
order, claim, complaint, investigation, proceeding, judgment, letter, or other
communication, written or oral, actual or threatened, from the United States
Environmental Protection Agency or other federal, state, or local agency or
authority, or any other entity or individual, public or private, concerning any
intentional or unintentional act or omission which involves management of
Hazardous Substances on or off any Real Properties; the imposition of any lien
on any Real Properties, including but not limited to liens asserted by
government entities in connection with any Borrower's or Subsidiary's response
to the presence or Release of Hazardous Substances; and any alleged violation of
or responsibility under any Environmental Laws.
IV. CONDITIONS OF MAKING THE LOANS
The obligation of the Lender to make the Loan hereunder and to consummate
the other transactions contemplated hereby are subject to the following
conditions precedent:
Section 4.01 Representations and Warranties. The representations and
warranties set forth in Article III hereof shall be true and correct on and as
of the date of the funding of the Loan.
15
Section 4.02 Loan Documents. The Borrower, the Guarantors, the Companies,
and the applicable Subsidiaries shall have duly executed and/or delivered to the
Lender, upon the execution of this Agreement, all of the following:
(a) The various Loan Documents, including (i) the Note duly
executed by the Borrower, (ii) the Guaranty duly executed by the Guarantors,
(iii) the Mortgage and Security Agreements duly executed by each of the Asset
Owners and owners of the Additional Assets, and (iv) the Pledge Agreement duly
executed by each of the Borrower Stockholders, the Borrower and the record
owners of 100% of the shares of capital stock of each of the Companies and other
Subsidiaries of the Borrower;
(b) A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the vote of the Board of Directors of the Borrower,
authorizing and directing the execution and delivery of this Agreement, the
Note, and all further agreements, instruments, certificates and other documents
pursuant hereto and thereto;
(c) A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names of the officers of the Borrower who are
authorized to execute and deliver this Agreement, the Note, and all Loan
Documents, instruments, certificates and other documents to be delivered
pursuant hereto and thereto, together with the true signatures of such officers.
The Lender may conclusively rely on such certificate until the Lender shall
receive any further such certificate canceling or amending the prior certificate
and submitting the signatures of the officers named in such further certificate;
(d) Such other agreements, instruments, documents and certificates
as the Lender or its counsel may reasonably request.
Section 4.03 Legal Opinion. The Lender shall have received the favorable
written opinion of legal counsel to the Borrower, and/or other such counsel
acceptable to the Lender, dated the Agreement Date, satisfactory to the Lender
and its counsel in scope and substance.
Section 4.04 Closing under Acquisition Agreement. The closing of the
acquisition by Borrower of the capital stock of the Companies and the other
transactions contemplated by the Acquisition Agreement shall have been
consummated in a manner satisfactory to the Borrower.
Section 4.05 Execution of Stock Purchase Agreement, Asset Purchase
Agreement and Transaction Closing Documents. The Borrower and ▇▇▇▇▇ shall have
(a) executed and delivered to the Lender the Stock Purchase Agreement and the
Asset Purchase Agreement, together with all exhibits and schedules thereto and
(b) executed and delivered the Management Agreement, and shall have caused the
applicable Subsidiaries of Borrower to have executed and delivered the
Transaction Security Agreement, the Joinder and Assumption Agreement and such
other and further documents and instruments to be executed and delivered at the
Transaction Closings in favor of the Lender (the "Transaction Closing
Documents"); which Transaction Closing Documents shall be held in escrow by
▇▇▇▇▇▇▇▇▇ Traurig, counsel to the Lender, pending satisfaction of the HSR
Condition.
16
Section 4.06 Further Matters. All legal matters, and the form and
substance of all documents, incident to the transactions contemplated hereby
shall be satisfactory to counsel for the Lender.
Section 4.07 HSR Act Filing. The Borrower and its "ultimate parent
entit(ies)" if any, shall (a) have completed to the satisfaction of the Lender
all applications and forms required to file under the HSR Act, (b) paid or
delivered to Lender, a check in the amount of $45,000 to defray a portion of
Lender's HSR Act filing fees, and (c) executed and delivered all such other and
further documents and supporting materials which Lender shall reasonably request
in order to promptly make all filings under the HSR Act on behalf of the Lender
and the Borrower (or their ultimate parent entities) and seek early termination
of the waiting period thereunder.
Section 4.08 No Default. No Default or Event of Default shall have
occurred and be continuing.
V. AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, from the date hereof and
until all Obligations (whether now existing or hereafter arising) have been paid
in full, the Borrower shall, and shall cause each of its Subsidiaries to:
Section 5.01 Corporate and Insurance. Do or cause to be done all things
necessary to at all times (a) preserve, renew and keep in full force and effect
its corporate or other legal existence, rights, licenses, permits and
franchises, (b) comply with this Agreement and any other agreements and
instruments executed and delivered hereunder (to the extent a party thereto),
(c) maintain, preserve and protect all of its franchises and material trade
names, and preserve all of its material property used or useful in the conduct
of its business and keep the same in good repair, working order and condition
(reasonable wear and tear excepted), and from time to time make, or cause to be
made, all needed and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the Business Operations carried on in connection
therewith may be properly and advantageously conducted at all times, (d)
maintain such insurance as may be required under the ▇▇▇▇▇▇▇▇▇ Collateral
Agreements and the Mortgage and Security Agreement from time to time, and, with
respect to all liability coverages included therein, name the Lender as an
additional insured as its interests appear and provide for the Lender to receive
written notice thereof at least thirty (30) days prior to any cancellation,
modification or non-renewal of the subject policy, and (e) comply with all
Applicable Law material to its Business Operations, whether now in effect or
hereafter enacted, promulgated or issued. The Borrower will provide to the
Lender a certificate of the foregoing insurance, promptly upon request.
Section 5.02 Payment of Taxes. File, pay and discharge, or cause to be
paid and discharged, all taxes, assessments and governmental charges or levies
imposed upon the Borrower and/or any Subsidiary or upon its income and profits
or upon any of its property (real, personal or mixed) or upon any part thereof,
before the same shall become in default, as well as all lawful claims for labor,
materials, supplies and otherwise, which, if unpaid when due, might become a
Lien or charge upon such property or any part thereof; provided, however, that
neither
17
the Borrower nor any Subsidiary shall be required to pay and discharge or cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as (a) the validity thereof shall be contested in good faith by appropriate
proceedings and the Borrower or such Subsidiary shall have set aside on its
books adequate reserves with respect to any such tax, assessment, charge, levy
or claim so contested, and (b) payment with respect to any such tax, assessment,
charge, levy or claim shall be made before any of the Borrower's or such
Subsidiary's property shall be seized or sold in satisfaction thereof.
Section 5.03 Notice of Proceedings. Give prompt written notice to the
Lender of (a) any proceedings instituted against the Borrower or any Subsidiary
in any federal or state court or before any commission or other regulatory body,
whether federal, state or local, which, if adversely determined, could have a
material adverse effect upon the Borrower's or any Subsidiary's business,
operations, properties, assets or condition, financial or otherwise, (b) the
occurrence of any Default or Event of Default, and the action that the Borrower
has taken, is taking, or proposes to take with respect thereto, and (c) the
occurrence of any "Default" or "Event of Default" in payment of the ▇▇▇▇▇▇▇▇▇
Debt or under and as defined in the ▇▇▇▇▇▇▇▇▇ Collateral Agreements, and the
action taken, being taken or proposed to be taken with respect thereto.
Section 5.04 Periodic Reports. Furnish to the Lender:
(a) Within thirty (30) calendar days after the end of each
calendar month, consolidated and consolidating unaudited balance sheets,
statements of income and statements of cash flows of the Borrower and its
Subsidiaries, together with supporting schedules thereto, prepared by the
Borrower and certified by the Borrower's Chairman, President, Executive Vice
President, Chief Financial Officer or Chief Accounting Officer, such balance
sheets to be as of the close of such calendar month and such statements of
income and statements of cash flows to be for the period from the beginning of
the then-current calendar month to the end of such fiscal quarter, together with
comparative statements of income and cash flows for the corresponding period in
the immediately preceding Fiscal Year, in each case subject to normal audit and
year-end adjustments which shall not be material;
(b) Concurrently with the delivery of each of the financial
statements required by Section 5.04(a) above, a certificate on behalf of the
Borrower (signed by the Chairman, President, Executive Vice President, Chief
Financial Officer or Chief Accounting Officer of the Borrower), certifying that
he has examined the provisions of this Agreement and that no Default or Event of
Default has occurred and/or is continuing; and
(c) Promptly, from time to time, such other information regarding
the Borrower's or any Subsidiary's operations, assets, business, affairs and
financial condition, as the Lender may reasonably request.
Section 5.05 Books and Records; Inspection. Maintain centralized books and
records regarding all of the Business Operations at the Borrower's principal
place of business, and permit agents or representatives of the Lender to
inspect, at any time during normal business hours,
18
upon reasonable notice, all of the Borrower's and its Subsidiaries' Business
Operations, and books and records, and to make copies, abstracts and/or
reproductions thereof.
Section 5.06 Accounting. Maintain a standard system of accounting in order
to permit the preparation of financial statements in accordance with GAAP.
Section 5.07 Reimbursements. Pay or reimburse the Lender or other
appropriate Persons on demand for all costs, expenses and other charges incurred
or payable in connection with the transactions contemplated by this Agreement,
regardless of whether the transactions are in fact consummated, including but
not limited to any and all search fees, recording fees and legal fees.
Section 5.08 Environmental Response. In the event of any discharge, spill,
injection, escape, emission, disposal, leak or other Release of Hazardous
Substances on any Real Property owned or leased by the Borrower or any
Subsidiary, which is not authorized by a permit or other approval issued by the
appropriate governmental agencies, and which requires notification to or the
filing of any report with any federal or state governmental agency, the Borrower
shall promptly: (i) notify the Lender; and (ii) comply with the notice
requirements of the Environmental Protection Agency and applicable state
agencies, and take all steps necessary to promptly clean up such discharge,
spill, injection, escape, emission, disposal, leak or other Release in
accordance with all applicable Environmental Laws and the Federal National
Contingency Plan, and, if required, receive a certification from all applicable
state agencies or the Environmental Protection Agency, that such Real Property
has been cleaned up to the satisfaction of such agency(ies).
Section 5.09 Business Operations. Obtain the prior written approval of the
Lender before (a) making any material changes in the Business Operations of the
Borrower or any Subsidiary outside of the ordinary course of the Business
Operations, or (b) with respect to Arrow, the Assets or the operation of the
cargo airline business conducted by Arrow, making any Capital Expenditures,
route changes, entering into any Contracts involving a commitment of $50,000 or
more, rescheduling employees or otherwise making any changes not consistent with
past practice.
Section 5.10 Use of Proceeds. Cause all proceeds of the Loan to be
utilized solely in the manner and for the purposes set forth in Section 2.02
hereof.
Section 5.11 Board of Directors. At any and all times when the Lender or
any of its Affiliates shall hold any shares of capital stock of the Borrower or
any Subsidiaries under the Pledge Agreement or otherwise: (a) provide to the
Lender notice of all meetings of the Boards of Directors or other governing
bodies of the Company and each of the Subsidiaries, together with copies of all
documents and information provided to the members of such Boards of Directors or
other governing bodies; (b) permit a representative of the Lender to attend, as
an observer, each meeting of such Boards of Directors or other governing bodies;
and (c) provide to the Lender, promptly after the preparation thereof, copies of
all minutes or action by written consent of such Boards of Directors or other
governing bodies.
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VI. NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that, until all Obligations
(whether now existing or hereafter arising) have been paid in full, unless the
Lender shall otherwise consent in writing, the Borrower shall not, and shall not
permit any of the Companies or any other Subsidiary to, directly or indirectly:
Section 6.01 Indebtedness and Liabilities. Incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any Indebtedness
or liability, other than:
(a) Indebtedness to the Lender pursuant to this Agreement;
(b) ▇▇▇▇▇▇▇▇▇ Debt pursuant to the Acquisition Agreement;
(c) Liabilities with respect to trade obligations, accounts
payable, operating leases and other normal accruals incurred in the ordinary
course of business, or with respect to which the Borrower or the subject
Subsidiary is contesting in good faith the amount or validity thereof by
appropriate proceedings, and then only to the extent that the Borrower or the
subject Subsidiary has set aside on its books adequate reserves therefor;
(d) Indebtedness existing on the Agreement Date and reflected in
the Financial Statements or the footnotes thereto or owed to those Persons, in
those amounts and having those maturities as set forth in Schedule 8 annexed
hereto;
(e) Capitalized Leases reflected in the Financial Statements, and
Capitalized Leases hereafter entered into by the Borrower or its Subsidiaries in
the ordinary course of the Business Operations and within the limitations of
Section 6.09 hereof; and
(f) Purchase money indebtedness incurred in connection with the
Borrower's or its Subsidiaries' acquisition of capital assets, within the
limitations of Section 6.09 hereof.
Section 6.02 Liens. Create, incur, assume or suffer to exist any Lien or
other encumbrance of any nature whatsoever on any of its assets, now or
hereafter owned, other than:
(a) Subject to Section 5.02 above, Liens securing the payment of
taxes which are either not yet due or the validity of which is being contested
in good faith by appropriate proceedings, and as to which the Borrower or the
subject Subsidiary shall have set aside on its books adequate reserves;
(b) Deposits under workers' compensation, unemployment insurance
and social security laws, or to secure the performance of bids, tenders,
contracts (other than for the repayment of money borrowed) or leases, or to
secure statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
20
(c) Liens imposed by law, such as carriers', warehousemen's or
mechanics' liens, incurred by the Borrower or any Subsidiary in good faith in
the ordinary course of business and discharged promptly after same are incurred,
and fully bonded Liens arising out of a judgment or award against the Borrower
or any Subsidiary with respect to which the Borrower or such Subsidiary shall
currently be prosecuting an appeal, a stay of execution pending such appeal
having been secured;
(d) Liens in favor of ▇▇▇▇▇▇▇▇▇ as agent under the ▇▇▇▇▇▇▇▇▇
Collateral Agreements, and other Liens in existence on the Agreement Date as
disclosed in Schedule 2 annexed hereto;
(e) Other Liens incurred in connection with indebtedness expressly
permitted pursuant to Section 6.01(e) and/or Section 6.01(f) above, but only to
the extent that such Liens secure indebtedness in amounts not in excess of those
permitted by such Section 6.01(d) and/or Section 6.01(e), and only to the extent
that such Liens to not extend to any assets or property other than the specific
assets or properties acquired pursuant to such permitted indebtedness;
(f) Encumbrances consisting of easements, rights-of-way, survey
exceptions and other similar restrictions on the use of Real Property, or minor
irregularities in title thereto which do not materially impair the use of such
property in the operation of the business of the Borrower and its Subsidiaries;
and
(g) Liens arising out of judgments or awards with respect to which
the Borrower or the subject Subsidiary shall be prosecuting an appeal in good
faith and in respect of which a stay of execution shall have been issued.
Section 6.03 Guarantees. Guarantee, endorse or otherwise in any manner
become or be responsible for obligations of any other Person, except (a)
endorsements of negotiable instruments for collection in the ordinary course of
business, (b) guarantees of the Subsidiaries' obligations under the ▇▇▇▇▇▇▇▇▇
Collateral Agreements, and (c) other guarantees by the Borrower of obligations
of the Subsidiaries up to a maximum principal amount of $200,000 at any one time
outstanding.
Section 6.04 Sales of Assets and Management. (a) Sell, lease, transfer,
encumber or otherwise dispose of any of the Borrower's or any Subsidiary's
properties, assets, rights, licenses or franchises other than (i) sales of
inventory in the ordinary course of business, (ii) licenses, joint ventures and
related transactions entered into, modified or terminated in the ordinary course
of business, (iii) the disposition of obsolete personal properties in the
ordinary course of business, or (iv) the sale of the equipment and assets under
Capitalized Leases (excluded, however, any of the Assets or Additional Assets
covered by the Asset Purchase Agreement), (b) turn over the management of, or
enter into any management contract with respect to, the Business Operations or
such properties, assets, rights, licenses or franchises, or (c) permit any
Affiliate of the Borrower to own or obtain any patent, patent application,
license, trademark or other intangible asset relating to the Business
Operations.
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Section 6.05 Sale-Leaseback. Enter into any arrangement, directly or
indirectly, with any Person whereby the Borrower or any Subsidiary shall sell or
transfer any property (real, personal or mixed) used or useful in the Business
Operations, whether now owned or hereafter acquired, and thereafter rent or
lease such property.
Section 6.06 Investments; Acquisitions. Make any Investment in, or
otherwise acquire or hold securities (including, without limitation, capital
stock and evidences of indebtedness) of, or make loans or advances to, or enter
into any arrangement for the purpose of providing funds or credit to, any other
Person (including any Affiliate), except:
(a) existing Investments in the Subsidiaries, and loans by the
Borrower to the Subsidiaries out of the proceeds of the Loan hereunder;
(b) advances to employees of the Borrower or the Subsidiaries: (i)
for business expenses not to exceed at any time $50,000 in the aggregate, and
(ii) for personal needs not to exceed at any time $50,000 in the aggregate as to
all employees of the Borrower and the Subsidiaries; and
(c) investments in obligations of the United States or certificates
of deposit of commercial banks reasonably satisfactory to the Lender.
Section 6.07 Corporate Form; Acquisitions. Dissolve or liquidate, or
consolidate or merge with or into, sell all or substantially all of the assets
of the Borrower or any Subsidiary to, or acquire all or substantially all of the
securities, assets or properties of, any other Person.
Section 6.08 Dividends and Redemptions. Directly or indirectly declare or
pay any dividends, or make any distribution of cash or property, or both (other
than dividends solely in the form of common stock of the Borrower), to any
Person in respect of any of the shares of the capital stock of the Borrower, or
directly or indirectly redeem, purchase or otherwise acquire for consideration
any securities or shares of the capital stock of the Borrower or any other
Person.
Section 6.09 Capital Expenditures. Make aggregate expenditures for capital
assets (whether through cash purchase, principal payments under Capitalized
Leases, or otherwise) in excess of (a) $25,000 in the aggregate for the Borrower
and all Subsidiaries, or $50,000 in the aggregate for Arrow or with respect to
capital assets or Capitalized Leases to replace any of the Assets or Additional
Assets subject to the provisions of the Asset Purchase Agreement and exhibits
thereto..
Section 6.10 Change of Business. Directly or indirectly: (a) engage in a
business materially different from the general nature of the Business Operations
as now being conducted or as same may hereafter be reasonably expanded from time
to time in like areas of business, (b) change in any manner or wind up any
portion of the Business Operations of Arrow, or cease any of Arrow's normal
Business Operations, or (c) suffer any material disruption, interruption or
discontinuance of a material portion of its normal Business Operations for a
period in excess of thirty (30) consecutive days.
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Section 6.11 Certain Amendments. Agree, consent, permit or otherwise
undertake to amend, revoke or modify any of the terms or provisions of (a) the
Borrower's or any Subsidiary's Certificate of Incorporation or By-Laws or other
organizational documents in a manner which may impair in any respect any of the
Lender's rights hereunder, (b) any of the ▇▇▇▇▇▇▇▇▇ Collateral Agreements or the
Acquisition Agreement in any manner, (c) any Contract relating to Arrow or
Arrow's Business Operations, or (d) any other Contract which is material to the
consolidated Business Operations of the Borrower.
Section 6.12 Issuance of Capital Stock. Neither the Borrower nor any
corporate Guarantor or Pledgor under the Pledge Agreement shall issue any shares
of its capital stock or any options, warrants, rights, or other securities
exercisable for or convertible into shares of capital stock of any such Person.
VII. DEFAULTS
Section 7.01 Events of Default. Each of the following events is herein,
and in the Note, sometimes referred to as an Event of Default:
(a) if any representation or warranty made in this Agreement, in
the Stock Purchase Agreement, the Asset Purchase Agreement, or in any report,
certificate, financial statement, instrument or other statement furnished in
connection herewith or therewith or the borrowing hereunder, shall be false,
inaccurate or misleading in any material respect when made or when deemed made
hereunder;
(b) any default in the payment of any principal or interest
under the Note or any other Obligations of the Borrower to the Lender when
the same shall be due and payable, whether at the due date thereof or at a
date required for prepayment or by acceleration or otherwise;
(c) any default in the due and timely observance, payment or
performance of (i) any covenant, condition or agreement contained in any Section
of Article VI hereof, or (ii) any covenant, condition or agreement to be
performed on behalf of the Lender which is contained in the Stock Purchase
Agreement or the Asset Purchase Agreement, in each case, which, if capable of
being cured, is not fully cured within ten (10) days after the occurrence
thereof;
(d) any default in the due observance or performance of any
covenant, condition or agreement to be observed or performed under Article V
hereof, or otherwise pursuant to the terms hereof, and the continuance of such
default unremedied for a period of ten (10) days after written notice thereof to
the Borrower;
(e) any default with respect to any indebtedness for money
borrowed of the Borrower or any of the Subsidiaries (other than to the Lender)
in an amount in excess of $250,000, if the effect of such default is to permit
the holder to accelerate the maturity of any such indebtedness for money
borrowed or to cause such indebtedness for money borrowed to become due prior to
the stated maturity thereof (provided that any such default shall not be an
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Event of Default hereunder unless and until the earlier of (i) ten (10) days
after the occurrence of such default, or (ii) the acceleration of the maturity
of such indebtedness for money borrowed).
(f) any Default or Event of Default by the Borrower or ▇▇▇▇▇ in
connection with the ▇▇▇▇▇▇▇▇▇ Debt or under the ▇▇▇▇▇▇▇▇▇ Collateral Agreements;
(g) if the Borrower or any Subsidiary shall: (i) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of it
or any of its properties, (ii) admit in writing its inability to pay its debts
as they mature, (iii) make a general assignment for the benefit of creditors,
(iv) be adjudicated a bankrupt or insolvent or be the subject of an order for
relief under Title 11 of the United States Code, or (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage or any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
against him or it in any proceeding under any such law, or (vi) take or permit
to be taken any action in furtherance of or for the purpose of effecting any of
the foregoing;
(h) if any order, judgment or decree shall be entered, without the
application, approval or consent of the Borrower or any Subsidiary, by any court
of competent jurisdiction, approving a petition seeking reorganization of the
Borrower or any Subsidiary, or appointing a receiver, trustee, custodian or
liquidator of the Borrower or any Subsidiary, or of all or any substantial part
of its assets, and such order, judgment or decree shall continue unstayed and in
effect for any period of forty-five (45) days;
(i) if final judgment(s) for the payment of money in an uninsured
amount in excess of $250,000 individually or in the aggregate shall be rendered
against the Borrower and/or any of the Subsidiaries, and the same shall remain
undischarged or unbonded for a period of thirty (30) consecutive days, during
which execution shall not be effectively stayed; or
(j) the occurrence of any levy upon or seizure or attachment of
any property of the Borrower having an aggregate fair value in excess of
$250,000 individually or in the aggregate, which levy, seizure or attachment
shall not be set aside, bonded or discharged within thirty (30) days after the
date thereof.
Section 7.02 Remedies. Upon the occurrence of any Event of Default, and at
all times thereafter during the continuance thereof: (a) the Note, and any and
all other Obligations of the Borrower to the Lender, shall, at the Lender's
option (except in the case of Sections 7.01(g) and 7.01(h) hereof, the
occurrence of which shall automatically effect acceleration, regardless of any
action or forbearance in respect of any prior or ongoing Default or Event of
Default which may be inconsistent with such automatic acceleration), become
immediately due and payable, both as to principal, interest and other charges,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Note or other
evidence of such Obligations to the contrary notwithstanding, (b) all
outstanding Obligations under the Note, and all other outstanding Obligations,
shall bear interest at the default rate of interest provided in the Note, and
(c) the Lender may file suit against the Borrower on the Note
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and/or seek specific performance or injunctive relief thereunder (whether or not
a remedy exists at law or is adequate.
VIII. ASSIGNMENT.
Section 8.01 Transfer. Anything in this Agreement to the contrary
notwithstanding, the Lender may, at any time and from time to time, without the
requirement of any consent of the Borrower if to an Affiliate of the Lender or
an Affiliate of the Borrower, or otherwise with the prior written consent of the
Borrower (which consent shall not be unreasonably withheld or delayed), and in
any such case without in any manner affecting or impairing the validity of any
Obligations, transfer and assign all or any portion of its interest in this
Agreement and the Note to any Person (an "Assignee Lender") as the Lender may
determine (subject to any required consent as hereinabove provided). Upon any
such transfer or assignment, the Assignee Lender shall be deemed to succeed (to
the extent of the interest assigned) to the rights and obligations of "Lender"
for all purposes of this Agreement. The Lender shall endeavor to give written
notice to the Borrower prior to making any such transfer or assignment, but the
failure to give any such notice shall not affect or impair the assignment so
effected.
IX. MISCELLANEOUS
Section 9.01 Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by the Lender of the Loan, and the
execution and delivery to the Lender of the Note, and shall continue in full
force and effect for so long as the Note or any other Obligations are
outstanding and unpaid. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
permitted assigns of such party; and all covenants, promises and agreements in
this Agreement contained, by or on behalf of the Borrower, shall inure to the
benefit of the successors and assigns of the Lender.
Section 9.02 Indemnification. The Borrower shall indemnify the Lender and
its directors, officers, employees, attorneys and agents against, and shall hold
the Lender and such Persons harmless from, any and all losses, claims, damages
and liabilities and related expenses, including reasonable counsel fees and
expenses, incurred by the Lender or any such Person arising out of, in any way
connected with, or as a result of: (a) the use of any of the proceeds of the
Loan made by the Lender to the Borrower; (b) this Agreement, the ownership and
operation of the Borrower's and the Subsidiaries' assets, including all Real
Properties and improvements or any Contract, the performance by the Borrower or
any other Person of their respective obligations thereunder, and the
consummation of the transactions contemplated by this Agreement; and/or (c) any
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether or not the Lender or its directors, officers, employees, attorneys or
agents are a party thereto; provided that such indemnity shall not apply to any
such losses, claims, damages, liabilities or related expenses arising from (i)
any unexcused breach by the Lender of any of its obligations under this
Agreement, (ii) the willful misconduct or gross negligence of the Lender,
provided that any such loss, claim, damage, liability or expense is determined
by a court of competent jurisdiction by final judgment to have resulted from the
willful misconduct or gross
25
negligence of the Lender and the further finding that such willful misconduct or
gross negligence was the primary cause thereof (i.e., more than 50% of the
causation), or (iii) the breach of any commitment or legal obligation of the
Lender to any Person other than the Borrower or its Affiliates, provided that
such breach is determined pursuant to a final and nonappealable decision of a
court of competent jurisdiction. The foregoing indemnity shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated by this Agreement,
the repayment of the Loan, the invalidity or unenforceability of any term or
provision of this Agreement or the Note, any investigation made by or on behalf
of the Lender, and the content or accuracy of any representation or warranty
made by the Borrower under this Agreement. All amounts due under this Section
9.02 shall be payable on written demand therefor, provided, that notwithstanding
anything to the contrary contained in this Section 5.02, Borrower's indemnity
obligations to Lender hereunder shall not extend beyond the limits set forth in
the indemnity provisions of the Asset Purchase Agreement.
Section 9.03 Governing Law. This Agreement and the Note shall
(irrespective of where same are executed and delivered) be governed by and
construed in accordance with the laws of the State of Florida (without giving
effect to principles of conflicts of laws).
Section 9.04 Waiver and Amendment. Neither any modification or waiver of
any provision of this Agreement or the Note, nor any consent to any departure by
the Borrower therefrom, shall in any event be effective unless the same shall be
set forth in writing duly signed or acknowledged by the Lender and the Borrower,
and then such waiver or consent shall be effective only in the specific
instance, and for the specific purpose, for which given. No notice to or demand
on the Borrower in any instance shall entitle the Borrower to any other or
future notice or demand in the same, similar or other circumstances.
Section 9.05 Reservation of Remedies. Neither any failure nor any delay on
the part of the Lender in exercising any right, power or privilege hereunder or
under the Note shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or future exercise, or the exercise of any
other right, power or privilege.
Section 9.06 Notices. All notices, requests, demands and other
communications under or in respect of this Agreement or any transactions
hereunder shall be in writing (which may include telegraphic or telecopied
communication) and shall be personally delivered or mailed (by prepaid
registered or certified mail, return receipt requested), sent by prepaid
recognized overnight courier service, or telegraphed or telecopied by facsimile
transmission to the applicable party at its address or telecopier number
indicated in the Asset Purchase Agreement, or, as to each party, at such other
address or telecopier number as shall be designated by such party in a written
notice to the other party delivered as aforesaid. All such notices, requests,
demands and other communications shall be deemed given when personally delivered
or when deposited in the mails with postage prepaid (by registered or certified
mail, return receipt requested) or delivered to the telegraph company or
overnight courier service, addressed as aforesaid, or when submitted by
facsimile transmission to a telecopier number designated by such addressee. No
other method of written notice is precluded.
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Section 9.07 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not assign any of its
rights or obligations hereunder without the prior written consent of the Lender.
Section 9.08 Consent to Jurisdiction; Waiver of Jury Trial. The Borrower
hereby consents to the jurisdiction of all courts of the State of Florida and
the United States District Court for the Southern District of Florida, as well
as to the jurisdiction of all courts from which an appeal may be taken from such
courts, for the purpose of any suit, action or other proceeding arising out of
or with respect to this Agreement, the Note, any other agreements, instruments,
certificates or other documents executed in connection herewith or therewith, or
any of the transactions contemplated hereby or thereby, or any of the Borrower's
obligations hereunder or thereunder. The Borrower hereby expressly waives any
and all objections which it may have as to venue in any of such courts, and also
waives trial by jury in any such suit, action or proceeding. The Lender may file
a copy of this Agreement as evidence of the foregoing waiver of right to jury
trial.
Section 9.09 Severability. If any provision of this Agreement is held
invalid or unenforceable, either in its entirety or by virtue of its scope or
application to given circumstances, such provision shall thereupon be deemed
modified only to the extent necessary to render same valid, or not applicable to
given circumstances, or excised from this Agreement, as the situation may
require, and this Agreement shall be construed and enforced as if such provision
had been included herein as so modified in scope or application, or had not been
included herein, as the case may be.
Section 9.10 Captions. The Article and Section headings in this Agreement
are included herein for convenience of reference only, and shall not affect the
construction or interpretation of any provision of this Agreement.
Section 9.11 Sole and Entire Agreement. This Agreement, the Note, and the
other agreements, instruments, certificates and documents referred to or
described herein and therein constitute the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersede all prior discussions, agreements and understandings of every kind and
nature between the parties as to such subject matter.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers on the date set forth below, but
all as of the day and year first above written.
Dated: As of February 5, 1999
INTERNATIONAL AIR LEASES OF PR, INC., INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
FINE AIR SERVICES CORP.
By: /s/ ▇. ▇▇▇▇▇ Fine
-------------------------------------
▇. ▇▇▇▇▇ Fine, Chairman
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