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Section 1: 8-K (FORM 8-K)

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) 

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): February 8, 2019

 

 

 

AEROCENTURY CORP.

(Exact name of Registrant as specified in its charter)
 

Delaware 94-3263974
(State of Incorporation) (I.R.S. Employer Identification No.)

 

000-1036848

(Commission File Number)

 

1440 Chapin Avenue, Suite 310

Burlingame, CA 94010

(Address of principal executive offices including Zip Code)

 

650-340-1888

(Registrant's telephone number, including area code)

 

Not applicable

(Former name and former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

 

 

 

 

 

Item 1.01Entry into a Material Definitive Agreement

 

(a)Credit Agreement and Security Agreement

 

On February 8, 2019, AeroCentury Corp. (the “Company”), through four wholly owned subsidiary limited liability companies (“LLC Borrowers”), entered into a Credit Agreement (“Credit Agreement”) with Norddeutsche Landesbank Girozentrale, New York Branch (“Lender”) that provides for six separate term loans (collectively, the “Term Loans”) with an aggregate principal amount of $44.3 million. Each of the Term Loans is secured by a first priority security interest in a specific aircraft (“Term Loan Collateral Aircraft”) owned by an LLC Borrower, the lease for such aircraft, and a pledge by the Company of its membership interest in each of the LLC Borrowers, pursuant to a Security Agreement (the “Security Agreement”) among the LLC Borrowers and Wilmington Trust Company, as Security Trustee, and certain pledge agreements. The interest rates payable under the Term Loans vary by aircraft, and are based on a fixed margin above either 30-day or 3-month LIBOR. The proceeds of the Term Loans were used to pay off Company debt from its purchase the Term Loan Collateral Aircraft. The maturity of each Term Loan varies by aircraft, with the first Term Loan maturing in October 2020 and the last Term Loan maturing in May 2025. The debt under the Term Loans is expected to be fully amortized by rental payments and remarketing proceeds received by the LLC Borrowers from the lessees of the Term Loan Collateral Aircraft during the terms of their respective leases.

 

The Credit Agreement includes covenants that impose various restrictions and obligations on the LLC Borrowers, including covenants that require the LLC Borrowers to obtain the Lender’s consent before they can take certain specified actions. Events of default under the Credit Agreement and the Security Agreement include, among others: any failure by the LLC Borrowers to make payments thereunder when due; certain defaults by the lessees of the Term Loan Collateral Aircraft under their lease agreements for such aircraft; any misrepresentation by an LLC Borrower in the Credit Agreement or the Security Agreement or failure by an LLC Borrower to perform its obligations thereunder; the occurrence of certain bankruptcy events; any lapse or failure to maintain insurance coverage on the Term Loan Collateral Aircraft; and any suspension or cessation of business of an LLC Borrower or the Company. If such an event of default occurs, subject to certain cure periods for certain events of default, the Lender would have the right to terminate its obligations under the Credit Agreement, declare all or any portion of the amounts then outstanding under the Term Loans to be accelerated and due and payable, and/or exercise any other rights or remedies it may have under applicable law, including foreclosing on the assets that serve as security for the Term Loans.

 

The foregoing description of the Credit Agreement and the Security Agreement is intended to be a summary and is qualified in its entirety by the copies of the Credit Agreement and the Security Agreement filed as Exhibits 10.1 and 10.2 hereto.

 

 

 

 

(b)Master Agreement for Interest Rate Swap Transactions

 

On January 7, 2019, in anticipation of the closing of the Term Loans, each of the LLC Borrowers and Norddeutsche Landesbank Girozentrale (“Swap Counterparty”) entered into an International Swap Dealers Association, Inc. 2002 Master Agreement (“ISDA Master Agreement”), facilitating each of the Borrower LLCs to enter into an interest rate hedging transaction (collectively, the “Swap Transactions”) to effectively convert the variable rate payments due under the Term Loans into fixed rate payment obligations, at a weighted average weight of approximately 5.8% per annum. The Swap Transactions will be governed by the ISDA Master Agreement, including the related Schedule to the ISDA Master Agreement (“Schedule”). The Company's obligations to Swap Counterparty under the ISDA Master Agreement are secured by the collateral which secures the Term Loans under the Credit Agreement.

 

The foregoing description of the ISDA Master Agreement is intended to be a summary and is qualified in its entirety by the copies of the ISDA Master Agreement, Schedule and related confirmations filed as Exhibit 10.3 hereto.

 

Item 2.03Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

 

The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated in this Item 2.03 by reference.

 

Item 9.01Financial Statements and Exhibits

 

(d) Exhibits

 

10.1 Credit Agreement, dated February 8, 2019, among ACY SN 15129 LLC, ACY E-175 LLC, ACY SN 19002 Limited, and ACY SN 19003 Limited, Wilmington Trust Company, as Security Trustee, Norddeutsche Landesbank Girozentrale, New York Branch, as Agent, and Norddeutsche Landesbank Girozentrale, as swap counterparty
   
10.2 Security Agreement, dated February 8, 2019, among ACY SN 15129 LLC, ACY E-175 LLC, ACY SN 19002 Limited, and ACY SN 19003 Limited, Wilmington Trust Company, as Security Trustee, and certain other parties
   
10.3 Form of ISDA Master Agreements, Schedules and Confirmations of Interest Rate Swaps between Norddeutsche Landesbank Girozentrale, as swap counterparty, and each of ACY SN 15129 LLC, ACY E-175 LLC, ACY SN 19002 Limited, and ACY SN 19003 Limited

 

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

Date:  February 14, 2019

 

AEROCENTURY CORP.

By: /s/ Toni M. Perazzo  
Toni M. Perazzo
S.V.P - Finance & Chief Financial Officer

 

 

(Back To Top)

Section 2: EX-10.1 (EXHIBIT 10.1)

 

Exhibit 10.1

 

EXECUTION COPY

 

 

 

CREDIT AGREEMENT

 

dated as of February 7, 2019

 

among

 

ACY SN 19002 LIMITED

 

ACY SN 19003 LIMITED

 

ACY E-175 LLC

 

and

 

ACY SN 15129 LLC

as Borrowers

 

THE PARTICIPANTS PARTY HERETO

 

NORDDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH

as Agent

 

NORDDEUTSCHE LANDESBANK GIROZENTRALE

as Swap Counterparty

 

WILMINGTON TRUST COMPANY

as Security Trustee

 

Aircraft Credit Facility

 

Up to $47,000,000

___________________

 

Norddeutsche Landesbank Girozentrale, New York Branch

Mandated Lead Arranger

  

 

 

 

 

  

TABLE OF CONTENTS

 

    Page
     
SECTION 1. DEFINITIONS 1
     
SECTION 2. THE LOANS 1
     
2.1 Commitments to Lend 1
2.2 Notice of Borrowing 2
2.3 Funding Procedure 2
2.4 Deposit; Commitment Cancellation 3
2.5 Debt Rate; Hedging; Amortization Schedules 3
2.6 Manner of Payment 5
2.7 Fees 5
2.8 Air Nostrum Aircraft Payments 6
     
SECTION 3. CONDITIONS PRECEDENT 6
     
3.1 Conditions Precedent to the Closing Date 6
3.2 Conditions Precedent to a Drawdown Date 8
3.3 Conditions Subsequent 14
     
SECTION 4. REPRESENTATIONS AND WARRANTIES 14
     
4.1 Borrowers 14
     
SECTION 5. CERTAIN COVENANTS 18
     
5.1 The Borrowers 18
5.2 Section 2.13 of the Security Agreement 25
5.3 No Action Contrary to Lessee’s Rights Under the Lease 25
5.4 Ownership Interests 25
5.5   Residual Value Guarantees 25
     
SECTION 6. THE AGENT AND SECURITY TRUSTEE 26
     
6.1 Appointment, Powers and Immunities 26
6.2 Reliance by Agent and Security Trustee 27
6.3 Defaults 27
6.4 Indemnification 28
6.5   Non-Reliance on Agent, Security Trustee and Other Holder of a Loan Certificate 28
6.6 Failure to Act 28
6.7   Resignation or Removal of Agent and Security Trustee 29
6.8 Consents Under Operative Documents 29
     
SECTION 7. MISCELLANEOUS 29
     
7.1 Notices 29
7.2   Rights Cumulative 29

 

 i

 

  

TABLE OF CONTENTS

(continued)

 

    Page
     
7.3 Waivers; Amendments 30
7.4 Assignment 30
7.5 Severability 31
7.6   Headings 31
7.7   Governing Law; Counterpart Form 31
7.8   Indemnification 31
7.9   Waiver of Jury 32
7.10 Jurisdiction 33
7.11 Expenses 33
7.12 Confidentiality 34
7.13   Money Laundering 34
7.14  Compliance with Anti-Money Laundering, Sanctions and OFAC Laws 34
7.15 Contractual Bail-In 36
7.16  Non-Recourse Obligations 36

 

Annex A Definitions and Construction
     
Schedule I Address for Notices and Payment Instructions
Schedule II Aircraft; Lessors; Lessees; Loan Amounts; Applicable Margins; Maturity Dates; Leases
Schedule III Local Law Requirements
Schedule IV Repayment Schedules
     
Exhibit A Form of Notice of Borrowing
Exhibit B-1 Form of Borrower Pledge Agreement
Exhibit B-2 Form of Borrower Parent Pledge Agreement

 

 ii

 

  

CREDIT AGREEMENT, dated as of February 8, 2019 (this “Agreement”), among ACY SN 19002 LIMITED, a limited liability company incorporated under the laws of England (the “19002 Borrower), ACY SN 19003 LIMITED, a limited liability company incorporated under the laws of England (the “19003 Borrower ”), ACY E-175 LLC, a limited liability company organized under the laws of the State of Delaware (the “Republic Borrower”), ACY SN 15129 LLC, a limited liability company organized under the laws of the State of Delaware (the “Adria Borrower” and, together with the 19002 Borrower, the 19003 Borrower and the Republic Borrower, each individually a “Borrower” and, collectively, the “Borrowers”), each of the participants that is a signatory hereto identified under the caption “PARTICIPANTS” on the signature pages hereto or which, pursuant to Section 7.4 hereof, shall become a “Participant” hereunder (individually, a “Participant” and, collectively, the “Participants”), NORDDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH (“Nord/LB”), as agent (in such capacity, the “Agent”), NORDDEUTSCHE LANDESBANK GIROZENTRALE, as swap counterparty (in such capacity, the “Swap Counterparty”) and WILMINGTON TRUST COMPANY, as security trustee (the “Security Trustee”).

 

WHEREAS, each of the parties hereto has agreed to enter into this Agreement to provide for the financing of certain aircraft by the Participants; and

 

WHEREAS, such aircraft will be mortgaged to, and the Lease associated with such aircraft will be assigned to, the Security Trustee, for the benefit of the Participants, pursuant to the Security Agreement (as defined in Annex A to this Agreement).

 

NOW THEREFORE, for good and valuable consideration, the receipt of which has been duly received, the parties hereto agree as follows:

 

Section 1.       Definitions. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in Part I of Annex A to this Agreement and the Loan Operative Documents shall be interpreted in accordance with the rules of construction set forth in Part II of Annex A to this Agreement.

 

Section 2.      The Loans.

 

2.1       Commitments to Lend.

 

(a)       Subject to the terms and conditions of this Agreement, on the Drawdown Date for each Aircraft, each Participant agrees to fund an amount equal to its Participation Percentage of the Loan Amount for such Aircraft to the Security Trustee to enable a loan (a “Loan”) for such Aircraft to be made to the Borrower of such Loan during the Availability Period. The 19002 Borrower shall be the “Borrower” for the Loan secured by the 19002 Aircraft. The 19003 Borrower shall be the “Borrower” for the Loan secured by the 19003 Aircraft. The Republic Borrower shall be the “Borrower” for each of the Loans secured by a Republic Aircraft. The Adria Borrower shall be the “Borrower” for the Loan secured by the Adria Aircraft. Unless the context shall otherwise require, for all purposes of this Agreement and the other Loan Operative Documents, the Loan for any Aircraft shall be equal to the aggregate outstanding principal amount of the Loan Certificates relating thereto.

 

 

 

  

[Credit Agreement]

 

(b)       Subject to Section 5.1(s), no Loan shall be advanced unless the Basic Rent for the related Lease shall, on a Dollar-for-Dollar basis, support the debt service requirements for such Loan specified in Section 2.5 (other than any balloon pursuant to Section 2.5(c)). If the condition specified in the first sentence of this Section 2.1(b) is not satisfied, then the Loan Amount of such Loan shall be reduced to such Loan Amount as shall satisfy the debt service coverage condition.

 

2.2       Notice of Borrowing. The relevant Borrower of a Loan shall deliver to the Agent a Notice of Borrowing by 2:00 p.m. (New York time) at least three Business Days (or such shorter period as the Participants may otherwise agree) before the intended Drawdown Date for such Loan, which notice:

 

(a)       shall specify:

 

(i)       the Business Day on which the Drawdown Date is proposed to occur (for any Loan, its “Scheduled Drawdown Date”);

 

(ii)      the Loan Amount of such Loan; and

 

(iii)     wire instructions for the disbursement of such Loan on the Drawdown Date therefor; and

 

(b)       shall specify the manufacturer’s serial number and registration number of the relevant Aircraft and the manufacturer’s serial numbers of each Engine relating to such Aircraft; and

 

(c)       shall contain an indemnity by the Borrower of such Loan in favor of the Participants and the Swap Counterparty for any Liquidity Breakage, any LIBOR Breakage, any Swap Breakage Loss and interest and other expenses incurred pursuant to and in the manner specified in Sections 2.2(c) in respect of such Loan associated with a failure to borrow such Loan for any reason, other than a failure by the Participants to fund following the satisfaction of all conditions precedent thereto; such indemnity shall be guaranteed by the Borrower Parent.

 

Promptly following receipt of any Notice of Borrowing, the Agent shall transmit the same to each Participant.

 

2.3       Funding Procedure. Not later than 2:00 p.m. (New York time) on the applicable Scheduled Drawdown Date, the Participants shall make available their ratable share of the Loan to be funded on such Scheduled Closing Date, in immediately available funds, to the Security Trustee (such amounts being referred to in the aggregate as the “Deposit”). At such time as the Participants and the Agent are satisfied that the conditions precedent to a Drawdown Date have been satisfied or will be satisfied concurrently with funding, the Participants shall direct the Security Trustee to make the funds so received from the Participants immediately available to the Borrower of such Loan on such Scheduled Drawdown Date to the account specified by such Borrower in the Notice of Borrowing for such Loan.

 

 2 

 

  

[Credit Agreement]

 

2.4       Deposit; Commitment Cancellation.

 

(a)       If, for any reason, any Loan to be made hereunder on its Scheduled Drawdown Date shall not be so made on such date, the Deposit, and earnings thereon, will be, to the extent available, invested and reinvested by the Security Trustee at the sole discretion, for the account and at the risk of the relevant Borrower in an overnight deposit selected by the Security Trustee. The Borrower of such Loan agrees to pay to each Participant interest on the amount of the Deposit furnished by such Participant at the Debt Rate therefor, which interest (i) shall accrue to but excluding the earlier of the actual Drawdown Date or the fifth Business Day next succeeding the Scheduled Drawdown Date therefor (the “Cutoff Date”) and (ii) shall be payable on such earlier date.

 

(b)       If for any reason, other than the failure of any Participant to comply with the terms hereof, the Drawdown Date with respect to any Loan shall not have occurred on or prior to the applicable Cutoff Date, then each Participant may cancel, terminate or otherwise unwind any funding arrangements made in the London interbank market or otherwise to fund its Participation Percentage of the Loan Amount in respect of such Loan, and such Participant shall notify the Security Trustee thereof, and the Security Trustee shall return its Commitment to be funded on such Drawdown Date to such Participant.

 

(c)       In the event of the occurrence of the events described in Section 2.4(b) above, the applicable Borrower agrees to pay within three Business Days of the applicable Cutoff Date (A) to the Swap Counterparty, any Swap Breakage Loss and (B) to each Participant, without duplication of the amounts covered by the preceding clause (A), any Liquidity Breakage and any LIBOR Breakage and all reasonable out-of-pocket costs and expenses of such Participant (including, without limitation, reasonable legal costs and expenses) incurred by such Participant.

 

(d)       The Participants’ Commitments for all Loans shall be automatically terminated at 4:00 p.m. (New York time) on the Availability Termination Date.

 

(e)       If an Event of Default shall have occurred and be continuing, then in every such case, the Agent shall, upon receipt of written demand therefor from the Required Participants, at any time by delivery of written notice or notices to the Borrowers cancel all remaining unutilized Commitments, whereupon such unutilized Commitments shall be cancelled, without presentment, demand, protest or notice, all of which are hereby waived; provided that all unutilized Commitments will automatically be cancelled without any action by the Agent or the Participants and without presentment, demand, protest or notice, all of which are hereby waived, in the case of the occurrence and continuance of an Event of Default under Section 4.02(g) of the Security Agreement.

 

2.5       Debt Rate; Hedging; Amortization Schedules.

 

(a)       Each Loan shall bear interest at a floating rate of interest from the relevant Drawdown Date to the relevant Maturity Date. At least two Business Days prior to each Interest Period, the Agent shall determine the Debt Rate for such Interest Period, which determination shall be conclusive absent manifest error, and shall notify the relevant Borrower of such Debt Rate. The Agent’s failure to so notify such Borrower of such Debt Rate shall not relieve such Borrower of its obligation to pay interest payable hereunder nor shall it give rise to any claim against the Agent or any Participant by such Borrower. The relevant Debt Rate shall include the Liquidity Margin for such Loan.

 

 3 

 

  

[Credit Agreement]

 

(b)       Two Business Days prior to the Drawdown Date in respect of a Loan, the relevant Borrower shall enter into a Swap Transaction in respect of such Loan. Each Swap Transaction shall be evidenced by a Swap Agreement to hedge the interest rate risk arising from the mismatch between the fixed basic rentals under the relevant Lease to which the relevant Borrower or Lessor, as the case may be, is party and the relevant Debt Rate (the “Exposure”). At all times, 100% (and not more than 100%) of the Exposure will be hedged through such Swap Transaction. All payments to be made by the Swap Counterparty to the Borrowers under any Swap Agreement shall be paid directly by the Swap Counterparty into the relevant Collateral Account relating to the related Lease. All payments to be made by the Borrowers to the Swap Counterparty under any Swap Agreement shall be sourced exclusively from distributions made under Article III of the Security Agreement or from the Borrower Parent or other Affiliate of the Borrowers. The Security Trustee shall be granted a first priority, perfected security interest in each Swap Agreement entered into pursuant hereto. The Borrowers agree that they shall not enter into any other derivatives agreements or other hedging arrangements not provided for under this Section 2.5(b).

 

(c)        (i)    Each Loan with respect to a Republic Aircraft shall amortize monthly on each relevant Payment Date on a mortgage-style basis such that the principal amount payable on the Maturity Date with respect to such Loan shall be equal to zero in the manner provided in Schedule IV. The principal balance of such Loan outstanding on such Maturity Date shall be due and payable on such date.

 

(ii)       The Loan with respect to the Adria Aircraft shall amortize monthly on each relevant Payment Date on a mortgage-style basis with a balloon payment payable on the Maturity Date with respect to such Loan in the manner provided in Schedule IV.

The principal balance of such Loan outstanding on such Maturity Date shall be due and payable on such date.

 

(iii)       Each Loan with respect to an Air Nostrum Aircraft shall amortize quarterly on each relevant Payment Date on a mortgage-style basis with a balloon payment payable on the Maturity Date with respect to such Loan in the manner provided in Schedule IV. The principal balance of such Loan outstanding on such Maturity Date shall be due and payable on such date.

 

(iv)       For the purposes of the foregoing calculations, the interest component of debt service on any particular Loan shall be deemed to be the amount thereof determined by utilizing the Swap Rate under the related Swap Transaction effected in accordance with the Section 2.5(b) (calculated on the basis of a 360 day year and the actual number of days elapsed).

 

 4 

 

  

[Credit Agreement]

 

(v)       The amortization schedule for each Loan (to be appended to each applicable Loan Certificate) shall be prepared by the Agent based on the foregoing methodology, which shall be conclusive absent manifest error.

 

(d)       Before the discontinuation of the LIBOR Rate as a benchmark U.S. Dollar interest rate (which is currently planned to occur on or before December 31, 2021), each of the Borrowers, the Agent and the Participants will agree:

 

(i)       a replacement benchmark U.S. Dollar interest rate with respect to interest payable on each Loan, which:

 

(1)        the Borrowers, the Agent and the Participants anticipate at such time is likely to be a benchmark rate that is generally accepted and adopted by applicable market participants; and

 

(2)       will be implemented on a non-discriminatory basis with respect to each Participant’s similar (in terms of structure, product type and debtor profile) commercial aviation finance transactions; and

 

(ii)      any related necessary amendments to this Agreement and the other Loan Operative Documents, including any necessary amendments to (or replacements of) the definitions of “1 Month LIBOR Rate”, “3 Month LIBOR Rate”, “Market Disruption Event”, “Quotation Day” and “Screen Rate”.

 

2.6       Manner of Payment. Each Loan shall be disbursed by the Security Trustee to the applicable Borrower at such account or accounts as shall be directed in accordance with Section 2.2 in immediately available funds.

 

2.7Fees.

 

(a)       The Borrowers agree to pay the fees set forth in the Fee Letter at such times as are required by the terms thereof.

 

(b)       The Borrowers agree to pay to the Agent annually in advance its administrative fee (the “ Agency Fee ”) in the amount of $10,000 per Aircraft on the Closing Date and on each anniversary thereof (or, if such anniversary is not a Business Day, the next immediately succeeding Business Day). To the extent that the Closing Date and the initial Drawdown Date occur on the same Business Day, the Agency Fee due and payable on the Closing Date shall be set off against the portion of the Loans funded by NordLB on the initial Drawdown Date.

 

 5 

 

  

[Credit Agreement]

 

2.8       Air Nostrum Aircraft Payments. In respect of each Loan for an Air Nostrum Aircraft, the sum of any amounts paid by Bombardier Inc. under the relevant Residual Value Guarantee (the “RVG Payment Amount”) and any sales proceeds (including any purchase deposits) received by the relevant Borrower from the sale of such Air Nostrum Aircraft (together with the relevant RVG Payment Amount, in respect of such Air Nostrum Aircraft, the “Air Nostrum Proceeds”) shall be applied (i) first, to any amounts outstanding under the relevant Loan Certificates, together with any Swap Breakage Loss, LIBOR Breakage and Prepayment Fee (in accordance with Section 2.10 of the Security Agreement) in respect of such Aircraft and (ii) second, to any amounts outstanding under the relevant Loan Certificates for the other Air Nostrum Aircraft, together with any Swap Breakage Loss, LIBOR Breakage and Prepayment Fee (in accordance with Section 2.10 of the Security Agreement) in respect of such Aircraft. To the extent the Air Nostrum Proceeds are in excess of the amounts outstanding under the Loans related to the Air Nostrum Aircraft on the relevant date of prepayment (such excess, an “Air Nostrum Excess Amount”), such Air Nostrum Excess Amount shall either be applied to any amounts outstanding under the Loan related to the Adria Aircraft in accordance with Section 2.10 of the Security Agreement or, at the election of the Adria Borrower, deposited in the Cash Collateral Account as security for such Loan in accordance with the Security Agreement. To the extent the Adria Borrower elects to deposit the Air Nostrum Excess Amount in the Cash Collateral Account, the Air Nostrum Excess Amount shall remain in the Cash Collateral Account until the Lien in respect of the Adria Aircraft is terminated in accordance with Section 9.01 of the Security Agreement.

 

Section 3.Conditions Precedent.

 

3.1       Conditions Precedent to the Closing Date. The effectiveness of this Agreement is subject to the following conditions precedent having been complied with to the satisfaction of or waived in writing by the Participants on or before the Closing Date (each document, instrument, certificate, opinion or other paper referred to below to be in form and substance reasonably satisfactory to the Participants and, unless otherwise specified, to be dated the Closing Date):

 

(a)      The following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto (other than the Finance Parties), and an executed copy of each (other than with respect to the Finance Parties) shall have been delivered to each Participant and the Security Trustee:

 

(i)this Agreement;

 

(ii)the Security Agreement;

 

(iii)the Fee Letter;

 

(iv)the Borrower Parent Pledge Agreements;

 

(v)the Indemnity Agreement; and

 

(vi)the Swap Master Agreements.

 

(b)      Each Participant and the Security Trustee shall have received the following:

 

(i)       a copy of the organizational documents of each Borrower and the Borrower Parent, certified by an authorized representative of such Person, a good standing certificate (if applicable), and other evidence authorizing execution, delivery and performance by such Person of each Operative Document to which such Person is or will be a party;

 

 6 

 

  

[Credit Agreement]

 

(ii)       a copy of the organizational documents of the Security Trustee, certified by a Secretary or an Assistant Secretary of the Security Trustee, and other evidence authorizing the execution, delivery and performance by the Security Trustee of this Agreement and each other Operative Document to which the Security Trustee is or will be a party;

 

(iii)       an incumbency certificate of each Borrower and the Borrower Parent as to the person or persons authorized to execute and deliver Loan Operative Documents to which it is a party and the specimen signature of such person or persons;

 

(iv)       an incumbency certificate of or in respect of the Persons authorized to execute documents on behalf of the Security Trustee and the specimen signature of such persons;

 

(v)       copies of all documents delivered by the Borrower Parent under the Borrower Parent Pledge Agreements;

 

(vi)       all documentation and other information (including originals if required under regulation or policy) required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including without limitation, the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), that has been requested not less than five Business Days prior to the Closing Date; and

 

(vii)       such other documents and evidence with respect to each Borrower, the Borrower Parent and the Security Trustee as any Participant or its counsel may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement and the other Operative Documents, the taking of all corporate proceedings in connection therewith, compliance with the conditions herein or therein set forth and compliance with any money laundering informational requirements the Participants may have.

 

(c)        All approvals and authorizations of any trustee or holder of the indebtedness or obligation of each Borrower, the Borrower Parent or any of their Affiliates which are required in connection with any of the transactions contemplated by this Agreement shall have been duly obtained, and evidence thereof shall have been delivered to each Participant and the Security Trustee.

 

(d)        On the Closing Date, the Security Trustee and the Participants shall have received evidence reasonably satisfactory to it that all of the Borrower Parent Pledged Collateral is held by the Borrower Parent free and clear of all Liens other than the Borrower Parent Pledge Agreements.

 

 7 

 

  

[Credit Agreement]

 

(e)       The Uniform Commercial Code financing statements covering all the Liens created by or pursuant to the Borrower Parent Pledge Agreements and the Security Agreement shall have been authorized by the Borrower Parent and the Borrowers, as applicable, and such financing statements or other statements or documents for the same purpose shall have been authorized to be filed in all places which the Security Trustee or its special counsel shall deem necessary or advisable.

 

(f)       The Security Trustee and the Participants shall have received an opinion addressed to the Security Trustee, the Agent and the Participants as of the Effective Date, from, in each case in form and substance reasonably satisfactory to such Participants:

 

(i)       Christopher Tigno, General Counsel to the Borrower Parent, with respect to the Borrower Parent;

 

(ii)       Withers Bergman LLP, special New York and Delaware counsel to the Borrower Parties; and

 

(iii)      Vedder Price LLP, special English counsel to the Agent;

 

in each case covering such additional matters as the Security Trustee or any Participant may reasonably request, including, in respect of clauses (ii) and (iii) above, as to the enforceability of each Swap Master Agreement under the laws of the State of New York and the due execution of each Swap Master Agreement by the relevant Borrower.

 

(g)       The Borrowers shall have paid the fees due on the Closing Date pursuant to the Fee Letter and to Section 2.7(b).

 

(h)       Each Participant shall have received its internal credit approvals to execute and deliver this Agreement and the other Operative Documents to which such Participant is party, and to consummate the transactions contemplated hereby and thereby.

 

3.2       Conditions Precedent to a Drawdown Date. The obligation of the Participants to fund their Participation Percentages of the Loan Amount in respect of a Loan to be made to the applicable Borrower in respect of an Aircraft on a Drawdown Date is subject to the occurrence of the Closing Date and the following conditions precedent having been complied with to the satisfaction of or waived in writing by the Participants on or before such Drawdown Date (each document, instrument, certificate, opinion or other paper referred to below to be in form and substance reasonably satisfactory to the Participants and, unless otherwise specified, to be dated such Drawdown Date):

 

(a)       Each Participant shall have received a Notice of Borrowing with respect to such Loan pursuant to Section 2.2.

 

(b)       The conditions specified in Section 2.1(b) hereof shall be satisfied.

 

(c)       The following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto (other than the Finance Parties), and an executed copy of each (other than with respect to the Finance Parties) shall have been delivered to each Participant and the Security Trustee:

 

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(i)          the Security Agreement Supplement in respect of such Aircraft;

 

(ii)         the Loan Certificate for each Participant, duly completed (the original of each to be delivered to such Participant by the Agent promptly following such Drawdown Date);

 

(iii)        the Swap Agreement in respect of such Loan;

 

(iv)        the Funds Flow Agreement in respect of such Loan;

 

(v)         the Lessee Parties Acknowledgement for such Aircraft;

 

(vi)        if such Aircraft is the Adria Aircraft, the Adria Repossession Deed;

 

(vii)       if such Aircraft is an Air Nostrum Aircraft, the relevant Residual Value Guarantee and the relevant RVG Notice and Acknowledgment;

 

(viii)      if such Aircraft is an Air Nostrum Aircraft, the relevant Lease Management Agreement;

 

(ix)        if such Aircraft is the 19003 Aircraft, the Consent and Recognition of Rights Agreement;

 

(x)         the Deregistration Powers of Attorney for such Aircraft, if applicable;

 

(xi)        the IDERA for such Aircraft, if applicable;

 

(xii)       the Warranty Agreements for such Aircraft, if applicable;

 

(xiii)      the Lease Operative Documents with respect to such Aircraft;

 

(xiv)      the Lease Assignment with respect to such Aircraft, if applicable;

 

(xv)       the Local Law Mortgage with respect to such Aircraft, if applicable; and

 

(xvi)      the relevant Borrower Pledge Agreement, if applicable.

 

(d)       Such Aircraft shall not have suffered an Event of Loss (or an event which, with the passage of time would constitute an Event of Loss) and will be in the condition and state of repair required under the terms of the Lease with respect to such Aircraft.

 

(e)       Since September 1, 2018, in the reasonable opinion of the Security Trustee (acting in good faith), no material adverse changes in the business, operational or financial condition of the relevant Lessee shall have occurred that have materially and adversely affected its ability to perform its obligations under the relevant Lease.

 

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(f)       On such Drawdown Date, no change shall have occurred since the Closing Date in applicable law which, in the reasonable opinion of any Participant, would make it illegal under applicable law for such Participant to make available its Participation Percentage of the Loan Amount in respect of such Loan.

 

(g)       On such Drawdown Date, the following statements shall be correct, and the Security Trustee and the Participants shall have received evidence reasonably satisfactory to it to the effect that:

 

(i)        (A) in respect of the Adria Aircraft, the Borrower Parent has transferred title to such Aircraft to the Adria Borrower and (ii) in respect of each Aircraft, the relevant Lessor or the relevant Borrower, as the case may be, has good and legal title to such Aircraft free and clear of all Liens other than the Lease with respect to such Aircraft, the security created by the Security Agreement and the other Loan Operative Documents and the Permitted Liens (as defined in such Lease);

 

(ii)       after giving effect to the filings and registrations contemplated hereby, the Security Trustee has a first priority and duly perfected Lien of record in and to such Aircraft and the Airframe and Engines included in such Aircraft, and the Lease with respect thereto;

 

(iii)      the international interests of the Security Agreement as supplemented by the Security Agreement Supplement for such Aircraft and the Local Law Mortgage for such Aircraft, if applicable, with respect to the Airframe and each Engine included in such Aircraft shall be in a position to be registered with the International Registry on such Drawdown Date, and there shall exist no other registered international interest on the International Registry in relation thereto other than registrations being terminated or further assigned on such Drawdown Date, including the Lease with respect to such Aircraft;

 

(iv)      all Local Law Requirements that are specified as conditions precedent in respect of such Aircraft in Schedule III shall have been satisfied as contemplated in Schedule III; and

 

(v)       no event shall have occurred and be continuing which constitutes (x) an Event of Default or (y) to the Borrower of such Loan’s Actual Knowledge, a Lease Default or Lease Event of Default under the Lease with respect to such Aircraft except for, solely in respect of the Adria Aircraft, any Lease Event of Default that occurs as a result of any default by the Lessee of the Adria Aircraft in the payment when due of any installment of Rent due under the relevant Lease and such Lease Event of Default has been continuing for a period equal to or less than 60 days.

 

(h)       All approvals and authorizations of any trustee or holder of the indebtedness or obligation of each Borrower or any of their Affiliates which are required in connection with any of the transactions contemplated by this Agreement shall have been duly obtained, and evidence thereof shall have been delivered to each Participant and the Security Trustee.

 

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(i)        On such Drawdown Date, the Security Trustee and the Participants shall have received evidence reasonably satisfactory to it that all of the Borrower Pledged Collateral with respect to the relevant Lessor is held by the related Borrower free and clear of all Liens other than the relevant Borrower Pledge Agreement.

 

(j)        The Uniform Commercial Code financing statements covering all the Liens created by or pursuant to the Security Agreement and the relevant Borrower Pledge Agreement with respect to the relevant Eligible Entities, such Aircraft and the Lease with respect to such Aircraft shall have been authorized by the Borrower of such Loan, such Lessor or the Lessee of such Aircraft, as the case may be, and such financing statements or other statements or documents for the same purpose shall have been authorized to be filed in all places which the Security Trustee or its special counsel shall deem necessary or advisable.

 

(k)       The Security Trustee shall have received a duly executed letter of undertaking from the insurance broker of the related Lessee, in form and substance reasonably satisfactory to the Security Trustee and the Participants, together with a certificate of insurance and/or reinsurance from such broker as to the due compliance with the terms of the Lease with respect to such Aircraft, in each case, to the extent required under such Lease. In addition, the Agent shall have received from its insurance advisor a favorable opinion concerning the insurances and reinsurances evidenced by such certificate(s).

 

(l)        The Security Trustee and the Participants shall have received an opinion addressed to it and each of the Security Trustee, the Agent and the Participants as of such Drawdown Date, from, in each case in form and substance reasonably satisfactory to such Participants:

 

(i)       Withers Bergman LLP, special New York and Delaware counsel to the Borrowers and the Borrower Parent; and

 

(ii)       (A) in respect of each Borrower in respect of a Loan related to an Air Nostrum Aircraft, Vedder Price LLP, special English counsel to the Agent and (B) in respect of a Loan related to a Republic Aircraft, Morris James LLP, special Delaware counsel to the relevant Lessor;

 

(iii)      special counsel in the State of Registration of such Aircraft; and

 

(iv)      special counsel to the Lessee of such Aircraft,

 

in each case covering such additional matters as the Security Trustee or any Participant may reasonably request, including, in respect of clauses (i) and (ii) above, as to the enforceability of the relevant Swap Agreement under the laws of the State of New York and the due execution of such Swap Agreement by the relevant Borrower.

 

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(m)       On such Drawdown Date, the statements set forth in this paragraph shall be true and correct and the Security Trustee and each Participant shall have received a certificate signed by an authorized officer or representative in the name and on behalf of the Borrower of such Loan and each relevant Lessor certifying that (i) its representations and warranties contained in this Agreement or any other Loan Operative Document are correct in all material respects as though made on and as of such Drawdown Date, except to the extent that such representations and warranties relate to an earlier date (in which case such representations and warranties are correct on and as of such earlier date), (ii) to its Actual Knowledge, there are no Liens affecting the Mortgaged Property or any part thereof (other than Lessor Liens arising pursuant to the Loan Operative Documents or the Lease (including those permitted by such Lease) with respect to such Aircraft), (iii) no event has occurred and is continuing which constitutes, or with notice or lapse of time or both would constitute, due to any action or omission on the part of such officer, an Event of Default, (iv) all of the covenants and agreements of such person required to be performed on or as of such Drawdown Date, have been performed and (v) to its Actual Knowledge, no event has occurred and is continuing which constitutes a Lease Default or Lease Event of Default under the Lease with respect to such Aircraft except for, solely in respect of the Adria Aircraft, any Lease Event of Default that occurs as a result of any default by the Lessee of the Adria Aircraft in the payment when due of any installment of Rent due under the relevant Lease and such Lease Event of Default has been continuing for a period equal to or less than 60 days.

 

(n)       The Security Trustee and the Participants shall have received the most recent unaudited financial statements of such Borrower, certified by an officer of such Borrower, and the most recent audited financial statements of the Lessee Parties most recently delivered to such Lessor or such Borrower, as the case may be, in accordance with the Lease with respect to such Aircraft or otherwise delivered to such Lessor in accordance with the standard of a first class aircraft lessor, and the Participants shall have obtained all necessary approvals and consents to enter into the transaction.

 

(o)       The Security Trustee and the Participants shall (i) have received and reviewed the Lease with respect to such Aircraft, the Lease Operative Documents related thereto and, in respect of each Air Nostrum Aircraft, the relevant Residual Value Guarantee and all conditions precedent required to be delivered thereunder and (ii) subject to Section 5.1(s), be satisfied that the scheduled Basic Rent payable under the Lease is sufficient to satisfy the Borrower of such Loan’s debt service obligations in respect of the Loan Certificates related to such Loan (other than any balloon pursuant to Section 2.5(c)).

 

(p)       On such Drawdown Date, no material disruption shall have occurred in the London (or other relevant) interbank market that may have an adverse effect upon any Participant’s ability to raise funds in US Dollars;

 

(q)       The Agent shall have received (or will receive on such Drawdown Date) copies of (i) the certificate of airworthiness of such Aircraft issued by the Aviation Authority in respect thereof, (ii) the certificate of registration of such Aircraft issued by the Aviation Authority in respect thereof, (iii) all other government licenses and certificates required by any governmental entity in the State of Registration of such Aircraft required for the operation of such Aircraft and (iv) the operator’s license (or similar license or certificate) of the relevant Lessee, in each case as in effect on such Drawdown Date;

 

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(r)       The Agent shall have received a copy of each bill of sale (on a back-to-birth basis) for such Aircraft.

 

(s)       The Collateral Account with respect to the Lease relating to such Aircraft shall have been established and pledged to the Security Trustee in accordance with the terms of the Security Agreement. The Cash Collateral Account shall have been established and pledged to the Security Trustee in accordance with the terms of the Security Agreement.

 

(t)       If such Drawdown Date is in respect of the Adria Aircraft, the relevant Borrower shall have deposited the Adria Cash Collateral Amount in the Cash Collateral Account.

 

(u)       If applicable, each Participant and the Security Trustee shall have received the following:

 

(i)       a copy of the organizational documents of such Lessor, certified by an authorized representative of such Person, a good standing certificate (if applicable), and other evidence authorizing execution, delivery and performance by such Person of each Operative Document to which such Person is or will be a party;

 

(ii)      an incumbency certificate of such Lessor as to the person or persons authorized to execute and deliver Loan Operative Documents to which it is a party and the specimen signature of such person or persons;

 

(iii)     all documentation and other information (including originals if required under regulation or policy) required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including without limitation, the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), that has been requested not less than five Business Days prior to such Drawdown Date; and

 

(iv)     such other documents and evidence with respect to such Lessor as any Participant or its counsel may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement and the other Operative Documents, the taking of all corporate proceedings in connection therewith, compliance with the conditions herein or therein set forth and compliance with any money laundering informational requirements the participants may have.

 

(v)       The Agent shall have received from each of the relevant Borrower and the Borrower Parent a “bring-down” certificate of an authorized representative of such Person certifying that the organizational documents, evidence authorizing execution, delivery and performance, incumbency certificate and specimen signatures of such Person certified on the Closing Date pursuant to Sections 3.1(b)(i) and 3.1(b)(iii) are true, correct and complete as of such Drawdown Date.

 

(w)       The Security Trustee, the Agent and each Participant shall have received evidence of the acceptance of appointment of process agents in New York in respect of the relevant Borrower, the Borrower Parent and the relevant Lessor, if applicable.

 

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(x)       All appropriate action required to have been taken by any governmental or political agency, subdivision or instrumentality of the relevant State of Registration, the relevant jurisdiction of incorporation of the Borrower Parent, the relevant Borrower and the relevant Lessor, if applicable, or the United States on or prior to such Drawdown Date in connection with the transactions contemplated by this Agreement to occur on or prior to such Drawdown Date shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals of such entities required to be in effect on such Drawdown Date in connection with the transactions contemplated by this Agreement to occur on or prior to such Drawdown Date shall have been issued, and all such orders, permits, waivers, authorizations, exemptions and approvals shall be in full force and effect on such Drawdown Date.

 

(y)       If applicable, the Agent, the Security Trustee and each Participant shall have received an executed copy of a payoff letter or undertaking, a release agreement and such other documentation, including any relevant UCC searches, tax lien searches and litigation searches with respect to such Lessor and/or such Borrower, as the case may be, as it shall reasonably request evidencing that any indebtedness in respect of such Aircraft, such Lease or any other related Mortgaged Property has been, or will simultaneously with the advance of such Loan be, paid in full and all security interests and Liens (other than Permitted Liens) on such Aircraft, such Lease or such Mortgaged Property have been, or will simultaneously with the advance of such Loan be, released.

 

(z)       The Agent shall have received such other documentation, and such other conditions shall have been fulfilled, as the Agent or its counsel shall reasonably request in light of circumstances occurring following the Closing Date.

 

3.3       Conditions Subsequent. Promptly following the closing on a Drawdown Date for an Aircraft:

 

(a)       international interests in the relevant Airframe and each relevant Engine, in the name of the Security Trustee, shall be duly registered on the International Registry with respect to the Security Agreement as supplemented by the Security Agreement Supplement with respect to such Aircraft, and the Local Law Mortgage with respect to such Aircraft, if applicable;

 

(b)       all Local Law Requirements that are specified as conditions subsequent for such Aircraft in Schedule III shall have been completed or satisfied in a manner reasonably satisfactory to the Security Trustee within the allotted timeframes specified in such Schedule III, and evidence of such completion and/or satisfaction shall have been delivered to the Security Trustee;

 

(c)       the Borrower of such Loan shall have paid to Vedder Price P.C., special New York counsel to the Participants, the Agent and the Security Trustee, such firm’s reasonable legal fees and expenses (including filing and registration costs) promptly after such Drawdown Date, as shall have been invoiced at least three Business Days prior to such Drawdown Date.

 

Section 4.Representations and Warranties.

 

4.1       Borrowers. Each Borrower jointly and severally represents and warrants to each Participant and the Security Trustee as follows, such representations and warranties being made on the date of the execution and delivery of this Agreement, the Closing Date and each Drawdown Date applicable to such Borrower, except to the extent that such representations and warranties relate to an earlier date (in which case such representations and warranties are correct on and as of such earlier date):

 

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(a)       Organization, Corporate Authority, Etc. Such Borrower (i) is duly formed, validly existing, and in good standing (if applicable) under the laws of its jurisdiction of incorporation and is qualified to do business in all jurisdictions where it does business, except where the failure to so qualify would not have a material adverse effect on the assets, business, or condition (financial or otherwise) of such Borrower, (ii) has full power to carry on its business as it is now being conducted and to enter into, legally bind itself by, and perform its obligations under, this Agreement and each other Loan Operative Document to which it is a party and has complied with all material statutory and other requirements relative to the business carried on by it and (iii) such Borrower has duly executed and delivered this Agreement, and each of the Loan Operative Documents to which such Borrower is a party.

 

(b)       Authorization, Etc. This Agreement and the other Operative Documents to which such Borrower is party have been duly authorized, executed and delivered by such Borrower. This Agreement and the other Operative Documents to which such Borrower is party constitute the legal, valid and binding obligations of such Borrower, enforceable against it in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the rights of creditors generally or by the general principles of equity (regardless whether such enforceability is considered in a proceeding at law or in equity).

 

(c)       No Violation. None of the execution, delivery or performance by such Borrower of this Agreement or the other Operative Documents to which such Borrower is party, nor the consummation of any of the transactions contemplated hereby or thereby, will (i) contravene any applicable law binding on such Borrower or any of its property, or any provision of the organizational documents of such Borrower, or will result in a breach of, or constitute a default under, or contravene any provision of, any agreement or instrument to which such Borrower is a party or by which such Borrower or any of its property is bound; (ii) cause any limitation on such Borrower, or the power of its officers and directors, whether imposed by or contained in its organizational documents or any existing law, agreement or otherwise, to be exceeded; or (iii) result in the imposition of, or oblige it to create, any Lessor Lien (other than pursuant to a Loan Operative Document or the Lease).

 

(d)       No Consents or Approvals. None of the execution, delivery or performance by such Borrower of this Agreement or any other of the Operative Documents to which such Borrower is party, nor the consummation by such Borrower of any of the transactions contemplated hereby and thereby, requires the consent or approval of, the giving of notice to, the registration, recording or filing of any documents with, or the taking of any other action in respect of, any governmental authority, except such as has been obtained or effected on or prior to the effective date hereof or is to be obtained or effected on or prior to the Closing Date and/or each Drawdown Date, except the filings necessary to perfect Liens in favor of the Security Trustee, the notices, filings and registrations set forth in Section 3.3 and the Local Law Requirements.

 

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(e)       No Defaults. Such Borrower is not in default under any mortgage, deed of trust, indenture or other instrument or agreement to which it is a party or by which it or any of its assets may be bound and the Borrower Parent is not subject to any bankruptcy or similar type of event.

 

(f)       No Litigation. There are not pending or, to such Borrower’s Actual Knowledge, threatened investigations, suits or proceedings against such Borrower or affecting such Borrower or its properties.

 

(g)       Liens. The Mortgaged Property is free and clear of Liens attributable to such Borrower or any Lessor (other than Lessor Liens arising pursuant to the Loan Operative Documents or any Lease (including those permitted by such Lease) and there are no Liens affecting the title of the relevant Lessor or such Borrower to any Aircraft or resulting from any act or claim against such Borrower arising out of any event or condition not related to (i) the ownership, leasing, use or operation of such Aircraft or to (ii) any other transaction contemplated by this Agreement or any related documents.

 

(h)       [Intentionally Omitted].

 

(i)        Cape Town Convention. Each Lessor and such Borrower is (or will be) a transacting user entity or is otherwise duly qualified to consent to the registration of all applicable international interests or other registrations to be made by or on behalf of the Security Trustee on the International Registry on a Drawdown Date; is “situated”, for the purposes of the Cape Town Convention, in a “Contracting State”; and has the power to “dispose” (as such term is used in the Cape Town Convention) of the relevant Airframe and related Engines, and the relevant Lease (if applicable); the Airframe and related Engines financed on a Drawdown Date are “aircraft objects” (as defined in the Cape Town Convention).

 

(j)        Filings, Registrations, etc. With respect to any Aircraft, it is not necessary to ensure the legality, validity or enforceability in the State of Registration of such Aircraft or the United States of America of the Loan Operative Documents that any of them or any other instrument be filed, recorded, registered or enrolled in any court, public office or elsewhere in the State of Registration of such Aircraft or the United States of America, except as expressly specified on Schedule III with respect to such Aircraft, or that any stamp, registration or similar tax be paid in the State of Registration of such Aircraft or the United States of America on or in relation to any of the Loan Operative Documents, and no further action in the State of Registration of such Aircraft or the United States of America, including any filing or recording of any document, is necessary or permissible to establish and perfect such Borrower’s or any relevant Lessor’s title to and interest in, and the Security Trustee’s security interest in, such Aircraft, the relevant Lease, the relevant Pledged Collateral and the other relevant Mortgaged Property as against the relevant Lessee, such Borrower and any third parties except for (1) the filings and registrations set forth in Schedule III with respect to such Aircraft, (2) the Cape Town Registrations and (3) the filing of financing statements under the Uniform Commercial Code in any applicable jurisdiction.

 

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(k)       Security Interest. On the Drawdown Date for a Loan, the security interest in the Mortgaged Property created pursuant to the Security Agreement on such date will be validly created, and no action (other than the filings referred to in Schedule III with respect to the relevant Aircraft) is required to be taken by any person (other than the taking and retaining of possession of the original counterparts of the Lease with respect to such Aircraft and any instruments or investment property), in order for the full benefit of the security interest created thereby to vest in the Security Trustee on behalf of the Participants. The security interest in the Pledged Collateral created pursuant to each Borrower Pledge Agreement has been validly created on the date hereof, and no action (other than, if applicable, the taking and retaining of possession by the Security Trustee of all certificates evidencing the ownership interests pledged under such document (if any) and the other ancillary documents delivered pursuant to such document) is required to be taken by any person (other than the filings referred to in Section 4.1(j)) in order for the full benefit of the security interest created thereby to vest in the Security Trustee on behalf of the Participants or in order to ensure the first priority perfected security interest of the Security Trustee for the benefit of the Participants in the Pledged Collateral will be maintained.

 

(l)        Title. Each Lessor and such Borrower will have legal title to its assets including any Aircraft in which it holds title, any Lease in which it holds title and the related Mortgaged Property which is to be held by it free and clear of Liens attributable to such Borrower or such Lessor (other than Lessor Liens arising pursuant to the Loan Operative Documents or any such Lease (including those permitted by such Lease)).

 

(m)      Ownership. All of the Borrower Pledged Collateral is held by the Borrowers free and clear of all Liens (other than Lessor Liens arising pursuant to the Loan Operative Documents).

 

(n)       Borrower Location. The location of each of the 19002 Borrower and the 19003 Borrower for purposes of Article 9 of the New York Uniform Commercial Code is England. The location of each of the Republic Borrower and the Adria Borrower for purposes of Article 9 of the New York Uniform Commercial Code is Delaware. The location of each Lessor for purposes of Article 9 of the New York Uniform Commercial Code is Delaware.

 

(o)       Complete Documents. On the Drawdown Date for an Aircraft, the copies of the Lease and the related Lease Operative Documents with respect to such Aircraft and, in respect of each Air Nostrum Aircraft, the relevant Residual Value Guarantee, furnished to the Agent by the relevant Lessor or such Borrower, as the case may be, are true, correct and complete in all respects, and there are no amendments, supplements, letters or written or oral understandings modifying the terms of such copies.

 

(p)       Anti-Corruption Laws and Sanctions . Each Borrower has implemented and maintains in effect policies and procedures designed to promote and achieve compliance by such Borrower and its directors, officers, employees, agents and Affiliates (including Eligible Entities) with Anti-Corruption Laws and applicable Sanctions. None of the Borrowers nor any of their Affiliates (including any Lessor), directors or officers (i) is a Sanctioned Person or (ii) has in the past five years knowingly engaged in any activity or conduct which would violate any applicable Anti-Corruption Laws. No Borrower will directly or knowingly indirectly use the proceeds of a Loan or knowingly lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or any other Person, to fund any activities or business of or with any Sanctioned Person, or in any Sanctioned Country, or in a manner that will constitute a violation of applicable Anti-Corruption Laws or Sanctions by any Person.

 

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(q)       Special Purpose. Such Borrower and each Lessor has been formed for the sole purpose of negotiating, entering into and performing the transactions contemplated by the Operative Documents and matters reasonably incidental thereto, and since its formation, it has not entered into any transaction or conducted any business except as required or contemplated by the Operative Documents.

 

Section 5.       Certain Covenants.

 

5.1       The Borrowers. Each Borrower jointly and severally covenants and agrees as follows:

 

(a)       Transfer. Except as expressly contemplated by the Operative Documents, none of the Borrowers nor any Lessor shall directly or indirectly assign, convey otherwise transfer any of its right, title or interest in and to the Mortgaged Property, the Pledged Collateral, this Agreement or any of the other Operative Documents, without the prior written consent of the Security Trustee and the Participants, which consent may be withheld in their sole discretion.

 

(b)       Event of Default; an Event of Loss; Claims. Each Borrower shall inform the Agent with reasonable promptness upon its Actual Knowledge of the occurrence of (i) a Default or an Event of Default as set out in the Security Agreement, (ii) any event which, with or without the passage of time, could reasonably be expected to constitute an Event of Loss, (iii) any material claim with respect to any liability filed against Borrower or (iv) the occurrence of a Lease Event of Default under any Lease.

 

(c)       Registration. Each Borrower covenants that it will not consent to and shall procure that the Lessor of an Aircraft shall not consent to any change in the State of Registration of such Aircraft without the prior written consent of the Security Trustee, such consent not to be unreasonably withheld or delayed.

 

(d)       Liens. Each Borrower covenants that no Borrower Party will directly or indirectly create, incur, assume or suffer to exist any Liens (other than Lessor Liens arising pursuant to the Loan Operative Documents or any Lease (including any Liens permitted by such Lease)) attributable to it, with respect to any of the properties or assets constituting Mortgaged Property or the Pledged Collateral, that it shall, at its own cost and expense, promptly take such action as may be necessary to discharge duly any such Lien (other than Lessor Liens arising pursuant to the Loan Operative Documents or any Lease (including any Liens permitted by such Lease)), and that it will cause restitution to be made to the Mortgaged Property or the Pledged Collateral in the amount of any diminution of the value thereof as the result of any Liens thereon attributable to it (other than Lessor Liens arising pursuant to the Loan Operative Documents or any Lease (including any Liens permitted by such Lease)).

 

(e)       Existence, Etc. Each Borrower will and will procure that each Lessor will:

 

(i)       preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises and not change its location for purposes of Article 9 of the New York Uniform Commercial Code or name without the Security Trustee’s prior written consent;

 

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(ii)       comply with the material requirements of all applicable laws, rules, regulations and orders of governmental or regulatory authorities;

 

(iii)       pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained;

 

(iv)       keep adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied; and

 

(v)       permit representatives of any Participant, the Agent or the Security Trustee, during normal business hours and with prior written notice, to examine and copy from the books and records of such Borrower and such Lessor, as the case may be, and to discuss its business and affairs with their respective representatives or officers, as the case may be, all to the extent reasonably requested by such Participant, the Agent or the Security Trustee, as the case may be.

 

(f)        Special Purpose. No Borrower shall, and each Borrower shall not permit any Lessor to, without the prior written consent of the Required Participants:

 

(i)         have any employees earning compensation;

 

(ii)        except for (w) Intercompany Indebtedness, (x) the Loans, (y) any other indebtedness as is consented to by the Agent and (z) as expressly contemplated hereby (including as a result of engaging in the activities permitted under this Section 5.1(f)), incur or contract to incur any indebtedness;

 

(iii)       engage in any activity other than the execution, delivery and performance of the Operative Documents and activities incidental thereto (including any equity infusion made by a Borrower to a Lessor and including the purchase of Aircraft (whether directly or through Borrower’s acquisition of 100% of the ownership interests in an entity owning an Aircraft), as well as ordinary corporate or limited liability company, as applicable, housekeeping activities;

 

(iv)       maintain or have any obligation to make contributions to any “employee benefit plan” or “multiemployer plan” (each as defined in ERISA);

 

(v)       except as contemplated or permitted under the Operative Documents (including so as to meet its obligations under the Lease Operative Documents and the relevant Residual Value Guarantee, if applicable, to which it is a party), make or agree to make any capital expenditure;

 

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(vi)        create or own any subsidiary other than any Lessor;

 

(vii)       except as contemplated or permitted under the Operative Documents (including so as to meet its obligations under the Lease Operative Documents and any Residual Value Guarantee, if applicable, to which it is a party and including equity infusions made by a Borrower to a Lessor), make any investments or pledge any of its assets;

 

(viii)      except as required to perform its obligations under the Operative Documents, declare or make any dividend payment or distribution to its members, beneficial owners or shareholders, as the case may be (other than in respect of Excluded Payments or any other payments which either Borrower is entitled to receive under the Security Agreement);

 

(ix)        incur any material obligation to any third party (excluding any payment or other obligation incurred pursuant to the Operative Documents and activities incidental thereto, as well as obligations under purchase agreements with respect to Aircraft (or ownership interests of entities owning Aircraft) and ordinary corporate or limited liability company, as applicable, housekeeping activities); or

 

(x)         amend its formation or organizational documents.

 

(g)       Obligations. Each Borrower shall, and shall cause each Lessor to duly and punctually perform its obligations under the Operative Documents to which it is a party.

 

(h)       Preservation of the Property. Each Borrower agrees that such Borrower shall, and shall cause each Lessor to, take all steps reasonably required by the Security Trustee or the Agent to preserve or protect their respective interests and the interests of the Security Trustee in the Mortgaged Property and the Pledged Collateral. Each Borrower hereby authorizes, and will cause each Lessor to authorize, the Security Trustee to instruct its counsel to file one or more UCC financing or continuation statements on its behalf, and amendments thereto, or any similar document, with respect to (i) all or any part of the Mortgaged Property mortgaged by the Borrowers and all or any part of the Pledged Collateral pledged by the Borrowers and (ii) all or any part of the Mortgaged Property mortgaged by any Lessor, in each case, without the signature of the Borrowers or such Lessor.

 

(i)        Use of Proceeds. Each Borrower agrees that it will use the proceeds of each Loan borrowed by it hereunder to refinance the acquisition of the Aircraft with respect to such Loan (in compliance with all applicable legal and regulatory requirements) and the payment of fees and other costs associated thereto under this Agreement and the other Operative Documents; provided that none of the Security Trustee, the Agent or any Participant shall have any responsibility as to the use of any of such proceeds.

 

(j)        Insurance. Each Borrower shall, or shall procure that the Lessor of an Aircraft will, direct the Lessee of such Aircraft (i) to name the Security Trustee as the sole loss payee (or, in the case of insurance that incorporates AVN67B, a contract party) and the Finance Parties as additional insureds in any insurance and reinsurance maintained pursuant to the Lease with respect to such Aircraft, (ii) to maintain hull and hull war risk insurance at all times in an amount not less than 120% of the amount of the Loan with respect to such Aircraft and of a scope and coverage at least as comprehensive as customarily maintained by such Lessee’s fleet policy for similar aircraft, with a financier endorsement at least as comprehensive as AVN67B and (iii) to maintain hull and liability insurance as required by such Lease.

 

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(k)       Information.

 

(i)       Each Borrower shall, or shall procure that the Lessor of an Aircraft will, grant the Agent or its authorized representatives the right to request information regarding any monthly reports on such Aircraft that are to be delivered by the Lessee of such Aircraft to such Lessor or such Borrower, as the case may be, under the Lease with respect to such Aircraft in the form set out in such Lease (A) on an annual basis, (B) after the occurrence of a Lease Event of Default under such Lease that is continuing and

(C) after an Event of Default that has occurred and is continuing.

 

(ii)       Each Borrower shall, or shall procure that the Lessor of an Aircraft will, grant the Agent an independent inspection right as and when permitted under the Lease with respect to such Aircraft or will nominate the Agent as its representative for such inspection thereunder, and in case the relevant Lessor will not have made use of its annual inspection right under such Lease, the Agent shall be entitled to instruct such Lessor or such Borrower, as the case may be, to initiate such inspection. If requested by the Security Trustee, such Borrower and the Lessor of an Aircraft will fully involve the Security Trustee in relation to any inspection of such Aircraft to the extent permitted by the Lease with respect to such Aircraft.

 

(iii)       Each Borrower shall permit the Agent (or its designated representative) to periodically inspect, during normal business hours and with prior written notice, the books and records of such Borrower (and the Lessor owned by such Borrower) relating to the Loans and associated Aircraft; provided that, so long as no Event of Default is continuing, such inspection may not occur more frequently than once annually.

 

(l)        Subleasing. Each Borrower shall, or shall procure that the Lessor of an Aircraft will, take any such action as required by the Security Trustee (acting reasonably and having regards to the terms of the Lease) in relation to any subleasing of such Aircraft to the extent permitted by the Lease with respect to such Aircraft.

 

(m)       KYC. Each Borrower will, upon request, deliver such additional information about itself or any Lessor reasonably requested by a Participant, the Security Trustee or the Agent based on prevailing banking law requirements in order to satisfy such Participant’s, the Security Trustee’s or the Agent’s “know your customer” requirements.

 

(n)       Compliance with the Leases.

 

(i)       Each Borrower will, or will procure that each Lessor of an Aircraft, take commercially reasonable actions in accordance with the standards of reputable internationally recognized aircraft lessors to procure compliance with all provisions of the Lease with respect to such Aircraft that relate to the operation of such Aircraft, including, without limitation, the insurance, maintenance, registration, possession and use of such Aircraft.

 

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(ii)       Except for Day-to-Day Operational Matters, each Borrower will, or will procure that no Lessor of an Aircraft shall, (A) exercise any discretion granted to it under the Lease with respect to such Aircraft without the consent of the Security Trustee (which consent shall not be unreasonably withheld) or (B) amend or modify any Lease, Lease Operative Document or Residual Value Guarantee, if applicable, or grant any waiver of any term or condition of any Lease without the prior written consent of the Security Trustee.

 

(iii)       Subject to Section 4.03 of the Security Agreement, each Borrower will not, or will procure that no Lessor of an Aircraft will, terminate the Lease with respect to such Aircraft or waive any Lease Event of Default thereunder without the approval of the Security Trustee.

 

(o)       Blue Sky Event . Each Borrower agrees and shall cause each Lessor to grant further aircraft mortgages in the event that any mortgage delivered on the Drawdown Date for an Aircraft becomes unenforceable or inadequate to protect the Security Trustee’s Lien in the Collateral securing the relevant Loan.

 

(p)       Financial Statements, Etc. Each Borrower shall deliver and shall cause each Lessor of an Aircraft to, deliver, in English, to the Security Trustee and each Participant:

 

(i)       within 180 days of the last day of each fiscal year of the Lessee of such Aircraft, commencing with the fiscal year ending in 2018, the financial statements of such Lessee or the Lessee Parties delivered to the relevant Lessor or such Borrower, as the case may be, under the Lease with respect to such Aircraft (if any) (provided that if such financial statements are not provided in the English language, such Borrower shall procure, promptly following receipt thereof, a certified English translation);

 

(ii)       within 180 days of the last day of each fiscal year of the Borrowers, the unaudited financial statements of the Borrowers and each Lessor certified by an officer of the relevant Borrower;

 

(iii)       promptly after such Borrower has Actual Knowledge that (x) any Lease Event of Default has occurred, (y) any Default has occurred or (z) any Lien has been levied on an Aircraft (other than Lessor Liens arising pursuant to the Loan Operative Documents or any Lease (including any Liens permitted by such Lease)), a notice describing the same in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that such Borrower has taken or proposes to take with respect thereto;

 

(iv)       maintenance reports with respect to each Aircraft (A) on an annual basis (if requested by the Security Trustee), (B) after each scheduled maintenance event, (C) after each major unscheduled maintenance event and (D) constituting a utilization report of such Aircraft (delivered quarterly), in each case to the extent such report is received from the Lessee of such Aircraft;

 

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(v)       notice of all material litigation against such Borrower and any Lessor; and

 

(vi)      from time to time such other information available to such Borrower or the Lessor of an Aircraft pursuant to the Lease with respect to such Aircraft, or as would otherwise be provided to such Borrower or Lessor, as the case may be, in accordance with the standard of a first class aircraft lessor, regarding (A) such Aircraft (including, without limitation, its maintenance status) as any Participant may reasonably request or (B) the financial condition, operations, business or prospects of such Borrower or, to the extent available the Lessee of such Aircraft, as any Participant may reasonably request.

 

(q)       Anti-Corruption Laws; Sanctions. Each Borrower will maintain in effect and enforce policies and procedures designed to promote and achieve compliance by such Borrower, and, in each case, its respective directors, officers, employees, agents and Affiliates (including Eligible Entities) with Anti-Corruption Laws and applicable Sanctions. No Borrower will directly or knowingly indirectly use the proceeds of a Loan to fund any activities or business of or with any Sanctioned Person, or in any Sanctioned Country, or in a manner that will violate Anti-Corruption Laws.

 

(r)       Ownership Interest. The Borrowers shall not encumber or dispose of the shares or ownership interest in any Lessor to any person other than the Security Trustee.

 

(s)       Adria Cash Collateral Amount.

 

(i)       To the extent the monthly Rent payable on a Basic Rent Payment Date under the Lease related to the Adria Aircraft is less than the sum of the principal and interest payable on the Payment Date in respect of the Loan related to the Adria Aircraft immediately following such Basic Rent Payment Date (the relevant “Adria Shortfall”), the Security Trustee shall promptly transfer an amount equal to such Adria Shortfall from the Cash Collateral Account to the Collateral Account in respect of the Adria Aircraft for application in accordance with Section 3.01 of the Security Agreement. The amount of the Adria Cash Collateral Amount in the Cash Collateral Account shall be reduced by the amount of such Adria Shortfall.

 

(ii)       Upon receipt by the Adria Borrower and/or the Security Trustee of any late Rent from the Lessee in respect of the Adria Aircraft, such late Rent shall be deposited by the Adria Borrower or the Security Trustee, as the case may be, in the Cash Collateral Account and the Adria Cash Collateral Amount shall be increased by the amount of such late Rent.

 

(t)       Republic Aircraft Event of Loss.

 

(i)       With respect to an Event of Loss in respect of a Republic Aircraft, to the extent the Lessee of such Republic Aircraft elects to replace such Republic Aircraft in accordance with Section 8(a)(i) of the relevant Lease with a replacement airframe and replacement engines (together, a “Replacement Republic Aircraft”) in lieu of paying the relevant insurance proceeds in respect of such Event of Loss to the relevant Lessor, the relevant Borrower may replace such Republic Aircraft with such Replacement Republic Aircraft hereunder and under the other Loan Operative Documents (a “Republic Replacement”); provided that:

 

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(1)       such Borrower shall provide the Security Trustee with (A) a description of the proposed Replacement Republic Aircraft (including the model and serial number of the replacement airframe and each replacement engine) and information as to the current maintenance status of the proposed Replacement Republic Aircraft as soon as possible after such Borrower receives notice from such Lessee of its election to replace such Republic Aircraft and (B) written notice of the proposed date of such Republic Replacement no later than ten Business Days prior to the proposed date of such Republic Replacement;

 

(2)       on or prior to the date of the Republic Replacement, the relevant Borrower shall comply with Section 3.2, to the extent applicable, as if such Replacement Republic Aircraft was the subject of a Drawdown Date hereunder and as if references to Drawdown Date were references to the date of such Republic Replacement;

 

(3)       no Event of Default shall have occurred and be continuing at the time of such Republic Replacement or shall result therefrom;

 

(4)       such Replacement Republic Aircraft shall be free and clear of all Liens (other than Permitted Liens) on the date of the Republic Replacement;

 

(5)       such Replacement Republic Aircraft shall be of the same or newer make and model as such Republic Aircraft and shall have a value, utility and remaining useful life at least equal to such Republic Aircraft; and

 

(6)       such Republic Replacement shall be subject to the internal appraisal and approval processes of the Participants, in their sole discretion.

 

(ii)       Upon completion of a Republic Replacement, all references to the relevant replaced Republic Aircraft hereunder and under the other Loan Operative Documents shall thereafter be deemed to refer to the relevant Replacement Republic Aircraft in lieu of such Republic Aircraft.

 

(iii)       The Borrowers and the Finance Parties shall enter into any amendments to this Agreement and the other Loan Operative Documents required to reflect a Republic Replacement, to the extent reasonably necessary.

 

(iv)       In connection with a Republic Replacement, after completion of such Republic Replacement in accordance with this Section 5.1(t):

 

(1)       the relevant Borrower may direct the Security Trustee to execute and deliver to or as directed in writing by such Borrower an appropriate instrument releasing the relevant Republic Aircraft and the Engines associated therewith from the Lien of the Security Agreement and the relevant Local Law Mortgage and the Mortgagee shall execute and deliver such instrument as aforesaid and give written notice thereof to the relevant Lessee;

 

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(2)       no mandatory prepayment in respect of the Event of Loss in respect of such Republic Aircraft under Section 2.10(b)(i) of the Security Agreement shall be required; and

 

(3)       no mandatory prepayment in respect of the release and disposition of such Republic Aircraft under Section 2.10(b)(ii) of the Security Agreement shall be required.

 

5.2       Section 2.13 of the Security Agreement. Each of the Participants (on its behalf and the behalf of its Affiliates) and the Borrowers hereby agree to the terms of Section 2.13 of the Security Agreement and shall be bound by the provisions thereof as if Section 2.13 of the Security Agreement were incorporated in this Credit Agreement mutatis mutandis.

 

5.3       No Action Contrary to Lessee’s Rights Under the Lease. Notwithstanding any of the provisions of any Loan Operative Document to the contrary, and so long as no Lease Event of Default shall have occurred and be continuing under a Lease with respect to an Aircraft, no Participant, or any person lawfully claiming through any of them, will take any action contrary to the Lessee of such Aircraft’s rights under such Lease, including the right to possession and use of, and the quiet enjoyment of, such Aircraft.

 

5.4       Ownership Interests. The Borrowers shall procure that the Borrower Parent shall not encumber or dispose of the shares or ownership interest in the Borrowers to any person other than the Security Trustee.

 

5.5       Residual Value Guarantees. In respect of the relevant Residual Value Guarantee, each of the 19002 Borrower and the 19003 Borrower shall:

 

(a)       not amend or agree to any amendment of such Residual Value Guarantee, or waive any right under such Residual Value Guarantee, without the prior written consent of the Agent;

 

(b)       not agree to any of the procedures in relation to the obligations under such Residual Value Guarantee, including the return conditions contemplated thereby, without the prior written consent of the Agent;

 

(c)       exercise its rights under such Residual Value Guarantee, including any right or requirement to appoint Bombardier Inc. as “remarketing agent” within the timeframes contemplated by such Residual Value Guarantee, solely on the instruction of the Agent;

 

(d)       procure that any proceeds payable by Bombardier Inc. under such Residual Value Guarantee will be paid to an account of the Security Trustee for application in accordance with this Agreement and the Security Agreement;

 

(e)       immediately notify the Agent about any termination of such Residual Value Guarantee;

 

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(f)       promptly deliver to the Agent (i) all information that the Agent may reasonably request in relation to such Residual Value Guarantee and (ii) a copy of any notice received from Bombardier Inc. under or in accordance with such Residual Value Guarantee;

 

(g)       not provide any consent under such Residual Value Guarantee without the prior written consent of the Agent;

 

(h)       to the extent any cooperation is required under such Residual Value Guarantee, provide any such cooperation on the instruction of the Agent; and

 

(i)       not rescind, cancel, terminate or permit the termination of such Residual Value Guarantee or enter into any agreement with Bombardier Inc. and/or the relevant Lessee (in relation to the relevant Lease or otherwise) which would rescind, cancel or terminate such Residual Value Guarantee (or any part thereof) without the prior written consent of the Agent.

 

Section 6.The Agent and Security Trustee.

 

6.1       Appointment, Powers and Immunities.

 

(a)       Each holder of a Loan Certificate hereby irrevocably appoints and authorizes Wilmington Trust Company (“Wilmington”) to act as Security Trustee hereunder and under the other Operative Documents with such powers as are specifically delegated to the Security Trustee by the terms of this Agreement and of the other Operative Documents, together with such other powers as are reasonably incidental thereto. Wilmington accepts such appointment. The Security Trustee (which term as used in this sentence and in Section 6.4 and the first sentence of Section 6.5 shall include reference to Wilmington’s Affiliates and its own and its Affiliates’ officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Operative Documents, and shall not by reason of this Agreement or any other Operative Document be a trustee for any holder of a Loan Certificate; (b) shall not be responsible to the holder of a Loan Certificate for (i) any recitals, statements, representations or warranties contained in this Agreement or in any other Operative Document, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Operative Document, or for (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any Loan Certificate or any other Operative Document or any other document referred to or provided for herein or therein or for any failure by the Borrowers or any other person to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Operative Document; and (d) shall not be responsible to the holder of any Loan Certificate for any action taken or omitted to be taken by it hereunder or under any other Operative Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. The Security Trustee may employ agents and attorneys-in-fact and shall not be responsible to the holder of any Loan Certificate for the negligence or misconduct of any such agent or attorneys-in-fact selected by it in good faith.

 

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(b)       Each holder of a Loan Certificate hereby appoints and authorizes Nord/LB to act as Agent hereunder and under the other Operative Documents with such powers as are specifically delegated to the Agent by the terms of this Agreement and of the other Operative Documents, together with such other powers as are reasonably incidental thereto. Nord/LB accepts such appointment. The Agent (which term as used in this sentence and in Section 6.4 and the first sentence of Section 6.5 hereof shall include reference to Nord/LB’s Affiliates and its own and its Affiliates’ officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Operative Documents, and shall not by reason of this Agreement or any other Operative Document be a trustee for any holder of a Loan Certificate; (b) shall not be responsible to the holder of a Loan Certificate for (i) any recitals, statements, representations or warranties contained in this Agreement or in any other Operative Document, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Operative Document, or for (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any Loan Certificate or any other Operative Document or any other document referred to or provided for herein or therein or for any failure by each Borrower or any other person to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Operative Document; and (d) shall not be responsible to any holder of a Loan Certificate for any action taken or omitted to be taken by it hereunder or under any other Operative Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible to the holder of any Loan Certificate for the negligence or misconduct of any such agent or attorneys-in-fact selected by it in good faith.

 

6.2       Reliance by Agent and Security Trustee. The Agent and Security Trustee shall be entitled to rely upon any certification, notice or other communication (including, without limitation, any thereof by telephone, telecopy or e-mail) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper person or persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent or the Security Trustee. As to any matters not expressly provided for by this Agreement or any other Operative Document, the Agent and the Security Trustee shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Participants.

 

6.3       Defaults. The Agent and the Security Trustee shall not be deemed to have knowledge or notice of the occurrence of a Default (other than the non-payment of principal of or interest on the Loan Certificate) unless the Agent or the Security Trustee has received notice from a holder of a Loan Certificate or a Borrower specifying such Default and stating that such notice is a “Notice of Default”. In the event that the Agent or the Security Trustee receives such a notice of the occurrence of a Default, the Agent or the Security Trustee, as the case may be, shall give prompt notice thereof to the holders of Loan Certificates (and shall give each holder of a Loan Certificate and the Borrowers prompt notice of each such non-payment). The Agent and Security Trustee shall (subject to Section 6.6) take such action with respect to such Default as shall be directed by the Required Participants.

 

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6.4       Indemnification. The holders of Loan Certificates agree to indemnify the Agent and Security Trustee ratably in accordance with their respective Loan Certificates, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent or Security Trustee (including by any holder of a Loan Certificate) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Operative Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or the enforcement of any of the terms hereof or thereof or of any such other documents, provided that no holder of a Loan Certificate shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Agent or the Security Trustee.

 

6.5       Non-Reliance on Agent, Security Trustee and Other Holder of a Loan Certificate. Each holder of a Loan Certificate agrees that it has, independently and without reliance on the Agent, the Security Trustee or any other holder of a Loan Certificate, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Lessee and decision to enter into the Operative Documents to which it is or is to be a party and that it will, independently and without reliance upon the Agent, the Security Trustee or any other holder of a Loan Certificate, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement. Each of the Agent and the Security Trustee shall not be required to keep itself informed as to the performance or observance by the Borrowers or the Lessees of this Agreement or any of the other Operative Documents or any other document referred to or provided for herein or therein or to inspect their respective properties or books. Except for notices, reports and other documents and information expressly required to be furnished to the holders of Loan Certificates by the Agent or Security Trustee hereunder, the Agent or the Security Trustee, as the case may be, shall not have any duty or responsibility to provide any holder of a Loan Certificate with any credit or other information concerning the affairs, financial condition or business of the Borrowers or the Lessees (or any of their Affiliates) that may come into the possession of the Agent or Security Trustee or any of its Affiliates.

 

6.6       Failure to Act. Except for action expressly required of the Agent and the Security Trustee hereunder and under the other Operative Documents, the Agent and the Security Trustee shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from the holders of Loan Certificates of their indemnification obligations under Section 6.4 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.

 

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6.7       Resignation or Removal of Agent and Security Trustee. Subject to the appointment and acceptance of a successor Agent or Security Trustee as provided below, one or both of the Agent or the Security Trustee may resign at any time by giving notice thereof to the holders of Loan Certificates and the Borrowers, and the Agent or the Security Trustee may be removed at any time with or without cause by the Required Participants. Upon any such resignation or removal, the Required Participants shall have the right to appoint a successor Agent or Security Trustee, as the case may be, which shall be a bank with a combined capital and surplus of at least $500,000,000 experienced in aircraft financing transactions. If no successor Agent or Security Trustee, as the case may be, shall have been so appointed by the Required Participants and shall have accepted such appointment within 30 days after the retiring Agent’s or Security Trustee’s giving of notice of resignation or the Required Participants’ removal of the retiring Agent or Security Trustee, then the retiring Security Trustee shall, on behalf of the holders of Loan Certificates, appoint a successor Security Trustee, that shall be a bank with a combined capital and surplus of at least $500,000,000 experienced in aircraft financing transactions. Upon the acceptance of any appointment as Agent or Security Trustee hereunder by a successor Agent or Security Trustee, such successor Agent Security Trustee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent or Security Trustee, and the retiring Agent or Security Trustee shall be discharged from its duties and obligations hereunder. After any retiring Agent or Security Trustee’s resignation or removal hereunder as Agent or Security Trustee, the provisions of this Section 6 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent or Security Trustee. Unless an Event of Default has occurred and is continuing, any successor Agent or Security Trustee shall be reasonably acceptable to the Borrowers.

 

6.8       Consents Under Operative Documents. Except as otherwise provided in Article VIII of the Security Agreement, the Security Trustee may, with the prior consent of the Required Participants (but not otherwise), consent to any modification, supplement or waiver under any of the Operative Documents, provided that, without the prior consent of each Participant, the Security Trustee shall not (except as provided in the Security Agreement) release any collateral or otherwise terminate any Lien under any Operative Document providing for collateral security, or agree to additional obligations being secured by such collateral security (unless the Lien for such additional obligations shall be junior to the Lien in favor of the other obligations secured by such Operative Document), except that no such consent shall be required, and the Security Trustee is hereby authorized, to release any Lien covering property which is the subject of a disposition of property permitted hereunder or to which the Required Participants have consented.

 

Section 7.       Miscellaneous.

 

7.1       Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Agreement to be made, given, furnished or filed shall be in writing, personally delivered or delivered by a commercial carrier, or by facsimile or by e-mail, and addressed to such address as set forth in Schedule I hereto. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Agreement. Any notice given as provided in this Section 7.1 shall be deemed effective and given for the purposes of the Operative Documents on the date on which it is received (or delivery refused or rejected) by the addressee.

 

7.2       Rights Cumulative. The rights and remedies of the Agent, Security Trustee and the Participants under this Agreement, the Security Agreement, the Loan Certificates and the other Operative Documents shall be cumulative and not exclusive of nor limiting upon any rights or remedies that it otherwise has, and no failure or delay by the Security Trustee, the Agent or any Participant in exercising any right shall operate as a waiver of it, nor shall any single or partial exercise of any power or right preclude its other or further exercise or the exercise of any other power or right.

 

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7.3       Waivers; Amendments. Notwithstanding any provision in any Loan Operative Document to the contrary, no term or provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Borrowers and the Required Participants (or the Agent on behalf of the Required Participants or all the Participants if required by Section 8.01 of the Security Agreement) with the written approval of the Swap Counterparty if required by Section 8.01 of the Security Agreement; and any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given.

 

7.4Assignment.

 

(a)       All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the permitted successors and assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Participant shall bind the successors and assigns of such holder.

 

(b)       Subject to the conditions set forth in paragraph (c) and (d) below and specified in Section 2.07 of the Security Agreement, following the relevant Drawdown Date, without the consent of the Borrowers or any other Person, any Participant may assign to one or more Persons that is (i) a Participant or an Affiliate of a Participant, (ii) a bank, financial institution, insurance company, trust, fund (other than a hedge fund) or other entity regularly engaged in or established for the purpose of making, purchasing, or investing in loans, securities or other financial assets, (iii) a member of the European System of Central Banks or (iv) any special purpose company or vehicle (each, an “Assignee”) all or a portion of its Loan Certificates in respect of the relevant Loan (each, an “Assignment” and collectively, the “Assignments”); provided that if an Event of Default has occurred and is continuing, subject to Section 7.4(d), any Participant may effect an assignment to any Person without the consent of the relevant Borrower or any other Person.

 

(c)       No Assignment shall cause any Borrower any increase in any cost, liability or obligation under or in respect of the Operative Documents at the time of such Assignment (including, without limitation, under Sections 2.02(e), 2.13 and 2.14 of the Security Agreement), in each case measured based upon the applicable law in effect on the date of such Assignment and laws that have been enacted prior to such date but are scheduled to take effect after such date. The Assignee shall be responsible for paying the reasonable costs and expenses (if any) of a single counsel to the Borrowers in connection with any Assignment.

 

(d)       Each Participant shall be entitled to assign its Participation Percentage in the Loans to a trustee in connection with the issuance of any Pfandbrief issued in accordance with the German Pfandbrief Act, as amended, so long as such Assignment does not increase any obligation or cost or diminish any right of the Borrowers, measured based upon the applicable law in effect on the date of such Assignment and laws that have been enacted prior to such date but are scheduled to take effect after such date.

 

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(e)       Any Participant may assign and pledge its Participation Percentage in the Loans (and any Loan Certificates) to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time, and any operating circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Participant from its obligations hereunder.

 

7.5       Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

7.6       Headings. The headings of the various Articles and sections herein and in the table of contents hereto are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

 

7.7       Governing Law; Counterpart Form. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK. This Agreement may be executed by the parties hereto in separate counterparts (or upon separate signature pages bound together into one or more counterparts), each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

 

7.8Indemnification.

 

(a)       General Indemnification. Subject to Section 7.8(c), each Borrower hereby jointly and severally indemnifies the Security Trustee, the Agent, the Swap Counterparty and the Participants and agrees to hold the Security Trustee, the Agent, the Swap Counterparty and the Participants harmless, on an after-Tax basis, against any and all liabilities, damages, losses, claims, reasonable and documented costs, or expenses whatsoever, and to promptly reimburse the Security Trustee, the Agent, the Swap Counterparty and the Participants for any reasonable and documented fees or expenses (including but not limited to the fees and expenses of expert witnesses) (it being agreed and understood that reimbursement for fees, costs and expenses of legal counsel shall be limited to the reasonable and documented fees and expenses of one primary counsel to all Finance Parties and one local counsel for all Finance Parties in any relevant jurisdiction and, in the case of an actual or perceived conflict of interest, one additional counsel to each affected person) (i) incurred by it in connection with any claim or defending or, in the event any Event of Default shall have occurred and be continuing, prosecuting any action or proceeding relating to this Agreement and any Operative Document or (ii) incurred by it in connection with the ownership, possession leasing, use, operations, maintenance or design of any Aircraft.

 

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(b)       Additional Indemnification by Borrowers. Subject to Section 7.8(c), each Borrower hereby jointly and severally indemnifies, on an after-Tax basis, the Security Trustee, the Agent, the Swap Counterparty and the Participants and agrees to hold the Security Trustee, the Agent, the Swap Counterparty and the Participants harmless against any and all liabilities, damages, losses, claims, reasonable and documented costs, or expenses whatsoever and to promptly reimburse the Security Trustee, the Agent, the Swap Counterparty and the Participants for any reasonable and documented legal or other fees or expenses, without duplication, (including but not limited to the fees and expenses of expert witnesses) (it being agreed and understood that reimbursement for fees, costs and expenses of legal counsel shall be limited to the reasonable and documented fees and expenses of one primary counsel to all Finance Parties and one local counsel for all Finance Parties in any relevant jurisdiction and, in the case of an actual or perceived conflict of interest, one additional counsel to each affected person) incurred by the Security Trustee, the Agent, the Swap Counterparty and the Participants in connection with (i) such Borrower’s obligations pursuant to Section 4.2(i), (ii) the consequences of its own gross negligence or willful misconduct or the failure to use ordinary care in the administration of funds or in the preservation of the Mortgaged Property pursuant to the terms of the Security Agreement, and (iii) any material breach of warranty or material misrepresentation by such Borrower or any material misrepresentation or material omission from any certificate, instrument, or paper delivered or to be delivered by such Borrower to the Agent and Participant pursuant to this Agreement or any Loan Operative Document or in connection with the transactions contemplated herein or therein.

 

(c)       Exclusions to Indemnification. None of the foregoing obligations to indemnify the Security Trustee, the Agent, the Swap Counterparty and the Participants shall apply to the extent that the liabilities, damages, losses, claims, costs, fees, or expenses arise from, are connected with or related to (i) Taxes (other than amounts necessary to make payments on an after-Tax basis), (ii) the gross negligence, bad faith or willful misconduct of the Security Trustee, the Agent, the Swap Counterparty or any of the Participants, (iii) any breach of warranty, misrepresentation or material omission in any Operative Document of the Security Trustee, the Agent, the Swap Counterparty or any of the Participants, or any breach of, or failure to comply with or perform any obligation under the Operative Documents by the Security Trustee, the Agent, the Swap Counterparty or any of the Participants, (iv) the offering of securities or investment interests by the Security Trustee, the Agent, the Swap Counterparty or any of the Participants, (v) ordinary and usual operating and overhead expenses of the Security Trustee, the Agent, the Swap Counterparty or any of the Participants, or (vi) disputes between and among Finance Parties.

 

7.9       Waiver of Jury. EACH BORROWER, EACH PARTICIPANT, THE SWAP COUNTERPARTY, THE AGENT AND THE SECURITY TRUSTEE HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, THE SECURITY AGREEMENT, THE LOAN CERTIFICATES OR THE OTHER OPERATIVE DOCUMENTS OR THE RELATIONSHIP ESTABLISHED HEREUNDER.

 

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7.10      Jurisdiction. Each party hereto hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in New York City for the purpose of all legal proceedings arising out of or relating to this Agreement, the other Operative Documents or the transactions contemplated hereby and thereby. Each party hereto irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

 

7.11      Expenses. Each Borrower jointly and severally agrees to pay or reimburse each of the Participants, the Agent, the Swap Counterparty and the Security Trustee for paying: (a) all documented out-of-pocket costs and expenses of the Participants, the Agent, the Swap Counterparty and the Security Trustee reasonably incurred by them (including, without limitation, the reasonable fees and out-of-pocket expenses, each pursuant to properly vouched invoices, of Vedder Price P.C., special New York counsel to the Participants, the Swap Counterparty and the Agent as a whole, any local counsel to the Agent and of Willis Towers Watson, insurance advisor to the Agent), in connection with (i) the negotiation, preparation, execution and delivery of this Agreement, the other Operative Documents and the extension of credit hereunder and (ii) any modification, supplement or waiver of any of the terms of this Agreement or any of the other Operative Documents which arise from a specific request of a Borrower; (b) all reasonable costs and expenses of the Participants and the Security Trustee (including, without limitation, reasonable counsels’, fees in each case pursuant to properly vouched invoices; provided, however, that it is understood that no Borrower will be responsible for the fees and expenses of separate counsel for the Participants, the Agent, the Swap Counterparty and the Security Trustee, but only for one lead counsel) in connection with (i) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom or in connection with the negotiation of any restructuring or “work-out” (whether or not consummated), of the obligations of any Borrower hereunder other than costs or expenses (x) resulting directly from a Lease Event of Default for which a Lessee is required to indemnify under any Lease and (y) which do not arise from a specific request by a Borrower to restructure the transactions contemplated by the Loan Operative Documents, and (ii) the enforcement of this Section 7.11; and (c) all charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Operative Document or any other document referred to therein; it being understood and agreed that, so long as no Event of Default shall have occurred and be continuing, no Borrower shall pay or reimburse the Participants, the Agent, the Swap Counterparty or the Security Trustee for any costs and expenses incurred in connection with the preparation, negotiation, documentation, or execution of any assignment of, transfer of, or participation in this Agreement, any of the other Loan Operative Documents or the Loans.

 

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7.12      Confidentiality. Each party hereto agrees (on behalf of itself and each of its Affiliates, directors, officers, employees and representatives) to keep confidential, in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound (banking, in the case of the Participant) practices, the terms of this Agreement and the other Operative Documents and, in the case of the Participant and the Agent, any non-public information supplied to it by the Borrowers pursuant to the terms of each of this Agreement, the other Operative Documents and any document, agreement or instrument delivered in connection with the foregoing, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by applicable statute, rule, regulation, rule of any applicable regulatory body (including any stock exchange), (ii) to legal counsel, auditors, bank examiners or accountants for any party hereto, in each case who agree to keep such information, the terms of this Agreement and the terms of any other Operative Document confidential, (iii) to any subsidiary, shareholder, investor (or potential investor) in or Affiliate of the Agent or Participant (and any of their respective legal counsel and other advisors), in each case who agrees to keep such information, the terms of this Agreement and the terms of any other Operative Document confidential, (iv) to any assignee (or prospective assignee) of Participant (and its legal counsel and other advisors) who agrees to keep such information, the terms of this Agreement and the terms of any other Operative Document confidential, (v) to the extent such non-public information is or becomes available in the public domain other than as a result of an authorized disclosure by any party hereto or (vi) with the prior written consent of the other parties hereto.

 

7.13      Money Laundering. For the purposes of the German Money Laundering Act (Geldwäschegesetz) (“GMLA”), each Borrower hereby confirms that it is acting in its own name and for its own account. Each Borrower agrees to provide such information as each Participant reasonably requests in order to comply with the GMLA (without reference to internal interpretations thereof).

 

7.14      Compliance with Anti-Money Laundering, Sanctions and OFAC Laws.

 

(a)       Each Borrower shall comply at all times with the requirements of all applicable Anti-Money Laundering Laws.

 

(b)       Each Borrower shall provide the Agent, the Security Trustee and the Participants any information regarding such Borrower, its Affiliates and subsidiaries necessary for the Agent, the Security Trustee and the Participants to comply with all Anti-Money Laundering Laws.

 

(c)       Each Borrower shall comply at all times with the requirements of all applicable OFAC Laws.

 

(d)       No Borrower shall knowingly conduct business with or knowingly engage in any transaction with any person or entity named in the OFAC SDN List or any person or entity included in, owned by, controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to, or otherwise associated with any of the persons or entities referred to or described in the OFAC SDN List.

 

(e)       If a Borrower obtains Actual Knowledge or receives any written notice that suche Borrower, any Affiliate, subsidiary or any person or entity holding any legal or beneficial interest whatsoever therein (whether directly or indirectly) is named on the OFAC SDN List (such occurrence, an “OFAC Violation”), such Borrower shall immediately (i) give written notice to the Agent, the Security Trustee and the Participants of such OFAC Violation, and (ii) comply with all applicable laws with respect to such OFAC Violation (regardless of whether the party included on the OFAC SDN List is located within the jurisdiction of the United States of America), including the OFAC Laws, and each Borrower hereby authorizes and consents to the Security Trustee’s taking any and all steps the Security Trustee deems reasonably necessary, in its sole discretion, to comply with all applicable laws with respect to any such OFAC Violation, including the requirements of the OFAC Laws (including the “freezing” and/or “blocking” of assets and reporting such action to OFAC).

 

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(f)       Upon the Agent’s request from time to time, each Borrower shall deliver a certification confirming its compliance with the covenants set forth in this Section 7.14.

 

(g)       Each Borrower acknowledges that in order for each Participant to comply with the requirements under Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”) (Public Law 107-56), such Borrower must provide such Participant with certain information or supporting documentation (collectively, “Documentation”) at the time of execution of this Agreement. Each Participant is required by the USA Patriot Act to verify and record any Documentation provided by the Borrowers to validate each Borrower’s identity. Documentation that may be requested from the Borrowers may include, but is not limited to, a Federal Employer Identification Number (FEIN), a certificate of good standing to validate a Borrower’s existence, a certificate of incumbency to authenticate the management of such Borrower and other government issued certified documents to validate such Borrower’s authorization to conduct business.

 

(h)       In relation to any provision in any Loan Operative Document that contains a representation or undertaking related to Sanctions (“Sanction Provision”): Any Sanction Provision shall only apply for the benefit of a Participant to the extent that the Sanctions would not result in (i) any violation of, conflict with or liability under EU Regulation (EC) 2271/96 or (ii) a violation or conflict with section 7 foreign trade rules (AWV) (Außenwirtschaftsverordnung) (in connection with section 4 paragraph 1 a no. 3 foreign trade law (AWG) (Außenwirtschaftsgesetz)) or a similar anti-boycott statute. The preceding sentence does not apply to the New York branch of Nord/LB.

 

For purposes of this Section 7.14, the following terms shall mean:

 

Anti-Money Laundering Laws” shall mean any laws or regulations relating to money laundering or terrorist financing, including, without limitation, the Bank Secrecy Act, 31 U.S.C. §§ 5301 et seq.; the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56 (a/k/a the USA Patriot Act); Laundering of Monetary Instruments, 18 U.S.C. § 1956; Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. § 1957; the Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulations, 31 C.F.R. part 103; and any similar laws or regulations currently in force or hereafter enacted.

 

OFAC” shall mean the United States Department of Treasury Office of Foreign Assets Control.

 

OFAC Laws” shall mean any laws, regulations, and Executive Orders relating to the economic sanctions programs administered by OFAC, including without limitation, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq.; the Trading with the Enemy Act, 50 App. U.S.C. §§ 1 et seq.; and the Office of Foreign Assets Control, Department of the Treasury Regulations, 31 C.F.R. parts 500 et seq. (implementing the economic sanctions programs administered by OFAC).

 

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OFAC SDN List” shall mean the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC.

 

7.15     Contractual Bail-In. Notwithstanding any other term of any Loan Operative Document or any other agreement, arrangement or understanding between the parties hereto, each party hereto acknowledges and accepts that any liability of any such party to any other such party under or in connection with the Operative Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges, accepts and agrees to be bound by the effect of:

 

(a)        any Bail-In Action in relation to any such liability, including (without limitation):

 

(i)       a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

 

(ii)       a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and

 

(iii)      a cancellation of any such liability; and

 

(b)        a variation of any term of any Loan Operative Document (other than the Lessee Parties Acknowledgement) to the extent necessary to give effect to any Bail-In Action in relation to any such liability.

 

7.16     Non-Recourse Obligations.

 

(a)       Each Borrower and each Lessor, as security for the Secured Obligations, shall mortgage, collaterally assign and create a Lien in favor of the Security Trustee in and upon the Collateral upon and subject to the terms of the Loan Operative Documents.

 

(b)       In recognition of each Borrower and each Lessor granting the security referred to in Section 7.16(a), each of the Security Trustee, the Agent, the Swap Counterparty and each Participant hereby agrees that, notwithstanding the provisions of any Loan Operative Document to the contrary, any and all liability of the Borrowers and the Lessors that is created hereunder or under any other Loan Operative Document shall, in the absence of fraud, gross negligence or willful misconduct in performing their respective obligations under the Loan Operative Documents to which they are a party, be limited to the aggregate assets from time to time of the Borrowers and the Lessors. Except as specified above, the Borrowers and the Lessors shall not be personally liable for any shortfall that may arise as a result thereof. The provisions of this Section 7.16(b) shall only limit the personal liability of the Borrowers and the Lessors for the discharge of its obligations as specified above and shall not (i) limit or restrict in any way the accrual of interest on any such unpaid amount, or (ii) derogate from or otherwise limit the right of recovery, realization or application by the Security Trustee, the Agent, the Swap Counterparty and each Participant under or pursuant to any of the Loan Operative Documents on anything assigned, mortgaged, charged, pledged or secured (by way of security) to or for the benefit of the Security Trustee, the Agent, the Swap Counterparty and each Participant under or pursuant to any of the Loan Operative Documents.

 

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(c)       Each of the Security Trustee, the Agent, the Swap Counterparty and each Participant hereby acknowledges and agrees that each Borrower’s and each Lessor’s obligations under this Agreement and the other Loan Operative Documents are solely the corporate obligations of such Borrower or such Lessor, as the case may be, and that none of the Security Trustee, the Agent, the Swap Counterparty or the Participants shall have any recourse against any of the directors, shareholders, officers or employees of such Borrower or such Lessor, as the case may be, for any claims, losses, damages, liabilities, indemnities or other obligations of the Borrowers and the Lessors under this Agreement and the other Loan Operative Documents.

 

*          *          *

 

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IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be executed by their duly authorized officers or attorneys in fact all as of the day and year first written above.

 

  BORROWERS
   
  ACY SN 19002 LIMITED, as Borrower
     
  By: /s/ Barry Mills
  Name: Barry Mills
  Title: Director
   
  ACY SN 19003 LIMITED, as Borrower
     
  By: /s/ Barry Mills
  Name: Barry Mills
  Title: Director

 

 

 

  

[Credit Agreement]

 

  ACY E-175 LLC, as Borrower
   
  By: AeroCentury Corp., its Manager
     
  By: /s/ Toni M. Perazzo
  Name: Toni Perazzo
  Title: SVP Finance
   
  ACY SN 15129 LLC, as Borrower
   
  By: AeroCentury Corp., its Manager
     
  By: /s/ Toni M. Perazzo
  Name: Toni Perazzo
  Title: SVP Finance

 

 

 

  

[Credit Agreement]

 

  PARTICIPANTS
   
  Norddeutsche Landesbank Girozentrale, NEW YORK BRANCH, as a Participant
     
  By: /s/ Oliver Gruenke
  Name: Oliver Gruenke
  Title: Managing Director
     
  By: /s/ Andreas Trunk
  Name: Andreas Trunk
  Title: Senior Director

 

 

 

  

[Credit Agreement]

 

  Norddeutsche Landesbank Girozentrale, as Swap Counterparty
     
  By: /s/ Sebastian Schlichting
  Name: Sebastian Schlichting
  Title: Legal Counsel
    Norddeutsche Landesbank - Girozentrale
    -authorized signatory-
     
  By: /s/ Carsten Meinecke
  Name: Carsten Meinecke
  Title: SENIOR Legal Counsel
    Norddeutsche Landesbank - Girozentrale
    -authorized signatory-
     
 

Norddeutsche Landesbank

Girozentrale, as Agent

     
  By: /s/ Oliver Gruenke
  Name: Oliver Gruenke
  Title: Managing Director
     
  By: /s/ Andreas Trunk
  Name: Andreas Trunk
  Title: Senior Director

 

 

 

  

[Credit Agreement]

 

  WILMINGTON TRUST COMPANY, as Security Trustee
     
  By: /s/ Robert P. Hines Jr.
  Name: Robert P. Hines Jr.
  Title: Vice President

 

 

 

  

[Credit Agreement]

 

ANNEX A

 

DEFINITIONS AND CONSTRUCTIONS

 

ANNEX A
Page 1

 

  

[Definitions]

 

ANNEX A

 

DEFINITIONS AND CONSTRUCTION

 

1.       Definitions. Unless the context otherwise requires, the following terms shall have the following meanings.

 

17000168 Aircraft” shall mean the Embraer model E175LR aircraft bearing manufacturer’s serial number 17000168 and on lease to Republic Airways Inc. (formerly known as Republic Airline Inc.), as more specifically described in the relevant Security Agreement Supplement.

 

17000172 Aircraft” shall mean the Embraer model E175LR aircraft bearing manufacturer’s serial number 17000172 and on lease to Republic Airways Inc. (formerly known as Republic Airline Inc.), as more specifically described in the relevant Security Agreement Supplement.

 

17000173 Aircraft” shall mean the Embraer model E175LR aircraft bearing manufacturer’s serial number 17000173 and on lease to Republic Airways Inc. (formerly known as Republic Airline Inc.), as more specifically described in the relevant Security Agreement Supplement.

 

19002 Aircraft” shall mean the Bombardier model CRJ-1000 aircraft bearing manufacturer’s serial number 19002 and on lease to Air Nostrum Lineas Aereas del Mediterraneo, S.A., as more specifically described in the relevant Security Agreement Supplement.

 

19002 Borrower” shall have the meaning set forth in the preamble to the Credit Agreement.

 

19003 Aircraft” shall mean the Bombardier model CRJ-1000 aircraft bearing manufacturer’s serial number 19003 and on lease to Air Nostrum Lineas Aereas del Mediterraneo, S.A., as more specifically described in the relevant Security Agreement Supplement.

 

19003 Borrower” shall have the meaning set forth in the preamble to the Credit Agreement.

 

1 Month LIBOR Rate ” shall mean (i) for an Interest Period commencing on a Drawdown Date for a Loan that is not a Payment Date for such Loan, the cost of funds for a Participant for such Interest Period, (ii) for an Interest Period commencing on the Payment Date immediately prior to the Maturity Date for a Loan and terminating on the Maturity Date for such Loan, the cost of funds for a Participant for such Interest Period and (iii) for any one-month Interest Period or other relevant period, the applicable Screen Rate as of 11:00 a.m. on the applicable Quotation Day for Dollars and a period equal in length to that Interest Period.

 

 

Annex A

Page 1

 

 

  

[Definitions]

 

3 Month LIBOR Rate ” shall mean (i) for an Interest Period commencing on a Drawdown Date for a Loan that is not a Payment Date for such Loan, the cost of funds for a Participant for such Interest Period, (ii) for an Interest Period commencing on the Payment Date immediately prior to the Maturity Date for a Loan and terminating on the Maturity Date for such Loan, the cost of funds for a Participant for such Interest Period and (iii) for any three-month Interest Period or other relevant period, the applicable Screen Rate as of 11:00 a.m. on the applicable Quotation Day for Dollars and a period equal in length to that Interest Period.

 

Actual Knowledge” shall mean, as it applies to any Lessor, any Borrower, any Participant, the Swap Counterparty, any Mortgagor or the Mortgagee, as the case may be, actual knowledge of a Vice President or more senior officer of such person or any other officer of such person in each case having responsibility for the transactions contemplated by the Operative Documents.

 

Additional Costs” shall have the meaning set forth in Section 2.14 of the Security Agreement.

 

Adria Aircraft” shall mean the Bombardier model CRJ-900 aircraft bearing manufacturer’s serial number 15129 and on lease to Adria Airways Slovenski Letalski Prevoznik, d.o.o., as more specifically described in the relevant Security Agreement Supplement.

 

Adria Borrower” shall have the meaning set forth in the preamble to the Credit Agreement.

 

Adria Cash Collateral Amount” shall mean an amount equal to $750,000.

 

Adria Prepayment Amount” shall have the meaning set forth in Section 2.10(a)(iii) of the Security Agreement.

 

Adria Repossession Deed” shall mean, in respect of the Adria Aircraft, the notarial repossession deed with direct enforceability dated on or prior to the relevant Drawdown Date between the Adria Borrower and Adria Airways Slovenski Letalski Prevoznik d.o.o., together with any powers of attorney granted by the Adria Borrower in favor of Nord/LB and/or the Security Trustee in relation to such repossession deed.

 

Adria Shortfall” shall have the meaning set forth in Section 5.1(s) of the Credit Agreement.

 

Affiliate” of any Person shall mean any other Person directly or indirectly controlling, directly or indirectly controlled by, or under direct or indirect common control with, such Person, or if such Person is a partnership, any general partner of such Person or a Person controlling such general partner. For purposes of this definition, “control” (including “controlled by” and “under common control with”) shall mean the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities or by contract or otherwise.

 

Agent” shall have the meaning set forth in the preamble to the Credit Agreement.

 

 

Annex A

Page 2

 

 

  

[Definitions]

 

Agreed Investments” shall mean any of the following investments so long as the issuer thereof has a senior unsecured long term rating of at least “A” by S&P and “A2” by Moody’s (and the related investment would have the benefit of such ratings): (a) any bond, note or other obligation which is a direct obligation of or guaranteed by the U.S. or any agency thereof (having original maturities of no more than 30 days, or such lesser time as is required for the distribution of funds); (b) any obligation which is a direct obligation of or guaranteed by any state of the U.S. or any subdivision thereof or any agency of any such state or subdivision (having original maturities of no more than 30 days, or such lesser time as is required for the distribution of funds), and which has the highest rating published by Moody’s or S&P; or (c) any money market investment instrument relying upon the credit and backing of any bank or trust company which is a member of the Federal Reserve System and which has a combined capital (including capital reserves to the extent not included in capital) and surplus and undivided profits of not less than $500,000,000 (including the Security Trustee and its Affiliates if such requirements as to Federal Reserve System membership and combined capital and surplus and undivided profits are satisfied), including, without limitation, certificates of deposit, time and other interest-bearing deposits, bankers’ acceptances, commercial paper, loan and mortgage participation certificates and documented discount notes accompanied by irrevocable letters of credit and money market funds investing solely in securities backed by the full faith and credit of the United States.

 

Air Nostrum Aircraft” shall mean either or both of the 19002 Aircraft and the 19003 Aircraft, as the context may require.

 

Air Nostrum Excess Amount” shall have the meaning set forth in Section 2.8 of the Credit Agreement.

 

Air Nostrum Proceeds” shall have the meaning set forth in Section 2.8 of the Credit Agreement.

 

Aircraft” shall mean, (i) individually, each Airframe, together with the related Engines, whether or not any of such Engines may at any time of determination be installed on such Airframe or installed on any other airframe, and the Aircraft Documents in respect thereof and (ii) collectively, all such Aircraft. Each of the Republic Aircraft, the Air Nostrum Aircraft and the Adria Aircraft are “Aircraft” hereunder.

 

Aircraft Documents” shall mean, with respect to an Aircraft, whether in paper, photographic, digital, electronic or other medium, the documents, data, logs and records maintained in respect of such Aircraft pursuant to the terms of the relevant Lease, and all additions, renewal, revisions and replacements from time to time made in accordance with such Lease.

 

Airframe” shall mean (i) an airframe associated with the Adria Aircraft, each Air Nostrum Aircraft and each Republic Aircraft bearing the manufacturer’s serial number and registration and nationality mark as specified on Schedule II to the Credit Agreement and as more specifically described in the relevant Security Agreement Supplement; and (ii) any and all Parts related to such Airframe so long as the same shall have been furnished with, installed on or appurtenant to such Airframe on Delivery of such Airframe, or title to which has, or should have, passed to the relevant Mortgagor pursuant to the Lease with respect to such Airframe.

 

 

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[Definitions]

 

Airframe Warranties” shall mean, with respect to an Aircraft, all remaining and assignable warranties (if any) relating to such Aircraft and related equipment manufactured by the relevant Airframe manufacturer that were assigned to the relevant Mortgagor in connection with its purchase of such Aircraft or that were subsequently granted to such Mortgagor.

 

Amortization Schedule” shall mean, with respect to each Loan Certificate for any Loan, the amortization schedule for such Loan Certificate and Loan established pursuant to Section 2.3 of the Credit Agreement.

 

Anti -Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to any of the Borrowers or the Borrower Parent or, in each case, its subsidiaries from time to time concerning or relating to bribery or corruption.

 

Anti-Money Laundering Laws” shall have the meaning set forth in Section 7.14 of the Credit Agreement.

 

Applicable Margin” shall mean, with respect to any Loan as of any date, the Applicable Margin for such Loan specified in Schedule II to the Credit Agreement.

 

Associated Rights” is defined in the Cape Town Convention.

 

Availability Period” shall mean the period from (and including) the Closing Date to (but excluding) the Availability Termination Date.

 

Availability Termination Date” shall mean March 31, 2019.

 

Aviation Authority” shall mean, with respect to any Aircraft, any governmental authority that is or shall from time to time be vested with the control and supervision of, or have jurisdiction over, the registration, airworthiness and operation of aircraft or other matters relating to civil aviation in the State of Registration under applicable law.

 

Bail-In Action” shall mean the exercise of any Write-down and Conversion Powers.

 

Bail-In Legislation” shall mean, in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time.

 

Basic Rent” shall mean, with respect to any Lease, any amounts of “Basic Rent” or similar term (as defined in such Lease) paid by the applicable Lessee to or for the account of the lessor pursuant to the terms of such Lease.

 

Basic Rent Payment Date” shall mean, with respect to any Lease, the first day of each Rental Period under such Lease.

 

Borrower” shall have the meaning set forth in the preamble to the Credit Agreement.

 

 

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[Definitions]

 

Borrower Parent” shall mean AeroCentury Corp., a corporation incorporated under the laws of the State of Delaware.

 

Borrower Parent Pledge Agreement” shall mean, in respect of a Borrower, a pledge agreement or share charge in respect of the ownership interests of such Borrower dated the Closing Date between the Borrower Parent and the Security Trustee, substantially in the form of Exhibit B-2 to the Credit Agreement or otherwise in form and substance reasonably satisfactory to the Security Trustee.

 

Borrower Parent Pledged Collateral ” shall mean, the “Pledged Collateral”, “Collateral”, “Shares”, “Security Asset” or like term as defined in any Borrower Parent Pledge Agreement.

 

Borrower Parties” shall mean each Lessor, each Borrower and the Borrower Parent.

 

Borrower Pledge Agreement” shall mean, in respect of a Lessor, a membership interest pledge agreement in respect of the ownership interests of such Lessor between the applicable Borrower and the Security Trustee, substantially in the form of Exhibit B-1 to the Credit Agreement.

 

Borrower Pledged Collateral” shall mean, the “Pledged Collateral”, “Collateral”, or like term as defined in any Borrower Pledge Agreement.

 

Breakage Event” shall mean (i) any failure to borrow a Loan under Section 2.2 of the Credit Agreement despite all of the conditions precedent set forth in Section 3.1 and 3.2 of the Credit Agreement having been satisfied, other than due to a failure by the Participants to fund following the satisfaction of all conditions precedent thereto, (ii) the acceleration of the Loans or (iii) payment or prepayment (other than by acceleration) of principal or interest on any Loan Certificate held by it not being made on the date irrevocably scheduled therefor (including a prepayment that is not received by the Security Trustee on the date specified in a notice delivered by the relevant Borrower pursuant to Section 2.10 of the Security Agreement).

 

Business Day” shall mean (a) any day other than (i) a Saturday or Sunday or (ii) a day on which commercial banks are not authorized or required to close in New York, New York, San Francisco, California and Hannover, Germany and (b) if such day relates to the giving of notices or quotes in connection with a borrowing of, a payment or prepayment of principal of or interest on, or an Interest Period for, a Loan or a notice by a Borrower with respect to any such borrowing, payment, prepayment or Interest Period, any day on which dealings in Dollar deposits are carried out in the London interbank market.

 

Cape Town Convention” shall mean the official English language texts of the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment which were signed in Cape Town, South Africa on November 16, 2001.

 

 

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[Definitions]

 

Cape Town Registrations” shall mean, with respect to any Aircraft, the registration on the International Registry of (1) international interests in respect of the Airframe and each Engine related to such Aircraft to evidence the Security Agreement as supplemented by the Security Agreement Supplement with respect to such Aircraft, (2) international interests in respect of the Airframe and each Engine related to such Aircraft to evidence the Local Law Mortgage (if any), (3) if the Lessee of such Aircraft is situated in a Contracting State (as defined in the Cape Town Convention), the assignment of the international interests in respect of the Airframe and each Engine related to such Aircraft which evidence the Lease with respect to such Aircraft under the Security Agreement as supplemented by the Security Agreement Supplement and (4) if the Lessee of such Aircraft is situated in a Contracting State (as defined in the Cape Town Convention), the transfer of the right to discharge the international interests in respect of the Airframe and each Engine related to such Aircraft which evidence the Lease with respect to such Aircraft.

 

Cash Collateral Account” shall have the meaning set forth in Section 2.03(b) of the Security Agreement.

 

Closing Date” shall mean the date on which the conditions specified in Section 3.1 of the Credit Agreement shall be satisfied.

 

Code” shall means the Internal Revenue Code of 1986, as amended.

 

Collateral Accounts” shall have the meaning set forth in Section 2.03(a) of the Security Agreement.

 

Commitment” shall mean, for each Participant, the obligation of such Participant to fund portions of the Loans at any one time in an aggregate amount up to but not exceeding the amount set opposite the name of such Participant in Schedule I to the Credit Agreement under the caption “Commitment” as the same may be varied in accordance with any assignment of Commitments pursuant to Section 7.4 of the Credit Agreement; provided that no such variation of Schedule I to the Credit Agreement shall change the amount of the Total Commitment.

 

Consent and Recognition of Rights Agreement” shall mean, in respect of the 19003 Aircraft, the consent and recognition of rights agreement, related to the Engine bearing manufacturer’s serial number 194975 and dated on or about the relevant Drawdown Date, among the 19003 Borrower, as lessor and owner, Air Nostrum Lineas Aereas del Mediterraneo, S.A., as lessee and sublessor, HEH Aviation “Sevilla” Beteiligungsgesellschaft mbH & Co. KG, as airframe lessor and airframe owner, Mediterranean Aviation Operations Company Limited, as sublessee, and the Security Trustee.

 

Credit Agreement” shall mean the Credit Agreement.

 

Cutoff Date” shall have the meaning set forth in Section 2.4(a) of the Credit Agreement.

 

Day-to -Day Operational Matters” shall mean any matter relating to a Lease and/or the relevant Lessee which is purely of administrative or non-material or routine operational nature.

 

Debt Rate” shall mean for each day during an Interest Period and for any Loan, the sum of the LIBOR Rate for such Loan for such day plus the Applicable Margin for such Loan.

 

 

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[Definitions]

 

Default” shall mean any event or condition which with the giving of notice or the lapse of time or both would become an Event of Default.

 

Delivery” shall mean, with respect to an Aircraft, an Airframe or an Engine, the “Delivery” thereof or similar term (as defined in any Lease).

 

Deposit” shall have the meaning set forth in Section 2.3 of the Credit Agreement.

 

Deregistration Power of Attorney” shall mean, with respect to an Aircraft, (i) if and to the extent required under the applicable Lease, the power of attorney executed by the applicable Lessee related thereto in favor of, inter alios, the Security Trustee and/or (ii) the power of attorney executed by the applicable Borrower or Lessor, as the case may be, in favor of the Security Trustee, in each case in connection with the repossession, re-export and deregistration of such Aircraft and as the context may require.

 

Documentation” shall have the meaning set forth in Section 7.14(g) of the Credit Agreement.

 

Dollars” and $ shall mean the lawful currency of the United States of America.

 

Drawdown Date” shall mean, with respect to any Loan and any Aircraft, the date on which such Loan is advanced by the Participants to the Borrower of such Loan pursuant to the terms of the Credit Agreement.

 

EEA Member Country” shall mean any member state of the European Union, Iceland, Liechtenstein and Norway.

 

Enforcement Notice” shall have the meaning set forth in Section 4.04(a) of the Security Agreement.

 

Engine” shall mean (i) each engine that is identified by manufacturer’s model and serial number that is associated with an Air Nostrum Aircraft, a Republic Aircraft or the Adria Aircraft and is set forth in Schedule II to the Credit Agreement and in the applicable Security Agreement Supplement, whether or not attached to the Airframe related thereto or any other airframe, or (ii) a Replacement Engine, together in each case with any and all related Parts so long as the same shall have been furnished with, installed on or appurtenant to such Engines on Delivery of such Aircraft, or title to which has, or should have, passed to the relevant Mortgagor pursuant to the Lease with respect to such Aircraft.

 

Engine Warranties” shall mean, with respect to an Aircraft, all remaining and assignable warranties (if any) relating to the Engines related to such Aircraft and related equipment manufactured by the Engine manufacturer relating to such Engines that were assigned to the relevant Mortgagor in connection with its purchase of such Aircraft or that were subsequently granted.

 

ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

 

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[Definitions]

 

EU Bail -In Legislation Schedule” shall mean the document described as such and published by the Loan Market Association (or any successor person) from time to time.

 

Event of Default” shall have the meaning specified in Section 4.02 of the Security Agreement.

 

Event of Loss ” shall mean, with respect to an Aircraft, an Airframe or an Engine, (i) at any time such Aircraft, Airframe or Engine is subject to a Lease, a “Total Loss” or similar term (as defined such Lease) or formulation used in such Lease and (ii) at any time such Aircraft, Airframe or Engine is not subject to a Lease, a “Total Loss” or similar term (as defined in the Lease with respect to such Aircraft, Airframe or Engine which was in effect on the Drawdown Date for the Aircraft related thereto or formulation used in such Lease).

 

Event of Loss Date” shall mean, with respect to an Aircraft, an Airframe or an Engine, (i) at any time such Aircraft, Airframe or Engine is subject to a Lease, the “Total Loss Date” or similar term (as defined such Lease) and (ii) at any time such Aircraft, Airframe or Engine is not subject to a Lease, the “Total Loss Date” or similar term (as defined in the Lease with respect to such Aircraft, Airframe or Engine which was in effect on the Drawdown Date for the Aircraft related thereto).

 

Event of Loss Excess Proceeds” shall have the meaning set forth in Section 2.10(b)(i) of the Security Agreement.

 

Event of Loss Prepayment Amount” shall have the meaning set forth in Section 2.10(b)(i) of the Security Agreement.

 

Excess Sales Proceeds” shall have the meaning set forth in Section 2.10(b)(ii) of the Security Agreement.

 

Excluded Payments” shall mean:

 

(i)       indemnity payments or similar obligations paid or payable by any Lessee to or in respect of any Borrower Party, including each of its respective shareholders, members, partners, Affiliates, directors, officers, employees, servants and agents, pursuant to any Lease;

 

(ii)       proceeds of public liability insurance in respect of an Aircraft payable as a result of insurance claims made, or losses suffered, by any Borrower Party, which are payable directly to any Borrower Party for its own account or for the account of any Borrower Party, including any of its shareholders, members, partners, Affiliates, directors, officers, employees, servants and agents;

 

(iii)       if the related Aircraft is subject to a Lease, proceeds of insurance maintained with respect to such Aircraft by or for the benefit of any Borrower Party for its own account or benefit, or for the account or benefit of any Borrower Party, including any of its shareholders, members, partners, Affiliates, directors, officers, employees, servants and agents;

 

(iv)       any interest that pursuant to the Operative Documents may from time to time accrue in respect of any of the amounts described in clauses (i) through (iii) above;

 

 

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[Definitions]

 

(v)       any right to enforce the payment of any amount described in clauses (i) through (iv) above (provided that the rights referred to in this clause (v) shall not be deemed to include the exercise of any remedies provided for in any Lease other than the right to sue for specific performance of any covenant to make such payment or to sue for damages in respect of the breach of any such covenant); and

 

(vi)       any right to exercise any election or option or make any decision or determination, or to give or receive any notice, consent, waiver or approval, or to take any other action in respect of, but in each case, only to the extent relating to, the foregoing.

 

Excluded Tax Payment” shall have the meaning set forth in Section 2.13(m) of the Security Agreement.

 

Excluded Taxes” shall mean any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Participant, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Participant, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Participant with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment under Section 2.13(c) of the Security Agreement) or (ii) such Participant changes its lending office, except in each case to the extent that, pursuant to Section 2.13 of the Security Agreement, amounts with respect to such Taxes were payable either to such Participant's assignor immediately before such Participant acquires such interest or to such Participant immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.13(f) of the Security Agreement and (d) any withholding Taxes imposed under FATCA.

 

FATCA” shall have the meaning set forth in Section 2.13(k) of the Security Agreement.

 

Fee Letter” shall mean the Fee Letter, dated as of February 7, 2019, among the Borrowers and the Agent.

 

Finance Parties” shall mean, collectively, the Swap Counterparty, the Participants, the Agent and the Security Trustee.

 

Funds Flow Agreement” shall mean any funds flow agreement or payment direction letter entered into among any Borrower, the Security Trustee and any existing security trustee, agent or lender in respect of existing financing being paid off on the relevant Drawdown Date in respect of an Aircraft, in form and substance reasonably satisfactory to the Security Trustee and the Participants.

 

GMLA” shall have the meaning set forth in Section 7.13 of the Credit Agreement.

 

 

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[Definitions]

 

Governmental Authority” shall have the meaning set forth in Section 5.5 of the Credit Agreement.

 

Granting Clause” shall mean the portion of the Security Agreement under the heading “GRANTING CLAUSE.”

 

Granting Clause Documents” shall mean, collectively, the documents, contracts and instruments subject to the Granting Clause.

 

IDERA” shall mean, in respect of an Aircraft, if the State of Registration of such Aircraft is a “contracting state” as defined in the Cape Town Convention that has made a declaration pursuant to Article XXX(1) of the Cape Town Convention that Article XIII of the Cape Town Convention shall apply, an irrevocable deregistration and export request authorization issued by the relevant Lessee or the relevant Borrower or Lessor, as the case may be, in favor of the Security Trustee, as authorized party.

 

Illegality Event” shall mean an event or condition that would cause the making or maintaining of any Loan or Commitment by any Participant or the performance by any Borrower of any of its obligations under any Loan Operative Documents to be unlawful by reason of any change after the Closing Date in any law or in any requirement of any monetary authority whether or not having the force of law.

 

Indemnitee” or “Indemnitees” shall mean the Security Trustee, the Agent, the Swap Counterparty, the Participants and each of their respective successors, permitted assigns, directors, officers, and employees, and for purposes of Section 2.13(i) of the Security Agreement, shall include the Borrower Parties or any Affiliate thereof, and each of their respective successors, permitted assigns, directors, officers, employees and Affiliates.

 

Indemnity Agreement” shall mean that certain indemnity agreement dated on or about the Closing Date among the Borrower Parent, the Participants, the Agent, the Swap Counterparty and the Security Trustee.

 

Intercompany Indebtedness” shall mean debt for borrowed money loaned by the Borrower Parent to any Borrower or Lessor which shall be subordinate to the Secured Obligations on terms reasonably satisfactory to the Agent.

 

Interest Period” shall mean, for each Loan, each period commencing on (and including) a Payment Date (or its Drawdown Date, as the case may be) and ending on (but excluding) the next Payment Date.

 

International Interest” is defined in the Cape Town Convention.

 

International Registry” is defined in the Cape Town Convention.

 

IRS” shall have the meaning set forth in Section 2.13(a) of the Security Agreement.

 

Lease” shall mean, in respect of an Aircraft, the lease agreement entered into by the relevant Borrower or Lessor, as the case may be, in respect thereof, as amended, supplemented and modified from time to time, pursuant to which such Borrower or such Lessor, as the case may be, leases such Aircraft to the Lessee related thereto, as identified on the related Security Agreement Supplement.

 

 

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[Definitions]

 

Lease Assignment” shall mean, in respect of an Aircraft, a security assignment of the relevant Lease between the relevant Borrower or Lessor, as the case may be, and the Security Trustee.

 

Lease Default” shall mean any default under a Lease which is not or has not become, through the giving of notice and/or passage of time or otherwise, a Lease Event of Default.

 

Lease Event of Default” shall mean any default under a Lease which, through the giving of notice, the passage of time or otherwise, has become an “event of default” or similar term (as defined and used in such Lease) thereunder; provided that, except with respect to Sections 3.2(g)(v)(y) and 3.2(m)(v) of the Credit Agreement, in respect of the Lease related to the Adria Aircraft, any default by the relevant Lessee of any installment of Rent due under such Lease that has occurred and been continuing for fewer than 120 days shall not be a Lease Event of Default.

 

Lease Expiration Date” shall mean, in respect of a Lease, the date on which the term of such Lease is scheduled to expire in accordance with its terms, as specified in a Security Agreement Supplement for such Aircraft.

 

Lease Management Agreement” shall mean, in respect of an Air Nostrum Aircraft, the lease management agreement for such Air Nostrum Aircraft entered into by the Borrower Parent and the relevant Borrower.

 

Lease Operative Documents” shall mean, with respect to any Lease, such Lease and any credit support agreement or instrument furnished by the related Lessee or other Lessee Party to the relevant Borrower or Lessor, as the case may be, under such Lease, which are identified in Annex A to a Security Agreement Supplement relating thereto as “Lease Operative Documents” and any other documents which may be entered into between the relevant Borrower or Lessor, as the case may be, and any Lessee Parties from time to time.

 

Lease Termination Notice” shall have the meaning set forth in Section 4.03(b)(ii) of the Security Agreement.

 

Lessee” shall mean, with respect to any Lease with respect to an Aircraft, the lessee under such Lease as specified in Schedule II to the Credit Agreement and Annex A to the relevant Security Agreement Supplement for such Aircraft (or any further supplement thereto) (it being understood that “Lessee” shall not include any Borrower or any Lessor).

 

Lessee Parties” shall mean, with respect to any Lease, the related Lessee and any of the other Persons obligors under any Lease Operative Documents (other than the Lease) identified in Annex A to a Security Agreement Supplement relating thereto as “Lessee Parties”, and any other Person which may enter into an agreement with the relevant Borrower or Lessor, as the case may be, under such Lease and/or any other Lessee Party in respect of such Lease from time to time.

 

 

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[Definitions]

 

Lessee Parties Acknowledgement” shall mean, with respect to each Lease, a Notice and Acknowledgement dated the Drawdown Date for the Aircraft subject to such Lease among the relevant Borrower or Lessor, as the case may be, the Security Trustee and the Lessee Parties party thereto, in form and substance reasonably satisfactory to the Security Trustee.

 

Lessor” shall mean, with respect to a Republic Aircraft, Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee of the trust that owns such Republic Aircraft.

 

Lessor Lien” shall mean, with respect to an Aircraft, (i) at any time such Aircraft, is subject to a Lease, a “Lessor Lien”, “Permitted Lien” or similar term (as defined such Lease) and (ii) at any time such Aircraft is not subject to a Lease, a “Lessor Lien”, “Permitted Lien” or similar term (as defined in the Lease with respect to such Aircraft which was in effect on the Drawdown Date for the Aircraft related thereto).

 

LIBOR Breakage” shall mean the amount, if any, required to compensate each Participant for any losses (excluding loss of profit and the type of losses, costs and expenses included in Swap Breakage Loss or Liquidity Breakage) which it incurs (on an actual or notional basis) as the result of any failure to borrow a Loan under Section 2.2 of the Credit Agreement following the issuance of the relevant Notice of Borrowing or payment or prepayment (by acceleration or otherwise) of principal or interest on any Loan Certificate held by it on a date other than a Payment Date or the failure to make any such payment on the date scheduled therefor, including, without limitation, losses incurred in connection with unwinding or liquidating any deposits or funding arrangements with its funding sources, as reasonably determined by such Participant, which determination shall be conclusive absent manifest error.

 

LIBOR Rate” shall mean (i) in respect of a Loan related to an Air Nostrum Aircraft, the 3 Month LIBOR Rate and (ii) in respect of a Loan related to a Republic Aircraft or the Adria Aircraft, the 1 Month LIBOR Rate.

 

Lien” shall mean any mortgage, pledge, security interest, lien, encumbrance, lease, or other charge of any kind on property.

 

Liquidity Breakage” shall mean the amount, if any, required to compensate each Participant for any losses (excluding loss of profit and the type of losses, costs and expenses included in Swap Breakage Loss or LIBOR Breakage) which it incurs (on an actual or notional basis) as the result of (x) any failure to borrow a Loan under Section 2.2 of the Credit Agreement following the issuance of the relevant Notice of Borrowing or (y) any acceleration under Section 4.04(b) of the Security Agreement or prepayment after acceleration under Section 4.04(b) of the Security Agreement of principal or interest on any Loan Certificate held by it or the failure to make any such payment on the date scheduled therefor, including, without limitation, losses incurred in connection with unwinding or liquidating any liquidity arrangements in connection with the establishment of any Liquidity Margin, as reasonably determined by such Participant, which determination shall be conclusive absent manifest error.

 

 

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[Definitions]

 

Liquidity Margin” shall mean a rate per annum equal to the liquidity cost to Nord/LB of funding a Loan for the period commencing on the relevant Drawdown Date through the relevant Maturity Date, as determined by the Treasury desk of Nord/LB on the date that is three Business Days (or such shorter period agreed to by Nord/LB in its sole discretion) prior to the Scheduled Drawdown Date. The Liquidity Margin, as so determined, shall be conclusive and binding absent manifest error.

 

Loan” shall have the meaning set forth in Section 2.1 of the Credit Agreement.

 

Loan Amount” shall mean, in respect of a Loan, the amount of such Loan specified in the Notice of Borrowing relating thereto; provided that, with respect to any Loan, an indicative maximum of the Loan Amount of such Loan shall be set forth opposite such Aircraft on Schedule II to the Credit Agreement.

 

Loan Certificate Register” shall have the meaning set forth in Section 2.07 of the Security Agreement.

 

Loan Certificates” shall mean, with respect to a Loan, the loan certificates in substantially the form of Exhibit B to the Security Agreement outstanding under the Loan Operative Documents.

 

Loan Operative Documents” shall mean this Security Agreement, each Security Agreement Supplement, each Loan Certificate, the Credit Agreement, the Consent and Recognition of Rights Agreement, the Indemnity Agreement, the Fee Letter, each Swap Agreement, each Lessee Parties Acknowledgement, each Local Law Mortgage, each RVG Notice and Acknowledgment, any Warranty Agreement, any Funds Flow Agreement, each Borrower Parent Pledge Agreement and each Borrower Pledge Agreement.

 

Local Law Mortgage” shall mean (i) with respect to an Aircraft, a mortgage in respect of such Aircraft governed by a law other than New York law, including, in respect of the Adria Aircraft, the Slovenian Mortgage or (ii) with respect to an Aircraft registered in the United States of America, a mortgage of such Aircraft governed by New York law and filed with the Federal Aviation Administration.

 

Local Law Requirements” shall mean, with respect to any Aircraft, the conditions precedent and subsequent to the Drawdown Date for such Aircraft set forth on Schedule III to the Credit Agreement. The Local Law Requirements for any Aircraft shall be determined based on advice received from local counsel retained by the Agent (with the advice of the relevant Borrower) in the applicable jurisdictions and shall be reasonably necessary in order to (i) establish and/or maintain the perfection of the Security Trustee’s interests in the Mortgaged Property, Borrower Pledged Collateral and Borrower Parent Pledged Collateral, (ii) ensure the enforceability and validity of the Loan Operative Documents and (iii) take all shall mean, in respect of an Interestsuch other action in such jurisdiction as may be recommended or customary, as determined based on such local counsel’s advice.

 

Mandated Lead Arranger” shall mean Nord/LB.

 

Mandatory Prepayment Event” shall mean any of the events giving rise to prepayment of a Loan under Section 2.10(b) of the Security Agreement.

 

 

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[Definitions]

 

Market Disruption Event” shall mean, in respect of an Interest Period with respect to a Loan, (i) the applicable Screen Rate is not available or (ii) any Participant advises the Agent that the LIBOR Rate for such Interest Period will not accurately reflect the cost to such Participant of maintaining or funding its respective portion of such Loan for such Interest Period (as a result of a market-wide disruption and not as a result of an idiosyncratic change to the creditworthiness of such Participant (unless such change is caused by a market-wide disruption)).

 

Material Lease Breach” shall mean, in respect of a Lease, any of (i) subject to Section 4.03(a) of the Security Agreement, a default by the relevant Lessee in the payment when due of any amounts under such Lease greater than $25,000, (ii) an insolvency or bankruptcy event in respect of the relevant Lessee, (iii) a failure by the relevant Lessee to insure the relevant Aircraft in accordance with the terms of such Lease and (iv) a failure by the relevant Lessee to comply with a material maintenance obligation pursuant to the terms of such Lease.

 

Maturity Date” shall mean, with respect to any Loan, the Maturity Date for such Loan specified in Schedule II to the Credit Agreement; provided that in the case of an Air Nostrum Aircraft, such date shall be the later of (a) such Maturity Date specified in Schedule II to the Credit Agreement and (b) the earlier of (i) the date of receipt of an RVG Payment Amount under the relevant Residual Value Guarantee and (ii) 30 days after such Maturity Date specified in Schedule II to the Credit Agreement

 

Mortgaged Property” shall have the meaning specified in the Granting Clause.

 

Mortgagee” shall have the meaning set forth in the preamble to the Security Agreement.

 

Mortgagee Event” shall mean either: (i) the Loan Certificates shall have become due and payable pursuant to Section 4.04(b) of the Security Agreement; or (ii) the Mortgagee has taken action or notified the Mortgagors that it intends to take action to foreclose the Lien of the Security Agreement or otherwise commence the exercise of any significant remedy under the Security Agreement or any Lease.

 

Mortgagee’s Office” shall mean the Mortgagee’s address set forth in Section 9.06 of the Security Agreement or such other office in the United States as the Mortgagee may from time to time specify to the Mortgagor and the Lessee.

 

Mortgagor” shall have the meaning set forth in the preamble to the Security Agreement.

 

Nord/LB” shall have the meaning set forth in the preamble to the Credit Agreement.

 

Notice of Borrowing” shall mean, with respect to any Loan, a notice of borrowing delivered by a Borrower to the Agent substantially in the form of Exhibit A to the Credit Agreement.

 

OFAC” shall have the meaning set forth in Section 7.14 of the Credit Agreement.

 

OFAC Laws” shall have the meaning set forth in Section 7.14 of the Credit Agreement.

 

 

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[Definitions]

 

OFAC SDN List” shall have the meaning set forth in Section 7.14 of the Credit Agreement.

 

OFAC Violation” shall have the meaning set forth in Section 7.14(e) of the Credit Agreement.

 

Operative Documents” shall mean the Loan Operative Documents and the Lease Operative Documents.

 

Original Amount” shall mean, for any Loan Certificate, the principal amount of a Loan funded by the applicable Participant on the Drawdown Date for such Loan or, in respect of any Loan Certificate issued after the Drawdown Date for such Loan, the principal amount of the applicable Participant’s portion of such Loan outstanding at the time of such Loan Certificate’s original issuance.

 

Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Operative Document, or sold or assigned an interest in any Loan or Loan Operative Document).

 

Participant” shall have the meaning set forth in the preamble to the Credit Agreement.

 

Participation Percentage” shall mean, for any Participant, the percentage set opposite the name of such Participant in Schedule I to the Credit Agreement, or if there is only one Participant, 100%.

 

Parts” shall mean, in respect of an Airframe or an Engine, any and all appliances, parts, instruments, components, appurtenances, accessories, furnishings, seats, and other equipment of whatever nature (other than complete Engines or engines and cargo containers) which are either (i) furnished with, installed on or appurtenant to the Airframe and Engines at Delivery of the related Aircraft or title to which has passed to the relevant Borrower or Lessor, as the case may be, under the related Lease.

 

Past Due Rate” shall mean, in respect of any principal of or interest on any Loan Certificate or any other amount under any other Loan Operative Document that is not paid by the relevant Mortgagor when due (whether at stated maturity, by acceleration, by optional or mandatory prepayment or otherwise), a rate per annum during the period from and including the due date to but excluding the date on which such amount is paid in full equal to 2.0% plus the Debt Rate.

 

Payment Date” shall mean, in respect of a Loan, (i) each day specified as a “Payment Date” in the Amortization Schedule for such Loan and (ii) the applicable Maturity Date.

 

 

Annex A

Page 15

 

 

  

[Definitions]

 

Person” shall mean any individual, corporation, company, limited liability company, voluntary association, partnership, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof).

 

Pledged Collateral” shall mean, collectively, the Borrower Pledged Collateral and the Borrower Parent Pledged Collateral.

 

Prepayment Fee” shall mean, with respect to the prepayment of any Loan pursuant to Section 2.10(a)(i) of the Security Agreement, (i) on or prior to the one year anniversary of the Drawdown Date for such Loan, an amount equal to 3.0% of the principal amount of such Loan; (ii) after the one year anniversary of such Drawdown Date but on or prior to the two year anniversary of such Drawdown Date, an amount equal to 2.0% of the principal amount of such Loan; (iii) after the two year anniversary of such Drawdown Date but on or prior to the three year anniversary of such Drawdown Date, an amount equal to 1.0% of the principal amount of such Loan. No Prepayment Fee shall be payable in respect of any prepayment pursuant to Section 2.10(a) of the Security Agreement after the third anniversary of the Closing Date, or in respect of a prepayment pursuant to Section 2.10(a)(ii) or 2.10(b) of the Security Agreement or, for the avoidance of doubt, if a Borrower repays its Loan on the relevant Maturity Date.

 

Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.

 

Regulatory Change” shall mean, with respect to any Participant, any change that occurs after the date hereof in Federal, state or foreign law or regulations (including Regulation D) or the adoption or making after such date of any interpretation, directive or request applying to a class of banks or financial institutions including such Participant of or under any Federal, state or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful so long as compliance therewith is standard banking practice in the relevant jurisdiction) by any court or governmental or monetary authority charged with the interpretation or administration thereof. “Regulatory Change” shall include (i) any adoption of risk-based capital adequacy guidelines described by the Basel Committee on Banking Regulations and Supervisory Practices and commonly known as Basel III and (ii) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith

 

Rental Period” shall mean, with respect to any Lease, the “Rental Period” or similar term (as defined in such Lease).

 

Remarketing Agent” shall mean (i) in respect of the early termination of a Lease prior to the Lease Expiration Date under such Lease by the relevant Borrower or the relevant Lessor, as the case may be, the Borrower Parent, (ii) in respect of the termination of a Lease related to an Air Nostrum Aircraft on the Lease Expiration Date for such Lease, Bombardier Inc. and (iii) any other remarketing agent mutually agreed by the Borrower Parent and the Agent.

 

Remarketing Period” shall have the meaning set forth in Section 4.03(b)(ii) of the Security Agreement.

 

 

Annex A

Page 16

 

 

  

[Definitions]

 

Remarketing Period Condition ” shall mean all of the undertakings of the relevant Borrower under Section 4.03(b)(iii) – (v) and (vii) of the Security Agreement during any Remarketing Period.

 

Rent” shall mean, with respect to any Lease, the “Rent” or similar term (as defined in such Lease).

 

Replacement Engine” shall mean any engine substituted for an Engine in accordance with Section 7.01 of the Security Agreement.

 

Replacement Republic Aircraft” shall have the meaning set forth in Section 5.1(t) of the Credit Agreement.

 

Republic Aircraft” shall mean any or all of the 17000168 Aircraft, the 17000172 Aircraft and the 17000173 Aircraft, as the case may be.

 

Republic Replacement” shall have the meaning set forth in Section 5.1(t) of the Credit Agreement.

 

Required Participants” shall mean, as of any date of the determination thereof, the holders of not less than a majority, in aggregate, of the outstanding principal amount of all Loan Certificates as of such date. For all purposes of the foregoing definition, in determining as of any date the then aggregate outstanding principal amount of Loan Certificates, there shall be excluded any Loan Certificates, if any, held by any Borrower or any of its Affiliates.

 

Reserve Requirement” shall mean, for any Loan Certificate, the average maximum rate at which reserves (including, without limitation, any marginal, supplemental or emergency reserves) are required to be maintained in respect of such Loan Certificate under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion Dollars against “Eurocurrency liabilities” (as such term is used in Regulation D).

 

Residual Value Guarantee” shall mean, in respect of an Air Nostrum Aircraft, the residual value guarantee agreement in respect of such Air Nostrum Aircraft dated December 17, 2010 between Aviacion RC II, A.LE. and Bombardier Inc., as novated to the relevant Borrower and including any side letters relating to such residual value guarantee agreement.

 

Return Compensation Payments” shall mean, in respect of an Aircraft, any and all amounts paid or payable, as the context may require, from time to time by the relevant Lessee in relation to the condition of such Aircraft upon any return of such Aircraft pursuant to the relevant Lease.

 

RVG Notice and Acknowledgment” shall mean, in respect of an Air Nostrum Aircraft, the notice and acknowledgment of the collateral assignment of the payments and proceeds payable under the relevant Residual Value Guarantee pursuant to the Security Agreement among the relevant Borrower, the Security Trustee and Bombardier Inc.

 

"RVG Payment Amount" shall have the meaning set forth in Section 2.8 of the Credit Agreement.

 

 

Annex A

Page 17

 

 

  

[Definitions]

 

Resolution Authority” shall mean any body which has authority to exercise any Write-down and Conversion Powers.

 

Sanction Provision” shall have the meaning set forth in Section 7.14(h) of the Credit Agreement.

 

Sanctioned Country” shall mean at any time, a country or territory, or whose government, which is itself the subject or target of any Sanctions broadly restricting or prohibiting dealings with such country, territory or government (as of the Closing Date, Crimea, Cuba, Iran, North Korea, Sudan and Syria).

 

Sanctioned Person” shall mean at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or otherwise controlled by any such Person or Persons.

 

Sanctions” shall mean economic or financial sanctions or trade embargoes enacted, imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

 

Screen Rate” shall mean the one-month U.S. Dollar London interbank offered rate or the three-month U.S. Dollar London interbank offered rate, as the case may be, administered by ICE Benchmark Administration (or any other person which takes over the administration of that rate) displayed on pages LIBOR01 or LIBOR02 of the Reuters screen (or any replacement Reuters page which displays that rate). If the agreed page is replaced or service ceases to be available (or if the prevailing practice in the London interbank market is no longer to use the agreed page for reference), the Agent may, in the case of suspension, for the duration of the suspension, specify another page or service displaying the appropriate or replacement rate after consultation with the Participants and consent of the relevant Borrower.

 

Secured Obligations” shall have the meaning set forth in the Granting Clause.

 

Secured Parties” shall mean the Finance Parties.

 

Security Agreement” shall mean the Security Agreement, dated as of the Closing Date, among, inter alios, the Borrowers and the Security Trustee, as supplemented, modified or amended from time to time.

 

Security Agreement Supplement” shall mean a supplement to the Security Agreement, in substantially the form of Exhibit A to the Security Agreement, executed and delivered by any applicable Borrower or Lessor, which shall particularly describe the Aircraft and Lease to which such supplement relates and any Replacement Engine, and which joins such Borrower or Lessor, as the case may be, to the Security Agreement.

 

Security Trustee” shall have the meaning set forth in the preamble to the Credit Agreement.

 

 

Annex A

Page 18

 

 

  

[Definitions]

 

Slovenian Mortgage” shall mean, in respect of the Adria Aircraft, that certain Slovenian-law governed debt acknowledgment and first priority mortgage agreement dated on or about the Drawdown Date in respect of the Adria Aircraft between the Adria Borrower, as mortgagor, and Norddeutsche Landesbank Girozentrale, New York Branch, as mortgagee.

 

Subject Aircraft” shall have the meaning set forth in Section 4.03(b)(ii) of the Security Agreement.

 

Swap Agreement” shall mean, in respect of any Loan, the Swap Master Agreement as modified by a swap confirmation evidencing the Swap Transaction for such Loan between the Swap Counterparty and the related Borrower.

 

Swap Break Amount” shall mean, in connection with any Breakage Event, an amount determined reasonably and in good faith by the Swap Counterparty in accordance with its standard “Close-out Amount” methodology for Swap Transactions to be the amount necessary on an after-Tax basis to compensate the Swap Counterparty for any and all losses, costs or expenses (expressed as a positive number (in respect of amounts payable to the Swap Counterparty) or a negative number (in respect of amounts payable by the Swap Counterparty)) as a consequence of any termination or unwind of the Swap Transaction affected by such Breakage Event.

 

Swap Breakage Loss” shall mean the absolute value of the Swap Break Amount if the Swap Break Amount is a negative number.

 

Swap Counterparty” shall mean Norddeutsche Landesbank Girozentrale, as floating rate payer under a Swap Agreement.

 

Swap Margin” shall mean 13 basis points.

 

Swap Master Agreement” shall mean, for each Borrower, the 2002 Master Swap Agreement published by ISDA, together with the associated schedules thereto, between such Borrower and the Swap Counterparty.

 

Swap Obligations” shall mean all obligations owing from time to time by a Borrower to the Swap Counterparty under a Swap Agreement (if any).

 

Swap Rate” shall have the meaning set forth in the definition of Swap Transaction.

 

Swap Transaction” shall mean, with respect to a Loan, (i) an interest rate swap transaction entered into by the Borrower of such Loan and the Swap Counterparty pursuant to which (A) such Borrower, as fixed rate payer, agrees to pay to the Swap Counterparty on each Payment Date in respect of such Loan an amount equal to the amount of interest that would accrue on a notional amount equal to the amount of principal with respect to such Loan scheduled to be outstanding during the Interest Period ending on such Payment Date at the fixed rate (the “Swap Rate”) determined by the Swap Counterparty to be, in accordance with its market practice, the fixed rate equivalent of the then-applicable Debt Rate plus the Swap Margin (calculated on the basis of a year of 360 days consisting of 12 30-day months) and (ii) the Swap Counterparty, as floating rate payer, agrees to pay to such Borrower on each Payment Date in respect of such Loan an amount equal to the amount of interest that would have accrued on such notional amount of such Loan for the Interest Period ending on such Payment Date at the applicable Debt Rate (calculated on the basis of a year of 360 days and actual number of days elapsed) as of 11:00 a.m. on the date that fell two London Business Days prior to the first date of such Interest Period.

 

 

Annex A

Page 19

 

 

  

[Definitions]

 

Tax” or “Taxes” shall mean any and all fees (including, without limitation, license, documentation, registration, recording, stamp and document fees), taxes (including, without limitation, income, gross receipts, sale, rental, use, turnovers, value added, property (tangible and intangible), excise and stamp taxes), licenses, levies, imposts, duties, recording charges, other charges, fees, assessments or withholdings of any nature whatsoever, together with any assessment, penalties, fees, additions to tax and interest thereon, imposed by any taxing authority (which term shall include any other governmental authority).

 

Total Commitment” shall mean $47,000,000.

 

transacting user entity” is defined in the regulations for the International Registry.

 

Transferee Participant” shall have the meaning set forth in Section 2.14 of the Security Agreement.

 

UCC” shall mean the Uniform Commercial Code as in effect in the State of New York or, when the laws of any other jurisdiction govern the perfection or enforcement of any security interest, the Uniform Commercial Code of such jurisdiction.

 

Unpaid Obligations” shall have the meaning set forth in Section 4.04(b) of the Security Agreement.

 

USA PATRIOT Act” shall have the meaning set forth in Section 7.14(g) of the Credit Agreement.

 

"Warranty Agreements" shall mean, in respect of an Aircraft and to the extent applicable, any warranty assignment agreement in respect of the relevant Airframe and Airframe Warranties and/or the relevant Engines and Engine Warranties, in each case among the relevant manufacturer, the relevant Borrower or Lessor, as the case may be, the relevant Lessee and the Security Trustee.

 

Withholding Taxes” shall have the meaning set forth in Section 2.13(a) of the Security Agreement.

 

Write-down and Conversion Powers” shall mean:

 

(a)       in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; and

 

 

Annex A

Page 20

 

 

  

[Definitions]

 

(b)       in relation to any other applicable Bail-In Legislation, any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or Affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

 

2.Rules of Construction.

 

(a)       Section headings and the table of contents in each Loan Operative Document are inserted for convenience of reference only and shall be ignored in the interpretation of such Loan Operative Document.

 

(b)       In each Loan Operative Document, unless the context otherwise requires:

 

(i)        references to Sections, Clauses, Annexes, Exhibits and Schedules are to be construed as references to the sections of, clauses of, and appendices, exhibits and schedules to, such Loan Operative Document as in force for the time being and as amended in accordance with the terms of such Loan Operative Document, or, as the case may be, with the agreement of the relevant parties;

 

(ii)        references to Sub-sections or Sub-clauses are to be construed as references to a sub-section or sub-clause of the Section or Clause in which such reference appears;

 

(iii)       references to any Operative Document include its Annexes, Exhibits and Schedules;

 

(iv)       references to any Operative Document shall be construed as references to such Operative Document as in force for the time being and as amended or amended and restated or supplemented from time to time, in accordance with the terms thereof, or, as the case may be, with the agreement of the relevant parties;

 

(v)        words importing any gender shall be construed as including every gender;

 

(vi)       words importing the plural shall include the singular and vice versa;

 

(vii)       any reference to any Person (including each of the parties to any Operative Document) shall include such Person and its successors, permitted assigns, and permitted transferees; and

 

(viii)      the word “including” shall be construed as “including but not limited to.”

 

 

Annex A

Page 21

 

 

  

[Credit Agreement]

 

SCHEDULE I

 

PARTICIPATION COMMITMENTS

 

Participant  Participation Percentage   Commitment 
         
Norddeutsche Landesbank
Girozentrale, New York Branch
   100%  $47,000,000 

 

ADDRESS FOR NOTICES/PAYMENT INSTRUCTIONS

 

Norddeutsche Landesbank Girozentrale, New York Branch

 1114 Avenue of the Americas, 20th Floor

New York, NY 10036

Tel: ****

Attention: ****

Email: ****

 

with copy to:

 

Norddeutsche Landesbank Girozentrale

 Aircraft Finance Department

Friedrichswall 10

30159 Hannover, Germany

Tel: ****

Attention: ****

Email: ****

 

Payment Details:

 

Bank: JP Morgan Chase Bank, New York

Account No.: ****

Swift: CHASUS33

ABA: ****

 

Account Name: Norddeutsche Landesbank, New York

Reference: ACY [Republic Aircraft][Adria Aircraft][Air Nostrum Aircraft]

 

Wilmington Trust Company

 1100 N. Market Street

Wilmington, DE 19890-1605

Attention: Corporate Trust Administration

Facsimile: ****

Telephone: ****

 

SCHEDULE I
Page 1

 

  

[Credit Agreement]

 

ACY SN 19002 Limited

 Third Floor

20 Old Bailey

London EC4M 7AN

United Kingdom

Attention: ****

Facsimile: ****

 

With a copy to:

 

AeroCentury Corp.

1440 Chapin Avenue, #310

Burlingame, CA 94010

Attention: General Counsel

Facsimile: ****

 

ACY SN 19003 Limited

 Third Floor

20 Old Bailey

London EC4M 7AN

United Kingdom

Attention: ****

Facsimile: ****

 

With a copy to:

 

AeroCentury Corp.

1440 Chapin Avenue, #310

Burlingame, CA 94010

Attention: General Counsel

Facsimile: ****

 

ACY E-175 LLC

 c/o AeroCentury Corp.

AeroCentury Corp.

1440 Chapin Avenue, #310

Burlingame, CA 94010

Attention: General Counsel

Facsimile: ****

 

ACY SN 15129 LLC

c/o AeroCentury Corp.

AeroCentury Corp.

1440 Chapin Avenue, #310

Burlingame, CA 94010

Attention: General Counsel

Facsimile: ****

 

SCHEDULE I
Page 2

 

  

[Credit Agreement]

 

SCHEDULE II

 

AIRCRAFT; LESSORS; LESSEES; LOAN AMOUNTS; APPLICABLE MARGINS; MATURITY DATES; LEASES

 

Aircraft  Lessor  Lessee  Indicative Loan Amount   Applicable Margin  Maturity Date
                 
1.   Bombardier CRJ-1000 bearing MSN 19002 and Spanish registration mark EC-LJR with two CF34-8C5 engines bearing MSNs 194897 and 194896  N/A  Air Nostrum  $10,000,000   3.20% p.a.  10/3/2020
                  
2.   Bombardier CRJ-1000 bearing MSN 19003 and Spanish registration mark EC-LJS with two CF34-8C5 engines bearing MSNs 194975 and 194976  N/A  Air Nostrum  $10,000,000   3.20% p.a.  11/7/2020
                  
3.   Embraer E175LR bearing MSN 17000168 and US registration number N109HQ with two CF34-8E5 engines bearing MSNs 193478 and 193479  Wells Fargo Delaware Trust Company, National Association, as Owner Trustee  Republic Airways  $6,500,000   2.80% p.a.  4/30/2025
                  
4.   Embraer E175LR bearing MSN 17000172 and US registration number N110HQ with two CF34-8E5 engines bearing MSNs 193484 and 193489  Wells Fargo Delaware Trust Company, National Association, as Owner Trustee  Republic Airways  $6,500,000   2.80% p.a.  5/30/2025
                  
5.   Embraer E175LR bearing MSN 17000173 and US registration number N111HQ with two CF34-8E5 engines bearing MSNs 193492 and 193499  Wells Fargo Delaware Trust Company, National Association, as Owner Trustee  Republic Airways  $6,500,000   2.80% p.a.  5/30/2025
                  
6.   Bombardier CRJ-1000 bearing MSN 15129 and Slovenian registration mark S5-AAL with two CF34-8C5 engines bearing MSNs 194585 and 194584  N/A  Adria Airways d.d.  $7,500,000   3.45% p.a.  12/11/2022

 

 

Schedule II

Page 1

 

 

  

[Credit Agreement]

 

Leases

 

MSN 19002

 

Operating Lease Agreement dated December 16, 2010 between Aviación RCII, A.I.E., as lessor, and Air Nostrum, Líneas Aéreas del Mediterráneo, S.A., as lessee, as novated, amended and restated pursuant to the Deed of Novation and Restatement dated August 4, 2016 among Aviación RCII, A.I.E., as existing lessor, Air Nostrum, Líneas Aéreas del Mediterráneo, S.A., as lessee, and ACY SN 19002 Limited, as new lessor, as further amended and restated pursuant to the Deed of Amendment and Restatement dated ___________, 2019 between ACY SN 19002 Limited, as lessor, and Air Nostrum, Líneas Aéreas del Mediterráneo, S.A., as lessee.

 

MSN 19003

 

Operating Lease Agreement dated December 16, 2010 between Aviación RCII, A.I.E., as lessor, and Air Nostrum, Líneas Aéreas del Mediterráneo, S.A., as lessee, as novated, amended and restated pursuant to the Deed of Novation and Restatement dated August 4, 2016 among Aviación RCII, A.I.E., as existing lessor, Air Nostrum, Líneas Aéreas del Mediterráneo, S.A., as lessee, and ACY SN 19003 Limited, as new lessor, as further amended and restated pursuant to the Deed of Amendment and Restatement dated ___________, 2019 between ACY SN 19003 Limited, as lessor, and Air Nostrum, Líneas Aéreas del Mediterráneo, S.A., as lessee.

 

MSN 17000168

 

Lease Agreement [N109HQ] dated as of May 29, 2007 between Wells Fargo Delaware Trust Company, National Association, as owner trustee, as lessor, and Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, as amended by the Amendment No. 1 to Lease Agreement (N109HQ) dated as of October 10, 2016 between Wells Fargo Delaware Trust Company, National Association, as owner trustee, as lessor, and Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, as further amended by Lease Amendment No. 2 (N109HQ) dated June 23, 2017 between Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee, as lessor, as further amended by the Amendment No. 3 to Lease Agreement (N109HQ) dated as of January 31, 2018 between Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee, as lessor, as further amended by Lease Amendment No. 4 (N109HQ) dated on or about the relevant Drawdown Date between Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee, as lessor.

 

 

Schedule II

Page 2

 

 

  

[Credit Agreement]

 

Participation Agreement [N110HQ] dated as of May 29, 2007 among Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, Metropolitan Life Insurance Company, as owner participant, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee.

 

MSN 17000172

 

Lease Agreement [N110HQ] dated as of June 28, 2007 between Wells Fargo Delaware Trust Company, National Association, as owner trustee, as lessor, and Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, as amended by the Amendment No. 1 to Lease Agreement (N110HQ) dated as of October 10, 2016 between Wells Fargo Delaware Trust Company, National Association, as owner trustee, as lessor, and Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, as further amended by Lease Amendment No. 2 (N110HQ) dated June 23, 2017 between Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee, as lessor, as further amended by Lease Amendment No. 3 (N110HQ) dated December 31, 2018 between Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee, as lessor, as further amended by Lease Amendment No. 4 (N110HQ) dated on or about the relevant Drawdown Date between Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee, as lessor.

 

Participation Agreement [N110HQ] dated as of June 28, 2007 among Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, Metropolitan Life Insurance Company, as owner participant, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee.

 

 

Schedule II

Page 3

 

 

  

[Credit Agreement]

 

MSN 17000173

 

Lease Agreement [N111HQ] dated as of June 28, 2007 between Wells Fargo Delaware Trust Company, National Association, as owner trustee, as lessor, and Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, as amended by the Amendment No. 1 to Lease Agreement (N111HQ) dated as of October 10, 2016 between Wells Fargo Delaware Trust Company, National Association, as owner trustee, as lessor, and Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, as further amended by Lease Amendment No. 2 (N111HQ) dated June 23, 2017 between Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee, as lessor, as further amended by Lease Amendment No. 3 (N111HQ) dated December 31, 2018 between Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee, as lessor, as further amended by Lease Amendment No. 4 (N111HQ) dated on or about the relevant Drawdown Date between Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee, as lessor.

 

Participation Agreement [N111HQ] dated as of June 28, 2007 among Republic Airways Inc. (formerly known as Republic Airline Inc.), as lessee, Metropolitan Life Insurance Company, as owner participant, and Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee.

 

MSN 15129

 

Aircraft Lease Agreement dated as of December 12, 2014 between AeroCentury Corp., as lessor, and Adria Airways d.o.o., as lessee, as amended by Amendment No. 1 to Aircraft Lease Agreement (15129) dated as of October 4, 2017 between AeroCentury Corp., as lessor, and Adria Airways Slovenski Letalski Prevoznik d.o.o., as lessee, as assigned to ACY SN 15129 LLC pursuant to the Lease Novation Agreement dated January 28, 2019 among Aerocentury Corp., as existing lessor, Adria Airways d.o.o., as lessee, and ACY SN 15129 LLC, as new lessor.

 

 

Schedule II

Page 4

 

 

  

[Credit Agreement]

 

SCHEDULE III

 

LOCAL LAW REQUIREMENTS

 

MSNs 19002 and 19003

 

(a)Conditions Precedent

 

•              Evidence that the Security Trustee has been appointed as Professional User Entity in respect of each Air Nostrum Aircraft for the purposes of making all International Registry filings contemplated by this Agreement.

 

•              Filing with the Moveable Property Registry (“Registro de Bienes Muebles”) as entry point in Spain the applications in order to request the Authorizing Entry Point codes regarding the discharge of the following underlying registrations made at the International Registry in respect of each Air Nostrum Aircraft:

 

MSN 19002:

 

-           International Interest with file number 1312295 (regarding a mortgage agreement);

 

-           International Interest with file number 1312298 (regarding a security agreement);

 

-           Assignment of an International Interest with file number 1312304 (regarding the Lease Agreement for MSN 19002).

 

MSN 19003:

 

-           International Interest with file number 1312280 (regarding a mortgage agreement);

 

-           International Interest with file number 1312283 (regarding a security agreement);

 

-           Assignment of an International Interest with file number 1312289 (regarding the Lease Agreement for MSN 19003).

 

•              Filing with the Moveable Property Registry (“Registro de Bienes Muebles”) as entry point in Spain the applications in order to request the Authorizing Entry Point, regarding the registration at the International Registry of the (i) Security Agreement and (ii) the Lease Assignment in respect of each Air Nostrum Aircraft.

 

•              Execution of the revocation of the irrevocable de-registration and export request authorisations issued in favour of Export Development Canada (“EDC”) as authorised party in respect of each Air Nostrum Aircraft (the “IDERA Revocations”)

 

 

Schedule III

Page 1

 

 

  

[Credit Agreement]

 

•              Execution of the irrevocable de-registration and export request authorisations issued in favor of the Security Trustee as authorised party in respect of each Air Nostrum Aircraft (the “New IDERAs”);

 

(b)Conditions Subsequent

 

•              Execution of a Spanish law-governed release deed of the Spanish credit right pledge granted by the 19002 Borrower in favor of EDC by means of a Spanish deed attested by Notary of Madrid, Mr. Andrés de la Fuente O’Connor, with number 1,699 of his records within three Business Days following the relevant Drawdown Date

 

•              Execution of a Spanish law governed release deed of the Spanish credit right pledge granted by the 19003 Borrower in favor of EDC by means of a Spanish deed attested by Notary of Madrid, Mr. Andrés de la Fuente O’Connor, with number 1,700 of his records within three Business Days following the relevant Drawdown Date

 

•              Execution and notarization in Spain of a waiver of the Lessor Deregistration Powers of Attorney granted by the 19002 Borrower and the 19003 Borrower in favor of EDC in respect of each Air Nostrum Aircraft within one Business Day following the relevant Drawdown Date

 

•              Execution and notarization in Spain of a waiver of the Lessee Deregistration Powers of Attorney granted by Air Nostrum in favor of the 19002 Borrower and the 19003 Borrower and EDC in respect of each Air Nostrum Aircraft within three Business Days following the Drawdown Date

 

•              Execution and notarization in Spain of a new Lessor Deregistration Power of Attorney granted by the 19002 Borrower and the 19003 Borrower in favor of the Security Trustee in respect of each Air Nostrum Aircraft within one Business Day following the relevant Drawdown Date

 

•              Execution and notarization in Spain of a new Lessee Deregistration Power of Attorney granted by Air Nostrum in favor of the 19002 Borrower and the 19003 Borrower and the Security Trustee in respect of each Air Nostrum Aircraft within three Business Days following the relevant Drawdown Date

 

•              Notarization in Spain of the signature (legitimación de firmas) of the IDERA Revocations within three Business Days following the Drawdown Date;

 

•              Notarization in Spain of the signature (legitimación de firmas) of the New IDERAs within three Business Days following the Drawdown Date;

 

•              Delivery of the original irrevocable de-registration and export request authorisations issued in favor of EDC as authorised party in respect of each Air Nostrum Aircraft to Air Nostrum Líneas Aereas del Mediterráneo, S.A. within 10 Business Days following the Drawdown Date

 

 

Schedule III

Page 2

 

 

  

[Credit Agreement]

 

•              Filing of the Revocation IDERAs and the New IDERAs with the Spanish Aviation Authority (Agencia Estatal de Seguridad Aérea) within five Business Days following the Drawdown Date;

 

•              Discharge of any international interests granted in favor of EDC in respect of each Air Nostrum Aircraft on the International Registry;

 

•              Filing of (i) the Security Agreement and (ii) the Lease Assignment in respect of each Air Nostrum Aircraft on the International Registry

 

•              Registering the Security Agreement and the Lease Assignment in respect of each Air Nostrum Aircraft with the Registrar of Companies in England within 21 days of execution

 

•              English law deed of release in respect of (i) the Liens over the 19002 Aircraft and the 19003 Aircraft, (ii) and the Liens over the shares in the 19002 Borrower and the 19003 Borrower and (iii) the collateral assignment of each Lease Agreement in respect of an Air Nostrum Aircraft in favor of EDC.

 

•              Removal of the existing Liens registered against the 19002 Borrower and the 19003 Borrower with the Registrar of Companies in England.

 

MSNs 17000168, 17000172 and 17000173

 

•              Filing of Local Law Mortgage in respect of each Republic Aircraft with US Federal Aviation Administration

 

•              Filing of the Security Agreement and the Local Law Mortgage in respect of each Republic Aircraft on the International Registry

 

MSN 15129

 

(a)Conditions Precedent

 

•              Execution of the Adria Repossession Deed in the form of directly enforceable notarial deed by the Adria Borrower and the Lessee in respect of the Adria Aircraft

 

•              Confirmation or evidence satisfactory to the Security Trustee exhibiting that there are no undischarged encumbrances pertaining to Adria Aircraft other than the debt acknowledgment and first priority mortgage in favor of MUFG Union Bank, N.A. (the “MUFG Mortgage”)

 

•              Confirmation that the Deletion Permit in respect of the MUFG Mortgage is held in escrow, to be released following the relevant Drawdown Date upon filing the request to discharge the MUFG Mortgage with the competent court in Slovenia

 

•              Adria Borrower issuing a Power of Attorney to the Security Trustee, authorizing them to exercise its rights under the Adria Repossession Agreement;

 

 

Schedule III

Page 3

 

 

 

[Credit Agreement]

 

(b)Conditions Subsequent

 

•              Execution of the Slovenian Mortgage in the form of a directly enforceable notarial deed within one Business Day of the relevant Drawdown Date

 

•              Filing the request to establish the Slovenian Mortgage with the competent court in Slovenia within three Business Days of the relevant Drawdown Date;

 

•              Filing the request to discharge the MUFG Mortgage with the competent court in Slovenia within three Business Days of the relevant Drawdown Date;

 

•              Filing the request with the Slovenian Civil Aviation Authority to enter the Slovenian Mortgage into the Slovenian Aircraft Register;

 

•              Filing the request with the Slovenian Civil Aviation Authority to remove the discharged MUFG Mortgage from the Slovenian Aircraft Register;

 

•              Confirmation or evidence satisfactory to the Security Trustee of the due registration of the Slovenian Mortgage with the Slovenian Civil Aviation Agency, within 30 days of the relevant Drawdown Date;

 

 

Schedule III

Page 4

 

 

  

[Credit Agreement]

 

SCHEDULE IV

 

REPAYMENT SCHEDULES

 

 

Schedule IV

Page 1

 

 

 

 

AeroCentury Corp. (ACY) Ctpy # 80124770 80124771 80124772 80124772 80124772 80124773 Lessee Nostrum 02 Nostrum 03 Republic 1 Republic 2 Republic 3 Adria MSN 19002 19003 17000168 17000172 17000173 15129 Ctpy Name ACY SN 19002 Limited ACY SN 19003 Limited ACY E-175 LLC ACY E-175 LLC ACY E-175 LLC ACY SN 15129 Limited Swap details: Product PV Swap PV Swap PV Swap PV Swap PV Swap Callable Swap Start Feb 8, 2019 Feb 8, 2019 Feb 8, 2019 Feb 8, 2019 Feb 8, 2019 Feb 8, 2019 End Oct 3, 2020 Nov 7, 2020 Apr 30, 2025 May 30, 2025 May 30, 2025 Dec 11, 2022 Notional amount $9,100,000.00 $9,100,000.00 $6,320,000.00 $6,320,000.00 $6,320,000.00 $7,150,000.00 Frequency Quarterly Quarterly Monthly Monthly Monthly Monthly Day of month due 24th 24th 4th 4th 4th 19th ACY receives p.a. (act/360) 3M USD Libor + 3,2000% 3M USD Libor + 3,2000% 1M USD Libor + 2,8000% 1M USD Libor + 2,8000% 1M USD Libor + 2,8000% 1M USD Libor + 3,4500% ACY pays p.a. (act/360) 6.0050% 6.0000% 5.3960% 5.3950% 5.3950% 6.3010% 1st interpolated rate 2.7708% 2.7708% 2.4700% 2.4700% 2.4700% 2.4101% Exercise Date (11:00am NY Time) - - - - - 11/17/2020 Interest Rate: Loan Margin 3.2000% 3.2000% 2.8000% 2.8000% 2.8000% 3.4500% Swap offer rate 2.6750% 2.6700% 2.4660% 2.4650% 2.4650% 2.7210% Swap credit margin 0.1300% 0.1300% 0.1300% 0.1300% 0.1300% 0.1300% Total fixed rate 6.0050% 6.0000% 5.3960% 5.3950% 5.3950% 6.3010% Debt services $619,520.20 $619,432.58 $99,625.42 $98,522.82 $98,522.82 $149,232.78 Nostrum 02 Republic 1 - 3 Adria act. Date Notional act. Date Notional Republic 1 Notional Republic 2 Notional Republic 3 act. Date Notional Feb 8, 2019 $9,100,000.00 Feb 8, 2019 $6,320,000.00 $6,320,000.00 $6,320,000.00 Feb 8, 2019 $7,150,000.00 Mar 25, 2019 $8,548,786.68 Mar 4, 2019 $6,243,109.73 $6,244,208.12 $6,244,208.12 Feb 19, 2019 $7,014,552.81 Jun 24, 2019 $8,059,031.12 Apr 4, 2019 $6,172,493.26 $6,174,693.99 $6,174,693.99 Mar 19, 2019 $6,899,745.89 Sep 24, 2019 $7,563,185.71 May 7, 2019 $6,103,399.05 $6,106,707.61 $6,106,707.61 Apr 23, 2019 $6,792,841.13 Dec 24, 2019 $7,058,469.42 Jun 4, 2019 $6,029,388.92 $6,033,809.21 $6,033,809.21 May 20, 2019 $6,675,755.47 Mar 24, 2020 $6,546,091.89 Jul 5, 2019 $5,957,779.39 $5,963,317.63 $5,963,317.63 Jun 19, 2019 $6,561,626.03 Jun 24, 2020 $6,027,028.74 Aug 5, 2019 $5,885,837.12 $5,892,498.57 $5,892,498.57 Jul 19, 2019 $6,446,896.47 Sep 24, 2020 $5,500,000.00 Sep 4, 2019 $5,812,678.35 $5,820,467.45 $5,820,467.45 Aug 19, 2019 $6,332,693.61 Oct 5, 2020 $0.00 Oct 4, 2019 $5,739,190.60 $5,748,112.48 $5,748,112.48 Sep 19, 2019 $6,217,870.22 Nov 4, 2019 $5,666,232.65 $5,676,293.64 $5,676,293.64 Oct 21, 2019 $6,103,512.78 Nostrum 03 Dec 4, 2019 $5,592,086.39 $5,603,290.50 $5,603,290.50 Nov 19, 2019 $5,985,304.49 act. Date Notional Jan 6, 2020 $5,520,121.29 $5,532,478.29 $5,532,478.29 Dec 19, 2019 $5,867,544.43 Feb 8, 2019 $9,100,000.00 Feb 4, 2020 $5,444,490.61 $5,457,999.47 $5,457,999.47 Jan 21, 2020 $5,752,250.50 Mar 25, 2019 $8,548,817.42 Mar 4, 2020 $5,368,531.18 $5,383,196.97 $5,383,196.97 Feb 19, 2020 $5,632,256.72 Jun 24, 2019 $8,059,041.91 Apr 6, 2020 $5,295,460.31 $5,311,296.31 $5,311,296.31 Mar 19, 2020 $5,511,653.01 Sep 24, 2019 $7,563,181.31 May 5, 2020 $5,218,853.08 $5,235,856.24 $5,235,856.24 Apr 20, 2020 $5,393,334.48 Dec 24, 2019 $7,058,456.99 Jun 4, 2020 $5,142,695.10 $5,160,872.96 $5,160,872.96 May 19, 2020 $5,271,516.31 Mar 24, 2020 $6,546,077.68 Jul 6, 2020 $5,067,736.33 $5,087,099.40 $5,087,099.40 Jun 19, 2020 $5,150,926.90 Jun 24, 2020 $6,027,018.29 Aug 4, 2020 $4,990,139.23 $5,010,684.98 $5,010,684.98 Jul 20, 2020 $5,029,682.25 Sep 24, 2020 $5,500,000.00 Sep 4, 2020 $4,913,700.77 $4,935,440.27 $4,935,440.27 Aug 19, 2020 $4,906,897.21 Nov 9, 2020 $0.00 Oct 5, 2020 $4,836,907.14 $4,859,846.00 $4,859,846.00 Sep 21, 2020 $4,786,046.73 Nov 4, 2020 $4,759,031.68 $4,783,172.25 $4,783,172.25 Oct 19, 2020 $4,660,302.80 Dec 4, 2020 $4,680,806.03 $4,706,153.78 $4,706,153.78 Nov 19, 2020 $4,536,392.29 Jan 4, 2021 $4,602,930.24 $4,629,494.31 $4,629,494.31 Dec 21, 2020 $4,412,603.63 Feb 4, 2021 $4,524,692.59 $4,552,478.72 $4,552,478.72 Jan 19, 2021 $4,285,800.35 Mar 4, 2021 $4,444,056.80 $4,473,058.61 $4,473,058.61 Feb 19, 2021 $4,159,854.94 Apr 6, 2021 $4,366,413.17 $4,396,656.93 $4,396,656.93 Mar 19, 2021 $4,031,037.80 May 4, 2021 $4,285,113.10 $4,316,582.98 $4,316,582.98 Apr 19, 2021 $3,903,708.11 Jun 4, 2021 $4,205,398.69 $4,238,113.69 $4,238,113.69 May 19, 2021 $3,775,002.32 Jul 6, 2021 $4,125,944.23 $4,159,914.98 $4,159,914.98 Jun 21, 2021 $3,647,604.78 Aug 4, 2021 $4,044,253.38 $4,079,471.04 $4,079,471.04 Jul 19, 2021 $3,516,273.63 Sep 7, 2021 $3,965,238.37 $4,001,734.26 $4,001,734.26 Aug 19, 2021 $3,386,146.91 Oct 4, 2021 $3,881,660.27 $3,919,403.47 $3,919,403.47 Sep 20, 2021 $3,255,906.64 Nov 4, 2021 $3,800,071.20 $3,839,089.00 $3,839,089.00 Oct 19, 2021 $3,123,223.81 Dec 6, 2021 $3,718,672.61 $3,758,976.75 $3,758,976.75 Nov 19, 2021 $2,990,961.41 Jan 4, 2022 $3,635,211.43 $3,676,790.35 $3,676,790.35 Dec 20, 2021 $2,857,980.35 Feb 4, 2022 $3,552,477.22 $3,595,348.78 $3,595,348.78 Jan 19, 2022 $2,723,775.78 Mar 4, 2022 $3,467,761.16 $3,511,912.44 $3,511,912.44 Feb 22, 2022 $2,590,775.18 Apr 4, 2022 $3,384,248.88 $3,429,704.90 $3,429,704.90 Mar 21, 2022 $2,453,803.24 May 4, 2022 $3,299,841.30 $3,346,601.47 $3,346,601.47 Apr 19, 2022 $2,317,043.28 Jun 6, 2022 $3,216,537.99 $3,264,628.99 $3,264,628.99 May 19, 2022 $2,179,994.28 Jul 5, 2022 $3,130,894.15 $3,180,294.16 $3,180,294.16 Jun 20, 2022 $2,042,988.84 Aug 4, 2022 $3,045,347.32 $3,096,069.42 $3,096,069.42 Jul 19, 2022 $1,904,140.68 Sep 6, 2022 $2,960,785.20 $3,012,857.96 $3,012,857.96 Aug 19, 2022 $1,765,254.26 Oct 4, 2022 $2,873,585.86 $2,926,977.43 $2,926,977.43 Sep 19, 2022 $1,625,613.18 Nov 4, 2022 $2,787,312.72 $2,842,052.46 $2,842,052.46 Oct 19, 2022 $1,484,928.41 Dec 5, 2022 $2,700,638.70 $2,756,732.95 $2,756,732.95 Nov 21, 2022 $1,344,284.70 Jan 4, 2023 $2,613,157.15 $2,670,603.95 $2,670,603.95 Dec 12, 2022 $0.00 Feb 6, 2023 $2,526,457.28 $2,585,288.38 $2,585,288.38 Mar 6, 2023 $2,437,435.12 $2,497,613.72 $2,497,613.72 Apr 4, 2023 $2,348,404.69 $2,409,945.47 $2,409,945.47 May 4, 2023 $2,259,339.26 $2,322,257.37 $2,322,257.37 Jun 5, 2023 $2,170,550.64 $2,234,871.07 $2,234,871.07 Jul 5, 2023 $2,080,685.46 $2,146,395.86 $2,146,395.86 Aug 4, 2023 $1,990,416.19 $2,057,522.88 $2,057,522.88 Sep 5, 2023 $1,900,337.69 $1,968,867.03 $1,968,867.03 Oct 4, 2023 $1,808,972.61 $1,878,900.86 $1,878,900.86 Nov 6, 2023 $1,718,294.97 $1,789,669.99 $1,789,669.99 Dec 4, 2023 $1,625,881.05 $1,698,656.83 $1,698,656.83 Jan 4, 2024 $1,533,810.37 $1,608,025.46 $1,608,025.46 Feb 5, 2024 $1,441,541.79 $1,517,214.02 $1,517,214.02 Mar 4, 2024 $1,347,966.36 $1,425,057.60 $1,425,057.60 Apr 4, 2024 $1,254,604.34 $1,333,155.17 $1,333,155.17 May 7, 2024 $1,161,184.61 $1,241,225.36 $1,241,225.36 Jun 4, 2024 $1,066,432.55 $1,147,910.86 $1,147,910.86 Jul 5, 2024 $971,762.37 $1,054,720.89 $1,054,720.89 Aug 5, 2024 $876,652.30 $961,097.99 $961,097.99 Sep 4, 2024 $780,968.89 $866,896.11 $866,896.11 Oct 4, 2024 $684,855.23 $772,270.71 $772,270.71 Nov 4, 2024 $588,412.02 $677,335.63 $677,335.63 Dec 4, 2024 $491,432.50 $581,858.01 $581,858.01 Jan 6, 2025 $394,237.87 $486,212.72 $486,212.72 Feb 4, 2025 $296,326.11 $389,802.97 $389,802.97 Mar 4, 2025 $197,944.34 $292,915.82 $292,915.82 Apr 4, 2025 $99,238.68 $195,753.80 $195,753.80 Apr T, JJJJ / May T, JJJJ $0.00 $98,169.73 $98,169.73 May 30, 2025 $0.00 $0.00

 

 

 

  

[Credit Agreement]

 

EXHIBIT A

 

FORM OF NOTICE OF BORROWING

 

__________, 20__

 

Norddeutsche Landesbank Girozentrale, New York Branch

1114 Avenue of the Americas, 20th Floor

New York, New York 10036

Attention: Loan Management/****

Telephone ****

Email: ****

 

Ladies and Gentlemen,

 

One (1) [_____] model [_____] Aircraft bearing MSN [_____] (the “Aircraft”)

 

We refer to the Credit Agreement, dated as of February 7, 2019 (as amended, modified and supplemented from time to time, the “Credit Agreement”), among ACY SN 19002 Limited, ACY SN 19003 Limited, ACY E-175 LLC and ACY SN 15192 LLC [(the “Borrower”)], as borrowers, each of the participants party thereto), Norddeutsche Landesbank Girozentrale, New York Branch, as agent (the “Agent”), Norddeutsche Landesbank Girozentrale, as swap counterparty and Wilmington Trust Company, as security trustee. Terms defined in the Credit Agreement shall have the same meanings in this notice.

 

We hereby give you notice in accordance with Section 2.2(a) of the Credit Agreement that, pursuant to the Credit Agreement, the Borrower wishes to borrow a Loan in an amount of $[_________] (or such lesser amount necessary to satisfy the condition precedent specified in Section 3.2(o)(ii) of the Credit Agreement, in any case as reflected on the face of the Loan Certificate) at an Advance Rate of [_________] upon the terms and subject to the conditions contained therein.

 

The Drawdown Date for the Loan shall be [________], 20__, which is a day not less than three Business Days after the date hereof (or such shorter period as the Participants may agree).

 

We agree to indemnify you on demand for any Swap Breakage Loss, any LIBOR Breakage, any Liquidity Breakage and any interest and other expenses incurred pursuant to and in the manner specified in Section 2.2 of the Credit Agreement associated with any failure to borrow the Loan on the date referred to above, other than a failure by the Participants to fund following the satisfaction of all conditions precedent thereto.

 

The proceeds of the Loan should be credited to:

 

[insert account details]

 

and used in accordance with the Credit Agreement.

 

Exhibit A
Page 1

 

  

[Credit Agreement]

 

This notice shall be governed by, and construed and enforced in accordance with, the law of the State of New York.

 

This notice is irrevocable.

 

*          *          *

 

Exhibit A
Page 2

 

  

[Credit Agreement]

 

  Yours faithfully,
     
  [_______________], as Borrower
     
  By:                 
  Name:  
  Title:  
     
  AEROCENTURY CORP., as Borrower Parent
     
  By:  
  Name:  
  Title:  

 

Exhibit A
Page 3

 

  

[Credit Agreement]

 

EXHIBIT B-1

 

FORM OF BORROWER PLEDGE AGREEMENT

 

Exhibit B-1
Page 1

 

  

BENEFICIAL INTEREST PLEDGE
AGREEMENT (MSN [_________])

 

dated as of ___________________

 

between

 

ACY E-175 LLC

as Pledgor

 

and

 

WILMINGTON TRUST COMPANY

as Security Trustee

_______________________________________

 

Borrower Pledge Agreement

________________________________________

 

 

 

  

TABLE OF CONTENTS

 

    Page
     
Section 1. Definitions 1
     
Section 2. Pledge 1
     
Section 3. Representations and Warranties of the Pledgor 2
     
Section 4. Covenants of the Pledgor 3
     
Section 5. Voting Rights, Distributions etc 5
     
Section 6. Delivery of Pledged Collateral 5
     
Section 7. Remedies upon Default 6
     
Section 8. Cooperation 7
     
Section 9. Private Sales 7
     
Section 10. Application of Proceeds of Sale and Cash and Securities 7
     
Section 11. Limitation on Duties Regarding Preservation of Pledged Collateral 7
     
Section 12. Further Assurances 8
     
Section 13. Notices 8
     
Section 14. No Waiver 8
     
Section 15. GOVERNING LAW 8
     
Section 16. Successors and Assigns 8
     
Section 17. Waivers; Amendments 8
     
Section 18. Termination 9
     
Section 19. Severability 9
     
Section 20. Headings 9
     
Section 21. Counterparts 9
     
Section 22. Entire Agreement 9
     
Section 23. WAIVER OF JURY TRIAL 9
     
Section 24. Non-Recourse Obligations 9
     
EXHIBIT A -      Form of Interest Transfer  

 

 i

 

 

THIS BENEFICIAL INTEREST PLEDGE AGREEMENT (MSN [_______]) dated as of ________________ (this “Agreement”) is between ACY E-175 LLC, a Delaware limited liability company, as pledgor (the “Pledgor”) and WILMINGTON TRUST COMPANY, as security trustee (the “Security Trustee”).

 

WITNESSETH:

 

WHEREAS, the Pledgor is the sole beneficial owner of [__________] Trust (the “Trust”) established under the [Trust Agreement] dated as of [____________] between Wells Fargo Delaware Trust Company, National Association, not in its individual capacity but solely as owner trustee (the “Owner Trustee”) and the Pledgor (as further amended, supplemented and modified from time to time, the “Trust Agreement”) and owns 100% of the Beneficial Interest (as defined below) in the Trust;

 

WHEREAS, the Pledgor has entered into a Credit Agreement, dated as of ________ __, 2019, among, inter alios, the Pledgor, as a borrower, the participants party thereto (the “Participants ”), Norddeutsche Landesbank Girozentrale, New York Branch, as agent, Norddeutsche Landesbank Girozentrale, as swap counterparty, and the Security Trustee (as it may be modified, supplemented or amended from time to time, the “Credit Agreement”) pursuant to which the Participants agreed to make certain loans available to refinance the Aircraft; and

 

WHEREAS, it is a condition precedent to the obligations of the Participants under the Credit Agreement that the Pledgor grant to the Security Trustee, a security interest in the Beneficial Interest (as defined below).

 

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and in order to induce the Participants to enter into the transactions contemplated by the Credit Agreement and the other Operative Documents, the Pledgor hereby covenants and agrees with the Security Trustee as follows:

 

Section 1.       Definitions. Unless the context otherwise requires, capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement.

 

Section 2.       Pledge. (a) As security for the payment and performance in full of all of the Secured Obligations (as defined in the Security Agreement), the Pledgor hereby pledges, hypothecates, assigns, transfers, sets over, delivers and grants to the Security Trustee a first priority Lien in all right, title and interest of the Pledgor which presently exist or hereafter arise in, to and under the following:

 

(i)       100% of the beneficial interest in the Trust under and as defined in the Trust Agreement (the “Beneficial Interest”),

 

(ii)       all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any of or all the Beneficial Interest,

 

 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

(iii)       all certificates or other instruments or documents representing any of the foregoing,

 

(iv)       all rights and privileges of the Pledgor with respect to the Beneficial Interest and the other property referred to in clauses (i) through (iii) above, and

 

(v)       all proceeds of any of the foregoing and any property of any character whatsoever into which any of the foregoing may be converted (all items referred to in clauses (i) through (v) being hereinafter collectively referred to as the “Pledged Collateral”).

 

(b)       For the avoidance of doubt, Excluded Payments (as defined in the Security Agreement) and any supplemental rent, maintenance reserves and security deposits payable to the Owner Trustee under the relevant Lease (received as distributions or otherwise) shall not be Pledged Collateral.

 

(c)       The Pledgor hereby confirms, as of the date hereof, that it does not hold any certificate(s) in respect of the Beneficial Interest or certificates or other instruments or documents representing the other Pledged Collateral.

 

TO HAVE AND TO HOLD the Pledged Collateral, together with all rights, title, interests, powers, privileges and preferences pertaining or incidental thereto, unto the Security Trustee, its successors and assigns permitted by the terms of the Credit Agreement; subject, however, to the terms, covenants and conditions hereinafter set forth.

 

Section 3.       Representations and Warranties of the Pledgor. The Pledgor hereby represents and warrants as of the date hereof:

 

(a)       it is a limited liability company duly formed and validly existing under the laws of the jurisdiction of its formation and has the requisite power and authority to enter into this Agreement and to carry out the transactions contemplated hereby;

 

(b)       (i) it has duly authorized, executed and delivered this Agreement and (ii) this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, receivership, reorganization, moratorium or other similar laws affecting creditors’ rights generally and by application of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law);

 

(c)       the execution, delivery and performance by the Pledgor of this Agreement is not in violation of the Trust Agreement or any indenture, mortgage, deed of trust or other instrument or agreement to which it is a party or by which it is bound or to which any of its property or assets may be subject;

 

(d)       neither the execution and delivery by the Pledgor of this Agreement nor the consummation by it of any of the transactions contemplated hereby requires the consent or approval of, the giving of notice to, or the registration or filing with, or the taking of any other action in respect of, any agency or authority, except for the filing of Uniform Commercial Code financing statements (and continuations thereof) in respect of the security interests created hereby in the State of Delaware;

 

 2 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

(e)       the Pledgor is the record owner of the Pledged Collateral, free and clear of any and all Liens or claims of any other Person, except for the Lien granted hereunder (and the rights and remedies of the Security Trustee related to such Lien);

 

(f)       the Beneficial Interest constitutes the entire Beneficial Interest of the Pledgor at the date hereof;

 

(g)       it has legal authority to pledge the Pledged Collateral in the manner hereby done or contemplated;

 

(h)       the Pledgor, as sole beneficial owner of the Trust, has not taken any action or commenced any legal proceedings nor (to the best of its knowledge and belief) has the Owner Trustee taken any or have any been threatened against the Trust for its winding up, dissolution, administration or reorganization or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or any of all of its assets;

 

(i)       other than the filing of a UCC -1 financing statement in respect of this Agreement, it is not necessary in order to ensure the validity, enforceability or admissibility in evidence in proceedings of this Pledge Agreement in New York or Delaware or any other relevant jurisdiction that it or any other document be filed or registered with any authority in such jurisdiction or elsewhere or that any tax be paid in respect thereof, and the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Pledged Collateral.

 

Section 4.       Covenants of the Pledgor. The Pledgor covenants as follows for so long as any Secured Obligations remain outstanding and/or unperformed (other than any contingent liabilities that continue past the termination of the Security Agreement and the other Loan Operative Documents):

 

(a)       except as contemplated hereby and by the Security Agreement, the Pledgor will not make any sale, assignment, pledge, mortgage, hypothecation or transfer of the Pledged Collateral or the ownership interests of the Trust and, except for the Lien granted hereby, the Pledgor will be the sole legal owner of the Pledged Collateral, free and clear of any and all Liens other than the Liens granted in favor of the Security Trustee;

 

(b)       as the sole beneficial owner of the Trust, it will not cause the Owner Trustee to issue any further beneficial interests of any class or description or other securities in addition to or in substitution for the Beneficial Interest in existence on the Closing Date; it will hold in trust and will pledge hereunder, immediately upon its acquisition (direct or indirect) thereof, all property (other than Excluded Payments and any supplemental rent, maintenance reserves or security deposits payable under the relevant Lease and other property explicitly permitted to be received and retained by the Trust under the Credit Agreement and the other Loan Operative Documents) or additional beneficial interest of any class or description or other securities of the Trust;

 

 3 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

(c)       at any time and from time to time, at no expense to the Security Trustee, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that the Security Trustee may reasonably request, in order to perfect and protect any Lien granted or purported to be granted hereby or to enable the Security Trustee to exercise and enforce its rights and remedies hereunder;

 

(d)       as sole beneficial owner of the Trust, it shall not authorize or, to the extent within its power or control, consent to the appointment of a receiver, trustee or liquidator of the Trust or of a substantial part of the Trust’s property, or admit in writing submitted in connection with judicial or other similar procedures the Trust’s inability to pay its debts generally as they come due, or make a general assignment for the benefit of creditors or permit any creditor to exercise a contractual right to assume the operations or financial management of the Trust;

 

(e)       as sole beneficial owner of the Trust, it shall not authorize the Trust to file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Trust in any such proceedings, or authorize the Trust by voluntary petition, answer or consent to or seek relief under the provisions of any other now existing or future bankruptcy, insolvency or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with the Trust’s creditors or otherwise for the relief of distressed debtors;

 

(f)        it shall not commence or join with any other Person in commencing any case, proceeding or action described in the preceding paragraph or seek an order, judgment or decree appointing a receiver, trustee or liquidator of the Trust of all or substantial part of its property, or sequestrating of all or any substantial part of the property of the Trust or otherwise file a petition against the Trust in a proceeding under any bankruptcy, insolvency or other similar laws as now or hereafter in effect;

 

(g)       as sole beneficial owner of the Trust, it shall not authorize the Trust to incur any indebtedness other than as provided in the Operative Documents;

 

(h)       as sole beneficial owner of the Trust, it shall not authorize the Trust to engage in any business other than as contemplated by the Operative Documents;

 

(i)        it shall not, unless (i) it has given at least 20 days’ prior written notice to such effect to the Security Trustee and (ii) all action reasonably necessary to protect and perfect the Lien granted or purported to be granted hereby with respect to the Pledged Collateral, shall have been taken, either (A) change its name, identity or structure or reorganize or (B) reincorporate under the laws of another jurisdiction;

 

(j)        if it receives distributions from the Trust that were made with funds that the Trust was not entitled to receive under the Security Agreement and the other Loan Operative Documents, it shall hold such funds in trust for the Security Trustee and promptly deposit such funds in the applicable Collateral Account on behalf of the Trust;

 

 4 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

(k)       it shall defend the Security Trustee’s right, title and Lien in and to the Pledged Collateral against the claims and demands of all Persons; and

 

(l)        it will not amend, repeal or modify the Trust Agreement without the prior written consent of the Security Trustee (not to be unreasonably withheld, delayed or conditioned).

 

Section 5.       Delivery of Pledged Collateral. The Pledgor agrees to deliver or cause to be delivered promptly to the Security Trustee any and all other Pledged Collateral, and any and all certificates or other instruments or documents representing any of the Pledged Collateral, which shall be in or come into the Pledgor’s possession during the term of this Agreement. The Pledgor agrees to deliver to the Security Trustee on or prior to the Closing Date a duly executed beneficial interest transfer form in blank in the form of Exhibit A hereto.

 

Section 6.       Remedies upon Default. If an Event of Default shall have occurred and be continuing, the Security Trustee may exercise all rights of a secured party under the Uniform Commercial Code, as enacted in any applicable jurisdiction, with respect to the Pledged Collateral and, in addition, the Security Trustee may, without being required to give any notice except as herein provided or as may be required by applicable law, sell, assign, transfer, endorse and deliver the whole or, from time to time, any part of the Pledged Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Security Trustee in its reasonable discretion shall deem appropriate. The Security Trustee shall be authorized at any sale to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Pledged Collateral for their own account in compliance with the Securities Act of 1933, as amended (the “Securities Act”). Upon consummation of any sale, the Security Trustee shall have the right to assign, transfer, endorse and deliver to the purchaser or purchasers thereof the Pledged Collateral sold and all of the voting and consensual rights and powers granted and reserved to the Security Trustee pursuant hereto shall thereupon become vested in such purchaser or purchasers, subject to any reservations or qualifications imposed by the Security Trustee. Each purchaser at any sale shall hold the property sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives and releases (to the extent permitted by law) all rights of redemption, stay, appraisal, reclamation and turnover which the Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Security Trustee shall give the Pledgor (with a copy to the Owner Trustee) ten days’ written notice (which the Pledgor agrees is reasonable notification within the meaning of Section 9-612 of the Uniform Commercial Code, as enacted in any applicable jurisdiction) of the Security Trustee’s intention to attempt to sell any of the Pledged Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale, and, in the case of a sale at a broker’s board or on a securities exchange, shall identify the board or exchange at which such sale is to be made and the day on which the Pledged Collateral, or a portion thereof, will first be offered for sale. Any public sale of any of the Pledged Collateral shall be held at such time or times within ordinary business hours and at such place or places as the Security Trustee may state in the notice or publication (if any) of such sale. At any sale, the Pledged Collateral, or any portion thereof to be sold, may be sold as an entirety or in separate parcels, as the Security Trustee may (in its sole and absolute discretion) determine. The Security Trustee shall not be obligated to sell any of the Pledged Collateral if it shall determine not to do so, regardless of the fact that notice of a sale of such Pledged Collateral may have been given. The Security Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, occur at the time and place identified in such announcement. In case all or any part of the Pledged Collateral is sold on credit or for future delivery, the Pledged Collateral so sold may be retained by the Security Trustee until the sale price is paid by the purchaser or purchasers thereof, but the Security Trustee shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Pledged Collateral so sold and, in case of any such failure, such Pledged Collateral may be sold again upon ten days’ notice (which the Pledgor agrees is reasonable notification within the meaning of Section 9-612 of the Uniform Commercial Code, as enacted in any applicable jurisdiction). At any sale made pursuant to this Agreement, to the extent permitted by applicable law, the Security Trustee may bid for or purchase, free from any right of redemption, stay, appraisal, reclamation or turnover on the part of the Pledgor (all said rights being also hereby waived and released to the extent permitted by law), any Pledged Collateral offered for sale and may make payment on account thereof by using the amount of Secured Obligations outstanding to it from the Pledgor as a credit against the purchase price, and the Security Trustee may, upon compliance with the terms of sale, hold, retain and dispose of the Pledged Collateral sold without further accountability to the Pledgor therefor. For purposes hereof, a written agreement to purchase all or any part of the Pledged Collateral shall be treated as a sale thereof and the Security Trustee shall be free to carry out such sale pursuant to such agreement, and the Pledgor shall not be entitled to the return of any Pledged Collateral subject thereto, notwithstanding the fact that after the Security Trustee shall have entered into such agreement all Events of Default shall have been remedied. As an alternative to exercising the power of sale herein conferred upon it, the Security Trustee may proceed by suit or suits at law or in equity to foreclose this Agreement and sell the Pledged Collateral or any portion thereof pursuant to a judgment or decree of a court having competent jurisdiction and/or pursuant to a proceeding of a court-appointed receiver.

 

 5 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

The Pledgor hereby constitutes and appoints the Security Trustee the attorney-in-fact of the Pledgor for the purpose of carrying out after the occurrence and during the continuance of an Event of Default, the provisions of this Agreement and taking any action and executing any instrument which the Security Trustee may deem necessary or reasonably advisable to accomplish the purposes hereof, which appointment is granted as security for the performance of the Pledgor’s obligations hereunder and for valuable consideration, and is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Security Trustee shall have the right, after the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Security Trustee’s name or in the name of the Pledgor, to settle, compromise, prosecute or defend any action, claim or proceeding with respect to the Pledged Collateral and shall have the right to sell, assign, endorse, pledge, transfer and make any agreement respecting, or otherwise deal with, the same.

 

Section 7.      Cooperation. The Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default, if for any reason the Security Trustee desires to sell any of the Pledged Collateral at a sale, it will, at any time and from time to time, upon the written request of the Security Trustee, use commercially reasonable efforts to cause the Trust to take such action and prepare, distribute and/or file such documents as are required for the Security Trustee to permit the sale of such Pledged Collateral.

 

 6 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

Section 8.      Private Sales. (a) The Pledgor recognizes that the Security Trustee may be unable to effect a public sale of any or all the Pledged Collateral, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale. The Security Trustee shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit the Trust to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Trust would agree to do so; nor shall the Trust be at any time obligated to register the Beneficial Interest for a public sale.

 

(b)       The Pledgor further agrees to use commercially reasonable efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Collateral pursuant to this Section 8 valid and binding and in compliance with applicable laws. The Pledgor further agrees that a breach of any of the covenants contained in this Section 8 will cause irreparable injury to the Security Trustee, that the Security Trustee has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 8 shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing.

 

Section 9.      Application of Proceeds of Sale and Cash and Securities. The proceeds of any sale of or realization upon the whole or any part of the Pledged Collateral and cash retained by the Security Trustee pursuant to this Agreement shall be applied by the Security Trustee in accordance with Section 3.03 of the Mortgage.

 

Section 10.     Limitation on Duties Regarding Preservation of Pledged Collateral. Neither the Security Trustee nor any director, officer, employee or counsel of the Security Trustee shall be liable for any action taken or omitted to be taken by it or them relative to any of the Pledged Collateral except for its or their own gross negligence or willful misconduct.

 

Section 11.     Further Assurances. The Pledgor agrees that at no expense to the Security Trustee, (a) it will duly execute and deliver (to the Security Trustee or otherwise) or cause to be duly executed and delivered (to the Security Trustee or otherwise) and will file or record such notices, financing statements or other documents as may be necessary to enable the perfection of the Lien of the Security Trustee hereunder, or as the Security Trustee may reasonably request, such instruments to be in form and substance reasonably satisfactory to the Security Trustee, and (b) it will do or cause to be done such further acts and things and execute and deliver (to the Security Trustee or otherwise) such additional conveyances, assignments, agreements and instruments, as the Security Trustee may at any time reasonably request in connection with the administration and enforcement of this Agreement or relative to the Pledged Collateral or any part thereof or in order to assure and confirm unto the Security Trustee its rights, powers and remedies hereunder, including, without limitation, the protection and perfection of the Security Trustee’s Lien in the Pledged Collateral or any part thereof.

 

 7 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

Section 12.     Notices. All notices and other communications shall be in writing and shall be given or made by fax, mail or personal delivery and faxed, mailed or delivered to the intended recipient at the address specified in Schedule 1 to the Credit Agreement or at such other address as shall be designated by the Pledgor or the Security Trustee in a notice to the other party hereto. All such communications shall be deemed to have been duly given when transmitted by fax (provided such transmission by fax is in legible form and is accompanied by or generates a substantially simultaneous confirmation of transmission), or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

 

Section 13.     No Waiver. No failure on the part of the Security Trustee or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Security Trustee or any of its agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

 

Section 14.     GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.

 

Section 15.     Successors and Assigns. This Agreement and the terms, covenants and conditions hereof shall be binding upon and inure to the benefit of the parties hereto and all holders of the Secured Obligations secured hereby and their respective successors and permitted assigns, except that the Pledgor shall not be permitted to assign or otherwise transfer this Agreement or any rights or interests herein or in the Pledged Collateral or any part thereof, or otherwise to pledge, encumber or grant any option with respect to the Pledged Collateral or any part thereof. The Pledgor shall not be permitted to delegate any of its duties or obligations hereunder. The Security Trustee may assign this Agreement or any or all of its rights hereunder in accordance with the provisions of the Operative Documents.

 

Section 16.     Waivers; Amendments. No term or provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the parties hereto; and any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given.

 

Section 17.     Termination.

 

(a)       Upon payment in full of the Secured Obligations, this Agreement shall terminate and the Security Trustee, at the request of the Pledgor, will execute and deliver to the Pledgor, at no cost to the Security Trustee, a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement and will duly assign, transfer and deliver to the Pledgor all of the rights and moneys at the time held by the Security Trustee under this Agreement and will execute any other instrument reasonably requested by the Pledgor in connection with the foregoing.

 

 8 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

(b)       Upon (or at any time after) payment in full of the principal amount of and interest on and all other amounts due under all Loan Certificates related to the Republic Aircraft owned by the Trust and provided that no Default or Event of Default shall have occurred and be continuing, the Pledgor may direct the Security Trustee to execute and deliver to or as directed in writing by the Pledgor an appropriate instrument releasing the Pledged Collateral from the Lien of this Agreement and the Security Trustee shall execute and deliver such instrument as aforesaid.

 

Section 18.      Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by applicable law, the Pledgor hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect.

 

Section 19.      Headings. Section headings used herein are for convenience only and are not to affect the construction of or be taken into consideration in interpreting this Agreement.

 

Section 20.      Counterparts. This Agreement may be executed in separate counterparts each of which when so executed and delivered shall be an exchangeable original, but all such counterparts shall together constitute but one and the same agreement.

 

Section 21.      Entire Agreement. This Agreement together with the Operative Documents constitutes, on and as of the date hereof, the entire agreement of the Pledgor and the Security Trustee with respect to the subject matter hereof, and all prior or contemporaneous understandings or agreements, whether written or oral, between the Security Trustee and the Pledgor with respect to such subject matter are hereby superseded in their entirety.

 

Section 22.      WAIVER OF JURY TRIAL. EACH PARTY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY CIVIL ACTION ARISING UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENTS.

 

Section 23.     Non-Recourse Obligations.

 

(a)       In recognition of the Pledgor granting the security referred to in Section 2, the Security Trustee hereby agrees that, notwithstanding the provisions of this Agreement or any Loan Operative Document to the contrary, any and all liability of the Pledgor that is created hereunder shall, in the absence of fraud, gross negligence or willful misconduct in performing its obligations under this Agreement, be limited to the aggregate assets from time to time of the Pledgor. Except as specified above, the Pledgor shall not be personally liable for any shortfall that may arise as a result thereof. The provisions of this Section 24(a) shall only limit the personal liability of the Pledgor for the discharge of its obligations as specified above and shall not (i) limit or restrict in any way the accrual of interest on any such unpaid amount, or (ii) derogate from or otherwise limit the right of recovery, realization or application by the Security Trustee, the Agent, the Swap Counterparty and each Participant under or pursuant to any of the Loan Operative Documents on anything assigned, mortgaged, charged, pledged or secured (by way of security) to or for the benefit of the Security Trustee, the Agent, the Swap Counterparty and each Participant under or pursuant to any of the Loan Operative Documents.

 

 9 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

(b)        The Security Trustee hereby acknowledges and agrees that the Pledgor’s obligations under this Agreement and the other Loan Operative Documents are solely the corporate obligations of the Pledgor and that none of the Security Trustee, the Agent, the Swap Counterparty or the Participants shall have any recourse against any of the directors, shareholders, officers or employees of the Pledgor for any claims, losses, damages, liabilities, indemnities or other obligations of the Pledgor under this Agreement and the other Loan Operative Documents.

 

*         *      *

 

 10 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Beneficial Interest Pledge Agreement to be duly executed and delivered by its proper and duly authorized officers as of the day and year first above written.

 

  ACY E-175 LLC, as a Borrower
     
  By: AeroCentury Corp., its Manager
     
  By:  
  Name:
  Title:
     
  WILMINGTON TRUST COMPANY, as Security Trustee
     
  By:   
    Name:
    Title:

 

Acknowledged and Agreed:  
     
WELLS FARGO DELAWARE TRUST COMPANY, NATIONAL ASSOCIATION, not in its individual capacity but solely as owner trustee of [_________] Trust  
     
By:      
Name:  
Title:  

 

 11 

 

  

[Beneficial Interest Pledge Agreement (MSN [__________])]

 

EXHIBIT A

 

FORM OF INTEREST TRANSFER

 

ACY E-175 LLC (the “Transferor”), for value received does hereby transfer to __________________ (the “Transferee”), its beneficial interest, to hold the same unto the Transferee.

 

  ACY E-175 LLC, as a Borrower
     
  By: AeroCentury Corp., its Manager
     
  By:        
  Name:
  Title:

 

Exhibit A
Page 1

 

 

[Credit Agreement]

 

EXHIBIT B-2

 

FORM OF BORROWER PARENT PLEDGE AGREEMENT

 

Exhibit B-2
Page 1

 

  

MEMBERSHIP INTEREST PLEDGE

AGREEMENT

 

dated as of ___________________

 

between

 

AEROCENTURY CORP.

as Pledgor

 

and

 

WILMINGTON TRUST COMPANY

as Security Trustee

_______________________________________

 

Borrower Parent Pledge Agreement

________________________________________

 

 

 

  

TABLE OF CONTENTS

 

    Page
     
Section 1. Definitions 1
     
Section 2. Pledge 1
     
Section 3. Representations and Warranties of the Pledgor 2
     
Section 4. Covenants of the Pledgor 3
     
Section 5. Voting Rights, Distributions etc 5
     
Section 6. Delivery of Pledged Collateral 6
     
Section 7. Remedies upon Default 7
     
Section 8. Cooperation 8
     
Section 9. Private Sales 8
     
Section 10. Application of Proceeds of Sale and Cash and Securities 9
     
Section 11. Limitation on Duties Regarding Preservation of Pledged Collateral 9
     
Section 12. Further Assurances 9
     
Section 13. Notices 9
     
Section 14. No Waiver 9
     
Section 15. GOVERNING LAW 9
     
Section 16. Successors and Assigns 10
     
Section 17. Waivers; Amendments 10
     
Section 18. Termination 10
     
Section 19. Severability 10
     
Section 20. Headings 10
     
Section 21. Counterparts 11
     
Section 22. Entire Agreement 11
     
Section 23. WAIVER OF JURY TRIAL 11
     
Section 24. Non-Recourse Obligations 11
     
EXHIBIT A -     Form of Interest Transfer  

  

 i

 

 

THIS MEMBERSHIP INTEREST PLEDGE AGREEMENT dated as of ________________ (this “Agreement”) is between AEROCENTURY CORP., a Delaware corporation, as pledgor (the “Pledgor”) and WILMINGTON TRUST COMPANY, as security trustee (the “Security Trustee”).

 

WITNESSETH:

 

WHEREAS, the Pledgor is the sole member and manager of [ACY SN 15129 LLC][ACY E-175 LLC], a Delaware limited liability company (the “Company”) pursuant to that certain Operating Agreement, dated as of [____________] (as it may be modified, supplemented or amended from time to time, the “LLC Agreement”) and owns 100% of the Membership Interest (as defined below) in the Company, as evidenced by [Certificate No. 1] dated ________ (the “Certificate”) issued by the Company to the Pledgor;

 

WHEREAS, the Company has entered into a Credit Agreement, dated as of ________ __, 2019, among, inter alios, the Company, as a borrower, the participants party thereto (the “Participants”), Norddeutsche Landesbank Girozentrale, as swap counterparty, Norddeutsche Landesbank Girozentrale, New York Branch, as agent, and the Security Trustee (as it may be modified, supplemented or amended from time to time, the “Credit Agreement”) pursuant to which the Participants agreed to make certain loans available to refinance the Aircraft;

 

WHEREAS, the Company has entered into a Security Agreement, dated as of ________ __, 2019, among, inter alios, the Company, as a mortgagor, and the Security Trustee (as it may be modified, supplemented or amended from time to time, the “Mortgage”); and

 

WHEREAS, it is a condition precedent to the obligations of the Participants under the Credit Agreement that the Pledgor grant to the Security Trustee, a security interest in the Membership Interest (as defined below).

 

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and in order to induce the Participants to enter into the transactions contemplated by the Credit Agreement and the other Operative Documents, the Pledgor hereby covenants and agrees with the Security Trustee as follows:

 

Section 1.       Definitions. Unless the context otherwise requires, capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement.

 

Section 2.       Pledge. (a) As security for the payment and performance in full of all of the Secured Obligations (as defined in the Security Agreement), the Pledgor hereby pledges, hypothecates, assigns, transfers, sets over, delivers and grants to the Security Trustee a first priority Lien in all right, title and interest of the Pledgor which presently exist or hereafter arise in, to and under the following:

 

(i)       the limited liability company interest in the Company held by the Pledgor and the rights of the Pledgor as the sole member of the Company (the “Membership Interest”),

 

 

 

  

[Borrower Parent Pledge Agreement]

 

(ii)       all dividends, interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any of or all the Membership Interest and all other options or rights of any nature whatsoever which may be issued or granted by the Company to the Pledgor in respect of the Membership Interest and the books and records of the Company evidencing record ownership and registration of the interests pledged hereunder,

 

(iii)       all certificates or other instruments or documents representing any of the foregoing, including the Certificate,

 

(iv)       all rights and privileges of the Pledgor with respect to the Membership Interest and the other property referred to in clauses (i) through (iii) above, and

 

(v)       all proceeds of any of the foregoing and any property of any character whatsoever into which any of the foregoing may be converted (all items referred to in clauses (i) through (v) being hereinafter collectively referred to as the “Pledged Collateral”).

 

(b)       For the avoidance of doubt, Excluded Payments (as defined in the Security Agreement) and any supplemental rent, maintenance reserves and security deposits payable to the Company under the relevant Lease (received as distributions or otherwise) shall not be Pledged Collateral.

 

TO HAVE AND TO HOLD the Pledged Collateral, together with all rights, title, interests, powers, privileges and preferences pertaining or incidental thereto, unto the Security Trustee, its successors and assigns permitted by the terms of the Credit Agreement; subject, however, to the terms, covenants and conditions hereinafter set forth.

 

Section 3.       Representations and Warranties of the Pledgor. The Pledgor hereby represents and warrants as of the date hereof:

 

(a)       it is a Delaware corporation duly incorporated and validly existing under the laws of the jurisdiction of its formation and has the requisite power and authority to enter into this Agreement and to carry out the transactions contemplated hereby;

 

(b)       (i) it has duly authorized, executed and delivered this Agreement and (ii) this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, receivership, reorganization, moratorium or other similar laws affecting creditors’ rights generally and by application of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law);

 

(c)       the execution, delivery and performance by the Pledgor of this Agreement is not in violation of the LLC Agreement or any indenture, mortgage, deed of trust or other instrument or agreement to which it is a party or by which it is bound or to which any of its property or assets may be subject;

 

 2 

 

  

[Borrower Parent Pledge Agreement]

 

(d)       neither the execution and delivery by the Pledgor of this Agreement nor the consummation by it of any of the transactions contemplated hereby requires the consent or approval of, the giving of notice to, or the registration or filing with, or the taking of any other action in respect of, any agency or authority, except for the filing of Uniform Commercial Code financing statements (and continuations thereof) in respect of the security interests created hereby in the State of Delaware;

 

(e)       the Pledgor is the record owner of the Pledged Collateral, free and clear of any and all Liens or claims of any other Person, except for the Lien granted hereunder (and the rights and remedies of the Security Trustee related to such Lien);

 

(f)       the Membership Interest has been duly authorized and validly issued;

 

(g)       the Certificate is accurate and the Membership Interest described therein constitutes the entire Membership Interest of the Pledgor at the date hereof;

 

(h)       it has legal authority to pledge the Pledged Collateral in the manner hereby done or contemplated;

 

(i)       the Pledgor, as manager and sole member of the Company, has not taken any action or commenced any legal proceedings nor (to the best of its knowledge and belief) has the Company taken any or have any been threatened against the Company for its winding up, dissolution, administration or reorganization or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or any of all of its assets;

 

(j)       other than the delivery of the Certificate to the Security Trustee evidencing the Pledged Collateral and the filing of a UCC-1 financing statement in respect of this Agreement, it is not necessary in order to ensure the validity, enforceability or admissibility in evidence in proceedings of this Pledge Agreement in New York or Delaware or any other relevant jurisdiction that it or any other document be filed or registered with any authority in such jurisdiction or elsewhere or that any tax be paid in respect thereof, and the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Pledged Collateral.

 

Section 4.       Covenants of the Pledgor. The Pledgor covenants as follows for so long as any Secured Obligations remain outstanding and/or unperformed (other than any contingent liabilities that continue past the termination of the Security Agreement and the other Loan Operative Documents):

 

(a)       except as contemplated hereby and by the Security Agreement, the Pledgor will not make any sale, assignment, pledge, mortgage, hypothecation or transfer of the Pledged Collateral or the ownership interests of the Company and, except for the Lien granted hereby, the Pledgor will be the sole legal owner of the Pledged Collateral, free and clear of any and all Liens other than the Liens granted in favor of the Security Trustee;

 

(b)       as manager and sole member of the Company, it will not cause the Company to issue any further limited liability company interests of any class or description or other securities in addition to or in substitution for the Membership Interest in existence on the Closing Date; it will hold in trust and will pledge hereunder, immediately upon its acquisition (direct or indirect) thereof, all property (other than Excluded Payments, any supplemental rent, maintenance reserves or security deposits payable under the relevant Lease and other property explicitly permitted to be received and retained by the Company under the Credit Agreement and the other Loan Operative Documents) or additional limited liability company interest of any class or description or other securities of the Company;

 

 3 

 

  

[Borrower Parent Pledge Agreement]

 

(c)       at any time and from time to time, at no expense to the Security Trustee, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that the Security Trustee may reasonably request, in order to perfect and protect any Lien granted or purported to be granted hereby or to enable the Security Trustee to exercise and enforce its rights and remedies hereunder;

 

(d)       as manager and sole member of the Company, it shall not authorize or, to the extent within its power or control, consent to the appointment of a receiver, trustee or liquidator of the Company or of a substantial part of the Company’s property, or admit in writing submitted in connection with judicial or other similar procedures the Company’s inability to pay its debts generally as they come due, or make a general assignment for the benefit of creditors or permit any creditor to exercise a contractual right to assume the operations or financial management of the Company;

 

(e)       as manager and sole member of the Company, it shall not authorize the Company to file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegations of a petition filed against the Company in any such proceedings, or authorize the Company by voluntary petition, answer or consent to or seek relief under the provisions of any other now existing or future bankruptcy, insolvency or other similar law providing for the reorganization or winding-up of corporations, or providing for an agreement, composition, extension or adjustment with the Company’s creditors or otherwise for the relief of distressed debtors;

 

(f)       it shall not commence or join with any other Person in commencing any case, proceeding or action described in the preceding paragraph or seek an order, judgment or decree appointing a receiver, trustee or liquidator of the Company of all or substantial part of its property, or sequestrating of all or any substantial part of the property of the Company or otherwise file a petition against the Company in a proceeding under any bankruptcy, insolvency or other similar laws as now or hereafter in effect;

 

(g)       as manager and sole member of the Company, it shall not authorize the Company to incur any indebtedness other than as provided in the Operative Documents;

 

(h)       as manager and sole member of the Company, it shall not authorize the Company to engage in any business other than as contemplated by the Operative Documents;

 

(i)       it shall not, unless (i) it has given at least 20 days’ prior written notice to such effect to the Security Trustee and (ii) all action reasonably necessary to protect and perfect the Lien granted or purported to be granted hereby with respect to the Pledged Collateral, shall have been taken, either (A) change its name, identity or structure or reorganize or (B) reincorporate under the laws of another jurisdiction;

 

 4 

 

  

[Borrower Parent Pledge Agreement]

 

(j)       if it receives distributions from the Company that were made with funds that the Company was not entitled to receive under the Security Agreement and the other Loan Operative Documents, it shall hold such funds in trust for the Security Trustee and promptly deposit such funds in the applicable Collateral Account on behalf of the Company;

 

(k)       it shall defend the Security Trustee’s right, title and Lien in and to the Pledged Collateral against the claims and demands of all Persons; and

 

(l)        it will not amend, repeal or modify the LLC Agreement of the Company without the prior written consent of the Security Trustee (not to be unreasonably withheld, delayed or conditioned).

 

Section 5.       Voting Rights, Distributions etc. (a) So long as no Event of Default has occurred and is continuing, the Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Membership Interest, or any part thereof, for any purpose not inconsistent with the terms of this Agreement or the other Loan Operative Documents; provided however, that the Pledgor shall not be entitled to exercise any voting and/or consensual rights and powers with respect to the following without the prior written consent of the Security Trustee:

 

(i)       the winding up, dissolution, liquidation or reorganization of the Company or the composition or readjustment of its debts;

 

(ii)       the merger or consolidation of the Company with any other Person;

 

(iii)       the sale of all or substantially all the assets of the Company;

 

(iv)       any amendment to or modification of the LLC Agreement;

 

(v)       except as otherwise provided in the Operative Documents, the incurrence of any indebtedness or the creation of any Lien by the Company;

 

(vi)       except as otherwise provided in the Operative Documents, the making by the Company of a general assignment for the benefit of creditors;

 

(vii)      the commencement by the Company of a voluntary case or other proceeding seeking liquidation, reorganization, winding up or other relief with respect to the Company or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or of all or any substantial part of its property;

 

(viii)      failing to controvert in a timely and appropriate manner, or acquiescence in writing to, any petition filed against the Company in an involuntary case under applicable bankruptcy or similar law or in any other action or proceeding against it under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or readjustment of its debts;

 

 5 

 

  

[Borrower Parent Pledge Agreement]

 

(ix)       other than with respect to payments permitted or required by the Operative Documents or to be made by the Security Trustee, the payment of dividends or other distributions other than in cash in respect of the Membership Interest or the repurchase or redemption of the Membership Interest; and

 

(x)       the taking of any action necessary for the purpose of effecting any actions specified in the foregoing clauses (i) through (ix);

 

(b)       The Pledgor shall execute and deliver, or cause to be executed and delivered, to the Security Trustee, as appropriate, all such proxies and other instruments as the Security Trustee may request for the purpose of enabling the Security Trustee to exercise all rights and privileges in respect of the Membership Interest and/or the voting and/or consensual rights and powers which the Security Trustee is entitled to exercise pursuant to this Section 5.

 

(c)       At any time when an Event of Default has occurred and is continuing, all rights of the Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 5(a) shall cease and all such rights shall thereupon become vested in the Security Trustee, without further act who shall thereupon have the sole right to exercise such voting and other consensual rights and remedies

 

(d)       Upon any sale or other disposition of any part of the Pledged Collateral by the Security Trustee pursuant to Section 7 hereof, all of the voting and consensual rights, privileges and powers referred to in the preceding sentence pertaining to such part shall in any event become vested in the Person to whom such sale or disposition is made, which Person shall thereafter have the sole and exclusive right to exercise such voting and consensual rights, privileges and powers.

 

Section 6.       Delivery of Pledged Collateral. The Pledgor agrees to deliver or cause to be delivered promptly to the Security Trustee any and all other Pledged Collateral, and any and all certificates or other instruments or documents representing any of the Pledged Collateral, including the Certificate, which shall be in or come into the Pledgor’s possession during the term of this Agreement. The Pledgor agrees to deliver to the Security Trustee on or prior to the Closing Date a duly executed limited liability company interest transfer form in blank in the form of Exhibit A hereto.

 

 6 

 

  

[Borrower Parent Pledge Agreement]

 

Section 7.       Remedies upon Default . If an Event of Default shall have occurred and be continuing, the Security Trustee may exercise all rights of a secured party under the Uniform Commercial Code, as enacted in any applicable jurisdiction, with respect to the Pledged Collateral and, in addition, the Security Trustee may, without being required to give any notice except as herein provided or as may be required by applicable law, sell, assign, transfer, endorse and deliver the whole or, from time to time, any part of the Pledged Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Security Trustee in its reasonable discretion shall deem appropriate. The Security Trustee shall be authorized at any sale to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Pledged Collateral for their own account in compliance with the Securities Act of 1933, as amended (the “Securities Act”). Upon consummation of any sale, the Security Trustee shall have the right to assign, transfer, endorse and deliver to the purchaser or purchasers thereof the Pledged Collateral sold and all of the voting and consensual rights and powers granted and reserved to the Security Trustee pursuant hereto shall thereupon become vested in such purchaser or purchasers, subject to any reservations or qualifications imposed by the Security Trustee. Each purchaser at any sale shall hold the property sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives and releases (to the extent permitted by law) all rights of redemption, stay, appraisal, reclamation and turnover which the Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Security Trustee shall give the Pledgor (with a copy to the Company) ten days’ written notice (which the Pledgor agrees is reasonable notification within the meaning of Section 9-612 of the Uniform Commercial Code, as enacted in any applicable jurisdiction) of the Security Trustee’s intention to attempt to sell any of the Pledged Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale, and, in the case of a sale at a broker’s board or on a securities exchange, shall identify the board or exchange at which such sale is to be made and the day on which the Pledged Collateral, or a portion thereof, will first be offered for sale. Any public sale of any of the Pledged Collateral shall be held at such time or times within ordinary business hours and at such place or places as the Security Trustee may state in the notice or publication (if any) of such sale. At any sale, the Pledged Collateral, or any portion thereof to be sold, may be sold as an entirety or in separate parcels, as the Security Trustee may (in its sole and absolute discretion) determine. The Security Trustee shall not be obligated to sell any of the Pledged Collateral if it shall determine not to do so, regardless of the fact that notice of a sale of such Pledged Collateral may have been given. The Security Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, occur at the time and place identified in such announcement. In case all or any part of the Pledged Collateral is sold on credit or for future delivery, the Pledged Collateral so sold may be retained by the Security Trustee until the sale price is paid by the purchaser or purchasers thereof, but the Security Trustee shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Pledged Collateral so sold and, in case of any such failure, such Pledged Collateral may be sold again upon ten days’ notice (which the Pledgor agrees is reasonable notification within the meaning of Section 9-612 of the Uniform Commercial Code, as enacted in any applicable jurisdiction). At any sale made pursuant to this Agreement, to the extent permitted by applicable law, the Security Trustee may bid for or purchase, free from any right of redemption, stay, appraisal, reclamation or turnover on the part of the Pledgor (all said rights being also hereby waived and released to the extent permitted by law), any Pledged Collateral offered for sale and may make payment on account thereof by using the amount of Secured Obligations outstanding to it from the Pledgor as a credit against the purchase price, and the Security Trustee may, upon compliance with the terms of sale, hold, retain and dispose of the Pledged Collateral sold without further accountability to the Pledgor therefor. For purposes hereof, a written agreement to purchase all or any part of the Pledged Collateral shall be treated as a sale thereof and the Security Trustee shall be free to carry out such sale pursuant to such agreement, and the Pledgor shall not be entitled to the return of any Pledged Collateral subject thereto, notwithstanding the fact that after the Security Trustee shall have entered into such agreement all Events of Default shall have been remedied. As an alternative to exercising the power of sale herein conferred upon it, the Security Trustee may proceed by suit or suits at law or in equity to foreclose this Agreement and sell the Pledged Collateral or any portion thereof pursuant to a judgment or decree of a court having competent jurisdiction and/or pursuant to a proceeding of a court-appointed receiver.

 

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[Borrower Parent Pledge Agreement]

 

The Pledgor hereby constitutes and appoints the Security Trustee the attorney-in-fact of the Pledgor for the purpose of carrying out after the occurrence and during the continuance of an Event of Default, the provisions of this Agreement and taking any action and executing any instrument which the Security Trustee may deem necessary or reasonably advisable to accomplish the purposes hereof, which appointment is granted as security for the performance of the Pledgor’s obligations hereunder and for valuable consideration, and is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Security Trustee shall have the right, after the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Security Trustee’s name or in the name of the Pledgor, to settle, compromise, prosecute or defend any action, claim or proceeding with respect to the Pledged Collateral and shall have the right to sell, assign, endorse, pledge, transfer and make any agreement respecting, or otherwise deal with, the same.

 

Section 8.       Cooperation. The Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default, if for any reason the Security Trustee desires to sell any of the Pledged Collateral at a sale, it will, at any time and from time to time, upon the written request of the Security Trustee, use commercially reasonable efforts to cause the Company to take such action and prepare, distribute and/or file such documents as are required for the Security Trustee to permit the sale of such Pledged Collateral.

 

Section 9.      Private Sales. (a) The Pledgor recognizes that the Security Trustee may be unable to effect a public sale of any or all the Pledged Collateral, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale. The Security Trustee shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit the Company to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Company would agree to do so; nor shall the Company be at any time obligated to register the Membership Interest for a public sale.

 

(b)       The Pledgor further agrees to use commercially reasonable efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Collateral pursuant to this Section 8 valid and binding and in compliance with applicable laws. The Pledgor further agrees that a breach of any of the covenants contained in this Section 8 will cause irreparable injury to the Security Trustee, that the Security Trustee has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 8 shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing.

 

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[Borrower Parent Pledge Agreement]

 

Section 10.     Application of Proceeds of Sale and Cash and Securities. The proceeds of any sale of or realization upon the whole or any part of the Pledged Collateral and cash retained by the Security Trustee pursuant to this Agreement shall be applied by the Security Trustee in accordance with Section 3.03 of the Mortgage.

 

Section 11.    Limitation on Duties Regarding Preservation of Pledged Collateral. Neither the Security Trustee nor any director, officer, employee or counsel of the Security Trustee shall be liable for any action taken or omitted to be taken by it or them relative to any of the Pledged Collateral except for its or their own gross negligence or willful misconduct.

 

Section 12.    Further Assurances. The Pledgor agrees that at no expense to the Security Trustee, (a) it will duly execute and deliver (to the Security Trustee or otherwise) or cause to be duly executed and delivered (to the Security Trustee or otherwise) and will file or record such notices, financing statements or other documents as may be necessary to enable the perfection of the Lien of the Security Trustee hereunder, or as the Security Trustee may reasonably request, such instruments to be in form and substance reasonably satisfactory to the Security Trustee, and (b) it will do or cause to be done such further acts and things and execute and deliver (to the Security Trustee or otherwise) such additional conveyances, assignments, agreements and instruments, as the Security Trustee may at any time reasonably request in connection with the administration and enforcement of this Agreement or relative to the Pledged Collateral or any part thereof or in order to assure and confirm unto the Security Trustee its rights, powers and remedies hereunder, including, without limitation, the protection and perfection of the Security Trustee’s Lien in the Pledged Collateral or any part thereof.

 

Section 13.    Notices. All notices and other communications shall be in writing and shall be given or made by fax, mail or personal delivery and faxed, mailed or delivered to the intended recipient at the address specified in Schedule 1 to the Credit Agreement or at such other address as shall be designated by the Pledgor or the Security Trustee in a notice to the other party hereto. All such communications shall be deemed to have been duly given when transmitted by fax (provided such transmission by fax is in legible form and is accompanied by or generates a substantially simultaneous confirmation of transmission), or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

 

Section 14.    No Waiver. No failure on the part of the Security Trustee or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Security Trustee or any of its agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

 

Section 15.    GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.

 

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[Borrower Parent Pledge Agreement]

 

Section 16.    Successors and Assigns. This Agreement and the terms, covenants and conditions hereof shall be binding upon and inure to the benefit of the parties hereto and all holders of the Secured Obligations secured hereby and their respective successors and permitted assigns, except that the Pledgor shall not be permitted to assign or otherwise transfer this Agreement or any rights or interests herein or in the Pledged Collateral or any part thereof, or otherwise to pledge, encumber or grant any option with respect to the Pledged Collateral or any part thereof. The Pledgor shall not be permitted to delegate any of its duties or obligations hereunder. The Security Trustee may assign this Agreement or any or all of its rights hereunder in accordance with the provisions of the Operative Documents.

 

Section 17.    Waivers; Amendments. No term or provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the parties hereto; and any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given.

 

Section 18.    Termination.

 

(a)       Upon payment in full of the Secured Obligations, this Agreement shall terminate and the Security Trustee, at the request of the Pledgor, will execute and deliver to the Pledgor, at no cost to the Security Trustee, a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement and will duly assign, transfer and deliver to the Pledgor all of the rights and moneys at the time held by the Security Trustee under this Agreement and will execute any other instrument reasonably requested by the Pledgor in connection with the foregoing.

 

(b)       Upon(or at any time after) payment in full of the principal amount of and interest on and all other amounts due under all Loan Certificates related to the Aircraft owned by the Company and provided that no Default or Event of Default shall have occurred and be continuing, the Pledgor may direct the Security Trustee to execute and deliver to or as directed in writing by the Pledgor an appropriate instrument releasing the Pledged Collateral from the Lien of this Agreement and the Security Trustee shall execute and deliver such instrument as aforesaid.

 

Section 19.    Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by applicable law, the Pledgor hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect.

 

Section 20.    Headings . Section headings used herein are for convenience only and are not to affect the construction of or be taken into consideration in interpreting this Agreement.

 

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[Borrower Parent Pledge Agreement]

 

Section 21.    Counterparts. This Agreement may be executed in separate counterparts each of which when so executed and delivered shall be an exchangeable original, but all such counterparts shall together constitute but one and the same agreement.

 

Section 22.     Entire Agreement . This Agreement together with the Operative Documents constitutes, on and as of the date hereof, the entire agreement of the Pledgor and the Security Trustee with respect to the subject matter hereof, and all prior or contemporaneous understandings or agreements, whether written or oral, between the Security Trustee and the Pledgor with respect to such subject matter are hereby superseded in their entirety.

 

Section 23.    WAIVER OF JURY TRIAL. EACH PARTY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY CIVIL ACTION ARISING UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENTS.

 

Section 24.    Non-Recourse Obligations.

 

(a)       In recognition of the Pledgor granting the security referred to in Section 2, the Security Trustee hereby agrees that, notwithstanding the provisions of this Agreement or any Loan Operative Document to the contrary, any and all liability of the Pledgor that is created hereunder shall, in the absence of fraud, gross negligence or willful misconduct in performing its obligations under this Agreement, be limited to the Pledged Collateral. Except as specified above, the Pledgor shall not be personally liable for any shortfall that may arise as a result thereof. The provisions of this Section 24(a) shall only limit the personal liability of the Pledgor for the discharge of its obligations as specified above and shall not (i) limit or restrict in any way the accrual of interest on any such unpaid amount, or (ii) derogate from or otherwise limit the right of recovery, realization or application by the Security Trustee, the Agent, the Swap Counterparty and each Participant under or pursuant to any of the Loan Operative Documents on anything assigned, mortgaged, charged, pledged or secured (by way of security) to or for the benefit of the Security Trustee, the Agent, the Swap Counterparty and each Participant under or pursuant to any of the Loan Operative Documents.

 

(b)       The Security Trustee hereby acknowledges and agrees that the Pledgor’s obligations under this Agreement and the other Loan Operative Documents are solely the corporate obligations of the Pledgor and that none of the Security Trustee, the Agent, the Swap Counterparty or the Participants shall have any recourse against any of the directors, shareholders, officers or employees of the Pledgor for any claims, losses, damages, liabilities, indemnities or other obligations of the Pledgor under this Agreement and the other Loan Operative Documents.

 

*     *    *

 

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[Borrower Parent Pledge Agreement]

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Membership Interest Pledge Agreement to be duly executed and delivered by its proper and duly authorized officers as of the day and year first above written.

 

  AEROCENTURY CORP., as Pledgor
     
  By:     
    Name:
    Title:
     
  WILMINGTON TRUST COMPANY, as Security Trustee
     
  By:  
    Name:
    Title:

 

Acknowledged and Agreed:  
     
[_________________]  
     
By its authorized signatory:  
     
By:    
  Name:  
  Title:  

 

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[Borrower Parent Pledge Agreement]

 

EXHIBIT A

 

FORM OF INTEREST TRANSFER

 

AEROCENTURY CORP. (the “Transferor”), for value received does hereby transfer to __________________ (the “Transferee”), its limited liability company interest standing in its name of [____________], represented by Certificate No. 1, to hold the same unto the Transferee.

 

  AEROCENTURY CORP.
     
  By:  
    Name:
    Title:

 

Exhibit A
Page 1

(Back To Top)

Section 3: EX-10.2 (EXHIBIT 10.2)

 

Exhibit 10.2

 

EXECUTION COPY

 

  

SECURITY AGREEMENT

 

dated as of February __, 2019

 

between

 

ACY SN 19002 LIMITED,

 

ACY SN 19003 LIMITED,

 

ACY E-175 LLC,

 

ACY SN 15129 LLC

 

and

 

THE LESSORS FROM TIME TO TIME PARTY HERETO,

as Mortgagors

 

and

 

WILMINGTON TRUST COMPANY

as Security Trustee and as Mortgagee

 

 

 

Aircraft Credit Facility

 

Up to $47,000,000

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
     
ARTICLE I DEFINITIONS 7
     
Section 1.01 Definitions 7
     
ARTICLE II THE LOAN CERTIFICATES 7
     
Section 2.01 Form of Loan Certificates 7
Section 2.02 Issuance and Terms of Loan Certificates 8
Section 2.03 Certain Accounts 9
Section 2.04 Method of Payment 10
Section 2.05 Application of Payments 11
Section 2.06 Termination of Interest in Mortgaged Property 11
Section 2.07 Registration, Transfer and Exchange of Loan Certificates 12
Section 2.08 Mutilated, Destroyed, Lost or Stolen Loan Certificates 12
Section 2.09 Payment of Expenses on Transfer 13
Section 2.10 Prepayment of Loan Certificates 13
Section 2.11 Provisions Relating to Prepayment 15
Section 2.12 [Intentionally Omitted.] 16
Section 2.13 Withholding Taxes; General Tax Indemnity 17
Section 2.14 Additional Costs 21
     
ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE MORTGAGED PROPERTY 23
     
Section 3.01 Rent Payment Distribution; Event of Loss and Sale Proceeds 23
Section 3.02 Voluntary Prepayment 24
Section 3.03 Payments After Event of Default 24
Section 3.04 Certain Payments 25
Section 3.05 Other Payments 26
     
ARTICLE IV COVENANTS OF MORTGAGORS; EVENTS OF DEFAULT; REMEDIES OF MORTGAGEE 27
     
Section 4.01 Covenants of Mortgagors 27
Section 4.02 Event of Default 27
Section 4.03 Cure Rights; Remarketing Period 29
Section 4.04 Remedies 33
Section 4.05 Return of Aircraft, etc 33
Section 4.06 Remedies Cumulative 35
Section 4.07 Discontinuance of Proceedings 35
Section 4.08 Waiver of Past Defaults 35
Section 4.09 Appointment of Receiver 35
Section 4.10 Mortgagee Authorized to Execute Bills of Sale, etc 36
Section 4.11 Slovenian Mortgage 36
     
ARTICLE V PAYMENTS FROM MORTGAGED PROPERTY ONLY 36
     
Section 5.01 Payments from Mortgaged Property Only 36

 

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TABLE OF CONTENTS

(continued)

 

    Page
     
ARTICLE VI CERTAIN RIGHTS OF MORTGAGOR 36
     
Section 6.01 Certain Rights of Mortgagor 36
     
ARTICLE VII REPLACEMENT ENGINES 37
     
Section 7.01 Replacement Engines 37
     
ARTICLE VIII SUPPLEMENTS AND AMENDMENTS TO THIS SECURITY AGREEMENT AND OTHER DOCUMENTS 38
     
Section 8.01 Instructions of Majority; Limitations 38
Section 8.02 Amendments 39
Section 8.03 Action Upon Instructions 39
     
ARTICLE IX MISCELLANEOUS 40
     
Section 9.01 Termination of Security Agreement; Release of Liens 40
Section 9.02 No Legal Title to Mortgaged Property in Participants 40
Section 9.03 Sale of Aircraft by Mortgagee Is Binding 41
Section 9.04 Security Agreement for Benefit of Mortgagors, Mortgagee and Holders of Loan Certificates 41
Section 9.05 No Action Contrary to Lessee’s Rights Under any Lease 41
Section 9.06 Notices; Payments 41
Section 9.07 Severability 41
Section 9.08 No Oral Modification or Continuing Waivers 41
Section 9.09 Successors and Assigns 41
Section 9.10 Headings 42
Section 9.11 Governing Law; Counterpart Form 42
Section 9.12 Concerning Prospective International Interests 42
Section 9.13 Contractual Bail-In 42

 

Exhibit A Form of Security Agreement Supplement  
Exhibit B Form of Loan Certificate  

 

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SECURITY AGREEMENT , dated as of February __, 2019, among ACY SN 19002 LIMITED, a limited liability company incorporated under the laws of England (the “19002 Borrower), ACY SN 19003 LIMITED, a limited liability company incorporated under the laws of England (the “19003 Borrower”), ACY E-175 LLC, a limited liability company organized under the laws of the State of Delaware (the “Republic Borrower”), ACY SN 15129 LLC, a limited liability company organized under the laws of the State of Delaware (the “Adria Borrower” and, together with the 19002 Borrower, the 19003 Borrower and the Republic Borrower, each individually a “Borrower” and, collectively, the “Borrowers”), the Lessors from time to time party hereto and identified as a “Mortgagor” in a Security Agreement Supplement executed in connection herewith (together with the Borrowers, each a “Mortgagor” and, collectively, the “Mortgagors”) and WILMINGTON TRUST COMPANY, as security trustee under the Credit Agreement referred to below (in such capacity, the “Security Trustee”) and as the mortgagee hereunder (in such capacity, the “Mortgagee”).

 

WHEREAS, all capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof;

 

WHEREAS, each Mortgagor (if applicable, by becoming a party to this Security Agreement by its execution and delivery of a Security Agreement Supplement), desires by this Security Agreement, among other things, (i) to provide for the issuance by the Borrowers to the Participants of Loan Certificates evidencing the loans made by the Participants to the Borrowers as provided in the Credit Agreement and (ii) to provide for the assignment, mortgage and pledge by each Mortgagor to the Mortgagee of, among other things, all of such Mortgagor’s right, title and interest in and to the Aircraft identified in a Security Agreement Supplement executed by such Mortgagor, and, except as hereinafter expressly provided as to Excluded Payments and any maintenance reserves, security deposits and supplemental rent payable under the relevant Lease, all of such Mortgagor’s right, title and interest in, to and under the Lease with respect to any such Aircraft and all payments and other amounts received hereunder or thereunder in accordance with the terms hereof or thereof, as security for such Mortgagor’s obligations to the Security Trustee, the Agent, the Swap Counterparty and the Participants under the Loan Operative Documents and for the benefit and security of the Security Trustee and the Participants;

 

WHEREAS, all things have been done to make each Loan Certificate, when executed by a Borrower hereunder, the valid, binding and enforceable obligations of such Borrower; and

 

WHEREAS, all things necessary to make this Security Agreement the valid, binding and legal obligation of the Mortgagors for the uses and purposes herein set forth, in accordance with its terms, have been done and performed and have happened.

 

 

[Security Agreement]

 

GRANTING CLAUSE

 

NOW, THEREFORE, THIS SECURITY AGREEMENT WITNESSETH, that, to secure (i) the prompt payment of the principal, Swap Breakage Loss, LIBOR Breakage, Liquidity Breakage, interest on, and all other amounts due with respect to, all Loan Certificates from time to time outstanding hereunder according to their tenor and effect and to secure the performance and observance by the Mortgagors and the Borrower Parent of all the agreements, covenants and provisions contained herein and in the Credit Agreement, the Loan Certificates and the other Loan Operative Documents, for the benefit of the Security Trustee, the Agent, the Swap Counterparty and the Participants and the prompt payment of all amounts from time to time owing under the Credit Agreement and the other Loan Operative Documents to the Security Trustee, the Agent, the Swap Counterparty and the Participants by the Mortgagors and the Borrower Parent, and (ii) each of the Swap Obligations (collectively, the “Secured Obligations”), and for the uses and purposes and subject to the terms and provisions hereof, and in consideration of the premises and of the covenants herein contained, the acceptance of the Loan Certificates by the holders thereof, and for other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, each Mortgagor does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Security Trustee, its successors and assigns, for the security and benefit of the Participants and the Swap Counterparty, a security interest in and mortgage lien on all right, title and interest of such Mortgagor in, to and under the following described property, rights and privileges, whether now or hereafter acquired, other than Excluded Payments (which collectively, excluding Excluded Payments but including all property hereafter specifically subjected to the lien of this Security Agreement by the terms hereof or any mortgage supplemental hereto, are included within the property mortgaged hereunder and are referred to as the “Mortgaged Property”), to wit:

 

(1)         each Aircraft more particularly described in each Security Agreement Supplement to be executed and delivered as provided in this Security Agreement, including the Airframe and Engines associated therewith, each of which Engines has at least 1750 lbs. of thrust, as the same is now and will hereafter be constituted, whether now owned by such Mortgagor or hereafter acquired, leased or intended to be leased under any Lease, and in the case of such Engines, whether or not any such Engine shall be installed in or attached to such Airframe or any other airframe, together with (a) all Parts of whatever nature, which are from time to time incorporated or installed in or attached to such Airframe and Engines and which are either now owned or hereafter acquired, including all substitutions, renewals and replacements of and additions, improvements, accessions and accumulations to such Airframe and Engines (other than substitutions, renewals, replacements, additions, improvements, accessions and accumulations which constitute appliances, parts, instruments, appurtenances, accessories, furnishings or other equipment excluded from the definition of Parts) and (b) all Aircraft Documents;

 

(2)         each Lease more particularly described in each Security Agreement Supplement to be executed and delivered as provided in this Security Agreement, together with all rights, powers, privileges, options and other benefits of such Mortgagor as lessor under any such Lease, including, without limitation, the immediate and continuing right to receive and collect all Basic Rent, Return Compensation Payments, income, revenues, issues, profits, insurance proceeds, condemnation awards and other payments, tenders and security (but excluding any security deposits, supplemental rent or maintenance reserves payable to such Mortgagor under such Lease) now or hereafter payable to or receivable by such Mortgagor under such Lease pursuant thereto, and the right of such Mortgagor to execute any election or option or to give any notice, consent, waiver or approval, to receive copies of all notices and other instruments or communications, to accept surrender or redelivery of the Aircraft subject to such Lease or any part thereof, as well as all the rights, powers and remedies on the part of the Mortgagor as lessor under such Lease, to take such action upon the occurrence of a Lease Event of Default thereunder, including the commencement, conduct and consummation of legal, administrative or other proceedings, in each case as shall be permitted by such Lease or by law, and to do any and all other things whatsoever which the Mortgagor is entitled to do under or in respect of such Lease and any right to restitution from any Lessee under such Lease or any other person in respect of any determination of invalidity of such Lease;

 

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(3)         each of the following documents:

 

(a)          any Lease Operative Document (other than any letter of credit issued pursuant to any Lease in respect of any security deposits, maintenance reserves or supplemental rent);

 

(b)          any IDERA (if applicable) and any Deregistration Power of Attorney;

 

(c)          the Adria Repossession Deed;

 

(d)          each Lease Management Agreement;

 

(e)          the Consent and Recognition of Rights Agreement; and

 

(f)          any and all other contracts, agreements and instruments relating to any Airframe and/or any Engines, including any bills of sale, or any rights or interests (including warranties) therein to which such Mortgagor is now or may hereafter be a party (except for each Residual Value Guarantee (other than as set forth in clause (8) below));

 

together with all rights, powers, privileges, licenses, easements, options and other benefits of such Mortgagor under each contract, agreement and instrument referred to in this clause (3), including, without limitation, the right to receive and collect all payments to such Mortgagor thereunder now or hereafter payable to or receivable by such Mortgagor pursuant thereto and the right of such Mortgagor to execute any election or option or to give any notice, consent, waiver or approval, to receive notices and other instruments or communications, or to take any other action under or in respect of any thereof or to take such action upon the occurrence of a default thereunder, including the commencement, conduct and consummation of legal, administrative or other proceedings, in each case as shall be permitted thereby or by law, and to do any and all other things which such Mortgagor is entitled to do thereunder and any right to restitution from any Lessee or any other person in respect of any determination of invalidity of any thereof;

 

(4)         any Airframe Warranties and any Engine Warranties with respect to any Aircraft;

 

(5)         each Swap Agreement, including, but not limited to, (x) all amounts or payments of any kind now or hereafter payable to or receivable by such Mortgagor under such Swap Agreement, as well as all rights of such Mortgagor to enforce payment of any such amounts or payments, and (y) all rights of such Mortgagor to exercise any election or option or to give or receive any notice, consent, waiver or approval or to take any other action under or in respect of such Swap Agreement, as well as the rights, powers and remedies on the part of such Mortgagor, whether acting under such Swap Agreement or by statute or at law or in equity, or otherwise, arising out of any default under such Swap Agreement;

 

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(6)         the Collateral Accounts, the Cash Collateral Account and all moneys and securities now or hereafter paid or deposited or required to be paid or deposited into such accounts and held or required to be held by the Security Trustee hereunder;

 

(7)         all rents, issues, profits, revenues and other income of the property subjected or required to be subjected to the Lien of this Security Agreement including all payments or proceeds payable to such Mortgagor after termination of any Lease with respect to an Aircraft as the result of the sale, lease or other disposition thereof, and all estate, right, title and interest of every nature whatsoever of such Mortgagor in and to the same;

 

(8)         all payments and proceeds required to be paid to such Mortgagor under each Residual Value Guarantee;

 

(9)         without limiting the generality of the foregoing, all insurance and requisition proceeds paid or payable with respect to any Aircraft or any part thereof, including but not limited to the insurance required under a Lease with respect to such Aircraft;

 

(10)        without limiting the generality of the foregoing, all monies and securities from time to time deposited or required to be deposited with the Mortgagee pursuant to any terms of this Security Agreement or any Lease or required hereby or by any Lease to be held by such Mortgagor under any Lease or Mortgagee hereunder as security for the obligations of any Lessee under any Lease or of such Mortgagor hereunder; and

 

(11)        all proceeds of the foregoing.

 

Excluding, however, in all events from each of foregoing clauses (1) through (11) all Excluded Payments and the right to specifically enforce the same or to sue for damages for the breach thereof as provided in the definition of “Excluded Payments” and the rights under Section 6.01(d).

 

Notwithstanding the foregoing or anything herein to the contrary, the assignment of the documents and instruments subject to the Granting Clause shall be subject to the terms and conditions hereof, and the Lien of this Security Agreement is subject to each Lease and all of the relevant Lessee’s rights thereunder.

 

Promptly following the delivery of its respective Security Agreement Supplement, each Mortgagor shall deliver to the Mortgagee the original executed chattel paper counterpart of the Lease as defined therein to the extent available to such Mortgagor, including all amendments and letter agreements thereto.

 

TO HAVE AND TO HOLD all and singular the aforesaid property unto the Mortgagee, and its successors and permitted assigns, for the equal and proportionate benefit and security of the Secured Parties, without any preference, distinction or priority of any one Secured Party over any other Secured Party by reason of priority of time of issue, sale, negotiation, date of maturity thereof or otherwise for any reason whatsoever, and for the uses and purposes and in all cases and as to all property specified in paragraphs (1) through (11) inclusive above, subject to the terms and provisions set forth in this Security Agreement (including, without limitation, Sections 6.01 and 9.05).

 

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It is expressly agreed that anything herein contained to the contrary notwithstanding, each Mortgagor shall remain liable under the Granting Clause Documents to which it is a party, to perform all of the obligations assumed by it thereunder, except to the extent prohibited or excluded from doing so pursuant to the terms and provisions thereof, and the Mortgagee and the Secured Parties shall have no obligation or liability under the Granting Clause Documents, other than to abide by the terms of such Granting Clause Documents (including in respect of any Lessee’s rights of quiet enjoyment) by reason of or arising out of the assignment hereunder, nor shall the Mortgagee or the Secured Parties be required or obligated in any manner to perform or fulfill any obligations of any Mortgagor under or pursuant to the Granting Clause Documents, or, except as herein expressly provided, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

 

Each Mortgagor, as security for the obligations secured by the Mortgaged Property, does hereby constitute the Mortgagee, exercisable upon the occurrence and during the continuance of an Event of Default, the true and lawful attorney of such Mortgagor, irrevocably during the continuance of an Event of Default, granted for good and valuable consideration and coupled with an interest and with full power of substitution, and with full power (in the name of such Mortgagor or otherwise) to ask for, require, demand, receive, compound and give acquittance for any and all monies and claims for monies (in each case including insurance and requisition proceeds but in all cases excluding Excluded Payments, any maintenance reserves or supplemental rent payable under a Lease and any security deposit payable under a Lease) due and to become due under or arising out of the Operative Documents, and all other property which now or hereafter constitutes part of the Mortgaged Property, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceedings which the Mortgagee may deem to be necessary or advisable in connection therewith. Without limiting the generality of the foregoing, but subject to the rights of the Mortgagors under Sections 4.03 and 4.04(a), during the continuance of any Event of Default under this Security Agreement, the Mortgagee shall have the right under such power of attorney to accept any offer in connection with the exercise of remedies as set forth herein of any purchaser to purchase any Airframe and any Engines and upon such purchase to execute and deliver in the name of and on behalf of the Mortgagor an appropriate bill of sale and other instruments of transfer relating to such Airframe and Engines, to perform all other necessary or appropriate acts with respect to any such purchase, and in its discretion to file any claim or take any other action or proceedings, either in its own name or in the name of any Mortgagor or otherwise, which the Mortgagee may deem necessary or appropriate to protect and preserve the right, title and interest of the Mortgagee in and to such Rents and other sums and the security intended to be afforded hereby; provided, that no action of the Mortgagee pursuant to this paragraph shall increase the obligations or liabilities of any Mortgagor to any person beyond those obligations and liabilities specifically set forth in this Security Agreement and in the other Operative Documents. The Mortgagee shall direct any Lessee, so long as this Security Agreement shall not have been fully discharged, to make all payments of Rent (other than Excluded Payments), Return Compensation Payments and all other amounts which are required to be paid to or deposited with a Mortgagor pursuant to any Lease (other than Excluded Payments, any maintenance reserves or supplemental rent payable under such Lease and any security deposit payable under such Lease) directly to, or as directed by, the Mortgagee at such address or addresses as the Mortgagee shall specify, for application as provided in Article III of this Security Agreement. Notwithstanding such direction, if any of the above amounts that are required to be transferred to the Mortgagee are transferred to such Mortgagor, such Mortgagor agrees that promptly upon receipt thereof, it will transfer to the Mortgagee any and all monies from time to time received by it constituting part of the Mortgaged Property, for distribution by the Mortgagee pursuant to this Security Agreement.

 

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Each Mortgagor agrees that at any time and from time to time, upon the written request of the Mortgagee, such Mortgagor shall promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Mortgagee may reasonably deem necessary or desirable to perfect, preserve or protect the mortgage, security interests and assignments created or intended to be created hereby or to obtain for the Mortgagee the full benefits of the assignment hereunder and of the rights and powers herein granted.

 

Each Mortgagor hereby represents and warrants that it has not assigned or pledged, and hereby covenants and agrees that it will not assign or pledge, so long as the assignment hereunder shall remain in effect, and the lien hereof shall not have been released pursuant to Section 9.01 hereof, any of its right, title or interest hereby assigned to the Mortgaged Property, to anyone other than the Mortgagee, and that it will not, except as otherwise provided in this Security Agreement (including, but not limited to, Sections 4.03 and 6.01), except with the written consent of the Mortgagee (such consent not to be unreasonably withheld or delayed), and except with respect to Excluded Payments to which it is entitled:

 

(a)        accept any payment from any Lessee Party under any Operative Document (other than any security deposit and/or maintenance reserves and/or supplemental rent payable under the relevant Lease);

 

(b)        enter into any agreement amending or supplementing any Lease, any Residual Value Guarantee or any other Lease Operative Document;

 

(c)        except as expressly provided herein in respect of Day-to-Day Operational Matters, execute any waiver or modification of, or consent under, the terms of any Lease, any Residual Value Guarantee or any other Lease Operative Document;

 

(d)        settle or compromise any claim against any Lessee Party arising under any Lease Operative Document or against Bombardier Inc. arising under any Residual Value Guarantee; or

 

(e)        submit or consent to the submission of any dispute, difference or other matter against the Lessee or any other Lessee Party arising under or in respect of any Lease Operative Document or against Bombardier Inc. arising under or in respect of any Residual Value Guarantee to arbitration thereunder (unless submission is required thereunder, in which case such Mortgagor shall notify the Mortgagee of such submission as soon as practicable).

 

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[Security Agreement]

 

Each Mortgagor hereby further agrees that it will not without the written consent of the Mortgagee:

 

(a)        receive or collect or agree to the receipt or collection of any payment of Rent, including, without limitation, Basic Rent, Return Compensation Payments or any other payment to be made pursuant to any Lease prior to the date for the payment thereof provided for by such Lease or assign, transfer or hypothecate (other than to the Mortgagee hereunder and under the Security Documents) any payment of Rent, including, without limitation, Basic Rent, Return Compensation Payments or any other payment to be made to such Mortgagor, pursuant to any Lease or any other Lease Operative Document, then due or to accrue in the future under such Lease in respect of the Airframe and Engines subject thereto but in all cases excluding Excluded Payments, any maintenance reserves or supplemental rent payable under a Lease or any security deposits payable under a Lease; or

 

(b)        sell, mortgage, transfer, assign or hypothecate (other than to the Mortgagee hereunder) its interest in any Aircraft, any Airframe, or any Engine or any part thereof or in the Aircraft Documents or in any amount to be received by it from the use or disposition of such Airframe or Engines, other than amounts distributed to it pursuant to Article III hereof.

 

It is hereby further agreed that any and all property otherwise meeting the definition of Mortgaged Property which is hereafter acquired by any Mortgagor shall ipso facto, and without any further conveyance, assignment or act on the part of such Mortgagor or the Mortgagee, become and be subject to the Lien and security interest herein granted as fully and completely as though specifically described herein, but nothing contained in this paragraph shall be deemed to modify or change the obligations of such Mortgagor contained in the foregoing paragraphs.

 

Each Mortgagor hereby ratifies and confirms any Lease to which it is a party and does hereby agree that it will not violate any covenant or agreement made by it therein, herein or in any other Operative Document.

 

Notwithstanding the Granting Clause or anything to the contrary herein, there is hereby excluded from the foregoing sale, transfer, assignment, grant, pledge and security interest all Excluded Payments.

 

IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01   Definitions .  For all purposes of this Security Agreement the terms used herein in capitalized form but not defined herein are used as defined in the Credit Agreement.

 

ARTICLE II

 

THE LOAN CERTIFICATES

 

Section 2.01   Form of Loan Certificates.  The Loan Certificates for each Loan shall be substantially in the form set forth in Exhibit B hereto.

 

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Section 2.02   Issuance and Terms of Loan Certificates.

 

(a)        Loan Certificates .  On the Drawdown Date for a Loan, there shall be issued and delivered to each Participant one or more Loan Certificates dated such Drawdown Date, captioned as having been issued in connection with the Aircraft related to such Loan, and payable to such Participant, in an aggregate Original Amount equal to the amount of such Participants’ portion of such Loan. Subject to Section 2.02(e), each Loan Certificate shall bear interest at the Debt Rate for such Loan (calculated on the basis of a year of 360 days and actual number of days elapsed) on the unpaid Original Amount thereof from time to time outstanding, payable in arrears on each Payment Date for such Loan; provided that each Loan Certificate shall instead bear interest at the Past Due Rate (calculated on the basis of a 360 day year and actual number of days elapsed) on any part of the Original Amount thereof, and any accrued interest, in each case not paid when due for any period during which the same shall be overdue. Interest payable on any Payment Date shall be in respect of the Interest Period ending on or about such date. Each Loan Certificate shall mature on the applicable Maturity Date. The Original Amounts of the Loan Certificates shall be payable on the dates and in the installments set forth in the Amortization Schedule for such Loan Certificates. Notwithstanding the foregoing, the final payment made under each Loan Certificate shall be in an amount sufficient to discharge in full the unpaid Original Amount, and all accrued and unpaid interest on, and any other amounts due under, such Loan Certificate.

 

(b)        Notwithstanding anything to the contrary herein, if any date on which a payment under any Loan Certificate becomes due and payable is not a Business Day then such payment shall not be made on such scheduled date but shall be made on the immediately succeeding Business Day; provided that, if such succeeding Business Day would fall in the next calendar month, then such payment shall be made on the immediately preceding Business Day.

 

(c)        Each Loan Certificate shall be executed by the Borrower who borrowed the related Loan by an authorized signatory of such Borrower. Each Loan Certificate bearing the signatures of individuals who were at any time the authorized signatories of any Borrower shall bind such Borrower, notwithstanding that such individuals or any of them have ceased to be authorized signatories prior to the execution and delivery of such Loan Certificates or at the respective dates of such Loan Certificates. Each Loan Certificate shall be dated the Drawdown Date for the Loan to which such Loan Certificate relates, whether issued on such date or a later date.

 

(d)        The aggregate principal amount of all Loan Certificates to be issued and outstanding hereunder shall not at any time exceed the Total Commitment.

 

(e)        If a Market Disruption Event occurs, each affected Participant will be entitled, so long as the Market Disruption Event shall continue, to charge interest on the principal amount of the Loans held by such Participant for each Interest Period during which such Market Disruption Event is continuing, at a per annum rate equal to for each affected Interest Period, the sum of the cost of funds to such affected Participant for such Interest Period and the relevant Applicable Margin. The report by any Participant to the Agent of its cost of funds for any Interest Period shall be promptly provided to the Borrowers and, absent manifest error, shall be conclusive and shall constitute a certification by such Participant that the interest rate so provided is an accurate and fair calculation of its Treasury-assessed funding costs for such Interest Period, which assessment has been made on a fair and non-discriminatory basis. As of the date hereof, no Market Disruption Event exists.

 

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 Section 2.03   Certain Accounts.

 

(a)        Collateral Accounts.  Each Borrower or Lessor, as the context may require, shall establish prior to the relevant Drawdown Date at the Security Trustee an account (each a “Collateral Account” and together the “Collateral Accounts”) in the name of and under the control of the Security Trustee, into which all Basic Rent, Return Compensation Payments and any Event of Loss proceeds, and any other amounts payable by the relevant Lessee to such Mortgagor under the relevant Lease (including proceeds of insurance but excluding any Excluded Payment, any maintenance reserves or supplemental rent payable under such Lease and any security deposit payable under such Lease), and all amounts payable in connection with the Loan related to the related Aircraft under the Loan Operative Documents, including without limitation any amounts payable to the relevant Borrower under a Swap Agreement with respect thereto, shall be deposited into the relevant Collateral Account. The balance from time to time in the Collateral Accounts shall be under the control of the Security Trustee and shall constitute part of the Mortgaged Property hereunder and shall not constitute payment of the Secured Obligations until applied as herein provided and shall be subject to withdrawal only as provided herein. All amounts deposited into the Collateral Accounts shall be applied in the manner set forth in Section 3.01 (subject to Section 3.02 or 3.03, as the case may be). Subject to the foregoing, the relevant Mortgagor and the Security Trustee hereby irrevocably instruct Wilmington Trust Company to apply amounts on deposit in the Collateral Accounts in the manner set forth in Section 3.01, 3.02 or 3.03, as the case may be. Such Mortgagor and the Security Trustee agree that any amounts received into the relevant Collateral Account and not immediately applied pursuant to Section 3.01 or 3.02 may be invested from time to time in Agreed Investments unless otherwise instructed by the relevant Mortgagor, or, following the occurrence of a Default or an Event of Default which is continuing, the Required Participants, and that any income earned or losses incurred on such investments will be for the account of the relevant Mortgagor (where funds credited to such Collateral Account are invested). For the avoidance of doubt, the Mortgagee and each Mortgagor agrees that any maintenance reserves or supplemental rent payable under a Lease and any security deposit payable under a Lease that is deposited in a Collateral Account may be paid to the relevant Mortgagor or the Borrower Parent.

 

(b)        Cash Collateral Account.  The relevant Mortgagor shall establish at the Security Trustee prior to the Drawdown Date for the Adria Aircraft an account (the “Cash Collateral Account”) in the name of and under the control of the Security Trustee into which there shall be deposited from time to time the Adria Cash Collateral Amount, the Air Nostrum Excess Amounts and any Excess Sale Proceeds in accordance with Section 2.10(b)(ii). The balance from time to time in the Cash Collateral Account shall constitute part of the Mortgaged Property hereunder and shall not constitute payment of the Secured Obligations until applied as herein provided and shall be subject to withdrawal only as provided herein and in the Credit Agreement. The Security Trustee shall (i) automatically apply the relevant portion of the Adria Cash Collateral Amount to the relevant Collateral Account for application in accordance with Section 4.03(a) hereof and/or in accordance with Section 5.1(s) of the Credit Agreement, (ii) in accordance with Section 3.03 hereof, apply the amounts held in the Cash Collateral Account, if applicable, (iii) in accordance with Section 2.10(a)(iii) hereof, apply the amounts held in the Cash Collateral Account to prepay in full the Adria Prepayment Amount and (iv) in accordance with Section 9.01 hereof, return the Adria Cash Collateral Amount to the relevant Mortgagor at such time as the Lien hereof is terminated.

 

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(c)        Agreed Investments.  Each Mortgagor acknowledges that shares or investments in any Agreed Investments shall not be obligations of the Security Trustee, nor its Affiliates, except that any Agreed Investments that rely on the credit and backing of the Security Trustee and/or its Affiliates, as set forth in subsection (c) of the definition of Agreed Investments in the Credit Agreement, or other investment obligations of any kind of the Security Trustee and/or its Affiliates, regardless of whether such obligations are insured, shall be considered to be obligations of the Security Trustee or its Affiliates repayable according to the terms of such obligations. For avoidance of doubt any obligations that are obligations of the Security Trustee and/or its Affiliates shall be obligations of the Security Trustee and/or its Affiliates in their capacity as bank or trust companies that are members of the Federal Reserve System, and not obligations of the Security Trustee in its capacity as security trustee under the Operative Documents.

 

(d)        Control.  This Security Agreement is intended to be an authenticated record to establish control of each of the Collateral Accounts and the Cash Collateral Account within the meaning of Section 9-104(a)(2) of the UCC and is entered into to perfect the Security Trustee’s security interest in the Mortgaged Property in accordance with Section 9-314(a) of the UCC. Prior to or concurrently with the execution and delivery of this Security Agreement, the relevant Mortgagor shall file such financing statements and other documents in such offices as the Security Trustee may reasonably request to perfect the security interests granted hereby. For purposes of Article 9 of the UCC and with respect to the Collateral Accounts and the Cash Collateral Account, the Security Trustee and the Mortgagor agree that the State of New York is the Security Trustee’s jurisdiction.

 

Section 2.04   Method of Payment.  The Original Amount of, interest and other amounts due under each Loan Certificate or hereunder will be payable in Dollars by wire transfer in federal or other immediately available funds, on the due date of payment to the Collateral Account with respect to the Loan related to such Loan Certificate for the Security Trustee’s distribution among the Secured Parties in the manner provided herein. The Mortgagee will pay or cause to be paid all amounts payable by the Borrowers hereunder and under such holder’s Loan Certificate or Loan Certificates to such holder or a nominee therefor (including all amounts distributed pursuant to Article III of this Security Agreement) by transferring, or causing to be transferred, by wire transfer in immediately available funds in Dollars, prior to 2:00 p.m., New York City time, on the due date of payment, to an account maintained by such holder with a bank located in the continental United States the amount to be distributed to such holder, for credit to the account of such holder maintained at such bank. Any payment made hereunder shall be made without any presentment or surrender of any Loan Certificate. Prior to the due presentment for registration of transfer of any Loan Certificate, the Borrower party to such Loan Certificate and the Mortgagee shall deem and treat the person in whose name any Loan Certificate is registered on the Loan Certificate Register as the absolute owner and holder of such Loan Certificate for the purpose of receiving payment of all amounts payable with respect to such Loan Certificate and for all other purposes, and none of the Borrowers or the Mortgagee shall be affected by any notice to the contrary.

 

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Section 2.05   Application of Payments.  In the case of each Loan Certificate, each payment of Original Amount and interest or other amounts due thereon shall be applied:

 

first, to the payment of Swap Breakage Loss, if any, LIBOR Breakage, if any, Liquidity Breakage, if any, and any other amount due under such Loan Certificate (other than amounts referred to below);

 

second, to the payment of accrued interest on the unpaid portion of the Original Amount of such Loan Certificate then due and owing (including any interest on any overdue portion of the Original Amount, and to the extent permitted by law, interest thereon at the Past Due Rate);

 

third, to the payment of the portion of the Original Amount of such Loan Certificate then due thereunder; and

 

fourth, if applicable pursuant to Section 2.10 or 2.11, the balance, if any, remaining thereafter, to the payment of the Original Amount of such Loan Certificate remaining unpaid (provided that such Loan Certificate shall not be subject to prepayment except as provided in Section 2.10 and 2.11).

 

The amounts paid pursuant to clause “fourth” above shall be applied to the installments of Original Amount of such Loan Certificate in the inverse order of their maturity.

 

Section 2.06   Termination of Interest in Mortgaged Property.  Subject to Section 9.01, the Security Trustee shall not have any further interest in, or other right with respect to, the Mortgaged Property when and if the Original Amount of and accrued interest on and other amounts then due under all Loan Certificates and all other sums then payable to the Security Trustee and each Participant and the Swap Counterparty hereunder and under the other Loan Operative Documents by the Borrower Parties, including without limitation, Swap Breakage Loss, LIBOR Breakage, Liquidity Breakage and amounts necessary to reimburse the Security Trustee and each Participant for payments made pursuant to Section 6.4 of the Credit Agreement (to the extent not previously reimbursed) shall have been indefeasibly paid in full (except for any obligations explicitly stated to survive such repayment and the termination of the Loan Operative Documents).

 

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Section 2.07   Registration, Transfer and Exchange of Loan Certificates.

 

(a)        The Mortgagee shall keep, as agent for the Borrowers, a register (the “Loan Certificate Register”) in which the Mortgagee shall provide for the registration of Loan Certificates and the registration of transfers and exchanges of Loan Certificates. The Loan Certificate Register shall be kept at the Mortgagee’s Office, and the Mortgagee is hereby appointed “Loan Certificate Registrar” for the purpose of registering Loan Certificates and transfers and exchanges of Loan Certificates as herein provided. A holder of any Loan Certificate intending to transfer such Loan Certificate, shall surrender such Loan Certificate to the Mortgagee at the Mortgagee’s Office, together with a written request from the registered holder thereof (a copy of which shall be delivered concurrently to the Borrower party to such Loan Certificate) for the issuance of a new Loan Certificate, specifying the name and address of the new holder or holders. Upon surrender for registration of transfer of any Loan Certificate, the Borrower party to such Loan Certificate shall execute and deliver, in the name of the designated transferee or transferees, one or more new Loan Certificates on the same terms as the replaced Loan Certificate and in the then outstanding portion of the Original Amount of the Loan Certificate being transferred. At the option of any holder, Loan Certificates may be exchanged for other Loan Certificates of any authorized denominations of the same aggregate outstanding Original Amount as the Loan Certificates to be exchanged, and on the same terms as the Loan Certificate(s) to be exchanged, upon surrender of the Loan Certificates to be exchanged to the Mortgagee at the Mortgagee’s Office. Each new Loan Certificate issued upon transfer or exchange shall be in an Original Amount of not less than $1,000,000 (or, in either case, such lesser amount as shall constitute 100% of the outstanding principal amount of such transferred or exchanged Loan Certificate). Whenever any Loan Certificates are so surrendered for exchange, the Borrower party thereto shall execute and deliver the Loan Certificates which the holder making the exchange is entitled to receive pursuant to the terms hereof. All Loan Certificates issued upon any registration of transfer or exchange of Loan Certificates meeting the requirements of this Security Agreement shall be the valid obligations of the Borrower party thereto evidencing the same respective obligations, and entitled to the same security and benefits under this Security Agreement, as the Loan Certificates surrendered upon such registration of transfer or exchange. Every Loan Certificate presented or surrendered for registration of transfer, shall (if so required by the Mortgagee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Mortgagee duly executed by the holder or such holder’s attorney duly authorized in writing. The Mortgagee shall make a notation on each new Loan Certificate of the amount of all payments of Original Amount previously made on the old Loan Certificate or Loan Certificates with respect to which such new Loan Certificate is issued and the date to which interest on such old Loan Certificate or Loan Certificates has been paid. Interest shall be deemed to have been paid on such new Loan Certificate to the date on which interest shall have been paid on such old Loan Certificate, and all payments and prepayments of the Original Amount of such old Loan Certificate shall be deemed to have been made thereon. The Mortgagee will promptly notify the Borrower party thereto of each registration of a transfer of a Loan Certificate. Notwithstanding the foregoing, no transfer of a Loan Certificate shall be made hereunder unless (i) the transfer meets the requirements of Section 7.4 of the Credit Agreement and (ii) the transferring holder shall give prior or contemporaneous notice to the Borrower party to such Loan Certificate of such transfer, which notice shall identify the proposed new holder and provide contact information for such holder, and the proposed new holder shall accept all the terms and conditions applicable to a Participant and holder of a Loan Certificate under the terms of the Credit Agreement, this Security Agreement, the Loan Certificates and the other Loan Operative Documents to and for the benefit of such Borrower.

 

Section 2.08   Mutilated, Destroyed, Lost or Stolen Loan Certificates.  If any Loan Certificate shall become mutilated, destroyed, lost or stolen, the Borrower party thereto shall, upon the written request of the holder of such Loan Certificate, execute and deliver in replacement thereof a new Loan Certificate, payable in the same outstanding Original Amount, dated the same date and captioned as issued in connection with the Aircraft related thereto. If the Loan Certificate being replaced has become mutilated, such Loan Certificate shall be surrendered to the Mortgagee and a photocopy thereof shall be furnished to the Borrower party thereto. If the Loan Certificate being replaced has been destroyed, lost or stolen, the holder of such Loan Certificate shall furnish to the Borrower party thereto and the Mortgagee such security or indemnity as may be required by them to hold such Borrower and the Mortgagee harmless in respect thereof and evidence satisfactory to such Borrower and the Mortgagee of the destruction, loss or theft of such Loan Certificate and of the ownership thereof.

 

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Section 2.09   Payment of Expenses on Transfer.  Upon the issuance of a new Loan Certificate or Loan Certificates pursuant to Section 2.07 or 2.08 hereof, the Borrower party to such Loan Certificate or such Loan Certificates and/or the Mortgagee may require from the party requesting such new Loan Certificate or Loan Certificates payment of a sum to reimburse such Borrower and the Mortgagee for, or to provide funds for, the payment of any Tax or other governmental charge in connection therewith or any other charges and expenses paid or payable by such Borrower or the Mortgagee.

 

Section 2.10   Prepayment of Loan Certificates.

 

(a)

 

(i)           On at least 15 Business Days’, or such shorter period as may be agreed by the Agent, prior irrevocable written notice to the Agent, a Borrower may voluntarily prepay on any Payment Date in respect of a Loan specified in its notice of prepayment all Loan Certificates with respect to such Loan in full, together with accrued interest thereon to the date of prepayment plus all Swap Breakage Loss, if any, LIBOR Breakage, if any, any Prepayment Fee (if applicable) and all other amounts then due and payable hereunder, under the Loan Certificates and under the other Loan Operative Documents; provided that any partial prepayments shall be in an amount not less than $5,000,000 and in multiples of $1,000,000 thereafter.

 

(ii)        In addition, if any Participant shall bring a claim in respect of (x) Additional Costs under Section 2.14 of this Security Agreement, (y) Taxes under Section 2.13 of this Security Agreement or (z) a Market Disruption Event under Section 2.02(e) of this Security Agreement, the relevant Borrower may effect a prepayment of all of the Loan Certificates of such Participant as provided in this Section 2.10(a) on ten Business Days’ notice.

 

(iii)        If all of the Loan Certificates in respect of the Air Nostrum Aircraft have been repaid in full and the amounts held in the Cash Collateral Account are sufficient to repay the Loan Certificates in respect of the Adria Aircraft in full, together with accrued interest thereon to the date of prepayment, all Swap Breakage Loss, if any, LIBOR Breakage, if any, any Prepayment Fee and all other amounts then due and payable hereunder, under the relevant Loan Certificates and under the Loan Operative Documents in respect of the Adria Aircraft (collectively, the “Adria Prepayment Amount”), the Adria Borrower may use such amounts held in the Cash Collateral Account to voluntarily prepay on any Payment Date in respect of the Loan related to the Adria Aircraft the Adria Prepayment Amount.

 

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(b)          Mandatory Prepayment Events.

 

(i)        If there shall have occurred an Event of Loss with respect to any Aircraft, the Borrower of the Loan related to such Aircraft shall prepay all of the Loan Certificates relating to such Aircraft on the earlier of (x) the date of receipt of insurance proceeds in respect of such Event of Loss and (y) (i) for all Aircraft other than the Republic Aircraft, the 120th day following such Event of Loss Date and (ii) for the Republic Aircraft, subject to Section 5.1(t) of the Credit Agreement, the 150th day following such Event of Loss Date, in each case at 100% of the unpaid Original Amount thereof, together with all accrued interest thereon to the date of the prepayment and all other amounts then payable hereunder or under the Loan Certificates or under any other Loan Operative Document together with Swap Breakage Loss, if any, and LIBOR Breakage, if any (collectively and in respect of such Loan, the “Event of Loss Prepayment Amount”). To the extent any insurance proceeds received by the relevant Borrower in respect of an Event of Loss of an Aircraft are in excess of the Prepayment Amount in respect of the Loan related to such Aircraft (such excess amount, the “Event of Loss Excess Proceeds ”), such Event of Loss Excess Proceeds may be retained by such Borrower and distributed to the Borrower Parent.

 

(ii)        If there shall have occurred any sale or other disposition of any Aircraft (other than as set forth in Section 5.1(t) of the Credit Agreement), the Borrower of the Loan related to such Aircraft shall immediately prepay all of the Loan Certificates relating to such Loan at 100% of the unpaid Original Amount thereof, together with all accrued interest thereon to the date of the prepayment and all other amounts then payable under the Loan Certificates related to such Loan or under any other Loan Operative Document with respect to such Loan together with Swap Breakage Loss, LIBOR Breakage and any Prepayment Fee. To the extent that the sale proceeds in respect of such Aircraft are in excess of the amount required to repay 100% of the unpaid Original Amount of the Loan related thereto, together with all accrued interest thereon to the date of the prepayment and all other amounts then payable under the Loan Certificates related to such Loan or under any other Loan Operative Document with respect to such Loan together with Swap Breakage Loss, LIBOR Breakage and any Prepayment Fee (such excess amount, the "Excess Sales Proceeds"), the Excess Sale Proceeds may, at the election of the relevant Borrower, either be (A) applied to prepay in part or in full the Loan Certificates in respect of all remaining Loans of the Borrowers outstanding at 100% of the unpaid Original Amount of such Loans, together with all accrued interest thereon to the date of the prepayment and all other amounts then payable under the Loan Certificates, including Swap Breakage Loss, LIBOR Breakage and any Prepayment Fee or (B) deposited as cash collateral in the Cash Collateral Account; provided that if the Loans in respect of the Air Nostrum Aircraft and the Adria Aircraft have been repaid in full prior to the sale of such Aircraft, no prepayment as set forth in clause (A) above or cash collateralization as set forth in clause (B) above shall be required and the relevant Borrower may retain the Excess Sales Proceeds in respect of such Aircraft. To the extent there are Excess Sales Proceeds in respect of the sale or other disposition of the Air Nostrum Aircraft, the Adria Borrower shall use such Excess Sales Proceeds and any RVG Payment Amount (together, the sum of such Excess Sales Proceeds and such RVG Payment Amount shall be the Air Nostrum Excess Amount as set forth in Section 2.8 of the Credit Agreement) to prepay on the Payment Date in respect of the Loan related to the Adria Aircraft immediately following November 7, 2020 all of the Loan Certificates relating to the Loan related to the Adria Aircraft at 100% of the unpaid Original Amount thereof, together with all accrued interest thereon to the date of the prepayment and all other amounts then payable under the Loan Certificates related to such Loan or under any other Loan Operative Document with respect to such Loan together with Swap Breakage Loss and LIBOR Breakage; provided that if such sale or disposition of the Air Nostrum Aircraft occurs prior to the Payment Date in respect of the Loan related to the Adria Aircraft immediately following November 7, 2020, such Air Nostrum Excess Amount shall be deposited in the Cash Collateral Account until such Payment Date when they shall be applied in accordance with this clause (ii).

 

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(iii)        If there shall have occurred an Illegality Event, the Security Trustee shall notify the relevant Mortgagor thereof immediately; and the Security Trustee and the Participants shall take commercially reasonable steps to minimize the effect of any such Illegality Event. In any case, the parties hereto shall consult together in an attempt to restructure this transaction in a manner that eliminates or reduces such effect prior to the effectiveness of such illegality. In the event the parties are unable to agree on an acceptable restructure, the Borrowers shall within 30 days after receipt of such notice or any later date permitted by applicable law, prepay all of the Loan Certificates at 100% of the unpaid original thereof, together with all accrued interest thereon to the date of the prepayment and all other amounts then payable hereunder or under the Loan Certificates or under any other Loan Operative Document together with all Swap Breakage Loss and LIBOR Breakage.

 

(iv)        Upon the termination or expiration of any Remarketing Period (other than as a result of a sale or re-lease of the Aircraft subject to such Remarketing Period), all Loan Certificates in respect of the Loan related to such Aircraft then outstanding shall become due and payable at 100% of the unpaid Original Amount thereof, together with accrued interest thereon to the date of prepayment, any Swap Breakage Loss, any LIBOR Breakage, any Prepayment Fee and all other amounts then payable under such Loan Certificates.

 

(v)        To the extent that the initial Drawdown Date under the Credit Agreement is not in respect of the Loans related to the Republic Aircraft and the Drawdown Date in respect of the Loans related to the Republic Aircraft does not occur within ten Business Days after such initial Drawdown Date, the relevant Borrower shall immediately prepay all of the Loan Certificates outstanding at 100% of the unpaid Original Amount thereof, together with all accrued interest thereon to the date of the prepayment and all other amounts then payable under all of the Loan Certificates outstanding or under any other Loan Operative Document, together with Swap Breakage Loss and any LIBOR Breakage.

 

Section 2.11   Provisions Relating to Prepayment.

 

(a)        Notice of prepayment having been given as aforesaid, the principal amount of the Loan Certificates so to be prepaid, plus accrued interest thereon to the date of prepayment, together with all Swap Breakage Loss, if any, LIBOR Breakage, if any, any Prepayment Fee (if applicable), shall become due and payable on the relevant prepayment date.

 

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(b)        On the date prepayment is required with respect to any Loan under Section 2.10, immediately available funds in Dollars shall be deposited by the Borrower making such prepayment in the relevant Collateral Account at the place and by the time and otherwise in the manner provided in Section 2.04, in the amount required by Section 2.10, including all Swap Breakage Loss, if any, LIBOR Breakage, if any, any Prepayment Fee (if applicable) and all other amounts then due with respect to such Loan to the holders of the Loan Certificates related to such Loan hereunder, thereunder and under the other Loan Operative Documents.

 

(c)        Any partial prepayment of Loan Certificates relating to any Aircraft as provided in Section 2.10(a)(i) shall be applied in inverse order of maturity to the remaining installments.

 

(d)        In respect of any partial prepayment of a Loan under Section 2.10, any related Swap Agreement shall be terminated on a pro rata basis to the amount of such Loan being prepaid.

 

(e)        If the Excess Sales Proceeds in respect of the Air Nostrum Aircraft are not sufficient to prepay the Loan Certificates in respect of the Loan related to the Adria Aircraft in full under clause (ii) of Section 2.10, (i) the Adria Borrower and the Agent shall adjust the relevant Amortization Schedule for such Loan to reflect the partial prepayment and (ii) the Adria Borrower and the Swap Counterparty shall partially terminate the Swap Transaction for such Loan to reflect the partial prepayment.

 

(f)        If any Excess Sales Proceeds in respect of an Aircraft are used to prepay in part the Loan Certificates in respect of all remaining Loans of the Borrowers outstanding in accordance with Section 2.10(b)(ii), such partial prepayment shall be applied pro rata amongst such remaining Loans or as otherwise allocated by the Borrowers and the Administrative Agent, in each case acting reasonably.

 

(g)        Any amounts prepaid may not be reborrowed. All amounts prepaid shall be applied as provided in Article III and in Section 2.05.

 

Section 2.12   [Intentionally Omitted.]

 

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Section 2.13   Withholding Taxes; General Tax Indemnity.

 

(a)        Notwithstanding anything to the contrary contained herein or in any other Operative Document, each Mortgagor agrees that any payment made to or for the benefit of the Security Trustee, the Agent, any Participant or any other recipient hereunder (a “Recipient”) with respect to interest, principal, Swap Breakage Loss, LIBOR Breakage, Liquidity Breakage or other amounts payable on or with respect to the Credit Agreement, any Loan Certificate or this Security Agreement (it being understood, including amounts payable pursuant to Section 2.14 hereof) shall be free of all withholdings or deductions (“Withholding Taxes”) except to the extent required by applicable law, and in the event that such Mortgagor or the Security Trustee shall be required by applicable law to make any such withholding or deduction for any such Withholding Taxes (i) such Mortgagor shall pay an additional amount so that after such Mortgagor having made all required withholdings or deductions for Withholding Taxes from such payment the Security Trustee, the Agent and such Participant each receives the same amount it would have received had no such withholdings or deductions been made (and if such Mortgagor is unable to pay such additional amount, such Mortgagor shall indemnify the Security Trustee, the Agent and such Participant on an after-Tax basis with respect to the same and upon written demand of the Security Trustee, the Agent or such Participant shall promptly pay such indemnity to the Security Trustee, the Agent or such Participant, as the case may be), (ii) such Mortgagor shall make all such withholdings or deductions, and (iii) such Mortgagor shall pay such amount withheld or deducted to the relevant taxing authority in accordance with applicable law; provided, however, that such Mortgagor shall only have an obligation to pay an additional amount under this Section 2.13 for Withholding Taxes which are not Excluded Taxes.

 

(b)        Prior to making any claim for payment on any Mortgagor of any indemnity under this Section 2.13, the relevant Indemnitee shall notify such Mortgagor and request that such Mortgagor arrange to make a claim for payment of such amount upon any Lessee pursuant to any applicable Lease and shall promptly furnish a copy of any such claim to such Mortgagor. If following the making of such claim upon any Lessee, such Lessee either shall deny liability for such claim or shall not pay such claim for a period of ten Business Days following the date such claim for payment was made upon such Lessee, then the relevant Indemnitee shall be entitled to make a claim for payment on such Mortgagor hereunder and such Mortgagor shall be obligated to pay such claim within ten Business Days following the date such claim for payment was made upon such Mortgagor, provided that to the extent such Mortgagor has made such a payment to the Indemnitee and the Indemnitee subsequently receives a payment from such Lessee with respect to such Indemnitee’s claim, such Indemnitee will promptly pay the amount received from such Lessee to such Mortgagor. To the extent that a claim indemnified by any Mortgagor under this Section 2.13 is in fact paid in full by such Mortgagor, such Mortgagor shall, to the extent permitted by applicable law, be subrogated to the rights and remedies of the relevant Indemnitee against any Lessee, provided, however, no such subrogation shall be permitted if it interferes with such Indemnitee’s ability to recover any amounts hereunder or under the other Operative Documents. Such Indemnitee agrees to take such reasonable actions as any Mortgagor may reasonably request to effect such subrogation (at the cost and expense of such Mortgagor).

 

(c)        Each Participant agrees to investigate alternatives for reducing or avoiding any Taxes indemnifiable pursuant to this Section 2.13 and to use commercially reasonable efforts to avoid or minimize, to the greatest extent possible, any liability with respect to such Taxes, including by designating a different existing lending office, if (in such Participant’s sole opinion) such efforts or designation would avoid the need for, or reduce the amount of, any such Taxes and would not, in the sole opinion of such Participant, result in any operational, economic, legal, or regulatory disadvantage to such Participant; provided, however, that this sentence shall not obligate any Participant to take any action that would, in its sole judgment, cause such Participant to incur any loss or cost or expense, unless, in the case of an economic disadvantage, any Mortgagor agrees to promptly reimburse such Participant therefor in manner satisfactory to the Participant (in such Participant’s sole opinion).

 

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(d)        Each Mortgagor agrees to pay any present or future stamp, registration, recording or documentary Taxes or any other license, excise or property Taxes (i) imposed by any taxing authority which arise from the registration, filing, recording, or perfection of any security interest of or in connection with this Security Agreement or the Credit Agreement (other than any such Taxes attributed to a voluntary transfer of a Loan Certificate by a Participant, which Taxes would not have arisen had the transfer not occurred and the exclusion shall only apply in an amount equal to the increase (if any) by which the Taxes resulting from any such transfer exceed the amount to be compensated for had the transfer not occurred or (ii) imposed by any taxing authority in connection with an Event of Default that has occurred and is continuing.

 

(e)        Each Mortgagor will pay to each Indemnitee interest at the Past Due Rate, to the extent permitted by applicable law, on any amount not paid when due under this Section 2.13 until the same shall be paid.

 

(f)           (i)        Each of the Security Trustee and each Participant shall deliver to each Borrower (and, in the case of each Participant, to the Security Trustee), on or before the Closing Date and thereafter upon written request a properly completed and executed and valid IRS Form W-8 BEN, W-8BEN-E, W-8ECI, W-8IMY, W-9 or other appropriate IRS form (including any other document or information required by applicable law or form instructions to be provided in connection with such form).

 

(ii)        If any IRS form (or any information or documentation provided in connection with any IRS form) delivered to the Borrowers pursuant to this Section 2.13(f) does not, on its face, allow each Mortgagor to determine its U.S. federal withholding tax obligations with respect to any payment to be made pursuant to the Operative Documents to or for the benefit of the Person to which that form, information or documentation relates, or if any Mortgagor knows or has reason to know that such form, information or documentation is incorrect, such Mortgagor shall promptly notify the relevant Person in writing and that Person shall provide to the Borrowers and the Security Trustee such additional IRS forms, information, certifications and documentation as may be necessary to allow each Mortgagor to determine its U.S. federal withholding tax obligations with respect to payments to or for the benefit of that Person under the Operative Documents, or as may be necessary to remedy any incorrect form previously provided to the Borrowers.

 

(iii)        If any IRS form delivered to the Borrowers pursuant to this Section 2.13(f) (or any information or documentation provided in connection with any such IRS form) expires or becomes obsolete or ceases to be valid or accurate, the Security Trustee or the relevant Participant, as the case may be, shall deliver to the Borrowers and the Security Trustee (promptly after receipt of any Mortgagor’s written request if the IRS form or related information or documentation expires or becomes obsolete or invalid and promptly after becoming aware thereof if the IRS form or related information or documentation becomes inaccurate) a replacement IRS form (or applicable successor form) and any additional IRS form (in each case together with any information or documentation required by applicable law or form instructions to be provided in connection with such IRS form) to the extent it is legally eligible to do so.

 

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(g)        Each Mortgagor hereby agrees to act as the U.S. withholding agent with respect to this Security Agreement and the Credit Agreement and to the extent required by applicable law to withhold from each payment due hereunder or under the Credit Agreement or any Loan Certificate U.S. federal withholding tax at the appropriate rate and, on a timely basis, to deposit such U.S. federal withholding tax with an authorized depository and make such returns, filings, and other reports in connection therewith, and in the manner required under applicable law. Each Mortgagor shall furnish no later than March 15 of each year to each Participant, that is not a “United States person” (as defined in Section 7701(a)(30) of the Code) an IRS Form 1042S (or applicable successor form),if applicable, indicating payment in full of any Taxes withheld from or with respect to any payments by such Mortgagor or the Security Trustee to such Participant together with all such other information and documents reasonably requested by such Person in writing and necessary or appropriate to enable such Person to substantiate a claim for credit or deduction with respect thereto for income tax purposes of any jurisdiction with respect to which such Person is required to file a tax return.

 

(h)        If a Participant receives a refund of any Withholding Taxes in respect of which additional amounts were paid by any Mortgagor pursuant to this Section 2.13, such Participant shall promptly pay to such Mortgagor the amount of such refund plus any interest received on such refund fairly attributable to such Tax and not in excess of amounts previously paid by such Mortgagor to the Participant pursuant to this Section 2.13 (other than interest actually received on such refund and fairly attributable to such Tax), provided, however, that such amount shall be reduced by the amount of any Unpaid Obligation then due and not made (and the amount of such reduction shall not be payable before such time and to the extent as such Unpaid Obligation shall have been satisfied); and, provided further; if at such time an Event of Default has occurred and is continuing, such Participant may defer payment of such amount (after the reduction for any Unpaid Obligations) to such Mortgagor until such time as no Event of Default exists. Any such refund which is subsequently disallowed in whole or in part shall to the extent disallowed be promptly repaid by the relevant Mortgagor on the written demand of the relevant Participant (accompanied by reasonable documentary evidence of the disallowance). In addition, notwithstanding anything that may be to the contrary in this Security Agreement or any other Operative Document, none of the Mortgagors or any other Person shall have any right to review any tax return, or books and records or workpapers relating to any tax return or financial statement or any other confidential documents or information of any Participant or other Indemnitee.

 

(i)        As a condition precedent to any performance by any Mortgagor in connection with any payment of additional amounts pursuant to this Section 2.13, each transferee of a Participant claiming the benefit of such additional amount shall agree in writing with such Mortgagor to be bound by all the terms of this Section 2.13.

 

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(j)        Each Mortgagor shall indemnify, on an after-Tax basis, and hold each Indemnitee harmless from and against any and all Taxes imposed against any such Indemnitee, any Lessee, any Aircraft, any Airframe, any Engine or any Part thereof or any interest therein or use thereof, and any and all license, registration and recording fees and assessments, as well as Taxes arising out of the transactions contemplated by this Security Agreement, any Lease and each other Operative Document, or based on or measured by, the payments of Rent and other amounts due hereunder, under any Lease or under any other Operative Document, the terms, covenants and conditions hereof and thereof, or the financing, mortgaging, use, operation, maintenance, possession, condition, control, occupancy, servicing, installation, transportation, storage, substitution, recording, documentation, import, export, rental, lease, location, repair, abandonment, replacement, delivery, registration, repossession, improvement, subleasing, manufacture, rental, settlement of any insurance claim, return or other disposition of any Aircraft, any Airframe, any Engine or any Part thereof or interest therein regardless of the method of calculation; provided, however, that no Mortgagor shall have any obligation to indemnify an Indemnitee for any or all of the following Taxes: (i) Taxes to the extent imposed as the result of activities of such Indemnitee in the jurisdiction imposing the Taxes if they are unrelated such Mortgagor’s dealings with any Lessee or the transactions contemplated by this Security Agreement or any Lease or any other Operative Document or the operation of any Aircraft, any Airframe, any Engine or any Part thereof by any Lessee; (ii) Taxes imposed or calculated by reference to the net income, profits, or gains of such Indemnitee or any franchise, capital or net worth Taxes imposed on such Indemnitee by any taxing authority of a jurisdiction, in each case as a result of such Indemnitee being organized in such jurisdiction, or having its principal place of business in such jurisdiction, or (in the case of a Participant) having its lending office for the transactions contemplated by the Operative Documents in such jurisdiction, or carrying on business in such jurisdiction (unless such Indemnitee would not be deemed to be carrying on such business in such jurisdiction but for (A) the transactions contemplated by the Operative Documents or (B) the use, operation, presence or registration of any Aircraft, any Airframe, any Engine, or any Part in the jurisdiction or (C) the situs of organization, any place of business, or any activity of any Lessee or any person having use, possession, or custody of any Aircraft, any Airframe, any Engine, or any Part thereof in the jurisdiction); or (iii) Taxes imposed with respect to any period commencing or event occurring after the payment in full of the unpaid Original Amount of and interest on, all Unpaid Obligations, and all other amounts then due from such Mortgagor under any Loan Certificates and other Operative Documents, and unrelated to the transactions contemplated by this Security Agreement and the other Operative Documents, and unrelated to such Mortgagor’s dealings with any Lessee or any Lease; or (iv) Taxes imposed on or as a result of the voluntary or involuntary sale, transfer, assignment (whether legal or equitable) or other disposition (including a change in a Participant’s lending office, (other than a change effected pursuant to Section 2.13(c) or Section 2.14(c) hereof)) by such Indemnitee of any rights with respect to the Loan Certificates or the Operative Documents), but excluding any voluntary or involuntary sale, transfer, assignment (whether legal or equitable) or other disposition by such Indemnitee that arises as a result of an Event of Default or at the request of the Borrowers or in order to comply with any change in applicable law or treaty or other governmental requirement; or (v) Taxes imposed under FATCA.

 

(k)        For the purposes of this Section 2.13, the term “FATCA” means (i) Sections 1471 through 1474 of the Code as of the date hereof, any current or future regulations or official written interpretations thereof and any written agreements entered into pursuant to Section 1471(b)(1) of the Code; (ii) any treaty, law, regulation or official written guidance relating to an intergovernmental agreement between the United States and any other jurisdiction (and related legislation or official written administrative guidance), which (in each such case) implements Sections 1471 through 1474 of the Code; or (iii) any agreement pursuant to the implementation of any authority described in clause (i) or (ii) immediately above with the U.S. Internal Revenue Service, the U.S. government or any governmental or taxing authority in any other jurisdiction.

 

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(l)        Each Mortgagor shall indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Taxes other than Excluded Taxes (including Taxes imposed or asserted on or attributable to amounts payable under this Section 2.13) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to such Mortgagor by a Recipient (with a copy to the Security Trustee), or by the Security Trustee on its own behalf or on behalf of a Recipient, shall be conclusive absent manifest error.

 

(m)          If:

 

(i)        any Mortgagor pays to any taxing authority pursuant to any provision of any Operative Document for the account of an Indemnitee any Tax for which such Mortgagor is not obliged to indemnify such Indemnitee under this Section 2.13, or

 

(ii)        any Mortgagor pays to an Indemnitee (or to the Security Trustee for the benefit of an Indemnitee) pursuant to any provision of any Operative Document an indemnity for any Tax for which such Mortgagor is not obliged to indemnify such Indemnitee under this Section 2.13, or

 

(iii)        any Mortgagor pays to or for the account of an Indemnitee an additional amount to compensate for any Withholding Tax for which such Mortgagor is not obliged to indemnify such Indemnitee under this Section 2.13,

 

(any payment described in clause (i), (ii) or (iii) is called herein an “Excluded Tax Payment”), then the Indemnitee to or for whose account that Excluded Tax Payment was paid shall pay to such Mortgagor, within 30 days after receipt of such Mortgagor’s written request therefor (accompanied by a description in reasonable detail of the Excluded Tax Payment and, in the case of an Excluded Tax Payment described in clause (i) or (iii) above, a receipt or other document evidencing payment of the Excluded Tax Payment to the relevant taxing authority), the amount of that Excluded Tax Payment for application in accordance with Section 3.01 (Rent Payment Distribution) or 3.03 (Payments After Event of Default), whichever applies at the relevant time.

 

Section 2.14   Additional Costs .  (a) Subject to the requirements of clause (c) of this Section 2.14, each Mortgagor shall pay directly to each Participant from time to time such amounts (if any) as such Participant may determine to be necessary to compensate such Participant for any increase in costs that such Participant reasonably determines are attributable to its making or maintaining of its participation in the Loans or funding arrangements utilized in connection with such participations, or any reduction in any amount receivable by such Participant hereunder in respect of any of such participations or such arrangements (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”), in each case resulting from any Regulatory Change that:

 

(i)           imposes any tax that is the functional equivalent of any reserve, special deposit or similar requirement of the sort covered by clause (ii) below; or

 

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(ii)        imposes or modifies any reserve, special deposit or similar requirements (including any Reserve Requirement) relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Participant; or

 

(iii)         imposes any other condition affecting this Security Agreement or its participation in the Loans (or any of such extensions of credit or liabilities);

 

provided that any Participant which acquires a Loan Certificate pursuant to Section 2.07 (a “Transferee Participant”) shall not be entitled to compensation for any Additional Costs in excess of the Additional Costs that would have been imposed on the Participant on the Closing Date under applicable law in effect on the Closing Date, except to the extent such transfer is effected (i) in connection with mitigation provisions, (ii) at the request of the Borrowers or (iii) in order to comply with any change in law or governmental requirement.

 

(b)        Without limiting the effect of the foregoing provisions of this Section 2.14 (but without duplication), and subject to the requirements of clause (c) of this Section 2.14, each Mortgagor shall pay directly to each Participant from time to time on request such amounts (if any) as such Participant may determine to be necessary to compensate such Participant (or, without duplication, the holding company of which such Participant is a subsidiary) for any increase in actual costs that it determines are attributable to the maintenance by such Participant (or such Participant’s lending office or such holding company), pursuant to any law or regulation or any interpretation, directive or request (whether or not having the force of law and whether or not failure to comply therewith would be unlawful so long as compliance therewith is standard banking practice in the relevant jurisdiction) of any court or governmental or monetary authority following any Regulatory Change of capital or liquidity requirements in respect of its participation in the Loan Certificates or funding arrangements utilized in connection with such participation; such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Participant (or any lending office or such bank holding company) could have achieved but for such law, regulation, interpretation, directive or request; provided that no Transferee Participant shall be entitled to compensation for any such additional costs or reduction of rate of return on assets or equity attributable to compliance with capital adequacy or liquidity requirements in excess of those that would have applied to the Participant on the Closing Date under applicable law in effect on the Closing Date; except to the extent such transfer is effected (i) in connection with mitigation provisions, (ii) at the request of the Borrower or (iii) in order to comply with any change in law or governmental requirement.

 

(c)        Each Participant shall notify the Borrowers of any event occurring after the date of this Security Agreement entitling such Participant to compensation under paragraph (a) or (b) of this Section 2.14 as promptly as practicable, but in any event within ten days, after such Participant obtains Actual Knowledge thereof; provided that each Participant will use commercially reasonable efforts (at Borrowers’ expense) to mitigate the amount of the additional costs associated with such event, including designating a different lending office for its participation in the Loan if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Participant, result in any economic, operational legal or regulatory disadvantage to such Participant. Each Participant will furnish to the Borrowers a written confirmation of such additional costs, which will set forth in reasonable detail (i) the events giving rise to such additional costs, (ii) the basis for determining and allocating such additional costs and (iii) the amount of each request by such Participant for compensation under paragraph (a) or (b) of this Section 2.14 (subject, however, to any limitations such Participant may require in respect of disclosure of confidential information relating to its capital structure), together with a statement that the determinations and allocations made in respect of the additional costs comply with the provisions of this Section 2.14, including as provided in the last proviso of this paragraph (c). Determinations and allocations by any Participant for purposes of this Section 2.14 of the effect of any Regulatory Change pursuant to paragraph (a) of this Section 2.14, or of the effect of capital maintained pursuant to paragraph (b) of this Section 2.14, on its costs or rate of return of maintaining its participation in the Loans or its funding thereof, or on amounts receivable by it in respect of its participation, and of the amounts required to compensate such Participant under this Section 2.14, shall be conclusive absent manifest error, provided that such determinations and allocations are made on a reasonable and non-discriminatory basis and, in the case of allocations, are made fairly.

 

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ARTICLE III

 

RECEIPT, DISTRIBUTION AND APPLICATION OF

INCOME FROM THE MORTGAGED PROPERTY

 

Section 3.01   Rent Payment Distribution; Event of Loss and Sale Proceeds .  Except as otherwise provided in Section 3.02 or 3.03, (A) each installment of Basic Rent and any payment of interest by any Lessee on overdue installments of Basic Rent, any Return Compensation Payments, any Event of Loss proceeds and any other amounts payable by any Lessee to the Lessor under any Lease (including proceeds of insurance but excluding any Excluded Payment, any maintenance reserves or supplemental rent payable under such Lease and any security deposit payable under such Lease) and all other amounts payable to any Mortgagor with respect to any Loan in connection with the Loan Operative Documents , in each case to the extent received into the Collateral Account related to such Lease or such Loan, (B) any amounts transferred from the Cash Collateral Account in accordance with Section 2.04(b), (C) sale proceeds of the Aircraft in respect of such Loan (except as otherwise provided in Section 2.10(b)(ii)), (D) all amounts received on account of payments from the Swap Counterparty under the Swap Transaction in respect of such Loan and (E) any income on the amounts held in each Collateral Account shall be promptly distributed by the Mortgagee on each relevant Payment Date (or as soon thereafter as received with respect to amounts due on such Payment Date) in the following order of priority; provided that any Air Nostrum Proceeds shall be applied as set forth in Section 2.8 of the Credit Agreement:

 

first, so much of such amounts as shall be required to pay or reimburse the Mortgagee for any fees and expenses (including legal fees and expenses) then due and owing to the Mortgagee under the Operative Documents and not paid after notice thereof from the Mortgagee to the Borrowers;

 

second, so much of such amounts as shall be required to pay any reasonable fees and expenses (including reasonable legal fees and expenses) then due and owing to the Agent under the Operative Documents and not paid after notice thereof from the Agent to the Borrowers;

 

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third, on a pari passu basis, so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of (i) outstanding Original Amount, interest and other amounts, including any Liquidity Breakage, LIBOR Breakage and Swap Breakage Loss (as well as any interest on overdue Original Amount and, to the extent permitted by law, interest thereon) then due under all Loan Certificates (to be applied as provided in Section 2.05) and (ii) all Swap Obligations shall be paid to the Security Trustee for distribution to the Participants and the Swap Counterparty on a pro rata basis; and

 

fourth, so long as no Event of Default shall be continuing, the balance, if any, of such installment or payment or income remaining thereafter shall be paid to the Borrowers on a pro rata and pari passu basis.

 

Section 3.02   Voluntary Prepayment .  Except as otherwise provided in Section 3.03, any payments received in any Collateral Account or by the Mortgagee in connection with a voluntary prepayment of the Loan Certificates with respect to any Loan in accordance with Section 2.10(a) shall be promptly distributed by Mortgagee and applied to prepayment of the relevant Loan Certificates and to all other amounts payable hereunder or to the Mortgagee or any Participant under the Credit Agreement by applying such funds:

 

first, to reimburse the Mortgagee for any reasonable out-of-pocket costs or expenses incurred in connection with such prepayment and then to any other amounts then due to the Mortgagee, the Participants and the Swap Counterparty under this Security Agreement, the Credit Agreement, the Swap Agreements or the Loan Certificates (other than amounts specified below);

 

second, as provided in clause “second” of Section 3.03;

 

third, as provided in clause “third” of Section 3.03;

 

fourth, as provided in clause “fourth” of Section 3.03; and

 

fifth, the balance, if any, of such payments or amounts remaining thereafter shall be distributed to the Borrower party to such Loan Certificates.

 

Section 3.03 Payments After Event of Default. Except as otherwise provided in Sections 3.04(b) and 3.04(c), all payments received in any Collateral Account or otherwise and amounts held or realized by the Mortgagee (including the Adria Cash Collateral Amount, Air Nostrum Excess Amounts and any amounts realized by the Mortgagee from the exercise of any remedies pursuant to any Lease or Article IV hereof) in any Collateral Account and the Cash Collateral Account, as well as all payments or amounts then held by the Mortgagee as part of the Mortgaged Property in each case after (i) an Event of Default shall have occurred and be continuing and (ii) a Mortgagee Event shall have occurred and be continuing, shall be promptly distributed by the Mortgagee in the following order of priority:

 

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first, so much of such payments or amounts as shall be required to reimburse the Mortgagee for any tax, expense or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Mortgaged Property pursuant to Section 4.05(b)) incurred by the Mortgagee (to the extent not previously reimbursed), the expenses of any sale, taking or other proceeding, reasonable attorneys’ fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Mortgagee or the Participants in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Mortgagee, liquidated or otherwise (it being agreed and understood that reimbursement for fees, costs and expenses of legal counsel shall be limited to the reasonable and documented fees and expenses of one primary counsel to all Finance Parties (as defined in the Credit Agreement) taken as a whole and one local counsel for all Finance Parties in any relevant jurisdiction and, in the case of an actual or perceived conflict of interest, one additional counsel to each affected person), upon such Event of Default shall be applied by the Mortgagee as between itself and the Participants in reimbursement of such expenses and any other expenses for which Mortgagee or the Participants are entitled to reimbursement under any Operative Document;

 

second, on a pari passu basis so much of such payments or amounts remaining as shall be required to pay all Secured Obligations owing to the Secured Parties (other than as provided in clause “third” below) to the date of distribution, shall be paid to the Security Trustee for distribution to the Participants holding Loan Certificates on a pro rata basis to be distributed by such Participants in accordance with Section 2.05;

 

third, on a pari passu basis so much of such payments or amounts remaining as shall be required to pay in full (i) the aggregate unpaid Original Amount of all Loan Certificates, the accrued but unpaid interest to the date of distribution and any related Swap Breakage Loss, LIBOR Breakage and Liquidity Breakage then due and owing and (ii) all Swap Obligations, shall be paid to the Security Trustee for distribution to the Participants and the Swap Counterparty on a pro rata and pari passu basis; and

 

fourth, the balance, if any, of such payments or amounts remaining thereafter shall be distributed to the Borrowers on a pro rata and pari passu basis.

 

Section 3.04   Certain Payments.

 

(a)        Any payments received by the Mortgagee for which no provision as to the application thereof is made in this Security Agreement and for which such provision is made in any Lease, the Credit Agreement or any other Operative Document shall be applied forthwith to the purpose for which such payment was made in accordance with the terms of such Lease, the Credit Agreement or such other Operative Document, as the case may be.

 

(b)        The Mortgagee will distribute promptly upon receipt any indemnity payment received by it from any Mortgagor or any Lessee in respect of the Mortgagee or any Participant directly to the person entitled thereto.

 

(c)        Notwithstanding anything to the contrary in this Agreement, any payments received by the Mortgagee which constitute Excluded Payments, any maintenance reserves or supplemental rent payable under a Lease and any security deposit payable under a Lease shall be distributed promptly upon receipt by the Mortgagee directly to the relevant Borrower Party.

 

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Section 3.05   Other Payments.

 

(a)        Except as otherwise provided in Section 3.03 and if no Default or Event of Default shall have occurred and be continuing, any payments received by the Mortgagee for which no provision as to the application thereof is made in any Lease, the Credit Agreement, elsewhere in this Security Agreement or in any other Operative Document, shall be distributed by the Mortgagee to the extent received or realized at any time to the extent constituting Excluded Payments, to the relevant Borrower Party, and otherwise (i) if prior to the payment in full of all Secured Obligations due to the Secured Parties, in the order of priority specified in Section 3.01, and (ii) if after payment in full of all Secured Obligations due the Participants in the manner provided in clause “fifth” of Section 3.03.

 

Further, and except as otherwise provided in Sections 3.02, 3.03 and 3.04, all payments received and amounts realized by the Mortgagee under any Lease or otherwise with respect to any Aircraft (including without limitation, all amounts realized upon the sale or re-lease of such Aircraft after the termination of the Lease with respect thereto), to the extent received or realized at any time after payment in full of all Secured Obligations then due to the Secured Parties, shall be distributed by the Mortgagee to the Borrowers on a pro rata and pari passu basis.

 

(b)        All payments received by the Mortgagee which are Excluded Payments, any maintenance reserves or supplemental rent payable under a Lease and any security deposit payable under a Lease are not part of the Mortgaged Property and shall promptly be paid over by the Mortgagee to the relevant Borrower or, if directed, the Borrower Parent. For the avoidance of doubt, the foregoing shall not include and nothing contained in this subsection shall affect any other payments received under any Lease or any other payments in each case which are part of the Mortgaged Property (including, without limitation, payments on account of the sale of, or an Event of Loss with respect to, an Aircraft or insurance proceeds (except as to Excluded Payments)), all of which shall be distributed in accordance with Sections 3.01 through 3.05(a), as applicable.

 

(c)        Notwithstanding anything to the contrary set forth herein, any amounts held by the Security Trustee, including, without limitation, pursuant to any Lease, and any other condemnation, requisition, indemnity or other payments, amounts or proceeds of any kind or nature received by it with respect to any Aircraft or other collateral subject to the Lien of this Security Agreement, which are payable to any Lessee pursuant to the terms of such Lease or the Operative Documents or any amounts to be paid by the Participants to such Lessee hereunder or under any other Operative Document, shall be (i) so paid to such Lessee so long as no Lease Event of Default shall have occurred and be continuing under such Lease or (ii) held by the Security Trustee or the Participants, as the case may be, if a Lease Event of Default has occurred and is continuing under such Lease, as security for the obligations of such Lessee until such time as there shall not be continuing any such Lease Event of Default.

 

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ARTICLE IV

 

COVENANTS OF MORTGAGORS; EVENTS OF

DEFAULT; REMEDIES OF MORTGAGEE

 

Section 4.01   Covenants of Mortgagors.  Each Mortgagor hereby covenants and agrees as follows:

 

(a)        each Borrower will duly and punctually pay the unpaid Original Amount of, and interest on and all other amounts due under, the Loan Certificates and hereunder in accordance with the terms of the Loan Certificates and this Security Agreement and the Loan Operative Documents and all amounts due and payable by it to the Participants and the Swap Counterparty under the Credit Agreement and the Swap Agreements;

 

(b)        in the event such Mortgagor shall have Actual Knowledge of an Event of Default, a Default or an Event of Loss, such Mortgagor will give prompt written notice of such Event of Default, Default or Event of Loss to the Agent;

 

(c)        such Mortgagor will furnish to the Mortgagee, promptly upon receipt thereof, duplicates or copies of all material reports, notices, requests, demands, certificates, financial information and other instruments furnished to such Mortgagor under any Lease to the extent that the same shall not have been furnished to the Agent or the Mortgagee pursuant to such Lease or the Credit Agreement; and

 

(d)        at any time and from time to time, upon the request of the Agent, the relevant Borrower or Lessor, as the case may be, shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or desirable to perfect, preserve or protect the security interests created or intended to be created hereby, or to obtain for the Mortgagee the full benefit of the specific rights and powers herein granted, including, without limitation, the execution and delivery of Uniform Commercial Code financing statements and continuation statements with respect thereto, or similar instruments (including such documents and instruments as may be required to register or continue the registration of the international interests represented hereby in favor of the Mortgagee on behalf of the Participants created by or arising in connection with this Security Agreement and the other Operative Documents at the International Registry) relating to the perfection of the security interests created or intended to be created hereby.

 

Section 4.02   Event of Default .  “Event of Default” means any of the following events (whatever the reason for such Event of Default and whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

 

(a)        any Lease Event of Default which does not remain capable of being cured by the relevant Borrower in accordance with Section 4.03(a) or which results in the invocation of a Remarketing Period by the relevant Borrower in accordance with Section 4.03(b); or

 

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(b)        (i) the failure of any Borrower to pay when due any payment of the unpaid Original Amount of the Loan Certificates and interest thereon or any Swap Obligations, and such failure shall have continued unremedied for three Business Days from such due date or (ii) the failure of any Mortgagor to pay any other amount payable by it under the Loan Operative Documents when due, and in either case such failure shall have continued unremedied for five Business Days after such Mortgagor, receives written notice of such failure or written demand from the Mortgagee or any Participant; or

 

(c)        (i) any Lessor Lien required to be discharged by any Borrower Party pursuant to Section 5.1(d) of the Credit Agreement shall remain undischarged for a period of ten Business Days after the date when such party shall have received written notice thereof from the Mortgagee or any Participant or (ii) any failure by any Mortgagor to observe or perform any of its covenants or obligations in Section 5.1(c), 5.1(e), 5.1(f), 5.1(g), 5.1(n)(i)-(ii), 5.1(o), 5.1(r) or 5.4 of the Credit Agreement or (iii) any failure by the Borrower Parent to observe its covenants and obligations under Sections 3(e) and 3(m)-(s) of the Borrower Parent Pledge Agreements; or

 

(d)        any misrepresentation is made by any Borrower Party herein, in the Credit Agreement or in any other Loan Operative Document that has or is likely to have a material adverse effect on the ability to perform its obligations or on the rights or interest of any Participant and such Borrower Party fails to cure such misrepresentation within 30 days after notice of such misrepresentation from Mortgagee; or

 

(e)        other than as provided in (c) above, any failure by any Borrower Party to observe or perform any other covenant or obligation of such Borrower Party contained in the Credit Agreement, this Security Agreement, any Lease or any other Loan Operative Document which is not remedied within a period of 15 days after notice of such failure has been given to such Borrower Party; or

 

(f)        any repudiation of this Security Agreement, the Credit Agreement or any other Loan Operative Document by any Borrower Party; or

 

(g)        at any time either (i) the commencement of an involuntary case or other proceeding in respect of a Borrower Party under bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar law in England or the United States seeking the appointment of a receiver, liquidator, assignee, Irish law examiner, custodian, trustee, sequestrator (or similar official) of such Borrower Party or for all or substantially all of its property, or seeking the winding-up or liquidation of its affairs and the continuation of any such case or other proceeding undismissed and unstayed for a period of 30 consecutive days; or (ii) such commencement by such Borrower Party of a voluntary case or proceeding under bankruptcy laws, as now constituted or hereafter amended, or any other applicable bankruptcy, insolvency or other similar law in the United States or the consent by such Borrower Party to the appointment of or taking possession by a receiver, liquidator, examiner, assignee, trustee, custodian, sequestrator (or other similar official) of such Borrower Party for all or substantially all of its property, or the making by such Borrower Party of any assignment for the benefit of the creditors of such Borrower Party, or such Borrower Party shall take any action to authorize any of the foregoing; or (iii) such Borrower Party has or suffers to be appointed any examiner, administrator, administrative receiver, receiver, liquidator, trustee or similar officer of all or a substantial part of its assets and such appointment is not dismissed for a period of 30 consecutive days; or

 

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(h)        the security interest on any Aircraft, any Lease or any of the Pledged Collateral shall cease to be valid and enforceable and/or duly perfected; or

 

(i)        any termination of the Remarketing Period pursuant to Section 4.03(b)(vi) or a failure to satisfy the Remarketing Period Conditions; or

 

(j)        any lapse of, or failure to maintain, insurance coverage on the Aircraft required to be maintained under the Credit Agreement or any Lease; or

 

(k)        any suspension or cessation of the business of any Borrower Party, or any materially adverse change in the business or operations of any Borrower Party, which could be reasonably expected to materially adversely affect such Borrower Party’s ability to perform its obligations under the Loan Operative Documents or the rights or interests of any Secured Party.

 

Section 4.03   Cure Rights; Remarketing Period.

 

(a)           Certain Cure Rights.    (i) With respect to a Republic Aircraft or an Air Nostrum Aircraft, if an Event of Default occurs as a result of any default by the relevant Lessee in the payment when due of any installment of Rent due under the relevant Lease, the relevant Borrower may, within ten Business Days after the occurrence of such Event of Default without the consent or concurrence of any Participant, the Agent or the Security Trustee, pay, as provided in Section 2.04, for application in accordance with Section 3.01 a sum equal to the amount of all (but not less than all) such overdue Rent under such Lease (but only to the extent of the component thereof relating to debt service, including interest payments, on the relevant Loan). With respect to the Adria Aircraft, if an Event of Default occurs as a result of any default by the relevant Lessee in the payment when due of any installment of Rent due under the relevant Lease and if such Lessee itself shall have theretofore failed to pay Basic Rent in the manner required by such Lease (after giving effect to any applicable grace period), the Security Trustee shall promptly transfer from the Cash Collateral Account to the relevant Collateral Account and apply in accordance with Section 3.01 an amount of the Adria Cash Collateral Amount equal to the amount of all (but not less than all) such overdue Rent under such Lease (but only to the extent of the component thereof relating to debt service, including interest payments, on the relevant Loan). If an Event of Default occurs as a result of any default by a Lessee in any obligation under the Lease other than the payment of Rent, if such Event of Default can be remedied by the payment of money, the relevant Borrower may, within three Business Days after the date of occurrence of the such Event of Default, without the consent or concurrence of any Participant, the Agent or the Security Trustee, perform such obligation on behalf of such Lessee and shall furnish all funds necessary for remedying such Event of Default. Solely for the purpose of determining whether there exists an Event of Default (a) any timely payment by the relevant Borrower pursuant to, and in compliance with, the first and second sentences of this Section 4.03(a) shall be deemed to remedy (but solely for purposes of this Security Agreement) any Event of Default that is a result of a default by such Lessee in the payment of installments of Rent theretofore due and payable under such Lease and to remedy (but solely for purposes of this Security Agreement) any default by such Borrower in the payment of any amount of principal due and payable under the related Loan and (b) any timely performance by such Borrower of any obligation of such Lessee under such Lease pursuant to, and in compliance with, the third sentence of this Section 4.03 shall be deemed to remedy (but solely for purposes of this Security Agreement) any Event of Default to the same extent that like performance by such Lessee itself would have remedied such Event of Default (but no such remedy shall relieve such Lessee of its duty to pay all Rent and perform all of its obligations pursuant to such Lease). If, on the basis specified in the preceding sentence, any Event of Default shall have been remedied for the purposes of this Security Agreement, then any declaration pursuant to this Security Agreement that the Loans are due and payable or that an Event of Default exists hereunder, based solely upon such Event of Default, shall be deemed to be rescinded, and the relevant Borrower shall (to the extent of any such payments made by it) be subrogated to the rights of the Participants under Section 3.01 to receive from the Security Trustee such payment of overdue Rent (and the payment of interest on account of such Rent being overdue) and shall be entitled, so long as no other Event of Default or Default shall have occurred and be continuing or would result therefrom, to receive, subject to the provisions of this Security Agreement, such payment upon receipt thereof by the Security Trustee; provided that such Borrower shall not otherwise attempt to recover any such amount paid by it on behalf of such Lessee pursuant to this Section 4.03 except by demanding of such Lessee payment of such amount or by commencing an action at law against such Lessee for the payment of such amount (or act in any pending action adverse to such Lessee); provided, further, that at no time while an Event of Default shall have occurred and be continuing shall any such demand be made or shall any such action be commenced (or continued), and any amounts nevertheless received by the relevant Borrower in respect thereof shall be held in trust for the benefit of, and promptly paid to, the Security Trustee for distribution as provided in Section 3.03 (or Section 3.04 with respect to indemnity payments); and further provided that, in respect of an Air Nostrum Aircraft and a Republic Aircraft, this Section 4.03(a) shall not apply with respect to any Event of Default that is a result of a default by the relevant Lessee in the payment of Basic Rent under the relevant Lease if such Lessee itself shall have theretofore failed to pay Basic Rent in the manner required by such Lease (after giving effect to any applicable grace period) on each of the two Payment Dates immediately preceding the date of such default or a total of four Payment Dates; and

 

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(ii)        No Borrower shall have the right to cure any Event of Default arising by reason of a Lease Event of Default except as specified in this Section 4.03(a).

 

(b)          Certain Remarketing Rights.

 

(i)        If a Lease Event of Default shall have occurred and be continuing under any Lease and the relevant Borrower shall have made the election provided in the following paragraph (ii), and so long as (A) no other Event of Default (not the result of a Lease Event of Default) shall have occurred and be continuing, (B) such Borrower duly and punctually performs its obligations under this Section 4.03(b) and (C) the Remarketing Period has not expired or otherwise terminated as provided below, no Lease Event of Default shall be deemed to have occurred and be continuing for purposes of any Loan Operative Document.

 

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(ii)        (A) So long as no Event of Default (other than a Lease Default or Lease Event of Default) has occurred and is continuing and (B) if the relevant Borrower or Lessor issues a termination notice under any Lease in respect of a Lease Event of Default not arising due to an Event of Loss (“Lease Termination Notice”), which Lease Termination Notice shall be issued with the consent of the Security Trustee (not to be unreasonably withheld or delayed), the relevant Borrower may elect to have a remarketing period for a period not to exceed 180 days (the “Remarketing Period”) in respect of the Aircraft related to such Lease Termination Notice (the “Subject Aircraft”) by giving written notice thereof to the Security Trustee and the Agent promptly following and, in any case, within ten Business Days of the issuance of the relevant Lease Termination Notice; provided that (i) the consent of the Security Trustee shall not be required for the relevant Borrower or Lessor, as the case may be, to issue a Lease Termination Notice if a Material Lease Breach has occurred under the relevant Lease, (ii) the relevant Remarketing Period shall commence on the date the relevant Lease is actually terminated pursuant to the terms of the Lease Termination Notice (which shall specify a date for the termination of such Lease), (iii) no Remarketing Period may end later than the Maturity Date in respect of the Loan related to the Subject Aircraft and (iv) such Remarketing Period shall terminate if an Event of Default occurs and is continuing (other than an Event of Default occurring under Section 4.02(a)). The remarketing services shall be performed by the relevant Remarketing Agent. The costs of all remarketing services hereunder during the Remarketing Period shall be borne by the relevant Borrower.

 

(iii)        During the Remarketing Period, the relevant Borrower agrees that it will do or cause to be done, the following (A) promptly initiate efforts to cause the Subject Aircraft and any related Aircraft Documents to be repossessed from the relevant Lessee and subsequently store, maintain and insure the Subject Aircraft, (B) sell or lease and otherwise remarket the Subject Aircraft, (C) keep the Security Trustee fully informed about all remarketing activities relating to the Subject Aircraft, (D) provide the Security Trustee periodic progress/status reports of the remarketing efforts, (E) pay all costs and expenses associated with all foregoing activities and a reasonable restructuring fee (to be assessed by the Mandated Lead Arranger in such amounts as determined thereby (in its absolute discretion) to compensate it for additional work required of it) for the Security Trustee, the Agent, the Swap Counterparty and the Participants and (F) such other things as the Security Trustee may require (acting reasonably) so to establish, maintain, perfect, preserve and/or protect the right, title and interest of such Borrower and each Participant in relation to the Subject Aircraft.

 

(iv)        The Remarketing Period Conditions shall be performed by or on behalf of the relevant Borrower in a manner consistent with the standards of a reputable, internationally recognized aircraft lessor.

 

(v)        During (i) the period commencing on the issuance of a Lease Termination Notice and terminating on the commencement of the relevant Remarketing Period and (ii) the relevant Remarketing Period, the relevant Borrower shall pay or cause to be paid all installments of principal of and interest on the Loan with respect to any Subject Aircraft as and when due.

 

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(vi)        The Security Trustee may, by written notice to the relevant Borrower, terminate the Remarketing Period upon the occurrence of any of the following events: (A) if an Event of Default (other than a Lease Event of Default) has occurred and is continuing; (B) if such Borrower fails to take commercially reasonably steps to repossess the Subject Aircraft in accordance with clause (iii)(A) above and such failure continues for 10 Business Days after such Borrower’s receipt of written notice of such failure from the Security Trustee; or (C) if such Borrower fails to comply in any material respect with any of the other Remarketing Period Conditions and (other than in respect of insurance) such failure continues for ten Business Days after such Borrower’s receipt of written notice of such failure from the Security Trustee.

 

(vii)        The relevant Borrower may not sell, re-lease or otherwise dispose of the Subject Aircraft during the Remarketing Period without the prior written consent of the Security Trustee (not to be unreasonably withheld or delayed but subject always to the approval of each Participant’s credit committee); provided that, such Borrower shall be entitled to sell such Subject Aircraft without the Security Trustee’s consent if the net sale price received by the Security Trustee in any disposition (together with any additional funds provided by such Mortgagor or the Remarketing Agent, if any, at their sole option, and without any obligation to provide such funds) equals or exceeds the Secured Obligations associated with the Loan made for such Aircraft (including associated Swap Obligations) and any other amounts owing (whether or not then due and payable) to the Participants, the Agent and the Security Trustee under the Credit Agreement, the Loan Certificates and the other Loan Operative Documents; provided further that upon a successful sale, re-lease or other disposition of such Subject Aircraft, (A) the Remarketing Period shall expire on the date of such sale, re-lease or other disposition, (B) no Default or Event of Default shall be deemed to occur as a result of such sale, release or other disposition, (C) conforming amendments shall be made to the Loan Operative Documents solely so as to reference the new lease (and its relevant defined terms), sale or other disposition rather than the Lease that was terminated and (D) such Borrower shall pay, unless such Borrower, Security Trustee and Agent have agreed otherwise in writing (such agreement to be provided, in each case, in the absolute discretion of the Security Trustee and the Agent) in connection with a re-lease of such Subject Aircraft, all amounts due and owing under 4.03(b)(iii).

 

(c)        If the relevant Borrower fails to sell or lease the Subject Aircraft by the expiration of the Remarketing Period, such Borrower shall, within three Business Days of receipt by such Borrower of notice of such requirement from the Security Trustee, pay all amounts then due and payable to the Participants and the Security Trustee under the Credit Agreement, the Loan Certificates and the other Loan Operative Documents with respect to the Loan related to the Subject Aircraft, including Swap Breakage Loss, LIBOR Breakage and Liquidity Breakage.

 

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Section 4.04   Remedies.

 

(a)        If an Event of Default shall have occurred and be continuing and so long as the same shall continue unremedied, then and in every such case the Mortgagee may exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article IV and shall have and may exercise all of the rights and remedies of a secured party under the UCC (as defined in the Credit Agreement), the Cape Town Convention or applicable law based on where any Aircraft is located and, in the event such Event of Default is also a Lease Event of Default under any Lease, any and all of the remedies under and pursuant to the terms of such Lease and may take possession of all or any part of the properties covered or intended to be covered by the lien and security interest created hereby or pursuant hereto and may exclude the Mortgagors, and any Lessee and all persons claiming under any of them wholly or partly therefrom; provided, however, that notwithstanding anything herein to the contrary, and in respect of the exercise of each of the remedies set forth herein, the Mortgagee shall provide the Borrowers with (i) not less than 10 Business Days written notice (an “Enforcement Notice”) and (ii) in the case of a Lease Event of Default, an opportunity to cure pursuant to Section 4.03(a) or enter into a Remarketing Period pursuant to Section 4.03(b) prior to exercising any such rights, powers or remedies hereunder or under any of the Loan Operative Documents or the relevant Lease. Without limiting any of the foregoing, it is understood and agreed that the Mortgagee may exercise any right of sale of any Aircraft available to it, even though it shall not have taken possession of such Aircraft and shall not have possession thereof at the time of such sale.

 

(b)        If an Event of Default shall have occurred and be continuing, then and in every such case the Mortgagee may (and shall, upon receipt of a written demand therefor from the Required Participants) at any time, by delivery of written notice or notices to the Borrowers, declare all the Loan Certificates to be due and payable, whereupon (i) the unpaid Original Amount of all Loan Certificates then outstanding, together with (ii) accrued but unpaid interest thereon (iii) all unpaid Swap Obligations and (iv) any other amounts due thereunder or hereunder (the “Unpaid Obligations”), together with Liquidity Breakage, LIBOR Breakage and Swap Breakage Loss, if any, shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived; provided, that the Loan Certificates will automatically become immediately due and payable without any action of the Mortgagee or the Participants and without presentment, demand, protest or notice, all of which are hereby waived in the case of an Event of Default under Section 4.02(g).

 

(c)        The Security Trustee shall be entitled, at any sale pursuant to any Lease or this Section 4.04, to credit against any purchase price bid at such sale by the Security Trustee all or any part of the Unpaid Obligations secured by the lien of this Security Agreement. In connection with any such sale, the Mortgagee agrees to provide the Borrowers with at least ten Business Days’ prior written notice of such sale, which notice shall, for the purposes of the Uniform Commercial Code in effect in any applicable jurisdiction, be deemed to be commercially reasonable and for purposes of the Cape Town Convention shall be deemed to satisfy the requirement of “reasonable prior notice” specified in Article 8(4) of the Convention.

 

(d)        In the event of any sale of the Mortgaged Property, or of any part thereof, pursuant to any judgment or decree of any court or otherwise in connection with the enforcement of any of the terms of this Security Agreement, the Unpaid Obligations shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived.

 

Section 4.05   Return of Aircraft, etc.

 

(a)        If an Event of Default shall have occurred and be continuing, at the request of the Mortgagee, each Mortgagor shall promptly execute and deliver to the Mortgagee such instruments of title and other documents as the Mortgagee may deem necessary or advisable to enable the Mortgagee or an agent or representative designated by the Mortgagee, at such time or times and place or places as the Mortgagee may specify, to obtain possession of all or any part of the Mortgaged Property to which the Mortgagee shall at the time be entitled hereunder. If any Mortgagor shall for any reason fail to execute and deliver such instruments and documents after such request by the Mortgagee, the Mortgagee may:

 

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(i)        obtain a judgment conferring on the Mortgagee the right to immediate possession and requiring such Mortgagor to execute and deliver such instruments and documents to the Mortgagee, to the entry of which judgment such Mortgagor hereby specifically consents to the fullest extent permitted by law; and

 

(ii)        pursue all or part of such Mortgaged Property wherever it may be found and, in the event that a Lease Event of Default has occurred and is continuing under any Lease, subject to applicable law, may enter any of the premises of the Lessee under such Lease wherever such Mortgaged Property may be or be supposed to be and search for such Mortgaged Property and take possession of and remove such Mortgaged Property.

 

All expenses of obtaining such judgment or of pursuing, searching for and taking such property shall, until paid, be secured by the Lien of this Security Agreement.

 

(b)        Upon every such taking of possession, the Mortgagee may, from time to time, at the expense of the Mortgaged Property, make all such reasonable expenditures for maintenance, use, operation, preservation, storage, insurance, leasing, control, management, disposition, modifications or alterations to and of the Mortgaged Property, as it may deem proper. In each such case, the Mortgagee shall have the right to maintain, use, operate, preserve, store, insure, lease, control, manage, dispose of, modify or alter the Mortgaged Property and to carry on the business and to exercise all rights and powers of any Mortgagor relating to the Mortgaged Property, as the Mortgagee shall deem best, including the right to enter into any and all such agreements with respect to the maintenance, use, operation, preservation, storage, insurance, leasing, control, management, disposition, modification or alteration of the Mortgaged Property or any part thereof as the Mortgagee may reasonably determine, and the Mortgagee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Mortgaged Property and every part thereof, except Excluded Payments, without prejudice, however, to the right of the Mortgagee under any provision of this Security Agreement to collect and receive all cash held by, or required to be deposited with, the Mortgagee hereunder. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the reasonable expenses of the maintenance, use, operation, preservation, storage, insurance, leasing, control, management, disposition, improvement, modification or alteration of the Mortgaged Property and of conducting the business thereof, and to make all payments which the Mortgagee may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon the Mortgaged Property or any part thereof (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Mortgagor), and all other payments which the Mortgagee may be required or authorized to make under any provision of this Security Agreement, as well as just and reasonable compensation for the services of the Mortgagee, and of all persons properly engaged and employed by the Mortgagee with respect hereto.

 

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Section 4.06   Remedies Cumulative.  Each and every right, power and remedy given to the Mortgagee specifically or otherwise in this Security Agreement shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, including, without limitations and if applicable, any of the remedies specified in the Cape Town Convention, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Mortgagee, and the exercise or the beginning of the exercise of any 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 the Mortgagee in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of any Mortgagor or any Lessee or to be an acquiescence therein.

 

Section 4.07   Discontinuance of Proceedings.  In case the Mortgagee shall have instituted any proceeding to enforce any right, power or remedy under this Security Agreement by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Mortgagee, then and in every such case each Mortgagor, the Mortgagee and each Lessee shall, subject to any determination in such proceedings, be restored to their former positions and rights hereunder with respect to the Mortgaged Property, and all rights, remedies and powers of the Mortgagee shall continue as if no such proceedings had been instituted.

 

Section 4.08   Waiver of Past Defaults.  The Mortgagee may waive any past default hereunder and its consequences and upon any such waiver such default shall cease to exist and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of all Loan Operative Documents, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon; provided, that in the absence of written instructions from all the Participants, the Mortgagee shall not waive any default (i) in the payment of the unpaid Original Amount, interest, Liquidity Breakage, LIBOR Breakage, Swap Breakage Loss and other amounts due under any Loan Certificate then outstanding, or (ii) in respect of a covenant or provision hereof which, under Article VIII hereof, cannot be modified or amended without the consent of each Secured Party.

 

Section 4.09   Appointment of Receiver.  If an Event of Default shall have occurred and be continuing the Mortgagee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Mortgagee or any successor or nominee thereof) for all or any part of the Mortgaged Property, whether such receivership be incidental to a proposed sale of the Mortgaged Property or the taking of possession thereof or otherwise, and each Mortgagor hereby consents to the appointment of such a receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Mortgaged Property shall be entitled to exercise all the rights and powers of the Mortgagee with respect to the Mortgaged Property.

 

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Section 4.10   Mortgagee Authorized to Execute Bills of Sale, etc.  Each Mortgagor irrevocably appoints the Mortgagee its true and lawful attorney-in-fact in its name and stead and on its behalf for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the lien of this Security Agreement, whether pursuant to foreclosure or power of sale, assignments and other instruments as may be necessary or appropriate, with full power of substitution, each Mortgagor hereby ratifying and confirming all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Mortgagee or any purchaser, each Mortgagor shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Mortgagee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request.

 

Section 4.11   Slovenian Mortgage.  Notwithstanding anything to the contrary set forth herein, in the Slovenian Mortgage or in the other Loan Operative Documents, the Adria Borrower hereby acknowledges and agrees that (i) as a result of requirements of Slovenian law, Norddeutsche Landesbank Girozentrale, New York Branch, as mortgagee (the “Slovenian Mortgagee”) is acting as the mortgagee under the Slovenian Mortgage in lieu of the Security Trustee and (ii) the rights and remedies in favor of the Slovenian Mortgagee under the Slovenian Mortgage, and the method pursuant to which the Slovenian Mortgagee may enforce such rights and remedies as set forth in the Slovenian Mortgage, does not cut across, conflict with or detract from any of the rights and remedies in favor of the Security Trustee in respect of the Adria Aircraft set forth herein or in the other Loan Operative Documents (other than the Slovenian Mortgage).

 

ARTICLE V

 

PAYMENTS FROM MORTGAGED PROPERTY ONLY

 

Section 5.01   Payments from Mortgaged Property Only.  Except as otherwise expressly provided in the next succeeding sentence of this Section 5.01, all payments to be made by a Mortgagor under the Operative Documents shall be made only from the income and the proceeds from the Collateral only to the extent that such Mortgagor shall have sufficient income or proceeds from the Collateral to enable such Mortgagor to make payments in accordance with the terms hereof. Each holder of a Loan Certificate, by its acceptance of a Loan Certificate, and the Security Trustee, each agrees that it will look solely to the income and proceeds from the Mortgaged Property to the extent available for distribution to it as above provided in respect of any obligation of any Mortgagor hereunder.

 

ARTICLE VI

 

CERTAIN RIGHTS OF MORTGAGOR

 

Section 6.01   Certain Rights of Mortgagor.  Notwithstanding any other provisions of this Security Agreement, including the Granting Clause, but subject to Section 8.01, the following rights shall be reserved to each Mortgagor (as separate and independent rights) to the extent described herein:

 

(a)        at all times each Mortgagor and the Mortgagee shall each have the right (i) to receive from any Lessee all notices, certificates, reports, filings, opinions of counsel and other documents and all information which they are permitted or required to give or furnish pursuant to any Operative Document and (ii) to retain any rights with respect to insurance maintained for its own account;

 

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(b)        so long as no Event of Default shall have occurred and be continuing, each Mortgagor shall have the right (A) together with the Mortgagee (consent of both being required except in the case of clause (iii) below) (i) to approve as satisfactory any accountants, inspectors, engineers or counsel to render services for or issue opinions to any Mortgagor pursuant to express provisions of the Lease Operative Documents, (ii) to grant such consents, approvals and waivers as may be requested under the Lease Operative Documents, (iii) subject to Section 5.1(k) of the Credit Agreement, to exercise inspection rights pursuant to any Lease (provided that if a Lease Event of Default shall have occurred and be continuing, any Mortgagor shall be permitted to exercise rights of inspection so long as such inspection does not interfere with Mortgagee’s exercise of its rights) and (iv) to direct the application of any insurance proceeds payable in connection with the relevant Lease and (B) exclusive of the Mortgagee, to agree to any matter relating to Day-to-Day Operations;

 

(c)        each Mortgagor shall have the non-exclusive right, as lessor, to seek specific performance of the covenants of any Lessee under any Lease relating to the protection, insurance, maintenance, possession and use of any Aircraft, and to maintain separate insurance with respect to such Aircraft (provided that no such insurance impairs or reduces coverage under any insurance required to be maintained by such Lessee under such Lease); and

 

(d)        at all times each Mortgagor shall have the right, to the exclusion of the Mortgagee, to demand, collect, sue for or receive the payment of Excluded Payments due and payable to it.

 

Notwithstanding anything to the contrary contained herein (including this Section 6.01), the Mortgagee shall have the right, to the exclusion of the Mortgagors, to (A) subject to Sections 4.03(a) and 4.03(b), declare any Lease to be in default and (B) subject only to the provisions of Section 4.04(a), to exercise the remedies set forth in any Lease (other than in connection with Excluded Payments, any maintenance reserves or supplemental rent payable under a Lease and any security deposit payable under a Lease) at any time that both a Lease Event of Default thereunder and an Event of Default shall have occurred and be continuing.

 

ARTICLE VII

 

REPLACEMENT ENGINES

 

Section 7.01   Replacement Engines.  At any time that an Engine is to be replaced under any Lease, the Mortgagee (upon full compliance by the Lessee under such Lease with the requirements of such Lease and execution and delivery by the Lessor or the Borrower, as the case may be, under such Lease of an instrument in form and substance reasonably satisfactory to Mortgagee subjecting such Replacement Engine to the Lien hereof) shall at the request of any Lessor execute and deliver to such Lessor or Borrower, as the case may be, an appropriate instrument releasing such Engine from the Lien of this Security Agreement; provided however, if any Lease does not provide for the replacement of Engines thereunder, then such Lessor or Borrower, as the case may be, thereunder may, upon 15 days’ prior written notice to the Mortgagee, replace such Engine with a Replacement Engine subjected to the Lien hereof without the Mortgagee’s consent and may request that the Mortgagee execute and deliver to such Lessor or Borrower, as the case may be, an appropriate instrument releasing such Engine from the Lien of this Security Agreement so long as the following conditions are satisfied at the time of replacement:

 

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(a)          no Event of Default or Lease Event of Default shall have occurred and be

continuing;

 

(b)        such Replacement Engine shall be free and clear of all Liens (other than Lessor Liens arising pursuant to the Loan Operative Documents);

 

(c)        such Replacement Engine shall be of the same make and model as the Engine being replaced (or an engine of the same manufacturer of a comparable or an improved model and suitable for installation and use on the related Airframe with the other Engine installed thereon) and shall have a value, utility and remaining useful life at least equal to the Engine to be replaced thereby;

 

(d)        such Lessor or Borrower, as the case may be, shall have all Aircraft Documents required by any applicable Aviation Authority in respect of such Replacement Engine; and

 

(e)        such Lessor or Borrower, as the case may be, shall (i) execute and deliver a Security Agreement Supplement with respect to such Replacement Engine, (ii) cause such Replacement Engine to be subjected to the Local Law Mortgage (if any) in respect of the Airframe on which such Replacement Engine shall be installed and (iii) if applicable, cause the international interests of this Security Agreement as supplemented by such Security Agreement Supplement and such Local Law Mortgage (if any) to be registered on the International Registry.

 

ARTICLE VIII

 

SUPPLEMENTS AND AMENDMENTS TO THIS SECURITY

AGREEMENT AND OTHER DOCUMENTS

 

Section 8.01   Instructions of Majority; Limitations.

 

(a)        No Mortgagor shall (i) enter into any written amendments or supplements to any Lease or the other Lease Operative Documents in respect of such Lease or to any Residual Value Guarantee, (ii) permit the subleasing of the Aircraft by the Lessee (beyond that which is expressly permitted by the terms of the Lease) or (iii) deregister or reregister any Aircraft from the register maintained by the Aviation Authority in the State of Registration for such Aircraft, in each case without the prior written consent of the Mortgagee (such consent not to be unreasonably withheld or delayed). Provided that the conditions precedent to the Drawdown Date in respect of the 19003 Aircraft are satisfied or waived in accordance with Section 3.2 of the Credit Agreement, the Mortgagee hereby agrees to consent to that certain sublease of that certain Engine bearing manufacturer’s serial number 194975 dated October 25, 2018 between Air Nostrum Lineas Aereas del Mediterraneo SA, as sublessor, and Mediterranean Aviation Operations Company Limited, as sublessee.

 

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(b)        The Mortgagee agrees for the benefit of the Secured Parties that it shall not enter into any written amendment, waiver or modification of, supplement or consent to this Security Agreement, any Lease (other than as set forth in Section 7.01 hereof), the Credit Agreement or any other agreement included in the Mortgaged Property, unless such supplement, amendment, waiver, modification or consent is consented to in writing by all or such number of the Secured Parties as is specified in Section 8.02.

 

Section 8.02   Amendments.  At any time and from time to time, the Mortgagee (but only on the written request of the Required Participants) may enter into such written amendment of or supplement to any Lease or any other Granting Clause Document or any other Operative Document to which it is party, as may be specified in such request; provided that (A) no modification, supplement or waiver shall, unless by an instrument signed by all of the Participants or by the Agent acting with the consent of all of the Participants: (i) increase, or extend the term of any of the Commitments, or extend the time or waive any requirement for the reduction or termination of any of the Commitments, (ii) extend the date fixed for the payment of principal of or interest on any Loan or any fee under the Loan Operative Documents, (iii) reduce the amount of any payment of principal, (iv) reduce the rate at which interest is payable thereon or any fee is payable to the Secured Parties under the Loan Operative Documents, (v) alter the terms of this Section 8.02, (vi) alter the rights or obligations of the Borrowers to prepay any Loan, (vii) modify the definition of the term “Required Participants” or of the term, or modify in any other manner the number or percentage of the Participants required to make any determinations or waive any rights hereunder or to modify any provision hereof , (viii) modify the definitions of “Event of Default”, “Debt Rate”, “Loan Operative Documents”, "Liquidity Breakage", "Swap Breakage Loss" and "LIBOR Breakage", (ix) release any of the Mortgaged Property or Pledged Collateral (other than as expressly provided by the Loan Operative Documents) or (x) modify any Section of Article III of this Security Agreement and (B) no modification of any provision relating to the Swap Counterparty may be made without the prior written consent of the Swap Counterparty.

 

Section 8.03   Action Upon Instructions.  (a) Upon the written instructions at any time and from time to time of the Required Participants, the Mortgagee shall take such of the following actions as may be specified in such instructions: (i) exercise such election or option, or make such decision or determination, or give such notice, consent, waiver or approval or exercise such right, remedy or power or take such other action hereunder or under any other Operative Document or in respect of any part or all of the Mortgaged Property as shall be specified in such instructions and otherwise permitted pursuant to the Operative Documents; (ii) take such action with respect to, or to preserve or protect, the Mortgaged Property (including the discharge of Liens) as shall be specified in such instructions and as are consistent with this Security Agreement and the other Operative Documents; and (iii) take such other action in respect of the subject matter of this Security Agreement as is consistent with the terms of this Security Agreement and any Lease and the other Operative Documents.

 

(a)        If any Event of Default shall have occurred and be continuing, on request of the Required Participants, subject to Section 4.03, the Mortgagee shall exercise such remedies under any Lease as shall be specified in such request.

 

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[Security Agreement]

 

(b) Any Participant, with the consent of the Required Participants, may itself, or the Required Participants may direct the Security Trustee to, make the expenditures contemplated by Section 4.05 hereof. No Participant shall otherwise have the right to reimbursement from the Mortgaged Property.

 

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.01   Termination of Security Agreement; Release of Liens .  (a) Upon (or at any time after) payment in full of the Original Amount of and interest on and all other amounts due under all Loan Certificates and provided that (x) no Default or Event of Default shall have occurred and be continuing and (y) there shall then be no other Secured Obligations then due to the Security Trustee, the Participants, the Swap Counterparty and the Mortgagee hereunder or under the Credit Agreement, the Mortgagors shall direct the Mortgagee to execute and deliver to or as directed in writing by the Mortgagors an appropriate instrument releasing the Aircraft and the Engines from the Lien of this Security Agreement and releasing the Leases, and other Mortgaged Property from the assignment and pledge thereof hereunder and the Mortgagee shall execute and deliver such instrument as aforesaid and give written notice thereof to each Lessee; provided, that this Security Agreement shall earlier terminate and this Security Agreement shall be of no further force or effect upon any sale or other final disposition by the Mortgagee of all property constituting part of the Mortgaged Property and the final distribution by the Mortgagee of all monies or other property or proceeds constituting part of the Mortgaged Property in accordance with the terms hereof. Except as aforesaid otherwise provided, this Security Agreement and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof.

 

(b)        Upon (or at any time after) payment in full of the principal amount of and interest on and all other amounts due under all Loan Certificates related to a Mortgagor’s Aircraft and provided that no Default or Event of Default shall have occurred and be continuing, a Mortgagor or the Mortgagors (as applicable) may direct the Mortgagee to execute and deliver to or as directed in writing by such Mortgagor an appropriate instrument releasing such Aircraft and the Engines associated therewith from the Lien of this Security Agreement and releasing the relevant Lease or Leases (as applicable) in respect of such Aircraft, and other Mortgaged Property, to the extent related to such Aircraft, from the assignment and pledge thereof hereunder and the Mortgagee shall execute and deliver such instrument as aforesaid and give written notice thereof to the relevant Lessee.

 

Section 9.02   No Legal Title to Mortgaged Property in Participants.  No holder of a Loan Certificate shall have legal title to any part of the Mortgaged Property. No transfer, by operation of law or otherwise, of any Loan Certificate or other right, title and interest of any Security Trustee in and to the Mortgaged Property or hereunder shall operate to terminate this Security Agreement or entitle such holder or any successor or transferee of such holder to an accounting or to the transfer to it of any legal title to any part of the Mortgaged Property.

 

 40 

[Security Agreement]

 

Section 9.03   Sale of Aircraft by Mortgagee Is Binding.  Any sale or other conveyance of the Mortgaged Property, or any part thereof (including, without limitation, any part thereof or interest therein), by the Mortgagee made pursuant to the terms of this Security Agreement and the other Operative Documents shall bind the Participants and shall be effective to transfer or convey all right, title and interest of the Mortgagee, each Mortgagor and such holders in and to such Mortgaged Property or part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Mortgagee.

 

Section 9.04   Security Agreement for Benefit of Mortgagors, Mortgagee and Holders of Loan Certificates.  Except as expressly provided in Section 9.05 hereof, nothing in this Security Agreement, whether express or implied, shall be construed to give any person other than the Mortgagors, the Mortgagee, the Swap Counterparty and the Participants, any legal or equitable right, remedy or claim under or in respect of this Security Agreement.

 

Section 9.05   No Action Contrary to Lessee’s Rights Under any Lease.  Notwithstanding any of the provisions of this Security Agreement to the contrary, and so long as no Lease Event of Default shall have occurred and be continuing under any Lease or unless compelled to do so by any applicable law, neither the Mortgagee nor any Mortgagor will take any action contrary to any Lessee’s rights under any Lease, including the right to possession and use of, and the quiet enjoyment of, the Aircraft subject to such Lease. Each of the Mortgagors and the Mortgagee agree that each Lessee is an intended third party beneficiary of this Section 9.05.

 

Section 9.06   Notices; Payments.

 

(a)        Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Security Agreement to be made, given, furnished or filed shall be in writing, and delivered as specified in Section 7.1 of the Credit Agreement.

 

(b)        All payments to be made under this Security Agreement shall be at the accounts of the Mortgagee or the Borrowers as set forth in Schedule I to the Credit Agreement.

 

Section 9.07   Severability.  Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 9.08   No Oral Modification or Continuing Waivers.  No term or provision of this Security Agreement or the Loan Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms hereof or of any Loan Certificate shall be effective only in the specific instance and for the specific purpose given.

 

Section 9.09   Successors and Assigns .  All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the permitted successors and assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Security Trustee shall bind the successors and assigns of such Security Trustee.

 

 41 

[Security Agreement]

 

Section 9.10   Headings.  The headings of the various Articles and sections herein and in the table of contents hereto are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

 

Section 9.11   Governing Law; Counterpart Form.  THIS SECURITY AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTION 5-1401 AND SECTION 5 -1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW. THIS SECURITY AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK. This Security Agreement may be executed by the parties hereto in separate counterparts (or upon separate signature pages bound together into one or more counterparts), each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

 

Section 9.12   Concerning Prospective International Interests.  To the extent a prospective international interest or a prospective assignment of associated rights, if any, is created or vested as contemplated hereby, the parties hereto agree that such prospective international interest or prospective assignment of associated rights, if any, will become an international interest or an assignment of associated rights, as the case may be, upon the execution and delivery by all parties of this Security Agreement and the Security Agreement Supplement.

 

Section 9.13   Contractual Bail-In.  Section 7.15 of the Credit Agreement is hereby incorporated by reference.

 

[Remainder of this page intentionally left blank.]

 

 42 

[Security Agreement]

 

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed by their respective officers or attorneys in fact thereof duly authorized as of the day and year first above written.

 

  WILMINGTON TRUST COMPANY, as
  Security Trustee,
  as Mortgagee

 

  By: /s/ Robert P. Hines Jr.
  Name: Robert P. Hines Jr.
  Title: Vice President

 

 

[Security Agreement]

 

  ACY SN 19002 LIMITED, as a Mortgagor

 

  By: /s/ Barry Mills
  Name: Barry Mills
  Title: Director

 

  ACY SN 19003 LIMITED, as a Mortgagor

 

  By: /s/ Barry Mills
  Name: Barry Mills
  Title: Director

 

 

[Security Agreement]

 

  ACY E-175 LLC, as a Mortgagor
   
  By: AeroCentury Corp., its Manager

 

  By: /s/ Toni M. Perazzo
  Name: Toni Perazzo
  Title: SVP Finance

 

  ACY SN 15129 LLC, as a Mortgagor
   
  By: AeroCentury Corp., its Manager

 

  By: /s/ Toni M. Perazzo
  Name: Toni Perazzo
  Title: SVP Finance

 

 

[Security Agreement]

 

EXHIBIT A

 

SECURITY AGREEMENT SUPPLEMENT AND JOINDER AGREEMENT (MSN [_____]), dated ________, _____ (herein called the “Security Agreement Supplement”) of [_______] (the “Mortgagor”), to WILMINGTON TRUST COMPANY, as Security Trustee, as Mortgagee under the Security Agreement referred to below (“Mortgagee”).

 

WHEREAS, the Security Agreement, dated as of February __, 2019 (the “Security Agreement”; capitalized terms used herein without definition shall have the meanings specified therein), between, inter alios, the Mortgagor and the Mortgagee, provides for the execution and delivery of a supplement thereto substantially in the form hereof, which shall particularly describe the Aircraft, and shall specifically mortgage such Aircraft to the Mortgagee.

 

NOW, THEREFORE, this Security Agreement Supplement Witnesseth, that to secure (i) the prompt payment of the principal, Liquidity Breakage, LIBOR Breakage, Swap Breakage Loss, interest on, and all other amounts due with respect to, all Loan Certificates from time to time outstanding hereunder according to their tenor and effect and to secure the performance and observance by the Mortgagor of all the agreements, covenants and provisions contained herein and in the Credit Agreement, the Loan Certificates and the other Loan Operative Documents, for the benefit of the Security Trustee, the Agent, the Swap Counterparty and the Participants and the prompt payment of all amounts from time to time owing under the Credit Agreement and the other Loan Operative Documents to the Security Trustee, the Agent, the Swap Counterparty and the Participants by the Mortgagor, and (ii) each of the Swap Obligations, and for the uses and purposes and subject to the terms and provisions hereof, and in consideration of the premises and of the covenants herein contained, the acceptance of the Loan Certificates by the holders thereof, and for other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, the Mortgagor does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Mortgagee, its successors and assigns, for the security and benefit of the Participants and the Swap Counterparty, a security interest in and mortgage lien on all right, title and interest of the Mortgagor in, to and under the following described property:

 

AIRFRAME

 

One Airframe Identified as follows:

 

        Registration   Manufacturer’s
Manufacturer   Model   Mark   Serial Number
             
             
             

 

together with all Parts of whatever nature, which are from time to time incorporated or installed in or attached to or removed from said aircraft.

 

Exhibit A

Page 1 

[Security Agreement]

 

AIRCRAFT ENGINES

 

Two aircraft engines, each of which engines having at least 1750 lbs. of thrust or its equivalent of such horsepower, identified as follows:

 

        Manufacturer’s
Manufacturer   Model   Serial Number
         
         
         

 

together with all Parts of whatever nature, which are from time to time incorporated or installed in or attached to or removed from such engines.

 

For purposes of the International Registry, manufacturer and model references for (i) the Airframe shall be “[______]” and “[______]”, respectively, and (ii) each Engine shall be “[______]” and “[______]”, respectively, which constitute the airframe manufacturer’s and the engine manufacturer’s name and respective generic model designations for such Airframe and Engines (as required by the International Registry regulations).

 

Together with all Aircraft Documents maintained in respect of the Aircraft.

 

As further security for the obligations referred to above and secured by the Security Agreement and hereby, the Mortgagor has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Mortgagee, its successors and assigns, for the security and benefit of the Participants, all of the right, title and interest of the Mortgagor in, to and under the Lease, the Lease Operative Documents and any Residual Value Guarantee, if applicable, with respect to the Aircraft (as more particularly described in Annex A hereto).

 

Notwithstanding any provision hereof, no Excluded Payments and no maintenance reserves, security deposits or supplemental rent payable under a Lease shall constitute security for any of the aforementioned obligations.

 

TO HAVE AND TO HOLD all and singular the aforesaid property unto the Mortgagee, its successors and assigns, in trust for the equal and proportionate benefit and security of the Security Trustee and the Participants, without any preference, distinction or priority of any one Loan Certificate over any other Loan Certificate by reason of priority of time of issue, sale, negotiation, date of maturity thereof or otherwise for any reason whatsoever, and for the uses and purposes and in each case subject to the terms and provisions set forth in the Security Agreement.

 

[The location of the Mortgagor for purposes of Article 9 of the New York Uniform Commercial Code is [________]].

 

This Security Agreement Supplement shall be construed as supplemental to the Security Agreement and shall form a part of the Security Agreement and the Security Agreement is hereby incorporated by reference herein and is hereby ratified, approved and confirmed.

 

Exhibit A

Page 2 

[Security Agreement]

 

This Security Agreement Supplement shall in all respects be governed by, and construed in accordance with, the internal laws of the State of New York without reference to principles of conflicts of law other than Section 5-1401 and Section 5-1402 of the New York General Obligations Law. This Security Agreement Supplement is being delivered in the State of New York.

 

AND, FURTHER, the Mortgagor hereby acknowledges that the Aircraft referred to in this Security Agreement Supplement is included in the property of the Mortgagor covered by all the terms and conditions of the Security Agreement.

 

AND, FURTHER, the Mortgagor hereby becomes a party to the Security Agreement, and shall be, for all purposes, a “Mortgagor” thereunder as if it were an original party thereto. The Mortgagor hereby (i) represents that the representations and warranties set forth in Section 4.1 of the Credit Agreement are true and correct with respect to it as though made on the date of this Security Agreement Supplement, except to the extent that such representations and warranties relate to a date prior to this Security Agreement Supplement and (ii) agrees to perform the covenants set forth in Section 5.1 of the Credit Agreement, in each case as if Sections 4.1 and 5.1 of the Credit Agreement were incorporated in this Security Agreement Supplement mutatis mutandis.

 

AND, FURTHER, the Mortgagor hereby acknowledges and accepts, and shall be bound by the provisions set forth in Section 7.15 of the Credit Agreement as if Section 7.15 were incorporated in this Security Agreement Supplement.

 

*      *      *

 

Exhibit A

Page 3 

[Security Agreement]

 

IN WITNESS WHEREOF , the Mortgagor has caused this Security Agreement Supplement and Joinder Agreement (MSN [_____]) to be duly executed by one of its officers or attorneys in fact thereunto duly authorized, on the day and year first above written.

 

  [_______], as Mortgagor

 

  By:  
    Name:
    Title:

 

Exhibit A

Page 4 

[Security Agreement]

 

ANNEX A

 

Lease:

 

Lease Expiration Date:

 

Lessee:

 

Lease Operative Documents:

 

Lessee Parties:

 

Exhibit A

Page 5 

[Security Agreement]

 

EXHIBIT B

 

THIS LOAN CERTIFICATE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS LOAN CERTIFICATE MAY NOT BE SOLD, UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 

[________________], AS BORROWER

 

LOAN CERTIFICATE

ISSUED IN CONNECTION WITH THE
[________] MODEL [________] AIRCRAFT BEARING
[________] REGISTRATION MARK [________]
AND MANUFACTURER’S SERIAL NUMBER [________]

 

No. __ Date: _______ __, 20__

 

$________

 

[______________] (herein called the “Borrower”), hereby promises to pay to _______________, or the registered assignee thereof, the principal sum of $__________ (the “Original Amount”), together with interest on the amount of the Original Amount remaining unpaid from time to time from the date hereof until paid in full at the Debt Rate (calculated on the basis of a year of 360 days and actual number of days elapsed). The Original Amount of this Loan Certificate shall be payable in monthly installments on the dates and in the corresponding amounts set forth in Annex A hereto. Accrued but unpaid interest shall be due and payable on each Payment Date in the amounts set forth in Annex A hereto. Notwithstanding the foregoing, the final payment due on the Maturity Date shall be in an amount sufficient to discharge in full the unpaid Original Amount and all accrued and unpaid interest on, and any other amounts due under, this Loan Certificate. Notwithstanding anything to the contrary contained herein, if any date on which a payment under this Loan Certificate becomes due and payable is not a Business Day then such payment shall not be made on such scheduled date but shall be made on the immediately succeeding Business Day; provided that, if such succeeding Business Day would fall in the next calendar month, then such payment shall be made on the immediately preceding Business Day.

 

For purposes hereof, the term “Security Agreement” means the Security Agreement, dated as of February __, 2019, between, inter alios , the Borrower and Wilmington Trust Company, as Security Trustee (the “Mortgagee”), as the same may be amended or supplemented from time to time. All other capitalized terms used in this Loan Certificate and not defined herein shall have the respective meanings assigned in the Security Agreement.

 

This Loan Certificate shall bear interest, payable on demand, at the Past Due Rate (calculated on the basis of a year of 360 days and actual number of days elapsed) on any overdue portion of the Original Amount, and (to the extent permitted by applicable law) on overdue interest and any other amounts payable hereunder which are overdue, in each case for the period the same is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise).

 

EXHIBIT B

Page 1 

[Security Agreement]

 

The Mortgagee shall maintain a Register for the purpose of registering transfers and exchanges of Loan Certificates or at the office of any successor in the manner provided in Section 2.07 of the Security Agreement.

 

The Original Amount and interest and other amounts due hereunder shall be payable in Dollars in immediately available funds at the Mortgagee’s Office, or as otherwise provided in the Security Agreement. Each such payment shall be made on the date such payment is due and without any presentment or surrender of this Loan Certificate.

 

The holder hereof, by its acceptance of this Loan Certificate, agrees that each payment received by it hereunder shall be applied as provided in Section 2.05 of the Security Agreement.

 

This Loan Certificate is one of the Loan Certificates referred to in the Security Agreement which have been or are to be issued by the Borrower pursuant to the terms of the Security Agreement. The Mortgaged Property is held by the Mortgagee as security, in part, for the Loan Certificates. The provisions of this Loan Certificate are subject to the Security Agreement. Reference is hereby made to the Security Agreement for a complete statement of the rights and obligations of the holder of, and the nature and extent of the security for, this Loan Certificate and the rights and obligations of the holders of, and the nature and extent of the security for, any other Loan Certificates executed and delivered under the Security Agreement, and to all of which terms and conditions in the Security Agreement each holder hereof agrees by its acceptance of this Loan Certificate.

 

As provided in the Security Agreement and subject to certain limitations therein set forth, this Loan Certificate is exchangeable for a like aggregate Original Amount of Loan Certificates of different authorized denominations, as requested by the holder surrendering the same; provided that in connection with any such exchange, the Security Trustee shall indicate on the new Loan Certificate the Payment Date through which payments on the Original Amounts have been made.

 

Prior to due presentment for registration of transfer of this Loan Certificate, the Borrower and the Mortgagee shall treat the person in whose name this Loan Certificate is registered as the owner hereof for all purposes, whether or not this Loan Certificate be overdue, and none of the Borrower or the Mortgagee shall be affected by notice to the contrary.

 

This Loan Certificate is subject to prepayment as provided in Sections 2.10 and 2.11 of the Security Agreement but not otherwise and to acceleration by the Mortgagee as provided in Section 4.04 of the Security Agreement.

 

The holder hereof, by its acceptance of this Loan Certificate, agrees to be bound by the terms of the Security Agreement and the Credit Agreement.

 

THIS LOAN CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

*      *      *

 

EXHIBIT B

Page 2 

[Security Agreement]

 

ANNEX A

TO

LOAN CERTIFICATE

 

Payment Date   Original Amount To Be Paid
     
     
     

 

EXHIBIT B

Page 3 

 

(Back To Top)

Section 4: EX-10.3 (EXHIBIT 10.3)

 

Exhibit 10.3 

 

ISDA

International Swaps and Derivatives Association, Inc.

 

2002 MASTER AGREEMENT

 

dated as of ___________________________________________

 

  and  

 

have entered and/or anticipate entering into one or more transactions (each a “Transaction”) that are or will be governed by this 2002 Master Agreement, which includes the schedule (the “Schedule”), and the documents and other confirming evidence (each a “Confirmation”) exchanged between the parties or otherwise effective for the purpose of confirming or evidencing those Transactions. This 2002 Master Agreement and the Schedule are together referred to as this “Master Agreement”.

 

Accordingly, the parties agree as follows:―

 

1.           Interpretation

 

(a)          Definitions. The terms defined in Section 14 and elsewhere in this Master Agreement will have the meanings therein specified for the purpose of this Master Agreement.

 

(b)          Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement, such Confirmation will prevail for the purpose of the relevant Transaction.

 

(c)          Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this “Agreement”), and the parties would not otherwise enter into any Transactions.

 

2.           Obligations

 

(a)          General Conditions.

 

(i)          Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement.

 

(ii)         Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement.

 

Copyright © 2002 by International Swaps and Derivatives Association, Inc.

 

 

 

(iii)        Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other condition specified in this Agreement to be a condition precedent for the purpose of this Section 2(a)(iii).

 

(b)          Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the Scheduled Settlement Date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change.

 

(c)          Netting of Payments. If on any date amounts would otherwise be payable:―

 

(i)          in the same currency; and

 

(ii)         in respect of the same Transaction,

 

by each party to the other, then, on such date, each party’s obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by which the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount.

 

The parties may elect in respect of two or more Transactions that a net amount and payment obligation will be determined in respect of all amounts payable on the same date in the same currency in respect of those Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or any Confirmation by specifying that “Multiple Transaction Payment Netting” applies to the Transactions identified as being subject to the election (in which case clause (ii) above will not apply to such Transactions). If Multiple Transaction Payment Netting is applicable to Transactions, it will apply to those Transactions with effect from the starting date specified in the Schedule or such Confirmation, or, if a starting date is not specified in the Schedule or such Confirmation, the starting date otherwise agreed by the parties in writing. This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries.

 

(d)          Deduction or Withholding for Tax.

 

(i)          Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party (“X”) will:―

 

(1)         promptly notify the other party (“Y”) of such requirement;

 

(2)         pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y;

 

(3)         promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and

 

 2ISDA® 2002

 

(4)         if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:―

 

(A)         the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or

 

(B)         the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, after a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law.

 

(ii)         Liability. If:―

 

(1)         X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4);

 

(2)         X does not so deduct or withhold; and

 

(3)         a liability resulting from such Tax is assessed directly against X,

 

then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).

 

3.           Representations

 

Each party makes the representations contained in Sections 3(a), 3(b), 3(c), 3(d), 3(e) and 3(f) and, if specified in the Schedule as applying, 3(g) to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement). If any “Additional Representation” is specified in the Schedule or any Confirmation as applying, the party or parties specified for such Additional Representation will make and, if applicable, be deemed to repeat such Additional Representation at the time or times specified for such Additional Representation.

 

(a)          Basic Representations.

 

(i)          Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing;

 

(ii)         Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance;

 

 3ISDA® 2002

 

(iii)        No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets;

 

(iv)        Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and

 

(v)         Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

 

(b)          Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party.

 

(c)          Absence of Litigation. There is not pending or, to its knowledge, threatened against it, any of its Credit Support Providers or any of its applicable Specified Entities any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document.

 

(d)          Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect.

 

(e)          Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true.

 

(f)          Payee Tax Representations. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true.

 

(g)          No Agency. It is entering into this Agreement, including each Transaction, as principal and not as agent of any person or entity.

 

4.           Agreements

 

Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:―

 

(a)          Furnish Specified Information. It will deliver to the other party or, in certain cases under clause (iii) below, to such government or taxing authority as the other party reasonably directs:―

 

(i)          any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation;

 

(ii)         any other documents specified in the Schedule or any Confirmation; and

 

 4ISDA® 2002

 

(iii)        upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification,

 

in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable.

 

(b)          Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future.

 

(c)          Comply With Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party.

 

(d)          Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure.

 

(e)          Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organised, managed and controlled or considered to have its seat, or where an Office through which it is acting for the purpose of this Agreement is located (“Stamp Tax Jurisdiction”), and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party’s execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party.

 

5.           Events of Default and Termination Events

 

(a)          Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes (subject to Sections 5(c) and 6(e)(iv)) an event of default (an “Event of Default”) with respect to such party:―

 

(i)          Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 9(h)(i)(2) or (4) required to be made by it if such failure is not remedied on or before the first Local Business Day in the case of any such payment or the first Local Delivery Day in the case of any such delivery after, in each case, notice of such failure is given to the party;

 

(ii)         Breach of Agreement; Repudiation of Agreement.

 

(1)         Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 9(h)(i)(2) or (4) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied within 30 days after notice of such failure is given to the party; or

 

(2)         the party disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, this Master Agreement, any Confirmation executed and delivered by that party or any Transaction evidenced by such a Confirmation (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);

 

 5ISDA® 2002

 

(iii)        Credit Support Default.

 

(1)         Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed;

 

(2)         the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document, or any security interest granted by such party or such Credit Support Provider to the other party pursuant to any such Credit Support Document, to be in full force and effect for the purpose of this Agreement (in each case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or

 

(3)         the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);

 

(iv)        Misrepresentation. A representation (other than a representation under Section 3(e) or 3(f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated;

 

(v)         Default Under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:―

 

(1)         defaults (other than by failing to make a delivery) under a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction;

 

(2)         defaults, after giving effect to any applicable notice requirement or grace period, in making any payment due on the last payment or exchange date of, or any payment on early termination of, a Specified Transaction (or, if there is no applicable notice requirement or grace period, such default continues for at least one Local Business Day);

 

(3)         defaults in making any delivery due under (including any delivery due on the last delivery or exchange date of) a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations under, or an early termination of, all transactions outstanding under the documentation applicable to that Specified Transaction; or

 

(4)         disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, a Specified Transaction or any credit support arrangement relating to a Specified Transaction that is, in either case, confirmed or evidenced by a document or other confirming evidence executed and delivered by that party, Credit Support Provider or Specified Entity (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);

 

 6ISDA® 2002

 

(vi)        Cross-Default. If “Cross-Default” is specified in the Schedule as applying to the party, the occurrence or existence of:―

 

(1)         a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) where the aggregate principal amount of such agreements or instruments, either alone or together with the amount, if any, referred to in clause (2) below, is not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments before it would otherwise have been due and payable; or

 

(2)         a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments under such agreements or instruments on the due date for payment (after giving effect to any applicable notice requirement or grace period) in an aggregate amount, either alone or together with the amount, if any, referred to in clause (1) above, of not less than the applicable Threshold Amount;

 

(vii)       Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:―

 

(1)         is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4)(A) institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official, or (B) has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and such proceeding or petition is instituted or presented by a person or entity not described in clause (A) above and either (I) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (II) is not dismissed, discharged, stayed or restrained in each case within 15 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 15 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) above (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or

 

 7ISDA® 2002

 

(viii)      Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, or reorganises, reincorporates or reconstitutes into or as, another entity and, at the time of such consolidation, amalgamation, merger, transfer, reorganisation, reincorporation or reconstitution:―

 

(1)         the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party; or

 

(2)         the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement.

 

(b)         Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes (subject to Section 5(c)) an Illegality if the event is specified in clause (i) below, a Force Majeure Event if the event is specified in clause (ii) below, a Tax Event if the event is specified in clause (iii) below, a Tax Event Upon Merger if the event is specified in clause (iv) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to clause (v) below or an Additional Termination Event if the event is specified pursuant to clause (vi) below:―

 

(i)          Illegality. After giving effect to any applicable provision, disruption fallback or remedy specified in, or pursuant to, the relevant Confirmation or elsewhere in this Agreement, due to an event or circumstance (other than any action taken by a party or, if applicable, any Credit Support Provider of such party) occurring after a Transaction is entered into, it becomes unlawful under any applicable law (including without limitation the laws of any country in which payment, delivery or compliance is required by either party or any Credit Support Provider, as the case may be), on any day, or it would be unlawful if the relevant payment, delivery or compliance were required on that day (in each case, other than as a result of a breach by the party of Section 4(b)):―

 

(1)         for the Office through which such party (which will be the Affected Party) makes and receives payments or deliveries with respect to such Transaction to perform any absolute or contingent obligation to make a payment or delivery in respect of such Transaction, to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or

 

(2)         for such party or any Credit Support Provider of such party (which will be the Affected Party) to perform any absolute or contingent obligation to make a payment or delivery which such party or Credit Support Provider has under any Credit Support Document relating to such Transaction, to receive a payment or delivery under such Credit Support Document or to comply with any other material provision of such Credit Support Document;

 

(ii)         Force Majeure Event. After giving effect to any applicable provision, disruption fallback or remedy specified in, or pursuant to, the relevant Confirmation or elsewhere in this Agreement, by reason of force majeure or act of state occurring after a Transaction is entered into, on any day:―

 

(1)         the Office through which such party (which will be the Affected Party) makes and receives payments or deliveries with respect to such Transaction is prevented from performing any absolute or contingent obligation to make a payment or delivery in respect of such Transaction, from receiving a payment or delivery in respect of such Transaction or from complying with any other material provision of this Agreement relating to such Transaction (or would be so prevented if such payment, delivery or compliance were required on that day), or it becomes impossible or impracticable for such Office so to perform, receive or comply (or it would be impossible or impracticable for such Office so to perform, receive or comply if such payment, delivery or compliance were required on that day); or

 

 8ISDA® 2002

 

(2)         such party or any Credit Support Provider of such party (which will be the Affected Party) is prevented from performing any absolute or contingent obligation to make a payment or delivery which such party or Credit Support Provider has under any Credit Support Document relating to such Transaction, from receiving a payment or delivery under such Credit Support Document or from complying with any other material provision of such Credit Support Document (or would be so prevented if such payment, delivery or compliance were required on that day), or it becomes impossible or impracticable for such party or Credit Support Provider so to perform, receive or comply (or it would be impossible or impracticable for such party or Credit Support Provider so to perform, receive or comply if such payment, delivery or compliance were required on that day),

 

so long as the force majeure or act of state is beyond the control of such Office, such party or such Credit Support Provider, as appropriate, and such Office, party or Credit Support Provider could not, after using all reasonable efforts (which will not require such party or Credit Support Provider to incur a loss, other than immaterial, incidental expenses), overcome such prevention, impossibility or impracticability;

 

(iii)        Tax Event. Due to (1) any action taken by a taxing authority, or brought in a court of competent jurisdiction, after a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (2) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Settlement Date (A) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 9(h)) or (B) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 9(h)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B));

 

(iv)        Tax Event Upon Merger. The party (the “Burdened Party”) on the next succeeding Scheduled Settlement Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 9(h)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets (or any substantial part of the assets comprising the business conducted by it as of the date of this Master Agreement) to, or reorganising, reincorporating or reconstituting into or as, another entity (which will be the Affected Party) where such action does not constitute a Merger Without Assumption;

 

(v)         Credit Event Upon Merger. If “Credit Event Upon Merger” is specified in the Schedule as applying to the party, a Designated Event (as defined below) occurs with respect to such party, any Credit Support Provider of such party or any applicable Specified Entity of such party (in each case, “X”) and such Designated Event does not constitute a Merger Without Assumption, and the creditworthiness of X or, if applicable, the successor, surviving or transferee entity of X, after taking into account any applicable Credit Support Document, is materially weaker immediately after the occurrence of such Designated Event than that of X immediately prior to the occurrence of such Designated Event (and, in any such event, such party or its successor, surviving or transferee entity, as appropriate, will be the Affected Party). A “Designated Event” with respect to X means that:―

 

(1)         X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets (or any substantial part of the assets comprising the business conducted by X as of the date of this Master Agreement) to, or reorganises, reincorporates or reconstitutes into or as, another entity;

 

 9ISDA® 2002

 

(2)         any person, related group of persons or entity acquires directly or indirectly the beneficial ownership of (A) equity securities having the power to elect a majority of the board of directors (or its equivalent) of X or (B) any other ownership interest enabling it to exercise control of X; or

 

(3)         X effects any substantial change in its capital structure by means of the issuance, incurrence or guarantee of debt or the issuance of (A) preferred stock or other securities convertible into or exchangeable for debt or preferred stock or (B) in the case of entities other than corporations, any other form of ownership interest; or

 

(vi)        Additional Termination Event. If any “Additional Termination Event” is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties will be as specified for such Additional Termination Event in the Schedule or such Confirmation).

 

(c)          Hierarchy of Events.

 

(i)          An event or circumstance that constitutes or gives rise to an Illegality or a Force Majeure Event will not, for so long as that is the case, also constitute or give rise to an Event of Default under Section 5(a)(i), 5(a)(ii)(1) or 5(a)(iii)(1) insofar as such event or circumstance relates to the failure to make any payment or delivery or a failure to comply with any other material provision of this Agreement or a Credit Support Document, as the case may be.

 

(ii)         Except in circumstances contemplated by clause (i) above, if an event or circumstance which would otherwise constitute or give rise to an Illegality or a Force Majeure Event also constitutes an Event of Default or any other Termination Event, it will be treated as an Event of Default or such other Termination Event, as the case may be, and will not constitute or give rise to an Illegality or a Force Majeure Event.

 

(iii)        If an event or circumstance which would otherwise constitute or give rise to a Force Majeure Event also constitutes an Illegality, it will be treated as an Illegality, except as described in clause (ii) above, and not a Force Majeure Event.

 

(d)          Deferral of Payments and Deliveries During Waiting Period. If an Illegality or a Force Majeure Event has occurred and is continuing with respect to a Transaction, each payment or delivery which would otherwise be required to be made under that Transaction will be deferred to, and will not be due until:―

 

(i)          the first Local Business Day or, in the case of a delivery, the first Local Delivery Day (or the first day that would have been a Local Business Day or Local Delivery Day, as appropriate, but for the occurrence of the event or circumstance constituting or giving rise to that Illegality or Force Majeure Event) following the end of any applicable Waiting Period in respect of that Illegality or Force Majeure Event, as the case may be; or

 

(ii)         if earlier, the date on which the event or circumstance constituting or giving rise to that Illegality or Force Majeure Event ceases to exist or, if such date is not a Local Business Day or, in the case of a delivery, a Local Delivery Day, the first following day that is a Local Business Day or Local Delivery Day, as appropriate.

 

 10ISDA® 2002

 

(e)          Inability of Head or Home Office to Perform Obligations of Branch. If (i) an Illegality or a Force Majeure Event occurs under Section 5(b)(i)(1) or 5(b)(ii)(1) and the relevant Office is not the Affected Party’s head or home office, (ii) Section 10(a) applies, (iii) the other party seeks performance of the relevant obligation or compliance with the relevant provision by the Affected Party’s head or home office and (iv) the Affected Party’s head or home office fails so to perform or comply due to the occurrence of an event or circumstance which would, if that head or home office were the Office through which the Affected Party makes and receives payments and deliveries with respect to the relevant Transaction, constitute or give rise to an Illegality or a Force Majeure Event, and such failure would otherwise constitute an Event of Default under Section 5(a)(i)or 5(