Form of Loan Agreement between AirCo 1, LLC and Minnesota Bank & Trust and Park State Bank dated January 18, 2019
Dated as of January 18, 2019
AIRCO 1, LLC,
as the Borrower
MINNESOTA BANK & TRUST AND PARK STATE BANK
as the “Lenders”
TABLE OF CONTENTS
Conditions Precedent to All Credit Extensions
Representations and Warranties
Events of Default
Accounting Terms and Calculations
Collateral Audit; Appraisals
This LOAN AGREEMENT dated as of January 18, 2019 (this “Agreement”), is entered into by and between AIRCO 1, LLC, a Delaware limited liability company (the “Borrower”), PARK STATE BANK, a Minnesota state banking corporation (“PSB”), MINNESOTA BANK & TRUST, a Minnesota state banking corporation (“MBT”; and together with PSB and their respective successors and assigns being sometimes collectively referred herein as the “Lenders” and individually as a “Lender”).
A. MBT has previously extended a line of credit to Borrower (the “MBT Line of Credit”) pursuant to which MBT, has agreed to make term loans (the “MBT Airframe Acquisition Loan(s)”) for the purpose of acquiring used airframes to be disassembled and sold as parts by the Borrower pursuant to the terms and conditions of that certain Second Loan Agreement dated as of February 22, 2018, by and between the Borrower and MBT (the “MBT Loan Agreement”).
B. Borrower now desires to obtain a term loan in the amount of $2,500,000 (the “Loan”) from Lenders the proceeds of which will be used to finance the purchase of a decommissioned Boeing 737 airframe to be disassembled and sold as parts by the Borrower.
C. Lenders are willing, upon the terms and conditions contained in this Agreement and related loan documents, to severally make the Loan to the Borrower.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Documents; etc.
The Borrower has delivered, or will deliver, to the Lenders before the Loan is made, the following documents (this Agreement together with each of the following defined documents and each other instrument, document, guaranty, mortgage, deed of trust, chattel mortgage, pledge, consent, assignment, contract, security agreement, lease, financing statement, patent, trademark or copyright registration, subordination agreement, trust account agreement, hedge agreement, or other agreement executed and delivered by Borrower with respect to this Agreement or to create or perfect any Lien in any collateral securing the payment of the Loans (collectively the “Collateral”) (in each case as originally executed and as amended, modified or supplemented from time to time) being sometimes hereinafter referred to collectively as the “Loan Documents” and individually as a “Loan Document”) and other items, all containing or to contain provisions acceptable to the Lenders and their respective counsel:
(a) (i) a promissory note dated as of even date herewith in the original principal amount of up to TWO MILLION ONE HUNDRED THOUSAND AND NO/100THS DOLLARS ($2,100,000) (such promissory note together with each renewal, replacement or substitute note therefor being the “PSB Note”) in the form attached hereto as Exhibit A-1, duly executed by the Borrower; and (ii) a promissory note dated as of even date herewith in the original principal amount of up to FOUR HUNDRED THOUSAND AND NO/100THS DOLLARS ($400,000) (such promissory note together with each renewal, replacement or substitute note therefor being the “MBT Note”; and together with the PSB Note being sometimes collectively referred to herein as the “Notes” and individually as a “Note”) in the form provided by the Lender, duly executed by the Borrower;
(b) a security agreement (as amended, modified, replaced or restated from time to time, the “Security Agreement”) in the form provided by the Collateral Agent and duly executed by the Borrower granting to the Collateral Agent for the benefit of itself and for the ratable benefit of the Lenders a Lien in the Collateral described therein to secure repayment of the Loan and all other Obligations together with Uniform Commercial Code Standard Form UCC Financing Statements and all such other documents as may be deemed necessary by Collateral Agent to perfect the Collateral Agent’s Liens in such Collateral, and UCC and other searches from the filing offices in all states and the International Registry as may be required by the Collateral Agent which reflect that no other Person holds a prior Lien in any such Collateral except as permitted by Section 8(a);
(c) a certificate by an officer of the Borrower certifying the names of the officers of the Borrower authorized to sign the Loan Documents to which the Borrower is a party on behalf of the Borrower together with: (i) a sample of the true signatures of such officers; (ii) resolutions of the sole member of the Borrower authorizing the execution, delivery and performance of the Loan Documents to which the Borrower is a party; and (iii) copies of the Borrower’s Certificate of Formation, together with all amendments thereto, certified by the appropriate governmental official of the jurisdiction of its organization as of a date acceptable to the Lender, and the limited liability company agreement of the Borrower together with all amendments thereto;
(d) evidence of Good Standing for the Borrower of recent date issued by the Secretaries of State of (i) the State of Delaware; and (ii) the State of Arizona;
(e) evidence of insurance required by any Loan Document;
(f) a non-refundable fee in the amount of $31,500, payable to PSB in immediately available funds
(g) a non-refundable fee in the amount of $6,000, payable to MBT in immediately available funds;
(h) evidence of insurance required by any Loan Document;
(i) a closing certificate, in the form provided by Lender, duly executed by a manager or officer of the Borrower;
(j) a true, correct and complete copy of the Airframe Sale and Purchase Agreement, dated on or about January 18, 2019, by and between Borrower and Contrail, together with true, correct and complete copies of each of the other documents described on Schedule 1(j) attached hereto and incorporated herein by reference (the “Airframe Purchase Agreement”), together with the other documents listed on Schedule 1(j) being sometimes hereinafter referred to as an “Airframe Transaction Document” and collectively as the “Airframe Transaction Documents”) pursuant to which the Borrower is acquiring (the “Airframe Acquisition”) from Contrail a used Boeing 737-700 Airframe bearing MSN 30741 and related parts and documents (collectively, the “Acquired Assets”);
(k) a Collateral Assignment of Purchase Agreement document pursuant to which Borrower collaterally assigns its right, title and interest to the Airframe Purchase Agreement and the other Airframe Transaction Documents to the Collateral Agent, in the form provided by the Lender, duly executed by Borrower;
(l) a true, correct and complete copy of the Aircraft Disassembly Agreement, dated on or about January 2, 2019, by and between Borrower and Jet Yard (the “Disassembly Agreement”), pursuant to which Jet Yard agrees to disassemble the Airframe into parts and prepare the constituent parts for sale;
(m) a true, correct and complete copy of that certain Consignment Agreement dated on or about January 18, 2019 by and between Borrower and Airco (the “Consignment Agreement”), pursuant to which Airco agrees to sell the disassembled Airframe parts on behalf of Borrower;
(n) separate Bailee Agreement documents, each in the form provided by Collateral Agent, duly executed by Jet Yard and Airco, regarding Collateral that may from time to time be located at each such Persons’ facilities;
(o) a statement summarizing the flow of funds required to consummate the Airframe Acquisition, acceptable to Lenders, in their sole discretion;
(p) evidence satisfactory to the Lenders that: (i) all conditions precedent to the consummation of the Airframe Acquisition have been satisfied or waived, including, without limitation, evidence that all necessary regulatory approvals to the consummation of the Airframe Acquisition have been obtained; (iii) no litigation exists relating to the Airframe Acquisition; (iv) all of the
(q) confirmation that all of such Acquired Assets have been delivered in acceptable condition to Jet Yard’s facility in Marana, Arizona; and (v) contemporaneously with the Borrower’s receipt of the proceeds of the Loan, the Airframe Acquisition will be consummated in full in accordance with the terms of the Airframe Transaction Documents;
(r) a final inspection report of the Acquired Assets, in form and substance acceptable to the Lenders, confirming that all parts included in the descriptive materials previously provided by the Borrower to the Lenders are actually present on the Airframe;
(s) a Collateral Agency Agreement (such Collateral Agency Agreement, as it may be amended, modified, supplemented, restated or replaced from time to time, being the “Collateral Agency Agreement”), by and among the Lenders and MBT, in its capacity as collateral agent (in such capacity, the “Collateral Agent”); and
such other approvals, inspection reports, appraisals, certificates, opinions or documents as the Lenders may reasonably request, including, without limitation, a Borrowing Base Certificate, together with a detailed inventory report as of a recent date. In addition, the Lenders or their agent(s) shall have completed their inspection of the business, operations and assets of the Borrower, and such survey shall provide the Lenders with results and information which, in the Lenders’ determination, are satisfactory to the Lenders.
(a) Disbursement. The Lenders shall severally disburse the proceeds of the Loan to the Borrower, on the Closing Date, following satisfaction of all of the conditions set forth in Section 5.
(b) Notes. The Loan shall be evidenced by, and be payable in accordance with the terms of, the Notes. Each Lender shall maintain records of the amount of all payments on such Lender’s Note. The outstanding amount of the Notes set forth on the records of the Lenders shall be rebuttable presumptive evidence of the principal amount owing and unpaid on the Notes.
(c) Interest on the Loan. The Borrower agrees to pay interest on the outstanding principal amount of the Loan from the date hereof until the Loan is paid in full at the rates and at the times specified in the Notes.
(i) Voluntary. The Borrower may prepay the Loan in whole or in part at any time; provided, that, each such prepayment shall be accompanied by any prepayment premium set forth in the respective Notes and all such payments shall be made on a pro rata basis to the Lenders in accordance with their Percentages.
(ii) Mandatory. The Loan shall be subject to mandatory prepayment as follows, with each such prepayment being paid to the Lenders for application to their respective Notes in accordance with their respective Percentages:
(A) Contemporaneously with the Borrower’s receipt of any Net Proceeds from the sale of any Acquired Asset, the Borrower shall prepay the Loan in an aggregate amount equal to sixty percent (60%) of such Net Proceeds.
(B) Contemporaneously with the Borrower’s receipt of any Net Proceeds from the sale of (whether in parts or in whole) that certain Boeing 737-700 Airframe bearing MSN 30742 (“Airframe 30742”), the Borrower shall prepay the Loan in an aggregate amount equal to eighty percent (80%) of such Net Proceeds; provided, that, if Airframe 30742 is not sold on or prior to April 15, 2019, the Borrower shall make a Loan prepayment in the aggregate amount of $600,000 on such date.
(C) If the outstanding principal balance of the Loan exceeds $1,200,000 on October 15, 2019, then the Borrower shall make a prepayment in the amount of such excess on such date.
(D) If the outstanding principal balance of the Loan exceeds $250,000 on April 12, 2020, then the Borrower shall make a prepayment in the amount of such excess on such date.
(E) If, at any time, the outstanding principal balance of the Loan exceeds the Borrowing Base, then the Borrower shall immediately prepay the amount of such excess.
Any other provision of this Agreement to the contrary notwithstanding, the Borrower shall make all payments of interest on and principal of the Loans and all payments to the Lenders with respect to payment of other fees, costs and expenses payable under any Loan Document in immediately available funds to the Lenders at their respective addresses for notices hereunder without setoff or counterclaim. The Borrower authorizes MBT to charge from time to time against the Borrower’s deposit account number 161010111 maintained with MBT or any other depository account maintained by Borrower with a Lender any such payments when due and the Lenders will use the reasonable efforts to notify the Borrower of such charges. The Borrower hereby authorizes the Lenders to make an additional Loan advance, at the Lenders’ sole and absolute discretion, to pay, on behalf of the Borrower, of any amount due to either or both Lenders or the Collateral Agent under any Loan Document without further action on the part of the Borrower and regardless of whether the Borrower is able to comply with the terms, conditions and covenants of this Agreement at the time of such Loan advance. Each payment received by the Lenders may be applied to the Borrower’ obligations to the Lenders under this Agreement or any other Loan Document in such order of application as the Lenders, in their sole and absolute discretion, may elect; provided, that all payments of principal and interest shall be applied by Lenders to their respective Notes on a pro rata basis in accordance with their respective Percentages.
4. Set-off, Etc.
Upon the occurrence and during the continuance of an Event of Default, each Lender and each of their respective affiliates may offset any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or monies of the Borrower then or thereafter with such Lender or such affiliate, or any obligations of a Lender or such affiliate to the Borrower, against the obligations of the Borrower arising under this Agreement or any other Loan Document. The Borrower hereby grants to the Lenders and each of their respective affiliates a Lien in all such balances, credits, deposits, accounts or monies.
5. Conditions Precedent to All Credit Extensions.
The obligation of the Lenders to extend any credit to the Borrower shall be subject to the satisfaction of each of the following conditions, unless waived in writing by both Lenders:
(a) The representations and warranties set forth in Section 6 shall be true and correct on the date of the requested credit extension and after giving effect thereto except to the extent that such representations and warranties expressly relate to an earlier date; and
(b) No Event of Default or event which, with notice and/or lapse of time, would constitute an Event of Default (such event being a “Default”) shall have occurred and be continuing on the date of the requested credit extension or after giving effect thereto.
6. Representations and Warranties.
To induce the Lenders to extend credit hereunder, the Borrower represents and warrants to the Lenders that:
(a) the Borrower is a limited liability company duly organized and, validly existing and in good standing under the laws of the jurisdiction of its formation, and (b) is duly qualified as a foreign limited liability company and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to qualify in such jurisdiction could not reasonably be expected to have a material adverse effect on Borrower’s financial condition, business, properties or assets;
(b) the Borrower has full power and authority to enter into and to perform its obligations under the Loan Documents to which it is a party;
(c) the Loan Documents constitute the legal, valid, and binding obligations of Borrower and are enforceable against Borrower in accordance with their respective terms subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability of rights of creditors generally and by general equitable principles which may limit the right to obtain equitable remedies;
(d) the Borrower’s execution, delivery and performance of the Loan Documents to which the Borrower is a party have been duly authorized by all necessary corporate or company action, do not require the consent or approval of any Person which has not been obtained, and do not conflict with any agreement binding upon the Borrower or any of the Borrower’s property;
(e) there is no litigation, bankruptcy proceeding, arbitration or governmental proceeding pending against Borrower or affecting the business, property or operations of Borrower which, if determined adversely to Borrower, could reasonably be expected to constitute a Material Adverse Occurrence;
(f) neither the Borrower nor any member of a group which is under common control with the Borrower (within the meaning of Section 414 of the IRC or Section 4001(a)(14) or 4001(b) of ERISA) (the Borrower’s “ERISA Affiliates”) has maintained, established, sponsored or contributed to any employee benefit plan which is a defined benefit plan (“Plan”) covered by Title IV of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder (“ERISA”);
(g) the proceeds of the Loan will be used finance a portion of the cost of acquisition of the Acquired Assets; and (ii); no part of the proceeds of the Loan will be used for any purpose which violates, or which is inconsistent with, any regulations promulgated by the Board of Governors of the Federal Reserve System;
(h) (i) the Borrower is in compliance in all material respects with all federal, state and local laws, rules and regulations applicable to it including, without limitation, all pollution control and environmental regulations in each jurisdiction where the Borrower is doing business; and (ii) no Loan Party has any material liability for the release or threatened release of any toxic or hazardous waste, substance or constituent into the environment;
(i) the Borrower’s internally prepared financial statements for the fiscal quarter that ended on September 30, 2018, copies of which have been furnished to the Lender, have been prepared in accordance with GAAP (except for the absence of footnotes and subject to customary year-end adjustments) and present fairly the financial condition of the Borrower as of such date and the result of its operation for the periods then ended;
(j) since the date on which the financial statements described in Section 6(i) were prepared, there has not been any material adverse change in the business, operations, prospects, assets, results of operations or condition (financial or other) of the Borrower that has not been otherwise reported via applicable regulatory filings, copies of which have been provided to the Lender;
(k) the Borrower has filed all Federal and State income tax and other tax returns which are required to be filed, and has paid all taxes as shown on said returns and all assessments received by the Borrower to the extent that such taxes have become due, except to the extent that the Borrower is disputing such taxes in good faith and has established adequate reserves on its books;
(l) the Borrower possesses adequate licenses, permits, franchises, patents, copyrights, trademarks and trade names, or rights thereto, to conduct its business substantially as now conducted and as presently proposed to be conducted;
(m) no Loan Party is in default of a material provision under any material agreement, instrument, decree or order to which it is a party or by which it or its property is bound or affected and assuming that this Agreement had been previously executed and delivered no Default or Event of Default has occurred and is continuing hereunder;
(n) the Borrower has good title to all of its properties and assets, including, without limitation, the Collateral, free and clear of all mortgages, security interests, Liens and encumbrances, except as permitted by Section 8(a);
(o) Airco owns all of the outstanding membership of the Borrower, free and clear of all Liens other than a Lien in favor of MBT;
(p) the Borrower is Solvent after giving effect to the making of the Loan hereunder and the granting of Liens pursuant to the Loan Documents;
(q) (i) the Borrower is not a party to any labor dispute; and (ii) there are no strikes or walkouts relating to any labor contracts to which the Borrower is subject;
(r) the Borrower is not an “investment company” and is not “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended;
(s) the Borrower is not a partner (limited or general) or joint venturer in any partnerships or joint ventures;
(t) the Borrower is not a “holding company” or a “subsidiary company” of a holding company or an “affiliate” of a holding company or of a subsidiary company of a holding company within the meaning of the Public Utility Holding Company Act of 1935, as amended;
(u) the Borrower is not subject to or in violation of any law or regulation, or listed on any list of any government agency including, without limitation, the U.S. Office of Foreign Asset Control list, Executive Order 13224 or the USA PATRIOT Act (Title III of Pub. L. 107-56, signed into law October 26, 2001, as amended) (the “Patriot Act”) that prohibits or limits the conduct of business with or receiving of funds, goods or services to or for the benefit of certain Persons specified therein or that prohibits or limits Lenders from making the Loan or any other extension of credit to Borrower or from otherwise conducting business with Borrower;
(v) (i) neither the execution of this Agreement nor the use of the proceeds of the Loan violates the Trading with the Enemy Act of 1917, as amended, nor any of the foreign assets control regulations promulgated thereunder or under the International Emergency Economic Powers Act or the U.N. Participation Act of 1945; and (ii) neither the Borrower nor any Person who owns a controlling interest in or otherwise controls the Borrower is listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control, the Department of the Treasury or included in Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001;
(w) the Borrower does not have any Subsidiaries; and
(x) Schedule attached hereto is a true and correct listing of all of the Acquired Assets.
All representations and warranties contained in this Section 6 shall survive the delivery of the Loan Documents, and the making of the Loan, and no investigation at any time made by or on behalf of Lender shall diminish its rights to rely thereon.
7. Affirmative Covenants.
The Borrower covenants and agrees with the Lenders that, for so long as any Loan remains unpaid, the Borrower shall:
(a) furnish to the Lenders:
(i) as soon as available and in any event within fifteen (15) days after the end of each of fiscal quarter of the Borrower’s fiscal year, a copy of the Borrower’s internally prepared financial statements consisting of a balance sheet as of the close of such fiscal quarter and related income statement and cash flow statement for such fiscal quarter and from the beginning of such fiscal year to the end of such fiscal quarter;
(ii) as soon as available and in any event within fifteen (15) days after the end of each fiscal month of the Borrower’s fiscal year, a borrowing base certificate, in the form of Exhibit B attached hereto (the “Borrowing Base Certificate”), showing the relevant information for the Borrower as of the end of business on the last business day of the then most recently-ended month of the Borrower’s fiscal year; each Borrowing Base Certificate shall be accompanied by a detailed inventory report by part serial number, an accounts receivable aging, a purchase order report, and other supporting reports such as may be required by the Lenders or the Collateral Agent and the Borrowing Base Certificate and such supporting reports shall be in a form acceptable to the Lenders and the Collateral Agent and certified as accurate by the Borrower’s chief financial officer, treasurer or controller;
(iii) as soon as available and in any event within fifteen (15) days after the end of each fiscal month of the Borrower’s fiscal year, a report, in form and detail acceptable to the Lenders in its sole discretion, showing sales made during such month and a timeline of anticipated sales of the remaining Acquired Assets;
(iv) by not later than five (5) business days after becoming aware of any Default or Event of Default, a notice describing the nature thereof and what action the Borrower proposes to take with respect thereto;
(v) copies of the federal income tax returns (with all supporting schedules) of Borrower due during the term of the Loan, within thirty (30) days after the deadline for filing the same;
(vi) by not later than five (5) business days after becoming aware of the institution of any litigation, arbitration or governmental proceeding against Borrower which, if determined adversely to Borrower, could reasonably be expected to be a Material Adverse Occurrence, or the rendering of a judgment or decision in such litigation or proceeding which could reasonably be expected to constitute a Material Adverse Occurrence, and the steps being taken by the Borrower with respect thereto; and
(vii) such other financial or other information or certification as the Lenders may reasonably request;
(b) maintain and preserve its existence as a limited liability company organized and in good standing under the laws of the State of its organization and in each other jurisdiction in which the character of the properties owned, leased or operated by it or the business conducted by it makes such qualification necessary and where the failure to qualify could constitute a Material Adverse Occurrence;
(c) maintain insurance of such types and in such amounts as are maintained by companies of similar size engaged in the same or similar businesses and as may be required by any Loan Document; provided, that, each policy insuring any Collateral securing the Loans shall name the Collateral Agent as lender loss payee and each policy of the liability insurance shall name the Lenders as additional insureds;
(d) file all federal and state income tax and other tax returns (including, without limitation, withholding tax returns) which are required and make payments as required of such taxes; provided, however, that: (i) the Borrower shall not be required to pay any such tax so long as the validity thereof is being contested in good faith by appropriate proceedings, the Borrower’s title to its property is not materially adversely affected, its use of such property in the ordinary course of its business is not materially interfered with and adequate reserves with respect thereto have been set aside on the Borrower’s books in accordance with GAAP; and (ii) in all events, the Borrower shall pay, or cause to be paid, all such taxes forthwith upon the commencement of foreclosure of any Lien which may have attached as security therefor;
(e) reimburse the Lenders and the Collateral Agent for reasonable expenses, fees and disbursements (including, without limitation, reasonable attorneys’ fees and legal expenses), incurred in connection with the preparation or administration of this Agreement or any other Loan Document or the Lenders’ and the Collateral Agent’s enforcement of the obligations of the Borrower under any Loan Document, whether or not suit is commenced, which attorneys’ fees and legal expenses shall include, but not be limited to, any attorneys’ fees and legal expenses incurred in connection with any appeal of a lower court’s judgment or order;
(f) permit the Lenders, the Collateral Agent and their respective representatives at reasonable times and intervals and upon reasonable notice to visit the Borrower’s offices and the offices and locations of each other Person storing any Collateral and inspect their respective books and records including, without limitation, permitting the Lenders and the Collateral Agent to examine any Collateral securing the Loans and reimburse the Lenders and the Collateral Agent for all examination fees and expenses incurred in connection with such examinations at its then current rate for such services and for its out-of-pocket expenses incurred in connection therewith;
(g) maintain in full force and effect all of the Borrower’s material rights, licenses, certifications, franchises and comply with all applicable laws and regulations necessary to enable it to conduct its business;
(h) promptly, upon request by the Lenders or the Collateral Agent: (i) correct any defect or error that may be discovered in any Loan Document or in the execution, acknowledgment or recordation thereof; (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all deeds, conveyances, mortgages, deeds of trust, trust deeds, assignments, estoppel certificates, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments as the Lenders or the Collateral Agent may reasonably require from time to time in order: (A) to carry out more effectively the purposes of the Loan Documents; (B) to perfect and maintain the validity, effectiveness and priority of any Liens intended to be created by the Loan Documents; and (C) to better assure, convey, grant, assign, transfer, preserve, protect and confirm unto the Collateral Agent the rights granted now or hereafter intended to be granted to the Collateral Agent under any Loan Document or under any other instrument executed in connection with any Loan Document or that the Borrower may be or become bound to convey, mortgage or assign to the Collateral Agent in order to carry out the intention or facilitate the performance of the provisions of any Loan Document; and (iii) cause each other Loan Party to do all of the foregoing;
(i) Borrower shall pay in a timely manner all applicable duties, freight, charges and like fees and charges of shippers, freight forwarders, carriers and warehousemen;
(j) Deliver a copy of the FAA decommissioning certificate for each Airframe to the Lenders by not later than two months after the date such Airframe is acquired by the Borrower; and
(k) maintain the Borrower’s primary depository accounts with MBT.
8. Negative Covenants.
The Borrower hereby agrees with the Lenders that, for so long as any Loan remains unpaid, the Borrower shall not:
(a) create, incur or suffer to exist any Liens encumbering any of its assets, including without limitation any real or personal property owned by the Borrower, except: (i) Liens in favor of the Collateral Agent; or (ii) Permitted Liens;
(b) create, incur, assume or suffer to exist any Indebtedness except: (i) the Indebtedness under this Agreement or any other Loan Document; (ii) current liabilities (other than borrowed money) incurred in the ordinary course of business; (iii) Indebtedness in respect of hedge agreements, including Hedge Agreements, entered into in the ordinary course of business to hedge or mitigate risks to which Borrower is exposed in the conduct of its business or the management of its liabilities and not for speculative purposes; (iv) Indebtedness in respect of taxes, assessments or government charges to the extent that payment thereof shall not at the time be required to be made under this Agreement; (v) Indebtedness owing to MBT; or (vi) Subordinated Debt;
(c) lease, sell or otherwise convey all or any substantial portion of its property and business to any other entity or entities, whether in one transaction or a series of related transactions, except for sales of Inventory in the ordinary course of Borrower’s business;
(d) consolidate with or merge into or with any other entity or entities or liquidate, wind up or dissolve itself or suffer any liquidation or dissolution;
(e) declare or pay any cash dividends, purchase, redeem, retire or otherwise acquire for value any of the Borrower’s membership interest (or any warrant or option to purchase any such membership interest) now or hereafter outstanding, or return any capital to its members;
(f) acquire, make or hold any Investment in any other Person except:
(i) loans or advances to officers and employees of the Borrower to finance travel, entertainment and relocation expenses and other ordinary business purposes in the ordinary course of business as presently conducted; provided, however, that the aggregate outstanding principal amount of all loans and advances permitted pursuant to this clause shall not exceed $50,000 at any one time;
(ii) Extensions of credit in the nature of accounts or notes receivable arising from the sale of goods and services in the ordinary course of business;
(iii) Shares of stock, obligations or other securities received in settlement of claims arising in the ordinary course of business; and
(iv) investments in Hedge Agreements and other hedging agreements permitted by Section 8(b)(iii);
(g) (i) assume, guarantee, endorse or otherwise become liable upon the obligation of any Person, firm or corporation except pursuant to the Loan Documents or by endorsement of negotiable instruments for deposit or collection in the ordinary course of business, nor (ii) sell any notes or accounts receivable with or without recourse;
(h) engage in any business other than the business engaged in by the Borrower on the date of this Agreement, or make any material change in the nature of the business of the Borrower as carried on the date of this Agreement;
(i) maintain, establish, sponsor or contribute to any Plan which is a defined benefit plan and shall not permit any of its ERISA Affiliates to do so;
(j) either: (i) form or acquire any corporation or company which would thereby become a Subsidiary; or (ii) form or enter into any partnership as a limited or general partner or form or enter into any joint venture;
(k) materially change its selling terms of payment on accounts receivable as in effect on the Closing Date;
(l) either: (i) permit the direct or indirect transfer, distribution or payment of any of its funds, assets or property to any Affiliate, except that the Borrower may pay: (A) bona fide employee compensation (including benefits) to Affiliates for services actually rendered to the Borrower; (B) expenses incurred by an employee in the ordinary course of business; (C) expenses or rents for services or property or the use thereof allocated to the Borrower; provided, however, that all such payments pursuant to subsections (i)(A), (B) and (C) shall not exceed the amount which would be payable in a comparable arm’s length transaction with a third party who is not an Affiliate; (ii) except as otherwise permitted by Sections 8(f)(i) of this Agreement, lend or advance money, credit or property to any Affiliate; (iii) invest in (by capital contribution or otherwise) or purchase or repurchase any stock or Indebtedness, or any assets or properties, of any Affiliate; or (iv) guarantee, assume, endorse or otherwise become responsible for, or enter into any agreement or instrument for the purpose of discharging or assuming (directly or indirectly, through the purchase of goods, supplies or services or otherwise) the Indebtedness, performance, capability, obligations, dividends or agreement for the furnishing of funds of any Affiliate or any officer, director or employee;
(m) make any loan to, or otherwise extend any credit to, Borrower’s officers, directors, shareholders, partners, members, managers or Affiliates or to any member of any such Person’s immediate family, except for loans expressly permitted by Section 8(f)(i);
(n) materially change its selling terms of payment on Accounts as in effect on the date of this Agreement or provide dating terms except on a basis consistent with past business practices of the Borrower;
(o) except as permitted by the Subordination Agreement pertaining to an item of Subordinated Debt: (i) make any payment of, or purchase, redeem, or acquire, any Subordinated Debt; (ii) give security for all or any part of any Subordinated Debt; (iii) take or omit to take any action whereby the subordination of any Subordinated Debt or any part thereof to the Obligations might be terminated, impaired or adversely affected; (iv) settle, compromise, discharge or otherwise reduce the outstanding principal amount of any Subordinated Debt or exercise any right to convert the Subordinated Debt to equity; or (v) omit to give the Lenders prompt written notice of any default or event which, with the giving of notice or lapse of time, would constitute a default under any other agreement or instrument relating to any Subordinated Creditor;
(p) use any proceeds of the Loan for any purpose other than to finance a portion of the purchase of the Acquired Assets or the refurbishment of Acquired Assets in preparation for the sale thereof; or
(q) change the Borrower’s fiscal year end to a date other than March 31.
9. Events of Default.
The occurrence of any one or more of the following shall constitute an Event of Default (“Event of Default”) hereunder:
(a) the Borrower shall default (i) in the due and punctual payment of any installment of interest or principal on the Loan on the date when due, or (ii) in the due and punctual payment of any other amount which is due and payable to either or both Lenders or the Collateral Agent under any Loan Document within five days of the date when due;
(b) the Borrower shall default in the due performance or observance of any covenant set forth in Sections 2(d)(ii), 7(b), 7(c), 7(i), 7(h) or in Section 8;
(c) Borrower shall default (other than those defaults covered by other subsections of this Section 9) in the due performance or observance of any term, covenant, agreement or warranty contained in any Loan Document on its part to be performed, and such default shall continue for a period of thirty (30) days after the earliest of: (i) the date the Borrower gives notice of such default to the Lenders; (ii) the date the Borrower should have given notice of such default to the Lenders pursuant to Section 7(a)(ii); or (iii) the date the Lenders gives notice of such default to the Borrower;
(d) Borrower shall default and fail to cure such default in the time provided therein, under the terms of any other agreement, indenture, deed of trust, mortgage, promissory note or security agreement governing the borrowing of sums money in excess of $10,000; and either (i) the maturity of any amount owed under such document or instrument is accelerated; or (ii) such default shall continue unremedied or unwaived for a period of time to permit such acceleration;
(e) Borrower shall become insolvent or generally fail to pay, or admit in writing Borrower’s inability to pay its debts as they become due; or Borrower shall apply for, consent to, or acquiesce in, the appointment of a trustee, receiver or other custodian for Borrower or for Borrower’s property, or make a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian shall be appointed for Borrower or for a substantial part of Borrower’s property and not be discharged within sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding shall be commenced by or against Borrower and if commenced against Borrower, be consented to or acquiesced in by Borrower or remain for sixty (60) days undismissed; or Borrower shall take any action to authorize any of the foregoing;
(f) any judgments, writs, warrants of attachment, executions or similar process (not covered by insurance) shall be issued against Borrower or any of Borrower’s assets where the aggregate amount of such judgments, writs, warrants of attachment, executions or similar process exceed $50,000.00 and are not released, vacated, suspended, stayed, abated or fully bonded prior to any sale and in any event within thirty (30) days after its issue or levy;
(g) Airco shall cease to own, directly or indirectly, all of the Borrower’s issued and outstanding membership interest or shall cease to have the power to elect a majority of the Borrower’s directors or shall cease to direct the Borrower’s management policies;
(h) the occurrence of any default by Borrower under any Consignment Agreement or Disassembly Agreement or the termination of any such agreement;
(i) the Lender, in its sole discretion, shall determine in good faith that there has been a Material Adverse Occurrence;
(j) any representation or warranty set forth in this Agreement or any other Loan Document shall be untrue in any material respect on the date as of which the facts set forth are stated or certified;
(k) there is instituted against Borrower or any executive officer of Borrower any criminal proceeding for which forfeiture of any material asset is a potential penalty, or the Borrower is enjoined, restrained or in any way prevented by order of any governmental authority from conducting any material part of its business affairs and such order is not completely stayed, to the satisfaction of the Lender, or dissolved within two business days from the effective date of such order;
(l) the occurrence of any “Event of Default” under the MBT Loan Agreement (as such term in quotation marks is therein defined);
(m) the occurrence of any “Event of Default” under the Air T Loan Agreement (as such term in quotation marks is therein defined); or
(n) the Borrower shall seek to revoke, repudiate or disavow the enforceability of any Loan Document.
Upon: (1) the occurrence of any Event of Default described in Section 9(e), the full unpaid principal amount of the Notes and all other obligations of the Borrower to the Lenders shall automatically be due and payable without any declaration, notice, presentment, protest or demand of any kind (all of which are hereby waived); or (2) the occurrence of any other Event of Default, the Lenders, upon written notice, may declare the outstanding principal amount of the Notes and all other obligations of the Borrower to the Lenders to be due and payable without other notice, presentment, protest or demand of any kind, whereupon the full unpaid amount of the Notes and any and all other obligations, which shall be so declared due and payable, shall be and become immediately due and payable. In addition, the Lenders may exercise any right or remedy available to it pursuant to any Loan Document, at law or in equity.
10. Accounting Terms and Calculations.
Except as may be expressly provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP consistently applied for the Borrower as used in the preparation of the Borrower’s financial statements described in Section 7(a)(i).
For purposes of this Agreement, the following terms shall have the following meanings:
“Acquired Assets”: As defined in Section 1 of this Agreement.
“Acquisition”: Any transaction or series of transactions by which the Borrower acquires, either directly or through a Subsidiary or otherwise, (a) any or all of the stock or other securities of any class of any Person if, after giving effect to such transaction, such Person would be an Affiliate of the Borrower; or (b) a substantial portion of the assets or a division, or line of business of any Person.
“Affiliate”: Shall mean, with respect to the Borrower, any Person which directly or indirectly controls, is controlled by, or is under common control with, the Borrower. One Person shall be deemed to control another Person if the controlling Person owns directly or indirectly 10% or more of any class of voting stock of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the controlled Person, whether through ownership of stock, by contract or otherwise.
“Airco”: Airco, LLC, a North Carolina corporation.
“Air T Loan Agreement”: Shall mean that certain Credit Agreement dated as of December 21, 2017, by and between MBT and Air T, as it may be amended, modified, supplemented, restated or replaced from time to time.
“Airframe”: The mechanical structure of an aircraft, including, without limitation, its fuselage, wings and undercarriage, but excluding its jet engines.
“Airframe Acquisition”: Shall have the meaning given such term in Section 1(j) of this Agreement.
Airframe Purchase Agreement”: Shall have the meaning given such term in Section 1(j) of this Agreement.
“Airframe Transaction Documents”: Shall have the meaning given such term in Section 1(j) of this Agreement.
“Air T”: Air T, Inc., a Delaware corporation.
“Audit”: As defined in Section 12 of this Agreement.
“Bailee Agreement(s)”: The Jet Yard Bailee Agreement, the Airco Bailee Agreement and each other bailee agreement executed by the owner of a facility where Collateral is located from time to time.
“Banking Services”: Each and any of the following bank services provided to Borrower by a Lender or any of its affiliates: (a) commercial credit cards, (b) stored value cards, and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).
“Banking Services Liabilities”: Any and all obligations of the Borrower, whether absolute or contingent and howsoever and whenever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.
“Borrowing Base. At any date of determination, the sum of: (a) 60% of Eligible Inventory; plus (b) 80% of Eligible Accounts Receivable; provided, however, that the Lenders reserve the right, in their discretion, to and to establish reserves as they deems appropriate and to adjust such borrowing base percentages based on their periodic evaluation of the Collateral. The amount of the Borrowing Base shall be determined periodically by the Lenders.
“Borrowing Base Certificate”: As defined in Section 7(a)(ii) of this Agreement.
“Cape Town Convention”: The English language text of the Convention on International Interests in Mobile Equipment, adopted on November 16, 2001 at a diplomatic conference held in Cape Town, South Africa, as implemented and modified by the Protocol to the Convention on Matters Specific to Aircraft Equipment as adopted by the United States of America, and as the same may be further amended or modified from time to time.
“Capitalized Lease”: Any lease which, in accordance with GAAP, is capitalized on the books of the lessee.
“Closing Date”: The date on which the Loan is made after the Lenders have received all of the Loan Documents in accordance with Section 1 and all conditions precedent specified in Section 5 have been satisfied.
“Code”: As defined in Section 8(e) of this Agreement.
“Collateral”: As defined in Section 1 of this Agreement.
“Collateral Agent”: As defined in Section 1(s) of this Agreement.
“Collateral Agency Agreement”: As defined in Section 1(s) of this Agreement.
“Consigned Inventory Eligibility Requirements”: As set forth on Exhibit C to this Agreement.
“Consignment Agreement”: As defined in Section 1 of this Agreement.
“Contrail”: Contrail Aviation Support, LLC, a Wisconsin limited liability company.
“Contingent Obligation”: With respect to any Person at the time of any determination, without duplication, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the “primary obligor”) in any manner, whether directly or otherwise, or entered into for the purpose of assuring in any manner the owner of such Indebtedness of the payment of such Indebtedness or to protect the owner against loss in respect thereof.
“Default”: As defined in Section 5(b) of this Agreement.
“Disassembly Agreement”: As defined in Section 1(l) of this Agreement.
“Eligible Accounts”: At any date of determination, the United States dollar value (net of deposits, finance charges and/or service charges) of only such accounts of the Borrower arising from the rendering of sale of goods in the ordinary course of Borrower’s business in which the Collateral Agent holds a perfected first priority Lien for the benefit of itself and for the ratable benefit of the Lenders and as to which the Lenders, in their reasonable business judgment, shall from time to time determine to be collectible in a timely manner in the ordinary course of business without dispute or set-off. Without limiting the Lenders’ right, in their reasonable business judgment, to consider any account not to be an Eligible Account, and by way of example only of types of accounts that the Lenders will consider not to be Eligible Accounts, the Lenders, notwithstanding any earlier classification of eligibility, may consider any account not to be an Eligible Account if: (a) any warranty is breached as to the account or the account debtor disputes liability or makes any claim with respect to the account; (b) (i) the account is not paid by the account debtor within 90 days after its invoice date; or (ii) the account is owed by any account debtor who has not paid 10% or more of such account debtor’s accounts within the time period specified in subsection (b)(i) above; (c) a petition in bankruptcy or other application for relief under any insolvency law is filed with respect to the account debtor owing the account, or the account debtor owing the account assigns for the benefit of creditors, becomes insolvent, fails, suspends, or goes out of business, or the Lenders, in their reasonable business judgment, shall become dissatisfied with the creditworthiness of an account debtor owing an account; (d) the account arises from a sale to an account debtor outside the United States, unless the sale is on letter of credit, acceptance or other terms acceptable to the Lenders; (e) the account debtor is an employee, or Affiliate of the Borrower, or an entity which has common officers, managers or directors with the Borrower; (f) the account debtor is the United States of America or any agency or department thereof and the account is subject to the Assignment of Claims Act; (g) the account is a bonded account; (h) the account balance includes the amount of any counterclaims or offsets which have been or may be asserted against the Borrower by the account debtor (including offsets for any "contra accounts" owed by the Borrower to the account debtor for goods purchased by the Borrower or for services performed for the Borrower); (i) the account debtor is a state, county, city, town or municipality; or (k) any account for a customer deposit.
“Eligible Inventory”: Shall mean the aggregate United States dollar Fair Market Value of the Borrower’s aircraft parts Inventory, in which only the Collateral Agent holds a perfected first priority Lien for the benefit of itself and for the ratable benefit of the Lenders and as to which the Lenders, in their reasonable business judgment, shall elect from time to time to constitute Eligible Inventory. Without limiting the Lenders’ right, in their reasonable business judgment, to consider any inventory not to be Eligible Inventory, and by way of example only of types of inventory that the Lenders will consider not to be Eligible Inventory, the Lenders, notwithstanding any earlier classification of eligibility, may consider any inventory not to be Eligible Inventory if: (a) such inventory is not located at (or in transit to or from) a facility owned and operated by either Jet Yard or Airco that is located in the domestic United States; and (b) in the case of Inventory that is consigned by Borrower to a consignee, the Borrower has not complied with any of the Consigned Inventory Eligibility Requirements. The value of Eligible Inventory shall be the lower of the cost or market value of the Eligible Inventory computed on a first-in, first-out basis
“Event of Default”: As defined in the introductory paragraph of Section 9 of this Agreement.
“Fair Market Value”: The price a willing non-affiliated buyer would pay a willing seller for an item of Inventory (neither being under any compulsion to buy or sell), whether or not such item of Inventory has been physically removed from the Airframe. The Fair Market Value of an item of Inventory included in Eligible Inventory shall be determined based on the most recent invoice price of a similar item of Inventory actually sold by the Borrower or by an Affiliate of Borrower to a non-affiliated buyer, or other supporting documentation provided by Borrower to Lender that is acceptable to Lender in its sole discretion; provided, however, that the Lenders reserve the right to assign a lower Fair Market Value for any such item based on an Appraisal of the Inventory commissioned by Lenders or by the Collateral Agent. At Lenders’ or Collateral Agent’s request, Borrower shall promptly provide Lenders with copies of invoices and other relevant materials to support its determination of Fair Market Value of any item(s) Inventory.
“Hedge Agreement”: Any agreement between Borrower and a Lender or any affiliate of a Lender (a “Hedge Provider”) now existing or hereafter entered into, which provides for and interest rate swap, cap, floor, collar, or any similar transaction or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging Borrower’s exposure to fluctuations in interest rates.
“Hedge Obligations”: The liabilities, Indebtedness, and obligations of the Borrower, if any, to the Hedge Provider under any Hedge Agreement.
“Indebtedness”: Without duplication, all obligations, contingent or otherwise, which in accordance with GAAP should be classified upon the obligor’s balance sheet as liabilities, but in any event including the following (whether or not they should be classified as liabilities upon such balance sheet): (a) obligations secured by any mortgage, pledge, security interest, or other Lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the obligation secured thereby shall have been assumed and whether or not the obligation secured is the obligation of the owner or another party, in an amount equal to the lesser of (i) such liabilities and (ii) the greater of the purchase price or the fair market value of such property in such obligations have not been assumed; (b) any obligation on account of deposits or advances; (c) any obligation for the deferred purchase price of any property or services, except Trade Accounts Payable; (d) any obligation as lessee under any Capitalized Lease; (e) all guaranties, endorsements and other contingent obligations in respect to Indebtedness of others; (f) undertakings or agreements to reimburse or indemnify issuers of letters of credit or in connection with bankers’ acceptances; and (g) all Hedge Obligations. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture as to which such Person is or may become personally liable.
“Inventory”: Shall have the meaning given such term in the Security Agreement.
“International Registry”: Shall mean the International Registry of Mobile Assets located in Dublin, Ireland and established pursuant to the Cape Town Convention, along with any successor registry.
“Investment”: The acquisition, purchase, making or holding of any stock or other security, any loan, advance, contribution to capital, extension of credit (except for trade and customer accounts receivable for inventory sold or services rendered in the ordinary course of business and payable in accordance with customary trade terms), any acquisitions of real or personal property (other than real and personal property acquired in the ordinary course of business) and any purchase or commitment or option to purchase stock or other debt or equity securities of, or any interest in, another Person or any integral part of any business or the assets comprising such business or part thereof.
“Jet Yard”: Jet Yard, LLC, an Arizona limited liability company.
“Lender(s)”: As defined in the Preamble to this Agreement.
“Liabilities”: At any date of determination, the aggregate amount of liabilities appearing on the Borrower’s consolidated balance sheet at such date prepared in accordance with GAAP.
“Lien(s)”: Any security interest, mortgage, pledge, lien, hypothecation, judgment lien or similar legal process, charge, encumbrance, title retention agreement or analogous instrument or device (including, without limitation, the interest of the lessors under Capitalized Leases and the interest of a vendor under any conditional sale or other title retention agreement), including without limitation, any registrations on the International Registry without regard to whether such registrations are valid.
“Loan(s)”: The Loan, together with each other loan or extension of credit now or hereafter provided by Lenders to Borrower pursuant to this Agreement.
“Loan Document(s)”: As defined in Section 1 of this Agreement.
“Loan Party(ies)”: Individually, or collectively, the Borrower and each Person who executes a guaranty of the Obligations in favor of the Lender. On the Effective Date, the Borrower is the sole Loan Party.
“Material Adverse Occurrence”: Any occurrence of whatsoever nature (including, without limitation, any adverse determination in any litigation, arbitration, or governmental investigation or proceeding) which could reasonably be expected to materially and adversely affect: (a) the financial condition or operations of Borrower; (b) the ability of Borrower to perform its obligations under the Loan Documents; (c) the validity or enforceability of the material obligations of Borrower under the Loan Documents; (d) the rights and remedies of the Lenders against Borrower; or (e) the timely payment of the principal of and interest on the Loan or other amounts payable by the Borrower hereunder or under any other Loan Document.
“MBT”: As defined in the Preamble to this Agreement.
“MBT Loan Agreement”: As defined in Recital A to this Agreement.
“Net Proceeds”: With respect to any sale of Inventory, the cash proceeds received by the Borrower from such transaction after deducting the ten percent (10%) commission payable to Airco pursuant to the Consignment Agreement.
“Note(s): As defined in Section 1(a) of this Agreement.
“Obligations”: All Loans, advances, debts, liabilities, obligations, Banking Services Liabilities, covenants and duties, owing by Borrower to the Lenders of any kind or nature, present or future, which arise under this Agreement, any other Loan Document or any permitted Hedge Agreement or by operation of law, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, opening, guarantying or confirming of a letter of credit, guaranty, indemnification or in any other manner, whether joint, several, or joint and several, direct or indirect (including those acquired by assignment or purchases), absolute or contingent, due or to become due, and however acquired. The term includes, without limitation, all principal, interest, fees, charges, expenses, attorneys’ fees, and any other sum chargeable to Borrower under this Agreement or any other Loan Document or any permitted Hedge Agreement.
“Patriot Act”: As defined in Section 6(t) of this Agreement.
“Percentage”. The term “Percentage” means, with respect to either Lender, and with respect to any amount to be funded or paid to the Lenders, such Lender’s pro rata share of such amount, determined by the ratio that the amount of the Obligations consisting of principal and interest owing such Lender bears to the aggregate amount of all of the Obligations consisting of principal and interest on the applicable date of determination.
(a) Liens in favor of MBT securing other obligations of Borrower to MBT;
(b) Deposits or pledges to secure payment of workers’ compensation, unemployment insurance, old age pensions or other social security obligations, in the ordinary course of business of the Borrower; and
(c) Liens for taxes, fees, assessments and governmental charges not delinquent or to the extent that payments therefor shall not at the time be required to be made in accordance with the provisions of Section 7(d);
“Person”: Any natural person, corporation, partnership, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision, or any other entity, whether acting in an individual, fiduciary or other capacity.
“PSB”: As defined in the Preamble to this Agreement.
“Regulatory Change”: As to either or both Lenders, any change (including any scheduled change) applicable to a class of banks which includes either or both Lenders in any:
(a) federal or state law or foreign law; or
(b) regulation, interpretation, directive or request (whether or not having the force of law) of any court or governmental authority charged with the interpretation or administration of any law referred to in clause (a) of this definition or of any fiscal, monetary or other authority having jurisdiction over such class of banks;
or the adoption after the date hereof of any new or final law, regulation, interpretation, directive or request applicable to a class of banks which includes either or both Lenders.
“Security Agreement”: As defined in Section 1(b).
“Solvent”: Shall mean, with respect to any Person on any date of determination, that on such date:
(a) the fair value of such Person’s tangible and intangible assets as a going concern is in excess of the total amount of such Person’s liabilities including, without limitation, Contingent Obligations;
(b) such Person is then able to pay its debts as they mature; and
(c) such Person has capital sufficient to carry on its business.
“Subordination Agreement(s)”: Each subordination agreement now or hereafter executed by a creditor of the Borrower in favor of the Lender.
“Subordinated Creditor”: Each holder of Subordinated Debt.
“Subordinated Debt”: At any date of determination, the outstanding principal amount of any Indebtedness of the Borrower which has been subordinated to the payment of the Obligations pursuant to a Subordination Agreement acceptable to the Lenders in their sole discretion.
“Subsidiary”: Any Person of which or in which the Borrower and its other Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such Person, if it is a corporation, (b) the capital interest or profit interest of such Person, if it is a partnership, joint venture or similar entity, or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated organization.
“Taxes” All present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments.
“Trade Accounts Payable”: The trade accounts payable of any Person with a maturity of not greater than 90 days incurred in the ordinary course of such Person’s business.
12. Collateral Audit; Appraisals.
Borrower acknowledges and agrees that, while the Loan or any portion thereof remains outstanding, Lenders have the right at any time to obtain an audit (“Audit”) of the Collateral (or any portion thereof) performed by employees of the Collateral Agent or by an appraiser, consultant or auditor engaged by the Collateral Agent. If any of the Collateral or related books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Collateral Agent or its agents to have access to perform inspections or audits and to respond to the Collateral Agent’s (or Collateral Agent’s agent’s) requests for information concerning such Collateral and records. The Borrower further agrees to promptly reimburse the Collateral Agent for all expenses, charges, costs and fees of any such Audit and Collateral Agent’s internal review of such Audit that is commissioned by Lender (a) following the occurrence of an Event of Default, or (b) if, at any time after October 15, 2019, the outstanding principal balance of the Loan is greater than $1,000,000.
(a) Notices. Any notices or demands required or contemplated hereunder shall be written and shall be effective two days after the placing thereof in the United States mails postage prepaid or with a nationally-recognized courier service such as Federal Express, addressed to the relevant party at its address set forth on the signature page below or upon transmission by telecopy to the relevant party at the telecopy number set forth on the signature page below and a confirmation is received or at any other address or telecopy number as may be designated by the party in a notice to the other parties provided, however, that any notice to a Lender shall not be deemed given until actually received by such Lender.
(b) Counterparts. This Agreement may be executed in counterparts and by separate parties in separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same document. Receipt by telecopy, pdf file or other electronic means of any executed signature page to this Agreement shall constitute effective delivery of such signature page.
(c) Governing Law. This Agreement, the Notes and each other Loan Document shall be governed by, interpreted and construed in accordance with the internal laws, but not the law of conflicts, of the State of Minnesota.
(d) General Indemnity. In addition to the payment of expenses pursuant to Section 7(f), whether or not the transactions contemplated hereby shall be consummated, the Borrower hereby indemnifies, and agrees to pay and hold the Lenders, the Collateral Agent, their respective affiliates and any holder of any Note, and their respective officers, directors, employees, agents, successors and assigns (collectively called the “Indemnitees”) harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for any of such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not any of such Indemnitees shall be designated a party thereto), that may be imposed on, incurred by, or asserted against the Indemnitees (or any of them), in any manner relating to or arising out of the Loan Documents, the statements contained in any proposal letters or other similar correspondence delivered by either or both Lenders or the Collateral Agent (whether in person, by mail, courier or any electronic means), the Lenders’ agreement to make the Loan to the Borrower, or the use or intended use of the proceeds of the Loan (the “Indemnified Liabilities”); provided, however, that the Borrower shall have no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of an Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, the Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. The obligations of the Borrower under this Section 13(d) and under Section 7(f) shall survive any termination of this Agreement.
(e) All payments made by the Borrower hereunder or under any Note will be made free and clear of, and without deduction or withholding for, any Taxes. If the Borrower shall be required to deduct any Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 13(e) such Lender or other recipient receives an amount equal to the sum it would have received had no such deduction been made; (ii) the Borrower shall make such deduction; and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Law.
(f) Regulatory Change. If, as a result of any Regulatory Change:
(i) any tax, duty or other charge with respect to any Loan, the Notes, or any commitment to lend is imposed, modified or deemed applicable, or the basis of taxation of payments to the Lenders of interest or principal of the Loans is changed;
(ii) any reserve, special deposit, special assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, the Lenders is imposed, modified or deemed applicable;
(iii) any increase in the amount of capital required or expected to be maintained by either or both Lenders or any Person controlling either or both Lenders is imposed, modified or deemed applicable;
(iv) any other condition affecting this Agreement or any commitment to lend is imposed on either or both Lenders or the relevant funding markets;
(v) and either or both Lenders determines that, by reason thereof, the cost to either or both Lenders of making or maintaining the Loan or any commitment to lend is increased, or the amount of any sum receivable by the Lenders hereunder or under the Notes is reduced, then, the Borrower shall pay to such Lender or Lenders upon demand such additional amount or amounts as will compensate such Lender or Lenders (or the controlling Person in the instance of (c) above) on an after-tax basis for such additional costs or reduction. Determinations by the Lenders for purposes of this Section 13(f) of the additional amounts required to compensate the Lenders shall be conclusive in the absence of manifest error. The Lenders’ demand for payment of any amount pursuant to this Section 13(f) shall show the calculation of the amount demanded in reasonable detail. In determining such amounts, the Lenders may use any reasonable averaging, attribution and allocation methods.
(g) Participation. Either or both Lenders may in their sole and exclusive discretion at any time issue participations in the Loan and in any or all or a portion of its obligations to make the Loan to one or more participants in the Loan. Each Lender may divulge all information received by it from Borrower or any other source, including but not limited to information relating to the Loan and to the Borrower, to any such participant(s) or other lenders, and Borrower shall cooperate with Lenders in satisfying the reasonable requirements of any such participant(s) or other lenders for consummating such a purchase, participation or assignment.
(h) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or transfer its rights hereunder without the prior written consent of both Lenders.
(i) Waivers, Amendments; etc. The provisions of this Agreement, or any other Loan Document, may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and both Lenders.
(j) Inconsistencies, etc. In the event of any conflict or inconsistency between or among the provisions of this Agreement and any other Loan Document, it is intended that the provisions of this Agreement and such other Loan Document be enforceable except to the extent that the enforcement of such provisions is irreconcilable and, in that event, the provisions of the Loan Document most favorable to the Lenders shall be controlling.
(k) WAIVER OF TRIAL BY JURY. THE BORROWER AND EACH LENDER SEVERALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i) UNDER THE LOAN DOCUMENTS OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR (ii) ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
(l) Limitation of Liability. Neither of the Lenders, the Collateral Agent or any affiliate of the Lenders or the Collateral Agent shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue upon, any claim for any special, indirect or consequential damages suffered by the Borrower in connection with, arising out of, or in any way related to, this Agreement, the Notes or any other Loan Document, or the transactions contemplated and the relationship established hereby or thereby, or any act, omission or event occurring in connection herewith or therewith.
(m) Customer Identification - USA PATRIOT Act Notice. The Lenders hereby notify the Borrower that pursuant to the requirements of the Patriot Act, and the Lenders’ policies and practices, the Lenders are required to obtain, verify and record certain information and documentation that identifies the Borrower, which information includes the name and address of the Borrower and such other information that will allow the Lenders to identify the Borrower in accordance with the Patriot Act.
(n) Venue. AT THE OPTION OF THE LENDERS, THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT TO WHICH THE BORROWER IS A PARTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE LENDERS AT THEIR OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.
(o) Entire Agreement; Document Construction. This Agreement, the Notes and the other Loan Documents embody the entire agreement and understanding between the Borrower and the Lenders with respect to the subject matter hereof and thereof. This Agreement supersedes all prior agreements and understandings relating to the subject matter hereof. This Agreement, the Notes and each other Loan Document has been reviewed by all parties hereto and incorporate the requirements of such parties. Each party waives the rule of construction that any ambiguities are to be resolved against the party drafting the same and agrees such rules will not be employed in the interpretation of this Agreement, the Notes or any other Loan Document. The words “hereof,” “herein,” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to Sections, Exhibits, Schedules and like references are to this Agreement unless otherwise expressly provided. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” Unless the context in which used herein otherwise clearly requires, “or” has the inclusive meaning represented by the phrase “and/or.”
(p) Document Imaging, Electronic Transactions and the UETA. Without notice to or consent of Borrower, Lenders may create electronic images of this Agreement and the other Loan Documents and destroy paper originals of any such imaged documents. Provided that such images are maintained by or on behalf of Lenders as part of Lenders’ normal business processes, Borrower agrees that such images have the same legal force and effect as the paper originals and are enforceable against Borrower. Furthermore, Borrower agrees that Lenders may convert any Loan Document into a “transferrable record” as such term is defined under, and to the extent permitted by, the UETA, with the image of such instrument in Lenders’ possession constituting an “authoritative copy” under the UETA.
(q) Single Purpose Entity. Borrower’s sole business purpose shall be to own and sell decommissioned Airframes. Borrower (i) shall conduct business only in its own name, (ii) shall not engage in any business or have any assets unrelated to decommissioned Airframes, (iii) shall not have any indebtedness other than as permitted by this Agreement and other than trade payables incurred in the ordinary course of Borrower’s business, (iv) shall have its own separate books, records, and accounts (with no commingling of assets), (v) shall hold itself out as being an entity separate and apart from any other person or entity, (vi) shall not change its name or identity unless Borrower shall have obtained the prior written consent of Lenders to such change, and shall have taken all actions necessary or requested by Lenders or the Collateral Agent to file or amend any financing statement or continuation statement to assure perfection and continuation of perfection of security interests under the Loan Documents, and (vii) shall not amend its limited liability company agreement in any way that would have a material adverse effect on its ability to own or sell the Acquired Assets or to perform its obligations under the Loan Documents unless Borrower shall have obtained the prior written consent of both Lenders to such change.
(r) Divisibility and Replacement of Notes. Any instrument representing the Loan may be divided into multiple notes or certificates in such denominations as the Lenders may request upon surrender of such instrument at the principal office of the Borrower. In case any instrument evidencing the Loan issued to the Lenders hereunder shall be mutilated, lost, stolen, or destroyed, the Borrower shall issue and deliver in exchange and substitution for, and upon cancellation of the mutilated instrument or in lieu of and substitution for the instrument lost, stolen or destroyed, a new note or other document of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Borrower of such loss, theft or destruction; the affidavit of the holder, without bond but with promise of indemnity, shall be satisfactory.
(s) Headings; Document Construction. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. This Agreement, the Note and each other Loan Document has been reviewed by all parties hereto and incorporate the requirements of such parties. Each party waives the rule of construction that any ambiguities are to be resolved against the party drafting the same and agrees such rules will not be employed in the interpretation of this Agreement, the Notes or any other Loan Document.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first set forth above.
PARK STATE BANK, a Minnesota state banking
|Address for Notices:|
1108 Nicollet Mall #210
Minneapolis, MN 55403
Attention: Mr. David Saber, President
Telephone No.: 612 ###-###-####
MINNESOTA BANK & TRUST, a Minnesota state
Eric P. Gundersen
Senior Vice President
|Address for Notices:|
9800 Bren Road East, Suite 200
Minnetonka, MN 554343
Attention: Mr. Eric P. Gundersen, SVP
Telephone No.: (952) 841-9331
|With a copy to (which shall not constitute notice or service of process):|
Fabyanske, Westra, Hart & Thomson, P.A
333 South Seventh Street, Suite 2600
Minneapolis, MN 55402
Attention: Frederick H. Ladner, Esq.
[signature page to Loan Agreement]
AirCo 1, LLC, a Delaware limited liability company
|Address for Notices:|
AirCo 1, LLC
5930 Balsom Ridge Road
Denver, North Carolina 28037
Attention: Candice Otey
Telephone No.: (828) 466-6680
|With a copy to (which shall not constitute notice or service of process):|
Winthrop & Weinstine, P.A.
225 S. 6th Street
Minneapolis, MN 55402
Attention: David E. Moran, Esq.
[Signature page to Loan Agreement]
EXHIBITS AND SCHEDULES TO LOAN AGREEMENT
FORM OF PARK STATE BANK TERM NOTE
FORM OF MINNESOTA BANK & TRUST TERM NOTE
FORM OF BORROWING BASE CERTIFICATE
CONSIGNED INVENTORY ELIGIBILITY REQUIREMENTS
|SCHEDULE 1(J)||AIRFRAME TRANSACTION DOCUMENTS|