CREDIT AGREEMENT

EXHIBIT 10.39

CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE OMITTED CONFIDENTIAL INFORMATION APPEARS ON NINE (9) PAGES OF THIS EXHIBIT.

 

CREDIT AGREEMENT

dated as of December 7, 2005

among

A IR T RAN A IRWAYS , I NC ., as Borrower,

E ACH L ENDER I DENTIFIED ON S CHEDULE 1 H ERETO , as Lenders,

and

HSH N ORDBANK AG, N EW Y ORK B RANCH , as Security Agent

 

Pre-Delivery Payment Financing

for up to Nineteen (19) Boeing model 737-7BD Aircraft

each equipped with

Two (2) CFM International model CFM56 engines

 

TABLE OF CONTENTS

 

 

 

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CREDIT AGREEMENT

T HIS C REDIT A GREEMENT (this “Agreement”), dated as of December 7, 2005, is by and among (i) A IR T RAN A IRWAYS , I NC . a Delaware corporation, (the “Borrower”), (ii) each L ENDER IDENTIFIED ON S CHEDULE 1 HERETO (“Lenders”) and (iii) HSH N ORDBANK AG, N EW Y ORK B RANCH , not in its individual capacity, except as expressly state herein, but solely as agent for the Lenders (“Security Agent”).

W I T N E S S E T H:

W HEREAS , Borrower and Airframe Manufacturer have entered into the Purchase Agreement, pursuant to which, among other things, Airframe Manufacturer agreed to manufacture and sell to Borrower, and Borrower agreed to purchase and take delivery of, among other things, nineteen (19) Boeing model 737-7BD aircraft, each equipped with two (2) CFM International model CFM56-7B20 engines, each to be delivered during the Scheduled Delivery Months (the “Aircraft”); and

W HEREAS , Borrower desires to borrow from Lenders, and Lenders desire to lend to Borrower, a portion of the non-deferrable Advance Payments (as defined in the Purchase Agreement) made or to be made by Borrower to Airframe Manufacturer in respect of the Aircraft pursuant to the Purchase Agreement.

N OW T HEREFORE , in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

1. D EFINITIONS AND C ONSTRUCTION

Except as otherwise defined in this Agreement, including its annexes, schedules and exhibits, terms used herein in capitalized form shall have the meanings attributed thereto in Annex A of the Security Agreement. Annex A of the Security Agreement also contains rules of usage that control construction of this Agreement.

2. C OMMITMENTS ; B ORROWER ’ S N OTICE OF P AYMENT D ATES ; C LOSING P ROCEDURE

(a) Subject to the terms and conditions of this Agreement, each Lender agrees to make a secured loan to the Borrower in respect of each Advance (herein called, for each Advance, a “Drawing”) on a Borrowing Date to be designated pursuant to Section 2(e) hereof, but in no event later than the Commitment Termination Date. In the case of each Lender, such Drawing shall be equal to such Lender’s Participation Percentage set forth opposite such Lender’s name in Schedule 2 hereto (as amended in accordance with the text of Schedule 2 and in a manner consistent with Schedule 4) multiplied by the amount of such Advance (for each Lender, such Lender’s “Commitment” with respect to such Advance); provided, that the aggregate amount of Drawings for all Advances to be made by any Lender shall not exceed the amount in Dollars set forth opposite such Lender’s name in Schedule 2 hereto as its Maximum Commitment (its “Maximum Commitment”). All Drawings made under this Agreement shall be evidenced in single series of Loan Certificates issued with respect to all Drawings. If any Lender shall default in its obligation to make the amount of its Commitment available pursuant to this

 

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Section 2(a) in respect of any Advance, no other Lender shall have an obligation to increase the amount of its Commitment for such Advance and the obligations of the non-defaulting Lender shall remain subject to the terms and conditions set forth in this Agreement. Without limiting the above, if the Security Agent disburses a Lender’s Commitment in relation to an Advance without first having received funds from a Lender, then that Lender hereby indemnifies Security Agent against any loss it may incur as a result of such failure to fund by that Lender.

(b) As more particularly set forth in Section 2.2 of the Security Agreement, Borrower shall execute and deliver to each Lender with appropriate insertions a Loan Certificate to evidence such Lender’s Maximum Commitment. The Loan Certificates shall be issued such that each Lender receives a Loan Certificate. Each Drawing shall be evidenced by this Agreement, the Loan Certificates, and notations made from time to time by each Lender in its books and records, including computer records. Each Lender shall record in its books and records, including computer records, the principal amount of the Drawings owing to it from time to time. Absent evidence to the contrary, each Lender’s books and records shall constitute presumptive evidence of the accuracy of the information contained therein. Failure by any Lender to make any such notation or record shall not affect the obligations of Borrower to such Lender with respect to the repayment of its Drawings.

(c) Borrower agrees to give the Security Agent at least five (5) Business Days’ prior written notice (the “Borrowing Notice”) of the Effective Date and the Borrowing Date for each Advance, which Borrowing Date shall be a Business Day not later than the Commitment Termination Date, which notice shall specify any funding instructions and shall be in substantially the form of Exhibit A.

(d) On the date of the execution and delivery of this Agreement and the satisfaction of the conditions precedent in Sections 4(a) and (b) (the “Effective Date”), Lenders shall make Drawings (subject to the limitations set forth in Section 2(a)) in respect of certain Advances which were paid by Borrower prior to the Effective Date. The proceeds of such Drawings shall be paid to Borrower to the account specified in the Borrowing Notice; provided, however, that Borrower shall remain responsible for, and shall have paid, its Cash Contribution for each Aircraft for which such Advances have been paid. On the first (1 ^st ) Business Day of each calendar month following the Effective Date (each such Business Day and the Effective Date, also referred to individually as a “Borrowing Date”) and the satisfaction (or waiver) of the conditions precedent in Section 4(b) hereof, the Lenders shall make Drawings (subject to the limitations set forth in Section 2(a)) in respect of Advances which are then due and payable by Borrower to Airframe Manufacturer. The proceeds of such Drawings shall be paid to Airframe Manufacturer (or to Borrower, if Borrower shall have paid such Advances to Airframe Manufacturer on or prior to the Borrowing Date thereof) by wire transferring (or by making other arrangements reasonably satisfactory to Security Agent and Airframe Manufacturer or Borrower (as the case may be)) such amounts to account or the accounts specified by Borrower in the applicable Borrowing Notice; provided, however, that Borrower shall remain responsible for, and shall have paid, its Cash Contribution for such Advances.

(e) If an Event of Default shall have occurred and be continuing, each Lender may cancel its Commitments, and upon notice of such cancellation to Borrower, the Commitments shall be cancelled and of no further effect. If an Event of Default under Sections 3(d), (e) or (f) of the Security Agreement shall have occurred and be continuing, the Commitments shall automatically, without any action or notice, be cancelled and of no further effect.

 

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(f) Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense (including any Break Loss) that such Lender may sustain or incur as a consequence of (a) failure by the Borrower in making a borrowing after the Borrower has given a Borrowing Notice requesting the same in accordance with the provisions of this Agreement other than as a result of a breach by such Lender to make its Commitment available pursuant to Section 2(a), (b) failure by the Borrower in making any prepayment of Loan Certificates after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Loan Certificates on a day that is not the last day of an Interest Period with respect thereto. This covenant shall survive the termination of this Agreement and the payment of the Loan Certificates and all amounts payable hereunder.

(g) The closing with respect to the financing of each Advance shall take place at the offices of Smith, Gambrell & Russell, LLP, Promenade II, Suite 3100, 1230 Peachtree Street, N.E., Atlanta, Georgia 30309.

3. L OAN C ERTIFICATES , E XPENSES , F EES AND I NCREASED C OSTS

(a) Loan Certificates . Each Loan Certificate shall bear interest and be repaid in accordance with the applicable terms of this Agreement and the Security Agreement.

(b) Transaction Expenses . As to the Drawing(s) made on the Effective Date, if the Transactions in respect of such Drawing(s) are consummated, or do not close for any reason other than a Lender’s breach of its obligations under Section 2 hereof, Borrower agrees to the pay such Lender’s and Security Trustee’s Transaction Expenses related to such Drawing(s).

(c) Upfront Fee. In consideration of the Lenders’ Commitments hereunder, Borrower shall pay to Paying Agent an amount equal to the Upfront Fee in immediately available funds on the Effective Date. Paying Agent shall distribute such fee to the Lenders pursuant to the Paying Agent Agreement.

(d) Commitment Fee. Borrower agrees to pay the Commitment Fee in arrears on the last Business Day of the calendar quarter following the Effective Date and on the last Business Day of each calendar quarter thereafter and on the Commitment Termination Date. Such Commitment Fee shall be calculated on the basis of a year of 360 days and actual number of days elapsed and shall accrue on the average daily unused portion of the aggregate Maximum Commitment during the preceding calendar quarter or part thereof. Borrower shall continue to pay the Commitment Fee until the earlier to occur of (i) the date on which the Commitments are terminated or cancelled and (ii) the Commitment Termination Date. The Commitment Fee shall be payable by Borrower to Paying Agent on the due date thereof in immediately available funds no later than 11:00 a.m., New York City time, on such date to the Payment Account. Paying Agent shall distribute the Commitment Fee when received to the Lenders pursuant to the Paying Agent Agreement. For purposes hereof, the aggregate unused Maximum Commitment of the Lenders shall be reduced by an amount equal to the amount by which (i) Borrower notifies Security Agent in writing that it wishes to reduce the aggregate unused Maximum Commitment

 

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of the Lenders (provided, the aggregate unused Maximum Commitment of the Lenders may not following any such reduction be increased) or (ii) a Lender cancels or terminates all or a portion of its Commitment pursuant to Section 2(e) hereof.

(e) Increased Costs.

(i) Borrower shall pay directly to each Lender such amounts as such Lender may determine to be necessary to compensate such Lender for any increase in costs that such Lender determines are attributable to its making or maintaining of its Commitment or the loans evidenced by its Loan Certificates or funding arrangements utilized in connection with such loans, or any reduction in any amount receivable by such Lender hereunder in respect of any of its Commitments, such loans or such arrangements (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”) and resulting from any Regulatory Change that:

(1) imposes any tax that is the functional equivalent of any reserve, special deposit or similar requirement of the sort covered by clause (2) below; or

(2) 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 Lender, or any such obligations; or

(3) imposes any other condition affecting this Agreement or its Loan Certificates (or any of such extensions of credit or liabilities) or any such obligation.

(ii) Without limiting the effect of the foregoing provisions of this Section 3(e) (but without duplication), Borrower shall pay directly to each Lender from time to time on request such amounts as such Lender shall determine to be necessary to compensate such Lender (or, without duplication, the holding company of which such Lender is a subsidiary) for any increase in costs that are attributable to the maintenance by such Lender (or any 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 (A) any Regulatory Change or (B) implementing any risk-based capital guideline or other similar requirement issued by any government or governmental or supervisory authority at the national level, of capital in respect of its Commitments or Loan Certificates or funding arrangements utilized in connection with the Loan Certificates; such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Lender (or any lending office or such bank holding company) would have achieved but for such law, regulation, interpretation, directive or request.

(iii) Each Lender shall notify Borrower of any event occurring after the date of this Agreement entitling such Lender to compensation under clauses (ii) or (iii) of this

 

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Section 3(e). Each Lender will use commercially reasonable efforts (at Borrower’s expense) to mitigate the amount of the Additional Costs associated with such event, including designating a different lending office for the Loan Certificates of such Lender affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the opinion of such Lender, result in any economic, legal or regulatory disadvantage to such Lender (other than economic disadvantages for which Borrower agrees to indemnify such Lender and which indemnity is acceptable to such Lender in its discretion acting reasonably and in good faith based on its credit assessment of Borrower). Each Lender will furnish to the Borrower an Officer’s Certificate setting forth in reasonable detail (1) the events giving rise to such Additional Costs, (2) the basis for determining and allocating such Additional Costs and (3) the amount of each request by such Lender for compensation under clauses (ii) or (iii) of this Section 3(e) (subject, however, to any limitations such Lender 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 3(e), including as provided in the last sentence of this clause (iii). Determinations and allocations by any Lender for purposes of this Section 3(e) of the effect of any Regulatory Change pursuant to clause (i) of this Section 3(e), or of the effect of capital maintained pursuant to clause (ii) of this Section 3(e), on its costs or rate of return of maintaining Loan Certificates or its funding, or on amounts receivable by it in respect of Loan Certificates, and of the amounts required to compensate such Lender under this Section 3(e), shall be conclusive absent manifest error, provided that such determinations and allocations are made on a reasonable basis and, in the case of allocations, are made fairly.

(iv) The Borrower shall not be required to make payments under this Section 3(e) to any Lender if (1) a claim hereunder arises through circumstances peculiar to such Lender and which do not affect commercial banks in the same jurisdiction generally, or (2) the claim arises out of a relocation by such Lender of its lending office (except any such relocation effected pursuant to Section 3(e)(iii)), or (3) such Lender is not seeking similar compensation for such costs from its borrowers generally in commercial equipment related loans, or (4) the claim arises as the result of any law or regulation or any interpretation, directive or request of any court or governmental or monetary authority in any jurisdiction other than an Accepted Jurisdiction.

(f) Agency Fee . On the Effective Date and on each anniversary of the Effective Date until all amounts owing hereunder have been fully repaid, Borrower shall pay to Security Agent an amount equal to the Agency Fee in immediately available funds

(g) ***

 

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Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Page 1 of 9 pages containing information redacted pursuant to a request for confidential treatment.

 

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4. C ONDITIONS

(a) Conditions Precedent to the Effectiveness of the Commitments . The effectiveness of this Agreement is subject to the fulfillment (or waiver) prior to or on the Effective Date of the following conditions precedent:

(i) Each Lender receives executed counterparts or conformed copies of the following documents and such counterparts have been duly authorized, executed and delivered by the parties thereto, are in full force and effect and are in form and substance reasonably satisfactory to Security Agent:

(1) the Holdings Guarantee;

(2) the Security Agreement;

(3) the Consent and Agreement;

(4) the Engine Consent and Agreement;

(5) the Paying Agent Agreement;

(6) the Loan Certificates; and

(7) the Remarketing Agreement.

(ii) Security Agent shall have received the following, in each case in form and substance reasonably satisfactory to Security Agent:

(1) (x) a copy of Borrower’s certificate of incorporation, by-laws, and resolutions, in each case certified by the secretary or an assistant secretary of Borrower, duly authorizing Borrower’s execution, delivery, and performance of this Agreement, the Security Agreement and each other document required to be executed and delivered by Borrower on or before each Borrowing Date in accordance with the provisions hereof and thereof; (y) incumbency certificate of Borrower as to the Person(s) authorized to execute and deliver the Operative Agreements on its behalf; and (z) good-standing certificate for Borrower for Delaware and Florida; and

(2) (x) a copy of Holdings’ articles of incorporation, by-laws, and resolutions, in each case certified by the secretary or an assistant secretary of Holdings, duly authorizing Holdings’ execution, delivery, and performance of the Holdings Guarantee required to be executed and delivered by Holdings on or before the Effective Date in accordance with the provisions hereof and thereof; (y) incumbency certificate of Holdings as to the Person(s) authorized to execute and deliver the Holdings Guarantee on its behalf; and (z) good-standing certificate for Holdings for Nevada.

 

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(iii) Lenders and Security Agent shall have received opinions addressed to the Lenders and Security Agent from (1) Borrower’s internal counsel, (2) Smith, Gambrell & Russell, LLP, special counsel to Borrower and (3) Vedder, Price, Kaufman & Kammholz, P.C., special counsel to the Lenders and Security Agent, each in form and substance reasonably satisfactory to the Security Agent.

(iv) Financing Statements related to the Collateral shall have been duly filed or shall be in the process of being filed in the appropriate jurisdiction.

(v) Paying Agent shall have received for account of the Lenders the Upfront Fee and Security Agent shall have received the payment of the Agency Fee due on the Effective Date.

(vi) Security Agent shall have received certified (but redacted) copies of (1) the provisions of the Purchase Agreement and the GTA specifically assigned to Security Agent pursuant to the terms of the Security Agreement and (2) the Back-Stop Letter.

(vii) ***

(b) Conditions Precedent to each Lender’s Participation in each Advance. Each Lender’s obligation to lend its respective Commitments to the Borrower in respect of each Advance (including Advances made by Borrower on or prior to the applicable Borrowing Date) is subject to the fulfillment (or waiver) prior to or on the Borrowing Date for such Advance of the following conditions precedent:

(i) Security Agent shall have received the Borrowing Notice with respect to the Borrowing Date for such Advance pursuant to Section 2(c) hereof.

(ii) After giving effect to the filing of the Financing Statements, the Security Agreement shall have a duly-perfected first-priority security interest in all of Borrower’s right, title, and interest in the Collateral, subject only to Permitted Liens.

(iii) No change shall have occurred after the date of the execution and delivery of this Agreement in applicable Law which would make it a violation of Law for the Lenders to make their respective Commitments for such Advance available to acquire their respective Loan Certificates or to realize the benefits of the security afforded by the Security Agreement.

(iv) On such Borrowing Date, (A) the representations and warranties of the Borrower contained in Section 5(a) of this Agreement shall be true and accurate in all material respects as though made on and as of such date except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties shall be true and accurate in all material respects on and as of such earlier date), (B) no Special Default or Event of Default exists, and (C) since June

 

***

Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Page 2 of 9 pages containing information redacted pursuant to a request for confidential treatment.

 

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30, 2005 there shall have been no Material Adverse Change with respect to the Borrower; and Security Agent shall have received an Officer’s Certificate to the effect of (A), (B) and (C).

(v) No action or proceeding shall have been instituted nor shall any action be threatened in writing before any Governmental Entity, nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Entity at the time of such Borrowing Date to set aside, restrain, enjoin or prevent the completion and consummation of this Agreement or the transaction contemplated hereby.

(vi) No material adverse change in the LIBOR market shall have occurred which would materially impair the ability of the Lenders to lend its respective Commitments to Borrower.

(vii) ***

(viii) ***

(ix) Borrower shall have paid to Airframe Manufacturer an amount equal to its Cash Contribution due and payable to Airframe Manufacturer on such Borrowing Date.

(x) In respect an Uncovered Aircraft to which such Drawings to be made on the applicable Borrowing Date relate, HSH shall have obtained an approval from its credit committee to make the secured loans contemplated hereby to be made by HSH in respect of the Advances related to the Uncovered Aircraft. The parties hereto understand and agree that this clause (x) shall not be applicable in respect of Drawings related to any Aircraft that is not an Uncovered Aircraft.

(c) Conditions Precedent to Borrower’s Obligations. It is hereby agreed that Borrower’s obligation to borrow the Commitments with respect to each Advance is subject to the satisfaction (or waiver), on or before the Borrowing Date for such Advance of the following conditions precedent:

(i) Borrower receives executed originals of the documents described in Section 4(a)(i) and such documents are reasonably satisfactory to Borrower.

(ii) Each of the conditions in Subsections (iii) and (v) of Section 4(b) are satisfied unless the failure of any such condition to be satisfied is the result of any action or inaction by Borrower.

5. R EPRESENTATIONS AND W ARRANTIES

(a) Borrower Representations and Warranties . Borrower represents and warrants to each Lender and Security Agent that on the date hereof and on each Borrowing Date:

 

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Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Page 3 of 9 pages containing information redacted pursuant to a request for confidential treatment.

 

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(i) Borrower is a corporation validly existing and in good standing under the Laws of Delaware, and has the corporate power and authority to conduct the business in which it is currently engaged and to own or hold under lease its properties and to enter into and perform its obligations under each of the Operative Agreements to which Borrower is or will be a party. Borrower is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which the nature and extent of the business conducted by it, or the ownership of its properties, requires such qualification, except where the failure to be so qualified does not constitute or would not give rise to a Materially Adverse Change to Borrower.

(ii) The execution and delivery by Borrower of, and performance by Borrower of its obligations under, the Operative Agreements to which Borrower is or will be a party have been, duly authorized by all necessary corporate action on the part of Borrower.

(iii) Borrower’s execution and delivery of, and performance of its obligations under, the Operative Agreements to which Borrower is or will be a party do not, (1) violate any provision of Borrower’s certificate of incorporation or by-laws, (2) violate any Law applicable to or binding on Borrower, or (3) violate or constitute any default under, or result in the creation of any Lien (other than as permitted under the Security Agreement) under, any lease, loan or other material agreement to which Borrower is or will be a party or by which Borrower or any of its properties is bound.

(iv) Borrower’s execution and delivery of, and performance of its obligations under, the Operative Agreements to which Borrower is or will be a party do not require the consent or approval of, the giving of notice to, the registration with, the recording or filing of any documents with, or the taking of any other action in respect of (1) any trustee or other holder of any debt of Borrower, or (2) any Governmental Entity, other than (x) the Financing Statements, and (y) filings, recordings, notices, or other ministerial actions pursuant to any routine recording, contractual, or regulatory requirements.

(v) Each of the Operative Agreements to which Borrower is or will be a party have been, duly authorized, executed, and delivered by Borrower and the Operative Agreements to which Borrower is or will be a party constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, and other similar Laws affecting the rights of creditors generally or by general principles of equity.

(vi) Except as set forth in Holdings’ most recent annual report on Form 10-K, quarterly report on Form 10-Q or current report on Form 8-K filed by with the SEC on or prior to September 30, 2005, no action, claim or proceeding is now pending or, to Borrower’s Actual Knowledge, threatened, against Borrower before any Governmental Entity, that is reasonably likely to be determined adversely to Borrower and if determined adversely to Borrower would result in a Material Adverse Change.

(vii) Holdings’ audited consolidated balance sheet for its most-recent fiscal year ended December 31, 2004, included in Holdings’ most-recent annual report on Form

 

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10-K filed by Holdings with the SEC, and the related consolidated statements of operations and cash flows for the period then ended, have been prepared in accordance with GAAP and fairly present in all material respects in accordance with GAAP the financial condition of Holdings and its consolidated subsidiaries as of such date and the results of its operations and cash flows for such period, and since the date of such balance sheet, there has been no Material Adverse Change in such financial condition or operations, except for matters disclosed in (1) the financial statements referred to above, or (2) any subsequent report filed with the SEC before September 30, 2005.

(viii) On the Borrowing Date, except for the filing of the Financing Statements, no further action, including filing or recording any document (including any financing statement under UCC Article 9) is necessary in order to establish and perfect Security Agent’s Lien on the Collateral, as against Borrower and any other Person, in any applicable jurisdictions in the United States.

(ix) Each of the Purchase Agreement and the GTA are in full force and effect and neither Borrower nor, to the Actual Knowledge of Borrower, either of the Airframe Manufacturer or the Engine Manufacturer is in default of its obligations thereunder.

(x) Neither Borrower nor any Person authorized to act on its behalf has directly or indirectly offered any beneficial interest or Security relating to the ownership of any interest in the Collateral, or any of the Loan Certificates or any other interest in or security under the Security Agreement or any other interest in or security under such Collateral, for sale to, or solicited any offer to acquire any such interest or security from, or has sold any such interest or security to, any Person in violation of the Securities Act.

(xi) Borrower holds all licenses, permits and franchises from the appropriate Government Entities necessary to authorize Borrower to engage in air transportation and to carry on scheduled commercial passenger service as currently conducted, except where the failure to hold any such license, permit, or franchise would not give rise to a Materially Adverse Change to Borrower.

(xii) Borrower is not an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940.

(xiii) No Person acting on behalf of Borrower is or will be entitled to any broker’s fee, commission, or finder’s fee in connection with the transactions contemplated by this Agreement, other than Borrower’s Advisor.

(xiv) Borrower will not directly or indirectly use any of the proceeds from the issuance of the Loan Certificates so as to result in a violation of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

(xv) None of the Reserved Provisions adversely affect in any material respect the rights assigned to Security Agent pursuant to the Security Agreement.

(xvi) The purchase price allowance granted by Engine Manufacturer to Borrower pursuant to the GTA is not assignable by Borrower to any third party and does not appear in any purchase price invoice prepared by Airframe Manufacturer for Boeing model 737 aircraft purchased by Borrower pursuant to the Purchase Agreement.

 

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(b) Lenders’ Representations and Warranties . Each Lender represents and warrants to each other Lender, Borrower and Security Agent on the date hereof and on each Borrowing Date:

(i) This Agreement has been duly authorized, executed, and delivered by it and this Agreement constitutes its legal, valid, and binding obligation enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, and other similar Laws affecting the rights of creditors generally or general principles of equity.

(ii) No Person acting on behalf of it is or will be entitled to any broker’s fee, commission, or finder’s fee in connection with the transactions contemplated by this Agreement, other than the Lenders’ Advisor.

(iii) No portion of the funds it uses to purchase, acquire and hold the Loan Certificates or interest directly or indirectly constitutes, or may be deemed under the Code or ERISA or any rulings, regulations, or court decisions thereunder to constitute, the assets of any Plan.

(c) Security Agent’s Representations and Warranties . The Security Agent represents and warrants to Borrower and the Lenders on the date hereof and on each Borrowing Date:

(i) Security Agent is a validly existing and in good standing under the Laws of the Germany and has banking and trust authority to execute and deliver, and perform its obligations under, each of the Operative Agreements to which it is or will be a party.

(ii) Each of the Operative Agreements to which Security Agent is or will be a party have been duly authorized, executed, and delivered by Security Agent and the Operative Agreements to which Security Agent is or will be a party constitute, legal, valid, and binding obligations of Security Agent enforceable against Security Agent in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, or other similar Laws affecting the rights of creditors generally or by general principles of equity.

(iii) No Liens will be attributable to Security Agent in respect of all or any part of the Collateral (other than Liens created by the Operative Agreements).

(iv) Neither Security Agent nor any Person authorized to act on its behalf has directly or indirectly offered any beneficial interest or Security relating to the Collateral or any of the Loan Certificates or any other interest in or security under the Collateral for sale to, or solicited any offer to acquire any such interest or security from, or has sold any such interest or security to, any Person.

 

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6. C OVENANTS OF B ORROWER .

(a) Liens . Borrower will not directly or indirectly create, incur, assume, or suffer to exist any Lien on or with respect to the Collateral, title thereto, or any interest of Borrower therein, except Permitted Liens. Borrower shall promptly, at its own expense, take such action as may be necessary duly to discharge (by bonding or otherwise) any such Lien other than a Permitted Lien arising at any time.

(b) Except as otherwise permitted in the Security Agreement, Borrower shall not enter into any agreement amending or supplementing the Purchase Agreement, the GTA or the Back-Stop Letter in any manner that would adversely affect in any material respect the rights of the Security Agent or the Lenders.

(c) Borrower Merger.

(i) Borrower shall not convey all or substantially all of its assets in one or a series of related transactions or consolidate with or merge into any other Person under circumstances in which Borrower is not the surviving corporation, unless, only in the case of a consolidation or merger:

(1) after giving effect to such consolidation or merger, such Person is organized, existing, and in good standing under the Laws of the United States, any state of the United States, or the District of Columbia, and, upon consummation of such transaction, such Person will be a U.S. Air Carrier; and

(2) such Person (aa) executes, prior to or contemporaneously with the consummation of such transaction, such agreements, if any, as are in the reasonable opinion of Security Agent necessary to evidence the assumption by such Person of liability for all of the obligations of the Borrower under the Security Agreement and the other Operative Documents, (bb) make such recordings and filings, and take such other action with respect to the Operative Documents, as shall be necessary in the reasonable opinion of Security Agent to protect its security interest in the Collateral and obtain all consents of Airframe Manufacturer and the Engine Manufacturer to the extent necessary; and (cc) cause to be delivered to Security Agent and the Lenders such legal opinions as any of them may reasonably request in connection with the matters specified in the preceding clauses (aa) and (bb); and

(3) such Person, immediately after giving effect to such transaction, shall have a tangible net worth of not less than (aa) Borrower’s tangible net worth (determined in each case in accordance with GAAP) as of the Effective Date or (bb) Borrower’s tangible net worth (determined in each case in accordance with GAAP) immediately prior to such transaction.

(ii) Upon any such consolidation or merger of Borrower with any Person in accordance with this Section 6(b), such Person will succeed to, and be substituted for, and may exercise every right and power of, Borrower under the Operative Agreements with the same effect as if such Person had been named as “Borrower” therein.

 

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(d) Corporate Existence, U.S. Air Carrier . Borrower shall at all times maintain its corporate existence, except as permitted by Section 6(c), and shall at all times remain a U.S. Air Carrier.

(e) Notice of Change of Location . Borrower will give to Security Agent timely written notice (but in any event at least thirty (30) days before the expiration of the period of time specified under applicable Law to prevent lapse of perfection) of any change of its jurisdiction of organization (as defined in UCC Article 9), and will promptly take any action required by Section 6(f)(2) as a result of such relocation.

(f) Certain Assurances . With respect to the Collateral:

(1) Borrower shall duly execute, acknowledge, and deliver (or cause to be executed, acknowledged, and delivered) all such further documents, and shall do and cause to be done such further things, as Security Agent reasonably requests to accomplish the purposes of the Operative Agreements, provided that any document so executed by Borrower will not expand any obligations or limit any rights of Borrower in respect of any of the Operative Agreements.

(2) Borrower will cause the Financing Statements and all continuation statements (and any amendments necessitated by any combination, consolidation, or merger of Borrower, or any relocation of its jurisdiction of organization) in respect of the Financing Statements to be prepared and duly and timely filed and recorded to the extent permitted under the UCC or similar Law of any applicable jurisdiction.

(3) Borrower shall pay all reasonable costs and expenses (including costs and disbursements of counsel) incurred by Security Agent, Paying Agent and the Lenders after the date hereof in connection with (A) any supplements or amendments of the Operative Agreements (including, without limitation, any related recording costs) (other than with respect to any supplement or amendment requested pursuant to Section 6(f)(1) above), (B) any Default, (C) any successful enforcement or collection proceedings resulting therefrom or in connection with the negotiation of any restructuring or “work-out” (whether or not consummated), or (D) the successful enforcement of this Section 6.

(g) Securities Laws . Neither Borrower nor any Person authorized to act on its behalf will directly or indirectly offer any beneficial interest or Security relating to the ownership of any interest in the Collateral or any of the Loan Certificates, for sale to, or solicit any offer to acquire any such interest or security from, or sell any such interest or security to, any Person in violation of the Securities Act or applicable state or foreign securities Laws.

(h) Aircraft Acquisition Financing . Borrower shall approach HSH and NordLB (jointly) prior to approaching any other bank or financial institution to provide HSH and NordLB (jointly) the opportunity to propose acquisition financing (lease or otherwise) terms to Borrower, which terms Borrower may accept or reject in its sole discretion.

 

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(i) Purchase Agreements . Borrower shall:

(1) duly perform all of its obligations under each of the Purchase Agreement and the GTA to the extent relating to the Aircraft against which Drawings are outstanding and take all actions necessary to keep the Purchase Agreement and the GTA to the extent relating to the Aircraft against which Drawings are outstanding in full force and effect;

(2) immediately notify Security Agent of any material default by Borrower or any material default of which Borrower has notice by Airframe Manufacturer or Engine Manufacturer under, or of any cancellation, termination or rescission or purported cancellation, termination or rescission of either the Purchase Agreement or the GTA to the extent relating to the Aircraft against which Drawings are outstanding;

(3) not in any way modify, cancel, terminate or amend either the Purchase Agreement or the GTA in respect of the Aircraft against which Drawings are outstanding, except as expressly permitted by the Security Agreement or this Agreement;

(4) not accept delivery of any Aircraft from the Airframe Manufacturer before repaying to the Lenders all amounts owing in respect of the Drawings relating to that Aircraft.

7. L ENDER C OVENANTS .

(a) Withholding Taxes . Each Lender agrees that if it is a Non-U.S. Person, to reimburse (on an After-Tax Basis) to Borrower or Paying Agent, as applicable for any amounts paid (including pursuant to obligations under any of the Operative Agreements) with respect to any United States withholding Taxes (and related interest, penalties, and additions to tax) as a result of any false, inaccurate or untrue statement in any certificate or form provided by it to Borrower or Paying Agent pursuant to Section 2.3 of the Security Agreement in connection with such withholding Taxes. Any amount payable under this Section 7(a) shall be paid within thirty (30) days after such Lender receives a written demand therefor (which shall state in reasonable detail the basis for and calculation of such claim).

(b) Compliance . Each Lender agrees that obligations and agreements under the Security Agreement and the Paying Agent Agreement which are specified to be obligations and agreements of the Lenders will apply as if it were a party to the Security Agreement and the Paying Agent Agreement.

(c) Consents . Each Lender hereby and by acceptance of a Loan Certificate covenants and agrees, for Borrower’s benefit, that it shall not unreasonably withhold, delay or condition any consent, waiver, approval or other action requested of it under the terms of this Agreement or any of the other Operative Agreements which by its terms are not to be unreasonably withheld, delayed or conditioned.

8. S ECURITY A GENT ’ S C OVENANTS

(a) Liens . Security Agent (a) will not directly or indirectly create, incur, assume, or suffer to exist any Lien attributable to it on or with respect to all or any part of the Collateral (other than Liens created by the Operative Agreements), (b) will, at its own cost and expense, promptly take such action as is necessary to discharge any such Lien attributable to Security

 

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Agent on all or any part of the Collateral, and (c) will personally hold harmless and indemnify Borrower and its Affiliates, successors, and permitted assigns, and the Collateral from and against (1) any and all Expenses, and (2) any interference with the possession, operation, or other use of all or any part of the Collateral, imposed on, incurred by, or asserted against any of the foregoing as a consequence of any such Lien.

(b) Securities Laws . Security Agent will not offer any beneficial interest or security relating to the ownership of any interest in the Collateral or any of the Loan Certificates for sale to, or solicit any offer to acquire any such interest or security from, or sell any such interest or security to, any Person in violation of the Securities Act or applicable state or foreign securities Laws.

(c) Performance of Agreements . Security Agent shall perform its obligations under the Operative Agreements in accordance with their terms.

9. A SSIGNMENT OR T RANSFER OF I NTEREST

(a) Lenders .

(i) Transfer . Subject to Sections 9(a)(ii) and (iii) below and Section 2.7 of the Security Agreement, any Lender may, at any time, with the prior written consent of Borrower (not to be unreasonably withheld), Transfer or grant participations in all or any portion of its Commitment, Loan Certificates or all or any portion of its interest in or represented by its Commitment or Loan Certificates to a Transferee; provided, that any participant in any such participations shall not have any direct rights under the Operative Agreements or any Lien on all or any part of any of the Collateral; further provided, that Borrower shall not be deemed to have unreasonably withheld its consent if (1) in Borrower’s reasonable determination, such Transfer or participation would diminish Borrower’s rights or increase Borrower’s liability or obligations or the amounts thereof (including with respect to withholding Taxes) above that which would result had any such Transfer or participation not occurred, (2) in connection with a Transfer of all or any part of its Commitment (which, for the avoidance of doubt, refers to the committed loan amounts subject to this Agreement which have not yet been drawn upon), the proposed Transferee does not have a credit rating issued by Standard & Poor’s, Moody’s or Fitch Ratings of A or better or (3) if, after giving effect to any such Transfer, there shall be more than four (4) Lenders (inclusive of HSH and NordLB) at any time (it being understood that each of HSH and NordLB shall have at least one opportunity to Transfer all or any party of its respective Commitments or Loan Certificates, unless otherwise agreed to between HSH and NordLB). In the case of any Transfer, the Transferee, by execution and delivery of a Transfer Certificate in connection with such Transfer, shall be bound by all of the covenants of the transferring Lender in the Operative Agreements.

(ii) Securities Law . Each Lender agrees that it will not Transfer any portion of its Commitment, any Loan Certificate which it holds or any interest in, or represented by, any Loan Certificate which it holds in violation of the Securities Act or any applicable state, federal or foreign securities Law.

 

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(iii) ERISA . Each Lender agrees that it will not Transfer any Loan Certificate which it holds or any interest in, or represented by, any Loan Certificate which it holds unless the proposed Transferee thereof first provides Borrower with the following:

(1) a written representation and covenant that no portion of the funds it uses to purchase and acquire such Loan Certificate or interest directly or indirectly constitutes, or may be deemed under the Code or ERISA or any rulings, regulations, or court decisions thereunder to constitute, the assets of any Plan; and

(2) a written covenant that it will not Transfer its Loan Certificate or any interest in, or represented by, any Loan Certificate unless the subsequent Transferee also makes the representation described in clause (1) of this Section 9(a)(iii) and agrees to comply with this clause (2).

(b) Transfer at Request of Borrower . In the event that Indemnified Withholding Taxes become payable by Borrower pursuant to Section 10(c)(i) hereof with respect to payments by Borrower to a Lender under a Loan Certificate or pursuant to any Operative Agreement and the elimination or sufficient reduction of such Indemnified Withholding Taxes pursuant to a transfer described in the last sentence of such Section 10(c)(i) is not accomplished, such Lender shall, upon the written request of Borrower, sell the affected Loan Certificate to a Person to which payments under the Loan Certificate would not be subject to withholding Taxes under then applicable Law for an amount which, together with any supplemental payment by Borrower in connection with such sale, shall be equal to the par value of such affected Loan Certificate plus accrued but unpaid interest thereon plus any Breakage Amount. Out-of-pocket costs and expenses, if any, (including reasonable fees and disbursements of counsel) reasonably incurred by a Lender and Security Agent in connection with any such transfer shall be for the account of Borrower.

(c) Effect of Transfer; Costs . Upon any Transfer in accordance with Section 9(a) (other than any Transfer by any Lender to the extent it only grants participations in Loan Certificates it holds or in its interest therein or represented thereby), the Transferee shall be deemed a “Lender” for all purposes of the Operative Agreements, and the transferring Lender shall be released from all of its liabilities and obligations with respect to such transferred Loan Certificate under the Operative Agreements to the extent such liabilities and obligations arise after such Transfer and, in each case, to the extent such liabilities and obligations are assumed by the Transferee; provided, that such transferring Lender (and its Affiliates, successors, assigns, agents, representatives, directors, and officers) will continue to have the benefit of any rights or indemnities under any Operative Agreement vested or relating to circumstances, conditions, acts, or events before such Transfer. The transferring Lender agrees that it shall reimburse, or shall cause the Transferee to reimburse, Borrower and Security Agent for all of their reasonable out-of-pocket costs and expenses (including reasonable fees and disbursements of counsel) incurred in connection with any such Transfer.

 

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10. I NDEMNITIES

(a) General Indemnity .

(i) Whether or not any of the transactions contemplated by this Agreement are consummated, Borrower shall indemnify, protect, defend, and hold harmless each Indemnitee from, against, and in respect of, and shall pay on an After-Tax Basis, any and all Expenses of any kind or nature whatsoever that may be imposed on, incurred or suffered by, or asserted against any Indemnitee, relating to, resulting from, or arising out of or in connection with any one or more of the following:

(1) the Operative Agreements or the enforcement of any of the terms of any of the Operative Agreements;

(2) (aa) any claim or penalty arising out of violations of applicable Laws by Borrower, and (bb) any Liens in respect of the Collateral;

(3) following delivery thereof, the Aircraft, the Airframe, any Engine or any part thereof, including with respect thereto, (aa) the manufacture, design, purchase, acceptance, nonacceptance, rejection, ownership, registration, reregistration, deregistration, delivery, nondelivery, lease, sublease, assignment, possession, use, non-use, operation, maintenance, testing, repair, overhaul, condition, alteration, modification, addition, improvement, storage, airworthiness, replacement, repair, sale, substitution, return, abandonment, redelivery, transfer of title or other disposition of the Aircraft, any Engine or any part thereof, (bb) tort liability, whether or not arising out of the negligence of any Indemnitee (whether active, passive or imputed), (cc) death or property damage of passengers, shippers, or others or (dd) environmental control, noise, or pollution; and

(4) any breach of or failure to perform or observe, or any other noncompliance with, any covenant, agreement, or other obligation to be performed by Borrower under any Operative Agreement to which it is party or the falsity of any representation or warranty of Borrower in any Operative Agreement to which it is party.

(ii) Notwithstanding anything in Section 10(a)(i), Borrower shall not be required to indemnify, protect, defend, and hold harmless any Indemnitee pursuant to Section 10(a)(i) against any Expense of such Indemnitee:

(1) for any Taxes or a loss of Tax benefit, whether or not Borrower is required to indemnify therefor pursuant to Section 10(c);

(2) to the extent attributable to any Transfer (voluntary or involuntary) by or on behalf of such Indemnitee of any Loan Certificate or interest therein, except for reasonable out-of-pocket costs and expenses incurred as a result of any such Transfer requested in writing by Borrower or made or effected pursuant to the exercise of remedies under any Operative Agreement;

(3) to the extent attributable to the gross negligence or willful misconduct of such Indemnitee or any “Related Indemnitee” (as defined at the end of this Section 10(a)(ii)) (other than gross negligence or willful misconduct imputed to such Person solely by reason of its interest in the Collateral or any Operative Agreement);

 

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(4) to the extent attributable to the incorrectness or breach of any representation or warranty, of such Indemnitee or any Related Indemnitee, contained in or made pursuant to any Operative Agreement;

(5) to the extent attributable to the failure, by such Indemnitee or any