SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT ("Agreement") dated as of August 9, 2002, by and
between FINOVA CAPITAL CORPORATION, a corporation organized and existing under
the laws of the State of Delaware ("FINOVA"), AIR 41, LLC, a limited liability
company formed under the laws of the State of Delaware ("Air 41"), AIRCORP,
INC., a Texas corporation ("Aircorp"), and INTERNATIONAL AIRLINE SUPPORT GROUP,
INC., a Delaware corporation ("IASG").
RECITALS
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(1) Pursuant to the Secured Loan Agreement, dated as of
September 16, 1998, between FINOVA and AIR 41 (the "Loan Agreement"), FINOVA
loaned to Air 41 the amount of $76,000,000.00 in order to finance, among other
things, the acquisition by Air 41 of 20 XxXxxxxx Xxxxxxx DC-9-41 Aircraft
described on Schedule A hereto (collectively, the "Aircraft");
(2) All capitalized terms used in this Agreement without
definition shall have the meanings set forth in the Loan Agreement;
(3) In order to secure the obligations of Air 41 under the
Loan Agreement:
(i) Air 41 granted to FINOVA a first priority security interest and
second priority security interest in each of six Aircraft, identified in the
Loan Agreement as the Norway Aircraft, pursuant to six first priority mortgages,
each dated September 16, 1998 and six second priority mortgages, each dated
December 8, 1998;
(ii) Air 41 granted to FINOVA a first priority security interest in the
beneficial interest of Air 41 in and to the Trust Estate, pursuant to the
Beneficial Interest Security Agreement, dated as of September 16, 1998, between
Air 41 and FINOVA, each of which Trust Estate consists of, among other things,
one of the eight Aircraft, identified in the Loan Agreement as the Sweden
Aircraft;
(iii) Air 41 granted to FINOVA a first priority security interest in each
of the six Aircraft, identified in the Loan Agreement as the Denmark Aircraft,
pursuant to six letters of indemnity, each dated September 16, 1998;
(iv) Air 41 granted to FINOVA a first priority security interest in each
of the 12 Lease Agreements, each dated September 16, 1998 and each related to
one of the six Norway Aircraft or one of the six Denmark Aircraft pursuant to 12
Collateral Assignments, each dated September 16, 1998; and
(v) Air 41 and First Security Bank, National Association (now known as
Xxxxx Fargo Bank Northwest, National Association), as owner trustee, granted to
FINOVA a first priority security interest in each of the eight Lease Agreements,
each dated September 16, 1998 and each related to one of the Sweden Aircraft
pursuant to eight Collateral Assignments, each dated September 16, 1998;
(4) In March, 1999, the Norway Aircraft were deregistered
from Norway and registered in Sweden and Air 41 subsequently granted to FINOVA a
first priority security interest in each of the six Norway Aircraft in order to
secure the obligations of Air 41 under the Loan Agreement;
(5) In order to secure the obligations of Air 41 under the
Loan Agreement Air 41 delivered to FINOVA a letter of credit, in the face amount
of $1,150,000.00, for the account of Aircorp (the "Aircorp L/C"), and a letter
of credit, in the face amount of $1,150,000.00, for the account of IASG (the
"IASG L/C," and, together with the Aircorp L/C, the "L/Cs");
(6) Pursuant to a letter agreement dated September 16, 1998,
between Air 41 and the Lessee (the "September, 1998 Letter"), the Lessee agreed,
among other things, to return each Aircraft with a minimum time remaining until
the next Heavy Maintenance Visits and to compensate Air 41 if any Aircraft is
returned with less than such minimum time remaining; with the payment of such
compensation to be made on October 1, 2002, and not later than 30 days after the
delivery of the last Aircraft returned (the "D-Check Payments");
(7) As of the date hereof, the 11 Aircraft bearing the
following manufacturer's serial numbers (the "US Aircraft") have been
de-registered from the registries of Sweden or Denmark, as the case may be, and
registered at the FAA, subject to mortgages in favor of FINOVA 47599, 47597,
47634, 47646, 47748 and 47778 (legal title to each of which is held by Air 41),
and 47633, 47747, 47750 and 47777 (legal title to each of which is held by the
Owner Trustee);
(8) In connection with the termination of the Leases in
respect of the US Aircraft, FINOVA, Air 41 and the Lessee entered into letter
agreements (the "Return Letters") under which, among other things, the Lessee
paid to Air 41 amounts (which amounts are held by FINOVA) in financial
settlement of certain return conditions of the US Aircraft.
(9) Under the Return Letter relating to the US Aircraft with
msn 47633, the Lessee paid to Air 41 the amount of approximately $1,025,000.00
(the "47633 Payout") in financial settlement of certain return conditions of
such US Aircraft, of which amount FINOVA has expended approximately $965,000.00
to make those repairs necessary to cause such US Aircraft to be in the
appropriate return condition;
(10) FINOVA intends to register the Current Scandinavian
Aircraft (as defined below) at the FAA upon the termination of the respective
Leases relating thereto and, at such time, negotiate, and enter into, letter
agreements (also "Return Letters") with the Lessee under which the Lessee may
pay additional amounts to Air 41 in financial settlement of certain return
conditions of such Aircraft.
(11) On the date hereof there is outstanding under the Loan
Agreement the aggregate amount of principal of $49,567,853.11, together with
accrued interest thereon (the "Indebtedness");
(12) As a result of the occurrence of Events of Default under
the Loan Agreement arising from, among other things, the failure of Air 41 to
make payments of principal and interest due and owing thereunder, by letter
dated April 23, 2002, FINOVA declared the entire principal of the Loan, accrued
interest thereon, and all other sums due FINOVA under the Loan Documents to be
due and payable;
(13) On May 3, 2002, FINOVA drew down the entire face amount of
the IASG L/C; and
(14) FINOVA wishes to accept all right, title and interest of
Air 41 in the Aircraft, the Leases and the other Collateral, the amount drawn
down under the IASG L/C (other than the amount of $165,000.00 to be paid to IASG
hereunder), a new letter of credit for the account of Aircorp, the D-Check
Payments to be made under the September, 1998 Letter and all payments made and
to be made under the Return Letters, including the balance of the 47633 Payout
(other than the amount of $20,000.00 thereof to be paid to IASG hereunder), in
full satisfaction of the obligations of Air 41 under the Loan Agreement and the
other Loan Documents (other than indemnification obligations) and Air 41, IASG
and Aircorp wish to consent to and acknowledges such acceptance, all in
accordance with the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the adequacy and receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. The following capitalized terms used
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herein shall have the meanings set forth below:
CURRENT SCANDINAVIAN AIRCRAFT means: (a) the six Aircraft currently
registered in Sweden, consisting of: (i) the four Aircraft, legal title to
which is held by the Owner Trustee, bearing manufacturer's serial numbers 47610,
47627, 47629 and 47779; and (ii) the two Aircraft, legal title to which is held
by Air 41, bearing manufacturer's serial numbers: 47626 and 47630; and (b) the
three Aircraft currently registered in Denmark, legal title to which is held by
Air 41, bearing manufacturer's serial numbers: 47624, 47632 and 47725.
EFFECTIVE DATE shall have the meaning set forth in Section 7(c)
hereof.
US AIRCRAFT shall have the meaning set forth in the Recital (7)
hereof.
2. ACCEPTANCE BY FINOVA. As of the Effective Date, FINOVA
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hereby accepts all right, title and interest of Air 41 in the Aircraft, the
Leases and the other Collateral, all amounts drawn down under the IASG L/C
(other than the amount of $165,000.00 to be paid to IASG hereunder), a new
letter of credit from Aircorp (as more fully described in Section 6(c) hereof),
the D-Check Payments to be made under the September, 1998 Letter and all
payments made and to be made under the Return Letters, including the balance of
the 47633 Payout (other than the amount of $20,000.00 to be paid to IASG
hereunder) (all of the above, collectively, the "Transferred Property") in full
satisfaction of all of the payment and performance obligations of Air 41 under
the Loan Agreement and the other Loan Documents, other than obligations
thereunder to indemnify FINOVA (the "Obligations").
3. CONSENT BY AIR 41. As of the Effective Date, Air 41 hereby
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consents to the acceptance by FINOVA of the Transferred Property in satisfaction
of the Obligations, and hereby acknowledges that FINOVA has a first priority
security interest in the Transferred Property, that the value of the Transferred
Property does not exceed the Indebtedness, that this Agreement shall constitute
an agreement of Air 41 after default consenting to the acceptance by FINOVA of
the Transferred Property in satisfaction of the Obligations pursuant to Revised
Section 9-620 of the Uniform Commercial Code in effect in any applicable
jurisdiction (the "UCC"), and acknowledges that FINOVA has no obligation to
dispose of any of the Transferred Property in accordance with Section 9-610 of
the UCC, and from and after the date hereof, FINOVA is free to sell, lease or
otherwise dispose of any and all of the Transferred Property unencumbered by and
free of any interest, rights, liens or claims of Air 41 therein.
4. CONSENT BY AIRCORP AND IASG. Each of Aircorp and IASG
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hereby consents to (i) the acceptance by FINOVA of the Transferred Property in
satisfaction of the Obligations; (ii) the draw down by FINOVA of the ace amount
of the IASG L/C; and (iii) the payment by FINOVA of the amounts to IASG
hereunder. Notwithstanding the foregoing, IASG and Aircorp do not release with
respect to one another and do hereby specifically preserve any and all claims
and causes of action that they may have against one another arising from or
related to the draw down by FINOVA of the face amount of the IASG L/C and the
payment by IASG of certain expenses of Air 41.
5. ASSIGNMENT OF RIGHTS. Air 41 hereby assigns to FINOVA all
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Air 41's right, title and interest in and to the September, 1998 Letter and all
Return Letters, including all amounts paid and payable by the Lessee thereunder.
6. ACTIONS TAKEN ON OR PRIOR TO THE DATE HEREOF. On or prior
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to the date hereof:
(a) Air 41 shall:
(i) execute and deliver to FINOVA seven warranty bills of sale,
each in the form of Exhibit "A" hereto, conveying to FINOVA, or to any other
Person at FINOVA's direction, title to each of the seven US Aircraft, legal
title to which is held by Air 41, and execute and cause to be filed at the FAA
an FAA Xxxx of Sale on form FAA 8030-2 with respect to each such US Aircraft;
and
(ii) cause the Owner Trustee to execute and deliver to FINOVA
four warranty bills of sale, each in the form of Exhibit "A" hereto, conveying
to FINOVA, or to any other Person at FINOVA's direction, title to each of the
four US Aircraft, legal title to which is held by the Owner Trustee, and execute
and cause to be filed at the FAA an FAA Xxxx of Sale on form FAA 8030-2 with
respect to each such US Aircraft.
(b) Air 41 shall execute and deliver to FINOVA an Assignment
and Assumption Agreement, in the form of Exhibit "B" hereto, assigning to
FINOVA, or to any other Person at FINOVA's direction, all the Lessor's interest
under the Leases relating to the US Aircraft, and shall execute and deliver to
FINOVA a letter, in form and substance acceptable to FINOVA, informing the
Lessee that Air 41 has assigned to FINOVA all its interest under each such
Lease;
(c) FINOVA shall deliver to Air 41 the Note relating to each US
Aircraft;
(d) FINOVA shall deliver to Aircorp the Aircorp L/C;
(e) Aircorp shall cause to be delivered to FINOVA a letter of
credit replacing the Aircorp L/C, in the face amount of $1,035,000.00, with an
expiration date of July 1, 2003, which FINOVA shall be permitted to draw upon on
or after May 3, 2003 and prior to the expiry date thereof, and otherwise in form
and substance, and issued by a domestic bank, satisfactory to FINOVA; and
(f) FINOVA shall pay to IASG the aggregate amount of
$185,000.00, consisting of the sum of $165,000.00 from the amount drawn under
the IASG L/C and $20,000.00 from the balance of the 47633 Payout, by wire
transfer of immediately available funds to such account as IASG may direct.
7. ACTIONS TAKEN AFTER THE EXECUTION HEREOF. At the times
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indicated below the parties hereto shall take the following actions:
(a) From and after the date hereof, Air 41 and FINOVA shall
cooperate to the extent necessary in order to facilitate the return of the
Current Scandinavian Aircraft from the Lessee, including the negotiation and
execution of Return Letters relating thereto.
(b) Promptly after the arrival of a Current Scandinavian Aircraft
in the United States in accordance with the applicable Return Letter, or after
the occurrence of a Total Loss under, and as defined in, the Lease relating to a
Current Scandinavian Aircraft.
(i) Air 41 shall, or shall cause the Owner Trustee to, execute
and deliver to FINOVA a warranty xxxx of sale, in the form of Exhibit "A"
hereto, conveying to FINOVA, or to any other Person at FINOVA's direction, title
to such Aircraft and shall, or shall cause the Owner Trustee to, execute and
cause to be filed at the FAA an FAA Xxxx of Sale on form FAA 8030-2 with respect
to each such Aircraft;
(ii) Air 41 shall execute and deliver to FINOVA an Assignment and
Assumption Agreement, in the form of Exhibit "B" hereto, assigning to FINOVA, or
to any other Person at FINOVA's direction, all the Lessor's interest under the
Lease relating to such Aircraft, including, without limitation, its interest to
any hull and war risk insurance proceeds and claims therefore, and shall execute
and deliver to FINOVA a letter, in form and substance acceptable to FINOVA,
informing the Lessee that Air 41 has assigned to FINOVA all its interest under
each such Lease; and
(iii) FINOVA shall deliver to Air 41 the Note relating to such
Aircraft;
(c) On the date (the "Effective Date") of the execution and
delivery of the documents referred to in Section 7(b) for the 20th and last
Current Scandinavian Aircraft.
(i) Air 41 shall execute and deliver to FINOVA a release, in
the for of Exhibit "D-1" hereto, and FINOVA shall execute and deliver to Air 41
a release, in the form of Exhibit "D-2" hereto;
(ii) Aircorp shall execute and deliver to FINOVA a release, in
the form of Exhibit "E-1" hereto, and FINOVA shall execute and deliver to
Aircorp a release, in the form of Exhibit "E-2"; and
(iii) IASG shall execute and deliver to FINOVA a release, in the
form of Exhibit "F-1" hereto, and FINOVA shall execute and deliver to IASG a
release, in the form of Exhibit "F-2" hereto.
8. REMARKETING. (a) FINOVA appoints Air 41 as a
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non-exclusive remarketing agent for a period of 12 months from the date hereof
to find, and conclude a binding agreement with, a purchaser or lessee of any of
the Aircraft for a sale or lease thereof by FINOVA to such purchaser or lessee.
Air 41 shall keep FINOVA reasonably informed of the marketing activities
undertaken by it (including, without limitation, furnishing monthly written
memorandum of such activities to FINOVA, participating in monthly telephone
calls with FINOVA, and providing notice of any written or oral offers received
and any potential purchasers or lessees to be contacted and of any
advertisements to be placed regarding any of the Aircraft).
(b) FINOVA may accept or reject an offer to purchase or lease
an Aircraft (or to choose from two or more competing offers to purchase or lease
an Aircraft) and the terms and provisions of any letter of intent, contract of
sale or lease agreement, in its sole and absolute discretion.
(c) Air 41 shall bear and be responsible for all its costs and
expenses incurred in connection with such remarketing of the Aircraft.
(d) Air 41 shall be paid a commission in the amount of three per
cent (3%) of the net sale proceeds or net rent of any Aircraft sold or leased by
FINOVA pursuant to an offer obtained by Air 41 in accordance with the provision
of this Section 5. Such net sale proceeds or net rent shall be determined as
the total sales proceeds or rent, less any costs or expenses (including
attorneys' fees and expenses) of FINOVA incurred in connection with such sale or
lease.
9. MISCELLANEOUS.
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(a) NOTICE. All notices required or permitted hereunder
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shall be in writing and may be either telefaxed or sent by internationally
recognized overnight courier service, addressed to Aircorp at the following
address: 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, XX 00000, and to the other
parties, at the addresses thereof set forth in the Loan Agreement, or to such
other address as either party advises the other from time to time through a
notice given in accordance with the provisions of this Section 9(a). Any notice
sent by FINOVA to Air 41 shall also be sent to each of Aircorp and IASG. Any
notice sent by either Aircorp or IASG to FINOVA shall also be sent to the other.
Any such notice shall be effective and shall be deemed to have been given, in
the case of a facsimile, upon confirmation of receipt of such facsimile by the
addressee (provided that if the date of dispatch is not a Business Day, it shall
be deemed to have been received at the opening of business on the next Business
Day), and in the case of a notice sent by courier service, when delivered
personally (provided that if delivery is tendered but refused, such notice shall
be deemed effective upon such tender).
(b) COUNTERPARTS. This Agreement may be executed in counterparts,
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and each counterpart shall be an original, and all counterparts together shall
be but one and the same Agreement.
(c) APPLICABLE LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
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NEGOTIATED AND MADE IN, AND SHALL BE GOVERNED AND INTERPRETED UNDER THE LAWS OF,
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE BY RESIDENTS THEREOF TO BE
ENTIRELY PERFORMED THEREIN.
(d) CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph
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headings used herein are for convenience only and are not a part of this
Agreement and shall not be used in construing it.
(e) SEVERABILITY. In the event that any one or more of the
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provisions of this Agreement shall be invalid, illegal or unenforceable in any
respect or in any jurisdiction, the validity, legality and enforceability of the
remaining provisions contained herein or of the same provisions in any other
jurisdiction shall not, in any way, be affected or impaired thereby.
(f) FURTHER ASSURANCES. Each party will promptly, at any time
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and from time to time, execute and deliver to each other party hereto such
further instruments and documents and take such further action as may be
required by law or as they may each reasonably request to establish, maintain
and protect their respective rights and remedies and to carry out the intent of
the parties under this Agreement, including, without limitation, the transfer of
title and the de-registration of the Current Scandinavian Aircraft upon the
termination of the respective Leases.
(g) WRITTEN CHANGES ONLY. No term or provision of this Agreement
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may be changed or waived orally, but only by an instrument in writing signed by
the parties hereto.
(h) EXCLUSIVENESS. This Agreement is the complete and exclusive
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statement of the parties hereto with respect to the subject matter hereof and
supersedes all prior oral and written communications, proposals, agreements,
representations, statements, negotiations and undertakings, whether express or
implied, between the parties hereto with respect to the subject matter hereof.
(i) TERMS AND DEFINITIONS. The terms and definitions, as
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herein contained, shall include the singular and/or plural, masculine, feminine
and/or neuter, successors and/or permitted assigns wherever the context so
requires or admits.
(j) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
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upon, and shall inure to the benefit of and shall be enforceable by the parties
hereto and their respective successors and assigns.
(k) EXPENSES. Each party hereto will bear and be responsible for
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all costs and expenses incurred or to be incurred by it in connection with this
Agreement and the transaction contemplated hereby, including but not limited to
outside legal counsel and advisors.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Settlement Agreement as of the date first
above written.
FINOVA CAPITAL CORPORATION AIR 41 LLC
By /s/ Xxxxxx X. Xxxx By: /s/Xxxxxxx X. Xxxx III
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Name: Xxxxxx X. Xxxx Name: Xxxxxxx X. Xxxx
III
Title: Vice President
Title: Manager
AIRCORP, INC.
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
By /s/ Xxxxx X. Xxxxxx By: /s/
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Xxxxxxx X. Xxxx III
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Name: Xxxxx X. Xxxxxx Name:
Xxxxxxx X. Xxxx III
Title: President Title:
President