Document:

Exhibit 10.6

 

EXECUTION COPY

	
 
    	
 
    	
 
    

 

FACILITY AGREEMENT

[Hawaiian A330 [1259]]

 

Dated as of

 

June 29, 2011

 

among

 

HAWAIIAN AIRLINES, INC.,

Borrower,

 

EACH LOAN PARTICIPANT
 IDENTIFIED ON SCHEDULE I HERETO,
 Loan Participants,

 

and

 

BANK OF UTAH,

Security Trustee

 

 

 

Norddeutsche Landesbank Girozentrale

BNP Paribas

Underwriters

	
 
    	
 
    	
 
    

 

Re: Financing of One Airbus A330-200 Aircraft

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

Confidential

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
SECTION 1
    	
CERTAIN   DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
SECTION 2
    	
THE   LOAN; BORROWER’S NOTICE OF DELIVERY DATES; CLOSING PROCEDURE
    	
2
    
	
 
    	
 
    	
 
    
	
SECTION 3
    	
LOAN   ECONOMICS
    	
5
    
	
 
    	
 
    	
 
    
	
SECTION 4
    	
CONDITIONS
    	
17
    
	
 
    	
 
    	
 
    
	
SECTION 5
    	
CLOSING   PROCEDURE
    	
23
    
	
 
    	
 
    	
 
    
	
SECTION 6
    	
EXTENT   OF INTEREST OF HOLDERS
    	
24
    
	
 
    	
 
    	
 
    
	
SECTION 7
    	
REPRESENTATION   AND WARRANTIES
    	
24
    
	
 
    	
 
    	
 
    
	
SECTION 8
    	
INDEMNITIES;   ETC
    	
29
    
	
 
    	
 
    	
 
    
	
SECTION 9
    	
COVENANTS   OF THE BORROWER
    	
38
    
	
 
    	
 
    	
 
    
	
SECTION 10
    	
NOTICES
    	
41
    
	
 
    	
 
    	
 
    
	
SECTION 11
    	
GOVERNING   LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
    	
41
    
	
 
    	
 
    	
 
    
	
SECTION 12
    	
INVOICES   AND PAYMENT OF EXPENSES
    	
42
    
	
 
    	
 
    	
 
    
	
SECTION 13
    	
SECTION 1110   COMPLIANCE
    	
43
    
	
 
    	
 
    	
 
    
	
SECTION 14
    	
CONFIDENTIALITY
    	
43
    
	
 
    	
 
    	
 
    
	
SECTION 15
    	
NONDISTURBANCE
    	
44
    
	
 
    	
 
    	
 
    
	
SECTION 16
    	
MISCELLANEOUS
    	
44
    
	
 
    	
 
    	
 
    
	
SECTION 17
    	
PATRIOT   ACT; MONEY LAUNDERING
    	
47
    
	
 
    	
 
    	
 
    
	
SECTION 18
    	
REGISTRATIONS   WITH THE INTERNATIONAL REGISTRY
    	
47
    

 

	
Schedules:
    	
 
    
	
I.
    	
Notice   and Account Information
    
	
II.
    	
Commitments
    
	
III.
    	
Tax   Provisions
    
	
3(a)(i)
    	
Amortization   Schedule (Tranche 1 Loans)
    
	
3(a)(ii)
    	
Amortization   Schedule (Tranche 2 Loans)
    
	
 
    	
 
    
	
Exhibit A
    	
-
    	
Form of   Borrowing Notice
    
	
Exhibit B
    	
-
    	
Form of   Assignment Agreement
    
	
Exhibit C
    	
-
    	
Form of   Loan Certificates
    
	
Exhibit D
    	
-
    	
Form of   Mortgage
    
	
 
    	
 
    	
 
    
	
Appendix   X
    	
-
    	
Definitions   and Rules of Usage
    

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

i

 

FACILITY AGREEMENT [Hawaiian A330 [1259]]

 

THIS FACILITY AGREEMENT [Hawaiian A330 [1259]] (this “Agreement”) dated as of June 29, 2011 among (i) Hawaiian Airlines, Inc., a Delaware corporation (the “Borrower”), (ii) each Loan Participant identified on Schedule I hereto (collectively, together with their successors and permitted assigns, the “Loan Participants”) and (iii) Bank of Utah, as Security Trustee hereunder (together with its successors hereunder in such capacity, the “Security Trustee”).

 

W I T N E S S E T H:

 

WHEREAS, certain terms are used herein as defined in Section 1 hereof; and

 

WHEREAS, the Borrower will be acquiring a certain Airbus A330-200 aircraft from the manufacturer thereof and intends to finance the payment of the purchase price therefor with, among other things, the proceeds of the loans to be made by the Loan Participants hereunder; and

 

WHEREAS, the Loan Participants are willing to make such loans on the terms and conditions provided here, including the granting to the Security Trustee of a mortgage lien on the Designated Aircraft contemporaneously with the acquisition thereof pursuant to the Mortgage and Security Agreement in substantially the form of Exhibit D hereto (prior to its execution and delivery, in the form of such Exhibit and, thereafter as executed and delivered (and thereafter supplemented), the “Mortgage”).

 

NOW THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

 

SECTION 1            Certain Definitions.

 

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 Appendix X to the Mortgage, and the rules of usage specified therein shall be applicable to this Agreement.  In addition, the following terms shall have the following meanings:

 

“Adjusted Applicable Margin” means, [**].

 

“Applicable Margin” shall be [**].

 

“Commitment Termination Date” shall be [**].

 

“Designated Aircraft” means the Airbus A330-200 aircraft bearing manufacturer’s serial number 1259 and FAA registration No. N384HA, being delivered to the Borrower under the

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

Aircraft Purchase Agreement.  From and after the Delivery Date of such aircraft, the term “Designated Aircraft” shall mean the “Aircraft” as defined in the Mortgage.

 

“Obsolete Part Amount” means [**].

 

“Participation Percentage” means, for any Loan Participant, and for the Designated Aircraft, the percentage set forth next to the name of such Loan Participant for the Designated Aircraft on Schedule II hereto, which percentage shall be applicable to each Tranche.

 

SECTION 2            The Loan; Borrower’s Notice of Delivery Dates; Closing Procedure.

 

(a)           Commitment; Loan Certificates; Special Funding Elections.

 

(i)            Subject to the terms and conditions of this Agreement, the Loan Participants severally agree to make secured loans (the “Loans”) to the Borrower in respect of the Designated Aircraft on a date to be designated pursuant to Section 2(b)(i) hereof, but in no event later than the Commitment Termination Date, in two tranches (each, a “Tranche”): (i) one tranche in an aggregate principal amount of $[**] (the “Tranche 1 Loan”) and (ii) one tranche in an aggregate principal amount of $[**] (the “Tranche 2 Loan”). The aggregate original principal amount of the Loans shall be $67,000,000.  Each Loan Participant’s funding obligation in respect of any Tranche shall be its Participation Percentage of the amount thereof (respectively, its “Tranche 1 Commitment” and its “Tranche 2 Commitment”). Each Loan Participant shall receive, as evidence of the Tranche 1 Loan and Tranche 2 Loan made by it, a Loan Certificate(s) of the applicable Type and Tranche in the amount of such Loan.

 

(ii)           The Loan Certificates shall be issued by reference to a particular “Type” and “Tranche”.  The “Type” of any Loan Certificate, designated as “Type A” or “Type B”, shall indicate whether such Loan Certificate is held by a Type A Loan Participant or a Type B Loan Participant.  The “Tranche” of any Loan Certificate, designated as “Tranche 1” or “Tranche 2”, shall indicate whether such Loan Certificate is issued in respect of a Tranche 1 Loan or a Tranche 2 Loan.  The Type and Tranche of a Loan Certificate shall be indicated on the face of such Loan Certificate.  Each Loan and the related Commitment may be designated as being of the Type and Tranche of its related Loan Certificates.

 

(iii)          Schedule I hereto sets out the Type of Loan Certificates that each Loan Participant has irrevocably elected to receive on behalf of itself and its successors and permitted assigns.  Any Loan Certificate initially issued to a Type A Loan Participant shall be and remain a Type A Loan Certificate, and any Loan Certificate initially issued to a Type B Loan Participant shall be and remain a Type B Loan Certificate, in each case, regardless of the Holder thereof.  A Loan Certificate, once issued as a particular Type, shall only be transferred, assigned and/or reissued as such Type, entitling its Holder to the

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

2

 

rights, and subjecting such Holder to the obligations, applicable to such Type only, as further set forth herein.

 

(b)           Funding Procedures.

 

(i)            In connection with the financing of the Designated Aircraft hereunder, the Borrower agrees (subject to Section 2(b)(viii) hereof) to give the Loan Participants at least three Business Days’ prior written notice (which notice, to be effective on any Business Day, must be received no later than 11:00 a.m. New York time) of the anticipated Delivery Date for the Designated Aircraft (the “Funding Date”), which date shall be a Business Day not later than the Commitment Termination Date, and which notice shall be in substantially the form of the Notice of Borrowing attached hereto as Exhibit A (the “Notice of Borrowing”).  The Notice of Borrowing shall if desired by the Borrower, identify whether the Borrower elects a Fixed Rate to be applicable to the related Loan.

 

(ii)           In order to facilitate the timely closing of the transactions contemplated hereby, the Borrower, by delivery of the Notice of Borrowing to the Loan Participants, irrevocably instructs the Loan Participants to: (A) wire transfer (for receipt by no later than 10:00 a.m. New York City time) on the Funding Date its Commitment for the Designated Aircraft by the wiring of immediately available funds (reference: Hawaiian Airlines A330-200 MSN 1259) to the account of the Security Trustee specified on Schedule I (the “Account”); (B) in the case of any Type A Loan Participant, enter into arrangements to establish its Liquidity Margin for the related Loan (if it has not already done so) and notify the Borrower thereof no later than one Business Day prior to the Funding Date; and (C) if the Borrower shall have elected a Fixed Rate, enter into a Hedge Transaction on the terms set forth herein for its portion of the Loan (if it has not already done so).

 

(iii)          The funds so paid by each such Loan Participant (the “Deposit”) into the Account are to be held by the Security Trustee for account of such Loan Participant.  Subject to paragraph (vi) below, upon the satisfaction (as determined by each Loan Participant) of the conditions precedent set forth in Section 4 hereof, such Loan Participant (or its special counsel acting on its behalf) shall instruct the Security Trustee to disburse the Deposit for application of its Commitment for the Designated Aircraft in the financing as contemplated by Section 2(c) hereof.

 

(iv)          If, for any reason, the Designated Aircraft to be financed hereunder on its Funding Date shall not be so financed, the Deposit and earnings thereon, will be invested and reinvested by the Security Trustee at the sole direction, for the account, and at the risk of the Borrower in an overnight investment selected by the Borrower and reasonably acceptable to the Loan Participants and the Security Trustee.  Upon the Borrower’s oral (to be confirmed in writing) instructions, earnings on any such

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

3

 

investments shall be applied to the Borrower’s payment obligations to each Loan Participant under this Section 2(b) to the extent of such earnings.

 

(v)           If the actual Delivery Date for the Designated Aircraft is a date falling after the Funding Date, the Borrower shall pay interest hereunder to each Loan Participant on the amount of its Deposit for the period from and including the Funding Date to but excluding the earlier of (A) the Delivery Date for the Designated Aircraft or (B) the Cutoff Date (as defined below).  For each Loan Participant, such interest shall accrue on the amount of such Loan Participant’s Commitment at the Applicable Rate established for the Loan.  Interest on the Commitments accrued pursuant to the preceding sentence shall (I) if accrued to the Delivery Date for the Designated Aircraft, be paid on the first Interest Payment Date and (II) if accrued to the Cutoff Date, be due and payable to each Loan Participant on such date.

 

(vi)          If for any reason, other than the failure of any Loan Participant to comply with the terms hereof, the Delivery Date for the Designated Aircraft shall not have occurred on or prior to [**] after the Funding Date (the “Cutoff Date”), the Borrower hereby irrevocably agrees that such Loan Participant may (and upon the written instruction of the Borrower, given any time during the period from the Funding Date to the Cutoff Date, shall) cancel, terminate or otherwise unwind its funding arrangements made in the London interbank market or otherwise to fund its Commitment on the Funding Date (including, for any Type A Loan Participant, its related liquidity arrangements) and, if applicable, such Loan Participant may cancel, terminate or otherwise unwind the related Hedge Transaction, and such Loan Participant may notify the Security Trustee thereof, and the Security Trustee shall return its Commitment for the Designated Aircraft to it, subject, however, to such Loan Participant’s continuing commitment to fund its Commitment as provided herein.

 

(vii)         In the event of the occurrence of the events described in paragraph (vi) above, the Borrower agrees to pay promptly (but in any event within [**] after the relevant Cutoff Date) any Break Amount incurred by the relevant Loan Participant (for which purpose such Loan Participant shall be deemed to have the amount of its Commitment prepaid as a funded Loan).

 

(viii)        If funds have been returned to the Loan Participants pursuant to this Section 2(b), the Borrower may schedule a new Funding Date on any date prior to the Commitment Termination Date by giving a new Notice of Borrowing pursuant to Section 2(b)(i), and the provisions of this Section 2(b) shall be applicable to such new Funding Date, including, without limitation, the right to fix the interest rate in accordance with Section 3(b)(ii).  If any Loan Participant shall fail to fund its Commitment, the Borrower shall be under no obligation to borrow any portion of the Loan (though the Borrower shall, for the avoidance of doubt, have the right to borrow any portion of the Loan funded, subject to fulfillment of the conditions precedent set forth in Section 4 or

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

4

 

the waiver thereof by the Loan Participants who have funded their Commitments) but shall be obligated to pay Break Amount and interest with respect to any amounts so funded by the Loan Participants but not borrowed by the Borrower hereunder.

 

(c)           Subject to the terms and conditions of this Agreement, and immediately prior to the transfer of title to the Designated Aircraft to the Borrower, the Borrower shall authorize the delivery and filing for record at the FAA of the Mortgage and/or the Mortgage Supplement for the Designated Aircraft once title to the Designated Aircraft shall have transferred to the Borrower.  On the Delivery Date for the Designated Aircraft specified in the Borrower’s notice referred to in Section 2(b)(i), subject to the terms and conditions of this Agreement, each Loan Participant agrees, and hereby directs the Security Trustee, to pay the amount of its Commitment for the Aircraft to the Borrower by wire transferring such amounts to the Aircraft Manufacturer’s account identified by the Borrower in the Notice of Borrowing, or to such other account as the Borrower shall direct the Security Trustee in writing, immediately prior to the transfer of title to the Designated Aircraft to the Borrower.

 

(d)           On or prior to the Funding Date, if an Event of Default shall have occurred and be continuing (i) in the case of an Event of Default described in Section 8.06 or 8.07 of the Mortgage, the Commitments shall automatically terminate (without any notice or other act by the Security Trustee or any Loan Participant) and (ii) in the case of any other Event of Default (and following the expiration of any applicable grace period therefor), the Security Trustee, acting on instruction of the Majority in Interest of Holders, may terminate the Commitments by notifying the Borrower thereof, whereupon, in the case of a Type A Loan Participant, Liquidity Break Amount, if any, shall be payable as provided in Section 3(c)(ii).

 

(e)           The closing with respect to the financing of the Designated Aircraft shall take place at the offices of Vedder Price P.C., 1633 Broadway, New York, New York 10019.

 

SECTION 3            Loan Economics.

 

(a)           Principal Amortization.

 

(i)            Tranche 1 Loans.  The Tranche 1 Loans shall amortize, and Annex A for the Loan Certificates for the Tranche 1 Loans (and the related Schedule 1 of the Mortgage Supplement for the Designated Aircraft) shall be calculated, based on a mortgage-style (level payments of principal and interest) methodology utilizing an assumed interest rate of [**] per annum (the “Benchmark Rate”) for the Loan Certificates, with the original principal amount thereof amortizing [**] on a quarterly basis in arrears on each Interest Payment Date (the first such amortizing payment to be made on the first Interest Payment Date next following the Funding Date (or Projected Funding Date, if applicable in accordance with this Section 3(a)) and the final such installment falling due on the [**]) following the Funding Date (or Projected Funding Date, if applicable in accordance with this Section 3(a)).  The Loan Participants and the

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

5

 

Borrower agree that the aggregate principal amount of each such installment shall be as set forth on the amortization schedule attached as Schedule 3(a)(i) hereto.

 

(ii)           Tranche 2 Loans.  The Tranche 2 Loans shall amortize, and Annex A for the Loan Certificates for the Tranche 2 Loans (and the related Schedule 2 of the Mortgage Supplement for the Designated Aircraft) shall be calculated, based on a mortgage-style (level payments of principal and interest) methodology utilizing the Benchmark Rate for the Loan Certificates, with the original principal amount thereof amortizing [**] on a quarterly basis in arrears on each Interest Payment Date (the first such amortizing payment to be made on the first Interest Payment Date next following the Funding Date (or Projected Funding Date, if applicable in accordance with this Section 3(a)) and the final such installment (i.e., the balloon) falling due on the [**] following the Funding Date (or Projected Funding Date, if applicable in accordance with this Section 3(a)).  The Loan Participants and the Borrower agree that the aggregate principal amount of each such installment shall be as set forth on the amortization schedule attached as Schedule 3(a)(ii) hereto.

 

The Loan Participants shall determine the Annex A for the Loan Certificates of each Tranche (and the related Schedules 1 and 2 of the Mortgage Supplement for the Designated Aircraft) on the basis specified in this Section 3(a) and shall confirm such proposed schedules with the Borrower.

 

For the avoidance of doubt, if the Funding Date occurs after the Projected Funding Date such that amortization will be calculated from the Projected Funding Date, all payments of principal and interest shall be made solely in respect of periods commencing on the Funding Date and no interest shall accrue on the Loans until from and after the Funding Date.

 

(b)           Interest.  The Borrower shall, subject to the terms and conditions of this Section 3(b), have the right to elect that the Loan bear interest either at a Floating Rate or a Fixed Rate.

 

(i)            Floating Rate.  If the Borrower shall not have notified the Loan Participants of its request, pursuant to (A) the Notice of Borrowing or (B) the Fixed Rate Notice in accordance with paragraph (ii) below, to have the Loan bear interest at a fixed rate, then the Applicable Rate for the Loan and related Loan Certificates shall be, for each Interest Period, the Floating Rate for such Interest Period.  Interest on each Loan payable by reference to the Floating Rate shall be payable quarterly in arrears on each Interest Payment Date and shall be calculated on the basis of a year of 360 days and actual number of days elapsed.

 

(ii)           Fixed Rate Setting.  The Borrower may notify the Loan Participants of its request, pursuant to the Notice of Borrowing or at any time before the date that is six months after the Funding Date, for the Loan in respect of the Designated Aircraft to bear interest at a fixed rate (a “Fixed Rate Notice”), which Fixed Rate (as

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

6

 

defined below) shall be fixed two Business Days prior to its effective date (the “Hedge Effective Date”).  Upon delivery by the Borrower of a Fixed Rate Notice to the Loan Participants, the following procedures shall apply to determine the “Fixed Rate”:

 

(1)           In the case of a Fixed Rate Notice delivered pursuant to the Notice of Borrowing, no later than 10:00 a.m. (but no earlier than 9:00 a.m.) New York time on the second Business Day prior to the Funding Date, the Loan Participants and the Borrower shall convene a conference call during which the Loan Participants will notify the Borrower of a single fixed rate of interest (without giving effect to the Applicable Margin) to be used as the basis for the calculation of the Fixed Rate for the Loan; such rate, and any other such interest rate quoted by the Loan Participants pursuant to this Section 3(b)(ii)(1) being referred to as a “Rate Quote”.  Each Rate Quote shall be agreed to by each Loan Participant and shall be quoted on a market basis as the fixed rate equivalent (calculated on a bond basis) of the Loan had the Loan been priced on the basis of the LIBOR Rate (flat) (giving effect to the anticipated amortization, maturity and Hedge Effective Date of such Loan).  The Borrower may accept or reject any such Rate Quote.  If the Borrower rejects the Rate Quote, the Loan will initially bear interest at the Floating Rate.  If the Borrower accepts such Rate Quote, the Loan Participants will advise as whether such Rate Quote is still available.  If the Loan Parties advise that it is still available, then such Rate Quote shall serve as the basis for establishing the Fixed Rate.  If such Rate Quote is not available any longer, at the request of the Borrower, the Loan Participants will furnish another Rate Quote and the above procedures will be utilized until a Rate Quote has been rejected or an accepted Rate Quote is determined by the Loan Participants to be available; provided that the Loan Participants shall not be obligated to quote more than five Rate Quotes in respect of any Fixed Rate Notice.  If the Borrower accepts any Rate Quote (by providing oral confirmation during the applicable telephone call) during such time period and such Rate Quote is advised by the Loan Participants as remaining available, such acceptance shall be binding on the Borrower, and shall be reflected on the Mortgage Supplement as provided therein.  In the event any such Rate Quote is so accepted by the Borrower, such Rate Quote plus the Adjusted Applicable Margin applicable to any Type and Tranche of the Loan shall be the “Fixed Rate” for such Type and Tranche of the Loan (subject to adjustment for the Liquidity Margin in the case of Type A Loans), effective on the Hedge Effective Date. If the Borrower does not accept any Rate Quote in accordance with the terms of this Section 3(b)(ii)(1), the Loan shall be initially funded as a Floating Rate Loan.

 

(2)           If the Loan is initially funded as a Floating Rate Loan, regardless of whether the Borrower requested a Rate Quote in the Notice of Borrowing, at any time within six months of the Funding Date, the Borrower may request that the Loan be converted into a Fixed Rate Loan so as to bear interest at

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

7

 

a fixed rate effective on any Interest Payment Date or the fifth Business Day after the Borrower’s delivery of the Fixed Rate Notice (the “Fixed Rate Conversion Date”), in each case, as the Borrower may designate in the Fixed Rate Notice and so long as the Fixed Rate Conversion Date occurs on or before the last day of such six month period (the “Fixed Rate Conversion Option”).  In order to exercise the Fixed Rate Conversion Option, subject to the other terms of this subparagraph (2), the Borrower shall furnish to the Loan Participants a Fixed Rate Notice of such exercise no later than five Business Days prior to the intended Fixed Rate Conversion Date.  No later than 10:00 a.m. (but no earlier than 9:00 a.m.) New York time on the third Business Day prior to the Fixed Rate Conversion Date, the Loan Participants and the Borrower shall convene a conference call during which the Loan Participants will notify the Borrower of a single fixed rate of interest (without giving effect to the Applicable Margin) to be used as the basis for the calculation of the Fixed Rate for the Loan; such rate, and any other such interest rate quoted by the Loan Participants pursuant to this Section 3(b)(ii)(2) being referred to as a “Conversion Rate Quote”.  Each Conversion Rate Quote shall be agreed to by each Loan Participant and shall be quoted on a market basis as the fixed rate equivalent (calculated on a bond basis) of the Loan had the Loan been priced on the basis of the LIBOR Rate (flat) (giving effect to the amortization, maturity and Fixed Rate Conversion Date of such Loan).  The Borrower may accept or reject any such Conversion Rate Quote.  If the Borrower rejects the Conversion Rate Quote, the Loan will continue to bear interest at the Floating Rate.  If the Borrower accepts such Conversion Rate Quote, the Loan Participants will advise as whether such Conversion Rate Quote is still available.  If the Loan Parties advise that it is still available, then such Conversion Rate Quote shall serve as the basis for establishing the Fixed Rate.  If such Conversion Rate Quote is not available any longer, at the request of the Borrower, the Loan Participants will furnish another Conversion Rate Quote and the above procedures will be utilized until a Conversion Rate Quote has been rejected or an accepted Conversion Rate Quote is determined by the Loan Participants to be available; provided that the Loan Participants shall not be obligated to quote more than five Conversion Rate Quotes in respect of any Fixed Rate Notice.  If the Borrower accepts any Conversion Rate Quote (by providing oral confirmation during the applicable telephone call) during such time period and such Conversion Rate Quote is advised by the Loan Participants as remaining available, such acceptance shall be binding on the Borrower and such Conversion Rate Quote shall be promptly confirmed to the Borrower in writing by the Loan Participants.  In the event any such Conversion Rate Quote is so accepted by the Borrower, such Conversion Rate Quote plus the Adjusted Applicable Margin applicable to any Type and Tranche of the Loan shall be the “Fixed Rate” for such Type and Tranche of the Loan (subject to adjustment for the Liquidity Margin in the case of Type A Loans), effective on the Fixed Rate Conversion Date, and the Borrower and the Security Trustee shall execute and deliver a supplement to the Mortgage

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

8

 

specifying the Fixed Rate applicable to each Tranche and Type of Loan Certificates; provided that if the Fixed Rate Conversion Date is not an Interest Payment Date, the Borrower shall compensate each Loan Participant for any LIBOR Break Amount.  If the Borrower does not accept any Conversion Rate Quote in accordance with the terms of this Section 3(b)(ii)(2), the Loan shall remain a Floating Rate Loan. No Fixed Rate Notice may be furnished if a Special Default shall have occurred and be continuing.

 

(3)           For the avoidance of doubt, the Fixed Rate applicable to the Type A Loans and the Type B Loans will vary as a consequence of the different Applicable Margin applicable to each Type.  In addition, insofar as the Liquidity Margin will be different for each Tranche of Type A Loans, the Fixed Rate for the different Tranches of Type A Loan will vary.

 

(4)           The Borrower understands and acknowledges that in order to provide any Fixed Rate the Loan Participants may be entering into one or more interest rate swaps or other hedging transactions (which may be effected internally or externally), and that it has assessed the risks (including but not limited to risks in relation to any Hedge Breakage Loss), benefits and consequences of obtaining a fixed interest so as to procure a fixed rate funding. The Borrower confirms that it is solely responsible for any decision to select a Fixed Rate, having relied on its own independent business judgment and advisers in connection with the Agreement.

 

(iii)          Fixed Rate.  If the Applicable Rate for the Loan Certificates and the Loan is a Fixed Rate:

 

(1)           Interest on the Loan shall be payable quarterly in arrears on each Interest Payment Date and shall be calculated on the basis of a year of 360 days consisting of 12 30-day months.

 

(2)           The Fixed Rate on a Fixed Rate Loan shall be subject to adjustment as provided in clause (v) below.

 

(3)           On the date of (i) any prepayment of Loan Certificates pursuant to the Mortgage or (ii) any acceleration of Loan Certificates pursuant to the Mortgage, the Borrower will request that each Loan Participant advise the Security Trustee and the Borrower by 11:00 a.m., New York time, on such date of the Hedge Break Amount applicable to such event.

 

(4)           Each Loan Participant agrees that, so long as no Event of Default shall have occurred and be continuing, it shall promptly pay to the Borrower at such account as the Borrower may specify any Hedge Breakage Gain in respect of the Loan Certificates (or its related Commitment), except that it may

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

9

 

first deduct therefrom any amounts then due and owing to it or the other Loan Participants under the Operative Documents and apply any amount so retained to the satisfaction thereof.  Each Holder may retain any Hedge Breakage Gain that arises after the occurrence of an Event of Default as security for the obligations of the Borrower until the earlier of (i) the date that such Event of Default is cured by the Borrower, promptly following which date such amount shall be paid over to the Borrower, or (ii) the date that Section 9.07 of the Mortgage shall be applicable, promptly following which date such amounts shall be remitted to the Security Trustee for application as provided in such Section 9.07.  For the avoidance of doubt, Hedge Breakage Gains, if any, shall be due and payable to the Borrower on the date that at any Break Amount is otherwise due and payable to the Loan Participants.

 

(5)           Upon the request of the Borrower, each Loan Participant shall provide a good faith written estimate of the Hedge Breakage Loss or Hedge Breakage Gain, as the case may be, in connection with the occurrence, or anticipated occurrence, of any event contemplated by the Operative Documents that might give rise to an obligation to pay Hedge Breakage Loss or to receive Hedge Breakage Gain.

 

(6)           Upon determination by a Loan Participant of any Hedge Breakage Loss or Hedge Breakage Gain payable to or by it, as the case may be, such Loan Participant will provide to the Borrower a certificate, certifying such Hedge Breakage Loss or Hedge Breakage Gain, which certified amount shall be determined in accordance with the procedures set out in the definition of “Hedge Break Amount”.

 

(iv)          Margin Adjustment.

 

(1)           The Applicable Margin is subject to adjustment for each Loan Participant to preserve such Loan Participant’s net return on capital based on its internal risk models if and to the extent the Aircraft is reregistered outside of an Approved Country (as defined below) and the resulting security package fails to provide (i) to the Security Trustee the same degree and quality of security as available under the law of an Approved Country and (ii) to such Loan Participant the Basel II treatment and the Basel III treatment (each as internally determined in good faith by such Loan Participant) required to support the internal risk “score” or “risk-model” pricing allowance afforded by such resulting security package.  Any determination of a need for such an adjustment shall be communicated to the Security Trustee and the Borrower promptly following notice by the Borrower of any such reregistration (either proposed or actual) and shall be effective immediately upon such reregistration.  The determination of any such adjustment by a Loan Participant (including as to its internal modeling and

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

10

 

Basel II and/or Basel III application) shall be conclusive absent manifest error.  Any such adjustment may be to increase or to decrease the Applicable Margin, and the Loan Participants agree to recalculate any applicable adjustment at the time of any reregistration; provided that the Applicable Margin shall automatically revert to the original “Applicable Margin” hereunder in the event the Designated Aircraft is reregistered in an Approved Country.  “Approved Country” means the United States.

 

(2)           A Loan Participant intending to make a claim for an Applicable Margin adjustment pursuant to Section 3(b)(iv)(1) shall, within 30 days after receipt of written notice of any proposed or actual reregistration, provide written notice to the Security Trustee and the Borrower in writing of the event by reason of which it is entitled to do so (the “Adjustment Notice”); provided, that: (x) the Adjustment Notice shall describe the events giving rise to such adjustment, the basis for determining such adjustment and the amount thereof, together with a statement that the determinations made in respect of such adjustment comply with the provisions of this Section 3(b)(iv); and (y) such Loan Participant shall not be required to disclose any confidential information relating to the organization of its affairs, or its capital structure or return on capital.

 

(v)           Fixed Rate Adjustment.  If the Loan Certificates and the Loan shall bear interest at a Fixed Rate, such rate shall be as provided in the definition of Fixed Rate, adjusted automatically by the amount of any increase or decrease of the Applicable Margin as determined pursuant to clause (iv) above (adjusted for bond basis).  Any adjustment effected by the preceding sentence shall be calculated by the Loan Participants, shall be notified promptly to the Security Trustee and the Borrower, and such calculation shall be conclusive absent manifest error.

 

(vi)          Past Due Interest.  Overdue payments of principal of any Tranche and Type of Loan (and to the extent permitted by applicable law, past due payments of interest and other amounts due under the Operative Documents) shall bear interest at the Past Due Rate, payable on demand.

 

(c)           Liquidity Costs.

 

(i)            [**].

 

(ii)           [**].

 

(d)           Structuring Fees.  The Borrower agrees to pay to, or for account of, the Underwriters the structuring fee as specified in the Structuring Fee Letter.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

11

 

(e)                                  Commitment Fees.  The Borrower agrees to pay a commitment fee to the Underwriters and their permitted transferees in the amounts, on the dates and subject to the conditions as set forth in the Fee Letter.

 

(f)                                    Security Trustee Fee.  The Borrower agrees to pay to the Security Trustee the up-front and annual fee of the Security Trustee as separately agreed between the Borrower and the Security Trustee.

 

(g)                                 LIBOR Break Amounts.  The Borrower shall compensate each Loan Participant, upon written request by that Loan Participant (which written request shall set forth in reasonable detail the basis for requesting such amount), for all LIBOR Break Amount (as defined below) incurred or deemed incurred by such Loan Participant as a result of:

 

(i)                                     funding, or making arrangements to fund, its participation in the Loan requested by the Borrower in the Notice of Borrowing but not made for any reason (other than by reason of default by that Loan Participant alone);

 

(ii)                                  the Loan (or part of the Loan) being repaid on a date other than an Interest Payment Date; or

 

(iii)                               the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment given by the Borrower.

 

For the purpose of this Agreement, “LIBOR Break Amount” hereunder shall be equal to the excess, if any, of (i) the amount of interest that otherwise would have accrued on the principal amount so paid, prepaid or not borrowed for the period from the date of such payment, prepayment or failure to borrow to the last day of the then current Interest Period for such Loan Participant’s Loan in respect of the Designated Aircraft (or, in the case of a failure to borrow, the Interest Period for the Loan that would have commenced on the date specified for such borrowing) at the applicable LIBOR rate over (ii) the amount of interest that otherwise would have accrued on such principal amount at a rate per annum equal to the interest component of the amount the applicable Loan Participant would have bid in the London interbank market for Dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by such Loan Participant).  For the avoidance of doubt, the calculation of LIBOR Break Amount shall not include any compensation for lost margin or profit.

 

(h)                                 Liquidity Break Amount.

 

(i)                                     Subject to Section 3(i) below, the Borrower shall compensate each [**].  For the purpose of this Agreement, [**] hereunder shall be equal to the cumulative amount of the present values of the interest amount for each (whole or partial) Interest Period relating to such Tranche as to which a Liquidity Margin applies and which succeeds the date of such Liquidity Event, calculated at a per annum rate equal to the

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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Liquidity Reserve Differential that would have accrued and been payable on the last day of such Interest Period on the amount so prepaid or Commitment cancelled in respect of such Tranche through the Maturity Date for such Tranche (taking into account (A) in the case of prepayment in full of the Loan, the scheduled amortization of the Loan in accordance with Section 3(a) hereof, and (B) in the case of a partial prepayment of the Loan, the application of such partial prepayments of the Loan in the inverse order of maturity).  The present value factor used in the making of the calculation required in the immediately preceding sentence shall be the interest rate customarily utilized by the Treasury (or comparable) desk of the applicable [**] for such purpose.  Any calculation by an affected [**] of Liquidity Break Amount, including the Liquidity Reserve Differential, shall be conclusive (and without the necessity for such [**] to disclose the manner or inputs for its determining the same); provided, that each affected [**] will furnish to the Borrower a certificate stating that Liquidity Break Amount has been incurred and listing the Liquidity Break Amount.  The delivery of such certificate shall be deemed a certification by such [**] that the determinants for calculating the Liquidity Reserve Differential were based on its Treasury (or comparable) desk’s assessed liquidity costs as at the applicable dates and that the calculation thereof was made on a non-discriminatory basis and in accordance with this provision and the definition of Liquidity Reserve Differential; there will be no further calculation or disclosure of refinancing practice in order to evidence or verify the actual liquidity breakage losses.  If the Liquidity Reserve Differential is a negative number, then neither the [**] nor the Borrower shall have any obligation under this Section 3(h).  Interest calculated as aforesaid shall be computed on the basis of a year of 360 days and actual number of days elapsed.  As amongst the [**], insofar as the Liquidity Break Amount is calculated on the weighted average of their individual Liquidity Margins, the Liquidity Break Amount payable to each [**] shall be paid to them on the basis of their individual Liquidity Margins, and the Security Trustee agrees to make payments on account of the Liquidity Break Amount to each [**] accordingly.

 

(ii)                                  On the date of (A) any prepayment of Loan Certificates pursuant to the Mortgage or (B) any acceleration of Loan Certificates pursuant to the Mortgage, the Borrower will request that each [**] advise the Security Trustee and the Borrower by 11:00 a.m., New York time, on such date of the Liquidity Break Amount applicable to such event.

 

(i)                                     Right of Repayment and Cancellation in Relation to a Single Loan Participant. If:

 

(1)                                  any sum payable to any Loan Participant by the Borrower is required to be increased under paragraph (d) of Schedule III hereto (other than in respect of Excluded Taxes subject to paragraph (d)(iii) of Schedule III); or

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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(2)                                  any Loan Participant claims indemnification from the Borrower under Section 8(c) hereof or the Borrower is required to repay or prepay the Loans of an Impaired Loan Participant in accordance with Section 8(d), or

 

(3)                                  any Type B Loan Participant seeks payment of the Market Disruption Floating Interest Rate or the Market Disruption Fixed Interest Rate after the occurrence of a Market Disruption Event;

 

then the Borrower may, while the circumstance giving rise to the requirement or indemnification continues, upon not less than five Business Days’ irrevocable prior notice to the Security Trustee and such Loan Participant either (1) cancel the commitment of that Loan Participant and repay that Loan Participant’s Loans together with accrued Commitment Fee, if any, accrued interest thereon, Break Amount, if any, and such Loan Participant’s allocable share of all other amounts due and owing by the Borrower under the Operative Documents or (2) cause that Loan Participant to transfer its Loans, Commitments and other rights and obligations hereunder to a transferee designated by the Borrower and permitted under Section 16(c) for a purchase price equal to the outstanding amount of principal owed to such Loan Participant as of the relevant date of transfer together with any accrued and unpaid Commitment Fee, accrued interest and Break Amount thereon.  In the case of any prepayment effected pursuant to clause (1) or (2) of this Section 3(i) in respect of the Break Amount payable to any [**] in association therewith, [**] of the component thereof constituting Liquidity Break Amount shall be payable to such [**].

 

(j)                                     Yield Protection.

 

(i)                                     If with respect to any Interest Period relating to any Tranche of any [**]:

 

(1)                                  the [**], each acting reasonably and in good faith, determine (which determination shall be binding and conclusive on all parties) that, by reason of circumstances affecting the London interbank market, adequate and reasonable means do not exist for ascertaining the LIBOR rate for such period; or

 

(2)                                  any [**], acting reasonably and in good faith, advises the Borrower and the Security Trustee that LIBOR as determined in accordance with the definition thereof will not adequately and fairly reflect the cost to such [**] of maintaining or funding its [**] in line with prudent banking practice for such Interest Period; provided, that such inadequacy is the result of circumstances affecting the relevant interbank market generally and is not directly and solely the result of a deterioration in the financial condition of such [**],

 

(each, a “Market Disruption Event”), then so long as such circumstances shall continue, the portion of the Loan that relates to such [**] shall bear interest, for each Interest Period of the

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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related Tranche 1 and Tranche 2 (A) in the case of a Floating Rate Loan, at the Market Disruption Cost of Funds applicable to the Type B Loan Participants, plus the Applicable Margin (applicable to [**] of each Tranche) (the “Market Disruption Floating Interest Rate”) and (B) in the case of a Fixed Rate Loan, at the Fixed Rate applicable to each Tranche of the [**] plus an amount equal to the difference of (I) the Market Disruption Cost of Funds, minus (II) LIBOR for such Interest Period (the “Market Disruption Fixed Interest Rate”).

 

(ii)                                  If the provisions of this Section 3(j) are applicable, then each affected [**] shall report, as provided in paragraph (iv) below, to the Security Trustee and the Borrower its cost of funding its share of the [**] for such Interest Period ), expressed as a percentage rate per annum, and, based on the report of each such [**] as to such cost of funds, the Security Trustee shall calculate the weighted average thereof.  Promptly following the calculation of such weighted average, the Security Trustee shall advise the Borrower and the each of the affected Type B Loan Participants thereof (which weighted average shall be the “Market Disruption Cost of Funds”) and the Market Disruption Cost of Funds shall be applicable to each of the affected Type B Loan Participants.

 

(iii)                               The report by any Type B Loan Participant to the Security Trustee and the Borrower of its cost of funds for any Interest Period shall be conclusive, absent manifest error, and shall constitute a certification by such Type B Loan Participant that the interest rate so provided is an accurate, fair and non-discriminatory calculation of its Treasury (or comparable) desk’s assessed funding costs for such period and that such Type B Loan Participant is, to the extent it is entitled to do so, generally charging its borrowers similarly situated with the Borrower such market disruption costs.

 

(iv)                              If the provisions of this Section 3(j) are applicable, each affected Type B Loan Participant shall report to the Security Trustee and the Borrower its cost of funds for each affected Interest Period as soon as practicable and, in any event, prior to the first day of such Interest Period (or promptly thereafter under circumstances where such costs of funds are generally not available to lenders similarly situated to any affected Type B Loan Participant); provided that if any affected Type B Loan Participant is not able to obtain deposits in the London interbank (or other relevant) market matching such Interest Period, notice of its cost of funds rate shall be provided as follows:  (i) prior to the first day of such Interest Period (or promptly thereafter under circumstances where such costs of funds are generally not available to lenders similarly situated to any affected Type B Loan Participant), such Type B Loan Participant shall provide to the Security Trustee and the Borrower an approximation of the cost to such Type B Loan Participant of such funding for such Interest Period; and (ii) prior to the last day of such Interest Period (or earlier, to the extent practicable if deposits of a duration longer than one day are obtained), such Type B Loan Participant shall provide to the Security Trustee and the Borrower the actual cost to such Type B Loan Participant of such funding for such Interest Period.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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(v)                                 Notwithstanding Section 2.04 of the Mortgage (or any other provision in the Operative Documents requiring that interest be paid on a pro rata basis), in respect of each Interest Period of the related Tranche with respect to which a Market Disruption Event shall be applicable, the Security Trustee shall pay to each affected Type B Loan Participant of such Tranche from the funds provided by the Borrower pursuant to the preceding clause (ii) interest on the portion of the Loan that relates to the Type B Loan Certificate of such Tranche held by such Type B Loan Participant at the Market Disruption Floating Interest Rate applicable to such Type B Loan Participant or the Market Disruption Fixed Interest Rate applicable to such Type B Loan Participant, as the case may be, provided in clause (i) above for such Type B Loan Participant.

 

(vi)                              All amounts payable under this Section 3(j) shall be calculated on the basis of a year of 360 days and actual number of days elapsed.

 

(vii)                           Upon any Type B Loan Participant affected by a Market Disruption Event confirming to the Security Trustee and the Borrower that the event(s) giving rise to such Market Disruption Event have ceased, the rate of interest applicable to such Type B Loan Participant’s Type B Loans will revert to such rate of interest immediately in effect prior to the occurrence of such Market Disruption Event.

 

(k)                                  Alternative Basis.  If a Market Disruption Event occurs and the Type B Loan Participants or the Borrower so requires, the Type B Loan Participants and the Borrower shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing on a substitute basis for determining the rate of interest payable in respect of Type B Loan Certificates, provided that any alternative basis agreed shall, with the prior consent of each affected Type B Loan Participant and the Borrower, be binding on all parties.  If within such 30 day period each of the affected Type B Loan Participants and the Borrower  agree upon a substitute basis for determining the rate of interest payable in respect of Type B Loan Certificates, such alternative basis shall be retroactive to and effective from the first day of the applicable Interest Period until and including the last day of such Interest Period.  For the avoidance of doubt, during any such period of negotiation, the Borrower shall be required to perform its obligations under the preceding Section 3(j).  Upon any Type B Loan Participant affected by a Market Disruption Event confirming to the Security Trustee and the Borrower that the event(s) giving rise to such Market Disruption Event have ceased, the alternative rate of interest applicable to such Type B Loan Participant’s Type B Loans will revert to such rate of interest immediately in effect prior to the occurrence of such Market Disruption Event.

 

(l)                                     Manner of Payment.  All amounts payable by the Borrower under this Agreement shall be payable without setoff or counterclaim in immediately available funds to the Person entitled thereto, and to such Person’s account specified on Schedule I or as otherwise directed.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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SECTION 4                                   Conditions.

 

(a)                                  Conditions Precedent to the Effectiveness of the Commitments.  It is agreed that the respective Commitments of each Loan Participant in respect of the Designated Aircraft and the effectiveness of this Agreement is subject to the satisfaction of the following conditions precedent:

 

(i)                                     The following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to each Loan Participant and shall be in full force and effect and executed counterparts shall have been delivered to each Loan Participant and its counsel:

 

(1)                                  this Agreement;

 

(2)                                  the Mortgage;

 

(3)                                  the Fee Letter; and

 

(4)                                  the Structuring Fee Letter.

 

(ii)                                  Each Loan Participant shall have received the following, in each case in form and substance satisfactory to it:

 

(1)                                  a certified copy of the Certificate of Incorporation and Bylaws of the Borrower and a copy of resolutions (or minutes of a meeting containing such resolutions) of the board of directors of the Borrower or the executive committee thereof, certified by the Secretary or an Assistant Secretary of the Borrower, duly authorizing the execution, delivery and performance by the Borrower of this Agreement, the Mortgage and each other document required to be executed and delivered by the Borrower on the Delivery Date in accordance with the provisions hereof and thereof;

 

(2)                                  a certificate of the Borrower as to the person or persons authorized to execute and deliver this Agreement, the other Operative Documents, and any other documents to be executed on behalf of the Borrower in connection with the transactions contemplated hereby and as to the signature of such person or persons;

 

(3)                                  an incumbency certificate of the Security Trustee as to the person or persons authorized to execute and deliver this Agreement, the Mortgage, and any other documents to be executed on behalf of the Security Trustee in connection with the transactions contemplated hereby and the signatures of such person or persons;

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

17

 

(4)                                  a copy of the resolutions of the board of directors of the Security Trustee, certified by the Secretary or an Assistant Secretary of the Security Trustee, duly authorizing the transactions contemplated hereby and the execution and delivery of each of the documents required to be executed and delivered on behalf of the Security Trustee in connection with the transactions contemplated hereby; and

 

(5)                                  a copy of the articles of association of the Security Trustee, each certified by the Secretary or an Assistant Secretary of the Security Trustee.

 

(iii)                               Such Loan Participant shall have received such further “KYC” requirements from the Borrower as it shall require to comply with its internal procedures.

 

(iv)                              The Borrower shall have paid, or made arrangements with such Loan Participant to pay, all fees, costs and expenses of such Loan Participant and the Security Trustee that are then due and payable in accordance with Section 12, the Fee Letter and the Structuring Fee Letter.

 

(v)                                 On the date hereof, no event shall have occurred and be continuing which constitutes (or would, with the passage of time or the giving of notice or both, constitute) an Event of Default.

 

(vi)                              As of the date hereof, no Material Adverse Change has occurred since December 31, 2010 and is continuing.

 

By their execution hereof, each Loan Participant certifies that all of the conditions precedent set forth in this Section 4(a) have been satisfied and that such Loan Participant’s Commitment and this Agreement have become effective as of the date hereof.

 

(b)                                 Conditions Precedent to such Loan Participants’ Participation in the Designated Aircraft.  It is agreed that the respective obligations of each Loan Participant to lend its Commitment to the Borrower in respect of the Designated Aircraft and Tranche is subject to the effectiveness of this Agreement under Section 4(a) and the satisfaction prior to or on the Delivery Date for the Designated Aircraft of the following conditions precedent:

 

(i)                                     Such Loan Participant shall have received the Notice of Borrowing (or shall have waived such notice either in writing or as provided in Section 2).

 

(ii)                                  No change shall have occurred after the date of the execution and delivery of this Agreement in applicable law or regulations thereunder or interpretations thereof by appropriate regulatory authorities which, in the reasonable opinion of such Loan Participant would make it a violation of law or regulations for such Loan Participant to make its Commitment for the Designated Aircraft available to acquire its Loan Certificate(s) or to realize the benefits of the security afforded by the Mortgage.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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(iii)                               On the Delivery Date of the Designated Aircraft, (A) (x) unless the Type A Loan Participants have previously established the Liquidity Margin pursuant to Section 3(c)(ii), the Type A Loan Participants are able to access U.S. dollars in the LIBOR or other applicable financial markets so as to fund (and to finance) their respective Loan to be made on such date to the Maturity Date and (y) the Type B Loan Participants are able to access U.S. dollars in the LIBOR or other applicable financial markets so as to fund (and to finance) their respective Loan to be made on such date to the succeeding Interest Payment Date and (B) no Material Adverse Change has occurred since December 31, 2010 that is continuing.

 

(iv)                              (x) each Underwriter shall have received its installment of the structuring fee specified in Section 3(d) in accordance with the terms of the Structuring Fee Letter, (y) the Security Trustee shall have received its fee specified in Section 3(f) in accordance with the terms of the agreement between the Security Trustee and the Borrower and (z) the Borrower shall have paid, or made arrangements with such Loan Participant to pay, all other fees, costs and expenses of such Loan Participant and the Security Trustee that are then due and payable in accordance with Section 12, if any.

 

(v)                                 The following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall each be satisfactory in form and substance to such Loan Participant and shall be in full force and effect and executed counterparts shall have been delivered to such Loan Participant and its counsel, provided that only such Loan Participant shall receive an executed original of its Loan Certificate(s) to be issued to it:

 

(1)                                  the Mortgage Supplement covering the Designated Aircraft and dated the Delivery Date for the Designated Aircraft;

 

(2)                                  the Loan Certificates for such Tranche, with Annex A for each Loan Certificate (and the related Schedule 1 of the Mortgage Supplement for the Designated Aircraft) duly completed (which Annex A and related Schedule 1 shall be prepared by the Loan Participants) as provided in Section 3(a) hereof;

 

(3)                                  the Consent and Agreement in respect of the Designated Aircraft;

 

(4)                                  the Engine Consent and Agreement in respect of the Engines installed on the Designated Aircraft at Delivery thereof;

 

(5)                                  copies of the Warranty Bill of Sale and FAA Bill of Sale for the Designated Aircraft; and

 

(6)                                  a copy of that portion of the Aircraft Purchase Agreement certified by a Responsible Officer of the Borrower as being a true and accurate

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

19

 

copy of the same that relates to the Assigned Warranties and the related obligations of the Borrower or a successor in interest to the Borrower which has the right to exercise any such warranty.

 

(vi)                              A Uniform Commercial Code financing statement or statements covering all the security interests created by or pursuant to the granting clause of the Mortgage that are not covered by the recording system established by the Federal Aviation Act shall have been authorized by the Borrower, and such financing statement or statements shall have been duly filed in all places deemed necessary or advisable in the opinion of counsel for the Loan Participants, and any additional Uniform Commercial Code financing statements deemed advisable by such Loan Participant shall have been authorized by the Borrower and duly filed and all other action shall have been taken as is deemed necessary or advisable, in the opinion of counsel for the Loan Participants, to establish and perfect the Security Trustee’s security interest in the Designated Aircraft.

 

(vii)                           All appropriate action required to have been taken by the Federal Aviation Administration, or any governmental or political agency, subdivision or instrumentality of the United States, on or prior to the Delivery Date for the Designated Aircraft in connection with the transaction contemplated by this Agreement shall have been taken, and all orders, permits, waivers, authorizations, exemptions and approvals of such entities required to be in effect on the Delivery Date in connection with the transaction contemplated by this Agreement shall have been issued, and all such orders, permits, waivers, authorizations, exemptions and approvals shall be in full force and effect on the Delivery Date.

 

(viii)                        On the Delivery Date for the Designated Aircraft, after giving effect to the filing with the FAA of the documents to be filed with the FAA and the Uniform Commercial Code financings statements referred to in paragraph (v) above and the registration of the international interests of the Security Trustee in the Airframe and each Engine with the International Registry, the following statements shall be true, and such Loan Participant shall have received evidence satisfactory to it (including a printout of the “priority search certificates” (as defined in the Regulations for the International Registry) from the International Registry relating to the Designated Aircraft (and the constituent Airframe and Engines), provided that such “priority search certificates” shall be provided promptly after the delivery of the Aircraft by Aircraft Manufacturer to the Borrower) to the effect that:

 

(1)                                  the Borrower has good title to the Designated Aircraft, free and clear of Liens other than (subject to filing and recording of the FAA Bill of Sale with the FAA if the Borrower does not already own the Designated Aircraft) the mortgage and security and international interests created by the Mortgage and the Mortgage Supplement for the Designated Aircraft;

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

20

 

(2)                                  the FAA Bill of Sale, the Mortgage and the Mortgage Supplement for the Designated Aircraft have been duly filed with the FAA for recordation (or are in form suitable for recordation and are in the process of being so filed for recordation) and there exist no Liens of record on the Designated Aircraft prior to the Lien of the Mortgage;

 

(3)                                  the international interest of the Mortgage Supplement with respect to the Airframe and Engines associated with the Designated Aircraft shall have been registered with the International Registry (or arrangements satisfactory to the Security Trustee for such registration immediately upon delivery shall have been made), and there exists no registered international interest on the International Registry prior to such international interest;

 

(4)                                  the Designated Aircraft has an export certificate of airworthiness issued by the DGAC (and such Loan Participant shall have received copies thereof);

 

(5)                                  the Security Trustee is entitled to the protection of Section 1110 of the United States Bankruptcy Code in connection with its right to take possession of the Designated Aircraft in the event of a case under Chapter 11 of the United States Bankruptcy Code in which the Borrower is a debtor; and

 

(6)                                  any Liens in respect of the Designated Aircraft associated with any pre-delivery payment facility have been discharged.

 

(ix)                                On the Delivery Date of the Designated Aircraft, (A) the representations and warranties of the Borrower contained in Section 7 of this Agreement shall be true and accurate 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 on and as of such earlier date), and (B) no event shall have occurred and be continuing which constitutes (or would, with the passage of time or the giving of notice or both, constitute) an Event of Default.

 

(x)                                   Such Loan Participant shall have received an opinions addressed to such Loan Participant and the Security Trustee from (A) Akin Gump Strauss Hauer & Feld LLP, special New York counsel to the Borrower, which opinion shall include matters relating to Section 1110 of the United States Bankruptcy Code, (B) in-house counsel to the Borrower and (C) an opinion of the Borrower’s regulatory counsel, each dated the Delivery Date of the Designated Aircraft, in form and substance reasonably satisfactory to the addressees thereof.

 

(xi)                                Such Loan Participant shall have received from Vedder Price P.C., special New York counsel for the Loan Participants, an opinion satisfactory in substance and form to such Loan Participant, dated the Delivery Date of the Designated Aircraft, as 

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

21

 

to such matters incident to the transactions contemplated hereby as such Loan Participant may reasonably request.

 

(xii)                             Such Loan Participant shall have received a certificate signed by a Responsible Officer of the Borrower, dated the Delivery Date of the Designated Aircraft, addressed to such Loan Participant and certifying as to the matters stated in paragraphs (ix), (xiv) and (xv) of this Section 4(b).

 

(xiii)                          Such Loan Participant shall have received (A) an independent insurance brokers’ report and certificate(s) of insurance, in form and substance reasonably satisfactory to such Loan Participant, dated the Delivery Date of the Designated Aircraft, as to the due compliance with the terms of Schedule 1 to the Mortgage relating to insurance with respect to the Designated Aircraft, (B) confirmation from such broker (or, if not available from such broker, from Willis Insurance Advisory or another insurance broker reasonably acceptable to the Loan Participants, the cost of which shall be for the Borrower’s account, provided that any costs exceeding $3,000 shall be for the account of the Loan Participants) that the type, scope and amount of the insurances evidenced by such insurance certificates and maintained by the Borrower in respect of the Designated Aircraft are largely consistent with those normally provided to international commercial passenger airlines flying comparable equipment as the Borrower (it being understood that such broker’s opinion may express no opinion as to other airlines’ limits of liability) and (C) a copy of the Fleet Schedule Change Report from the FAA evidencing the addition of the Designated Aircraft to the Borrower’s fleet for purposes of the insurance coverage under the policy referenced in Section C of Schedule 1 of the Mortgage.

 

(xiv)                         On the Delivery Date of the Designated Aircraft, it shall be true that no Event of Loss (or event which with the passage of time would become an Event of Loss) with respect to the Designated Aircraft (or constituent Airframe) or any Engine has occurred.

 

(xv)                            No action or proceeding shall have been instituted nor shall governmental action be threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency at the time of the Delivery Date of the Designated Aircraft to set aside, restrain, enjoin or prevent the completion and consummation of this Agreement or the transaction contemplated hereby.

 

(xvi)                         On the Delivery Date of the Designated Aircraft, the Aircraft Manufacturer shall have received the entire purchase price of the Designated Aircraft due to it, such purchase price to have been funded by (i) the Loan made in respect thereof and (ii) equity provided by the Borrower.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

22

 

(xvii)                      Such Loan Participant shall have received copies of the Borrower’s (x) air carrier certificate (as defined in 49 U.S.C. Sec. 41101 and issued pursuant to Part 119 of the Federal Aviation Regulations) and (y) operations specifications certificate issued under Part 121 of the Federal Aviation Regulations.

 

Promptly upon the recording of the Mortgage and the Mortgage Supplement at the FAA covering the Designated Aircraft pursuant to the Federal Aviation Act, the Borrower will cause McAfee & Taft, special FAA counsel in Oklahoma City, Oklahoma, to deliver to each Loan Participant and the Borrower an opinion as to the due and valid registration of the Designated Aircraft in the name of the Borrower, the due recording of the related FAA Bill of Sale, Mortgage and Mortgage Supplement and the lack of filing of any intervening documents with respect to the Designated Aircraft.  Following the Delivery Date, the Loan Participants may cause a huissier to serve a copy of a notice delivered on the Delivery Date to the Aircraft Manufacturer in accordance with Article 1690 of the French Civil Code.

 

(c)                                  Conditions Subsequent.  No later than three Business Days after the Delivery Date, the Borrower shall cause the Loan Participants and the Security Trustee to have received a copy of a current, valid Standard Certificate of Airworthiness for the Aircraft duly issued by the FAA.

 

SECTION 5                                   Closing Procedure.

 

(a)                                  Concurrently with the filings of the FAA Bill of Sale, registration application, Mortgage and Mortgage Supplement for the Designated Aircraft, the Borrower will obtain an authorization code from the FAA for the international interest of the Security Trustee with respect to the Airframe and each Engine associated with the Designated Aircraft by filing with the FAA an FAA Entry Point Filing Form — AC Form 8050-135 and the parties will pre-position the Mortgage and/or Mortgage Supplement with FAA counsel in Oklahoma City, Oklahoma, together with the FAA Bill of Sale for the Designated Aircraft and the application for registration of the Designated Aircraft in the name of the Borrower.  On the Delivery Date of the Designated Aircraft and in sufficient time to permit the closing to occur during business hours of the FAA in Oklahoma City, Oklahoma, each Loan Participant will wire transfer its Commitment prior to 9:00 a.m. New York time for the Designated Aircraft to the Security Trustee in accordance with Section 2(b)(ii) of this Agreement.  On the Delivery Date of the Designated Aircraft, by conference telephone call among the Aircraft Manufacturer, the Borrower (and its counsel), the Loan Participants (and/or their counsel acting on their behalf), the Security Trustee and FAA counsel, the Aircraft Manufacturer will authorize the filing of the FAA Bill of Sale for the Designated Aircraft to be delivered on the Delivery Date and the Borrower will (a) cause the registration application for the for the Designated Aircraft in the name of the Borrower to be filed with the FAA, (b) cause the ownership interest of the Airframe and each Engine associated with the Designated Aircraft to be duly registered with the International Registry as a contract of sale, (c) authorize the filing of the Mortgage and/or the Mortgage Supplement for the Designated

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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Aircraft upon receipt by the Aircraft Manufacturer of the purchase price for the Designated Aircraft and receipt by the Borrower (or its order) of the Loan for the Designated Aircraft and (d) cause an international interest in the Airframe and each Engine associated with the Designated Aircraft listing the Security Trustee as creditor to be registered with the International Registry with respect to the Mortgage and the Mortgage Supplement for the Designated Aircraft. The irrevocable authorization to FAA counsel to date the FAA Bill of Sale for the Designated Aircraft and file the FAA Bill of Sale and the Mortgage and/or Mortgage Supplement for the Designated Aircraft will occur prior to the transfer of the Loan for the Designated Aircraft to or for account of the Borrower, but the filing will not occur until the earlier of the Aircraft Manufacturer’s receipt of the purchase price for the Designated Aircraft and of the Borrower’s (or its order) receipt of the funds at the designated account.  The Loan Certificate(s) for the Designated Aircraft will be delivered to the applicable Loan Participants and legal opinions delivered to all parties immediately following the transfer of the related Loan as provided in Section 2(c).

 

(b)                                 The Borrower irrevocably authorizes FAA counsel to file with the FAA the Mortgage and/or Mortgage Supplement for the Designated Aircraft and register the appropriate international interests with the International Registry for the Designated Aircraft following the closing of the financing for the Designated Aircraft.  FAA counsel may rely, without any further investigation, on any statement or certification by the Security Trustee that the closing of the financing for the Designated Aircraft has occurred.

 

SECTION 6                                   Extent of Interest of Holders.

 

Subject to Section 14.01 of the Mortgage, a Holder shall not, as such, have any further interest in, or other right with respect to, the Mortgage Estate when and if the principal amount of and Break Amount (if any) and interest on and other amounts due under all Loan Certificates of the related Tranche held by such Holder and all other sums due to such Holder hereunder and under the other Operative Documents shall have been paid in full, provided, however, to the extent, for any reason, any such sums paid to a Holder is rescinded or must otherwise be restored by such Holder, the obligations of the Borrower and the security interests created by the Mortgage shall be automatically reinstated with respect to such Holder and the Security Trustee, as applicable.

 

SECTION 7                                   Representation and Warranties.

 

(a)                                  Borrower’s Representations and Warranties.  The Borrower makes the following representations and warranties set out in this Section 7 to each Loan Participant on the date hereof and on the Delivery Date of the Designated Aircraft (except to the extent such representation or warranty relates to an earlier date, in which case such representation or warranty shall only be made as to the date on which it is expressed to be made):

 

(i)                                     the Borrower is a corporation duly organized and validly existing in good standing pursuant to the laws of the State of Delaware; is duly qualified to do business as a foreign corporation in each jurisdiction in which its operations or the nature

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

24

 

of its business requires, except where the failure to be so qualified would give rise to a Material Adverse Change; is a U.S. Air Carrier; and has the corporate power and authority to, and holds all licenses, permits and franchises from the appropriate Governmental Body necessary to authorize the Borrower to, engage in air transport and to carry on scheduled commercial passenger service as presently conducted, to own the Designated Aircraft and to enter into and perform its obligations under the Operative Documents, except where the failure to hold such license, permit or franchise would not give rise to a Material Adverse Change;

 

(ii)                                  the Borrower has duly authorized, executed and delivered this Agreement and each of the Operative Documents to which it is (or will be) a party, and each of the Operative Documents to which it is (or will be) a party constitutes, or when entered into will constitute, a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity;

 

(iii)                               neither the execution and delivery by the Borrower of the Operative Documents to which it is or will be a party, nor the consummation by the Borrower of any of the transactions contemplated hereby or thereby, nor the compliance by the Borrower with any of the terms and provisions hereof and thereof, (A) requires or will require any approval of its stockholders, or approval or consent of any trustees or holders of any indebtedness or obligations of the Borrower except such as have been (or will be) duly obtained, (B) violates or will violate its certificate of incorporation or by-laws, (C) contravenes or will contravene any provision of, or constitutes or will constitute a default under, or results or will result in any breach of, any indenture, mortgage, lease, chattel mortgage, deed of trust, conditional sale contract, bank loan or credit agreement, material license, or other agreement, instrument or contractual restriction to which it is a party or by which it is bound, provided, however, that the grant by the Borrower to the Security Trustee of a Lien in certain after-acquired property of the type described in clause (4) of the Granting Clause of the Mortgage may require the consent of lenders under third-party loan agreements to which the Borrower is a party, which consent shall be obtained by the Borrower prior to the Borrower having any rights in such after-acquired property, or (D) contravenes or will contravene any law binding on it;

 

(iv)                              no authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any Governmental Body is required for the execution and delivery of, or the carrying out by, the Borrower of any of the transactions contemplated hereby or by any other of the Operative Documents to which the Borrower is or will be a party, except for (A) the orders, permits, waivers, exemptions, authorizations and approvals of the regulatory authorities having jurisdiction over the

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

25

 

operation of the Designated Aircraft by the Borrower, which orders, permits, waivers, exemptions, authorizations and approvals have been duly obtained or will on or prior to the Delivery Date of the Designated Aircraft be duly obtained, and will on the Delivery Date be in full force and effect, (B) any normal periodic and other reporting requirements under the Federal Aviation Act and the regulations promulgated thereunder and the applicable rules, and regulations of the FAA, in each case to the extent required to be given or obtained only after the Delivery Date of the Designated Aircraft and (C) any filings, registrations or applications specifically described in this Agreement or any of the other Operative Documents;

 

(v)                                 there are no pending or, to the Borrower’s actual knowledge, threatened actions or proceedings against the Borrower before any court or administrative agency that would reasonably be expected to materially adversely affect Borrower’s ability to perform its obligations under the Operative Documents;

 

(vi)                              except for (A) the filing with the FAA of an FAA Entry Point Filing Form — AC Form 8050-135 and the procurement of unique authorization codes for the registration of the ownership interest of the Borrower in the Airframe and each Engine associated with the Designated Aircraft represented by the contract of sale constituting the FAA Bill of Sale and/or the Warranty Bill of Sale and the registration of the Borrower’s ownership interest with respect to each contract of sale in respect of the Airframe and each Engine associated with the Designated Aircraft, (B) the filing with the FAA of an FAA Entry Point Filing Form — AC Form 8050-135 as to the international interest of the Security Trustee with respect to the Airframe and each Engine associated with the Designated Aircraft and the procurement of unique authorization codes for each thereof and the registration of the Security Trustee’s international interest in the Airframe and each Engine associated with the Designated Aircraft with the International Registry,  (C) the filing for recording pursuant to the Federal Aviation Act of the FAA Bill of Sale for the Designated Aircraft (and the application for registration of the Designated Aircraft in the name of the Borrower) and the Mortgage with the Mortgage Supplement for the Designated Aircraft, (C) the filing of financing statements (and continuation statements at periodic intervals) with respect to the interests created by such documents under the Uniform Commercial Code of Delaware and such other states as may be specified in the opinion furnished pursuant to Section 4(b)(x)(A) hereof and (D) the affixation of the nameplates referred to in Section 3.04 of the Mortgage for the Designated Aircraft, no further action, including any filing or recording of any document (including any financing statement in respect thereof under Article 9 of the Uniform Commercial Code of any applicable jurisdiction), is necessary in order to establish and perfect the Lien on the Designated Aircraft on a first priority basis in favor of the Security Trustee pursuant to the Mortgage for the Designated Aircraft or to establish as against third parties the international interest under such Mortgage in any applicable jurisdiction in the United States;

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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(vii)                           there has not occurred any event which constitutes a Default or an Event of Default under the Mortgage for the Designated Aircraft which is presently continuing;

 

(viii)                        (x) The Original Financial Statements were prepared in accordance with GAAP consistently applied (except as may be indicated in the notes thereto or as permitted by Form 10-Q in the case of interim unaudited consolidated financial statements);

 

(y)                                 The Original Financial Statements fairly represent in all material respects the consolidated financial condition and operations of Holdings as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated therein; and

 

(z)                                   There has been no Material Adverse Change since December 31, 2010 except as disclosed by the Borrower to the Loan Participants in writing prior to the date hereof;

 

(ix)                                on the Delivery Date of the Designated Aircraft and after the consummation of the transactions contemplated hereby, the Borrower will have good title to the Designated Aircraft delivered on the Delivery Date free and clear of all Liens, except the Lien of the Mortgage for the Designated Aircraft and Inchoate Liens;

 

(x)                                   neither the Borrower nor anyone acting on behalf of the Borrower has directly or indirectly offered any interest in the Loan Certificates for the Designated Aircraft for sale to, or solicited any offer to acquire any of the same from, anyone other than the related Loan Participants and not more than 35 other institutions believed capable of evaluating and bearing the risks of investment in the transactions contemplated hereby;

 

(xi)                                on the Delivery Date for the Designated Aircraft, the Designated Aircraft will have been insured by the Borrower in accordance with the terms of the Mortgage, will have suffered no Event of Loss and will be in the condition and state of repair required under the terms of the Mortgage, and, within three Business Days of the Delivery Date for the Designated Aircraft, the Designated Aircraft will have been duly certified by the FAA as to type and airworthiness;

 

(xii)                             the Borrower is not an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940;

 

(xiii)                          none of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Security Trustee or any Loan Participant in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

27

 

material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(xiv)                         no part of the proceeds of the Loan hereunder in respect of the Designated Aircraft will be used, whether directly or indirectly, for any purpose that entails a violation of Regulations U or X of the Board of Governors of the Federal Reserve;

 

(xv)                            (A) the Borrower is a “transacting user entity” (as such term is defined in the Regulations of the International Registry); is “situated”, for the purposes of the Cape Town Convention, in the United States; and has the power to “dispose” (as such term is used in the Cape Town Convention) of the Airframe and related Engines financed on the Delivery Date of the Designated Aircraft; (B) the Airframe and related Engines financed on the Delivery Date of the Designated Aircraft are “aircraft objects” (as defined in the Cape Town Convention); (C) the United States is a Contracting State under the Cape Town Convention; (D) the FAA Bill of Sale for the Airframe associated with the Designated Aircraft and/or the Warranty Bill of Sale for the Designated Aircraft constitutes a “contract of sale” (as defined in the Cape Town Convention), and the Mortgage and the Mortgage Supplement for the Designated Aircraft conveys an international interest in the Designated Aircraft; and (E) the payment of principal of and interest on the Loan Certificates in respect of the Designated Aircraft, and the performance by the Borrower of its other obligations under the Operative Documents, are “associated rights” (as defined in the Cape Town Convention); and

 

(xvi)                         In respect of the Designated Aircraft, there are no registrations on the International Registry in relation to the Airframe and each Engine associated with the Designated Aircraft other than those referred to in clause (vi)(A) above.

 

(b)                                 Representations and Warranties of the Security Trustee and Loan Participants.  Each Finance Party hereby represents and warrants to each of the other Parties, as of the date hereof, that:

 

(i)                                     it is a duly organized, validly existing and (if applicable) in good standing under the applicable laws of its jurisdiction of organization;

 

(ii)                                  it has the full requisite power and authority, including trust power (if applicable), to execute, deliver and enter into the Operative Documents to which it is or is contemplated to become a party, to comply with the terms hereof and thereof, and to perform its obligations hereunder and thereunder;

 

(iii)                               it has duly authorized, executed and delivered the Operative Documents to which it is or is contemplated to become a party and, assuming due execution and delivery by each of the parties thereto, each such Operative Document

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

28

 

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

 

(iv)                              without making any inquiries (legal, factual or otherwise) it does not have any knowledge of any circumstances that will give rise to a claim pursuant to Section 8(b) or 8(c) hereof; and

 

(v)                                 in the case of the Security Trustee, it is a “transacting user entity” (as such term is defined in the Regulations of the International Registry).

 

(c)                                  Loan Certificates. Each Loan Participant severally represents and warrants that it is acquiring its interest in its Loan Certificates either (A) in the ordinary course of its general banking business or (B) for investment and not with a view to any distribution thereof that would require registration under the Securities Act, subject, however, to the disposition of its property being at all times within its control.

 

SECTION 8                                   Indemnities; Etc.

 

(a)                                  General Indemnity.

 

(i)                                     Subject to the exclusions stated in (b) below and the other limitations in this Section 8, the Borrower hereby agrees to indemnify each Indemnitee against, and agrees to protect, save and keep harmless each of them, on an After-Tax Basis, from any and all Expenses imposed on, incurred by or asserted against any Indemnitee arising out of or directly resulting from (A) the operation, possession, use, maintenance, overhaul, testing, registration, reregistration, delivery, non-delivery, lease, nonuse, modification, alteration, or sale of the Designated Aircraft, Airframe or any Engine, or any engine used in connection with any associated Airframe or any part of any of the foregoing by the Borrower, any lessee or any other Person whatsoever, whether or not such operation, possession, use, maintenance, overhaul, testing, registration, reregistration, delivery, non-delivery, lease, nonuse, modification, alteration, or sale is in compliance with the terms of the Mortgage, including, without limitation, claims for death, personal injury or property damage or other loss or harm to any person whatsoever and claims relating to any laws, rules or regulations pertaining to such operation, possession, use, maintenance, overhaul, testing, registration, reregistration, delivery, non-delivery, lease, non-use, modification, alteration, sale or return including environmental control, noise and pollution laws, rules or regulations; (B) the manufacture, design, purchase, acceptance, rejection, delivery, or condition of the Designated Aircraft, Airframe or any Engine, any engine used in connection with any Airframe, or any part of any of the foregoing including, without limitation, latent and other defects, whether or not discoverable, or trademark or copyright infringement to the extent the Borrower has

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

29

 

claims against the Aircraft Manufacturer or Engine Manufacturer for such amounts; (C) any breach of or failure to perform or observe, or any other noncompliance with, any covenant or agreement to be performed, or other obligation of the Borrower under any of the Operative Documents, or the falsity of any representation or warranty of the Borrower in any of the Operative Documents; (D) the offer, sale and delivery by the Borrower or anyone acting on behalf of the Borrower of any Loan Certificates or successor debt obligations issued in connection with the refunding or refinancing thereof (including, without limitation, any claim arising out of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other Federal or state statute, law or regulation, or at common law or otherwise relating to securities) (the indemnity provided in this clause (D) to extend also to any Person who controls an Indemnitee, its successors, assigns, employees, directors, officers, servants and agents within the meaning of Section 15 of the Securities Act of 1933, as amended); and (E) the transactions contemplated by the Operative Documents or any Lease under the Mortgage for the Designated Aircraft, any Event of Default under the Mortgage for the Designated Aircraft or the enforcement against the Borrower of any of the terms thereof (including, without limitation, Article IX of such Mortgage).

 

(ii)           Claims Excluded.  The foregoing indemnity shall not extend to any Expense of any Indemnitee to the extent attributable to one or more of the following:

 

(1)           acts or omissions involving the willful misconduct, bad faith, fraud or gross negligence of such Indemnitee or any Person acting on behalf of such Indemnitee (other than gross negligence imputed to such Indemnitee solely by reason of its interest in the Designated Aircraft);

 

(2)           the failure by such Indemnitee to perform or observe any agreement, covenant or condition in any of the Operative Documents applicable to it (except to the extent such failure was caused directly by the failure of the Borrower to perform any of its obligations under the Operative Documents);

 

(3)           any representation or warranty by such Indemnitee in the Operative Documents or in connection therewith being incorrect;

 

(4)           with respect to any Indemnitee, a disposition, assignment or other transfer (voluntary or involuntary) by such Indemnitee of all or any part of such Indemnitee’s interest in any Loan Certificate other than during the continuance of an Event of Default;

 

(5)           other than in the case of amounts necessary to make payments on an After-Tax Basis, any Tax, or increase in tax liability under any Tax law [**];

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

30

 

(6)           to violations of applicable securities laws, including, without limitation, any federal, state or foreign securities laws, attributable to the Underwriters or any Loan Participant’s own actions, or the actions of anyone acting on behalf of the Underwriters or such Loan Participant, in connection with any offer, sale, assignment or other disposition of its interest in the Aircraft, the Loans or any Loan Certificate by such Loan Participant;

 

(7)           the authorization or giving or withholding of any future amendments, supplements, waivers, or consents with respect to any of the Operative Documents other than such as have been consented to, approved, authorized or requested by the Borrower;

 

(8)           any Expense which (a) is specified to be for account of an Indemnitee pursuant to the Operative Documents without express right of reimbursement under any Operative Document or (b) any Indemnitee agrees in writing to pay or such Indemnitee expressly agrees in writing shall not be paid or reimbursed by the Borrower;

 

(9)           any claim to the extent it is an ordinary and usual internal operating or overhead expense of such Indemnitee other than such expenses caused by an Event of Default;

 

(10)         any acts or events (other than acts or events related to the performance or failure to perform by Borrower of its obligations pursuant to the terms of the Operative Documents) that occur after the Security Trustee is required to release all Mortgage Estate from the Lien of the Mortgage for the Designated Aircraft, except to the extent attributable to acts or events occurring prior thereto;

 

(11)         if another provision of a Operative Document specifies the extent of the Borrower’s responsibility or obligation with respect to such Expense, to the extent of such Expense (in which case such other provision shall govern); and

 

(12)         the failure of the Security Trustee to distribute funds received and distributable by it in accordance with the Operative Documents.

 

(iii)          Claims Procedure.  If a claim is made against an Indemnitee involving one or more Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly after receiving such notice give notice of such claim to the Borrower; provided that the failure to provide such notice shall not release the Borrower from any of its obligations to indemnify hereunder except to the extent that the Borrower is prejudiced as a result of the failure to give such notice in a timely fashion, and no payment by the Borrower to an Indemnitee pursuant to this Section 8(a) shall be deemed 

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

31

 

to constitute a waiver or release of any right or remedy which the Borrower may have against such Indemnitee for any actual damages as a result of the failure by such Indemnitee to give the Borrower such notice.  The Borrower (or its insurer(s)) shall be entitled, at its sole cost and expense, acting through counsel reasonably acceptable to the respective Indemnitee, so long as the Borrower (or its insurer(s)) has acknowledged in writing its responsibility for such Expense hereunder (except that the Borrower (and its insurer(s)) will not be bound by such acknowledgment if the decision of a court or arbitrator provides that the Borrower is not liable hereunder), (A) in any judicial or administrative proceeding that involves solely a claim for one or more Expenses, to assume responsibility for and control thereof, (B) in any judicial or administrative proceeding involving a claim for one or more Expenses and other claims related or unrelated to the transactions contemplated by the Operative Documents, to assume responsibility for and control of such claim for Expenses to the extent that the same may be and is severed from such other claims (and such Indemnitee shall use its reasonable efforts to obtain such severance), and (C) in any other case, to be consulted by such Indemnitee with respect to judicial proceedings subject to the control of such Indemnitee and to be allowed, at the Borrower’s sole expense, to participate therein.  The Indemnitee may participate at its own expense and with its own counsel in any judicial proceeding controlled by the Borrower pursuant to the preceding provisions.  Notwithstanding any of the foregoing, the Borrower shall not be entitled to assume responsibility for and control of any such judicial or administrative proceedings if any Event of Default shall have occurred and be continuing, if such proceedings will involve a material risk of the sale, forfeiture or loss of the Designated Aircraft unless (I) fully covered by insurance and the applicable insurers have confirmed responsibility therefor in writing, or (II) the Borrower shall have posted a bond or other security reasonably satisfactory to the relevant Indemnitee with respect to such risk or if such proceedings could entail any risk of criminal liability being imposed on such Indemnitee.

 

The Indemnitee shall supply the Borrower with such information not within the control of the Borrower, as is in such Indemnitee’s control or is reasonably available to such Indemnitee, which the Borrower may reasonably request and as is necessary or advisable for the Borrower to control or participate in any proceeding to the extent permitted by this Section 8(a)(iii).  Such Indemnitee shall not enter into a settlement or other compromise with respect to any Expense without the prior written consent of the Borrower unless such Indemnitee waives its right to be indemnified with respect to such Expense under this Section 8(a) and repays to the Borrower all Expenses previously paid by the Borrower to such Indemnitee in connection therewith.

 

The Borrower shall supply the relevant Indemnitee with such information not within the control of such Indemnitee, as is in the Borrower’s control or is reasonably available to the Borrower, which such Indemnitee may reasonably requested and as is necessary or advisable for the Indemnitee to control or participate in any proceeding to the extent permitted by this Section 8(a).

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

32

 

In the case of any Expense indemnified by the Borrower hereunder which is covered by a policy of insurance maintained by the Borrower (or any Lessee) pursuant to Article VI of the Mortgage for the Designated Aircraft or otherwise, it shall be a condition of such indemnity with respect to any particular Indemnitee that such Indemnitee shall cooperate with the insurers in the exercise of their rights to investigate, defend or compromise such Expense as may be required to retain the benefits of such insurance with respect to such Expense.  Notwithstanding any of the foregoing to the contrary, with respect to any Expense which is covered under policies of insurance maintained by the Borrower (or any Lessee) pursuant to Article VI of the Mortgage for the Designated Aircraft or otherwise, the rights of an Indemnitee to control or participate in any proceedings shall be modified to the extent necessary to comply with the requirements of such policies and the rights of the insurers thereunder.

 

To the extent of any payment of any Expense pursuant to this Section 8(a), the Borrower (or its insurer(s), if applicable), without any further action, shall be subrogated to any claims the Indemnitee may have relating thereto.  The Indemnitee agrees to give such further assurances or agreements and to cooperate with the Borrower (or its insurer(s), if applicable) to permit the Borrower (or its insurer(s), if applicable) to pursue such claims, if any, to the extent reasonably requested by the Borrower (or its insurer(s), if applicable).

 

In the event that the Borrower (or its insurer(s)) shall have paid an amount to an Indemnitee pursuant to this Section 8(a), and such Indemnitee subsequently shall be reimbursed in respect of such indemnified amount from any other Person, such Indemnitee shall promptly pay the Borrower the amount of such reimbursement, including interest received attributable thereto, unless a Special Default or Event of Default has occurred and is continuing, in which case such amount shall be paid over to the Security Trustee to hold as security for the Borrower’s obligations under the Operative Documents or, if requested by the Borrower, applied to satisfy such obligations.

 

If an Indemnitee is not party to this Agreement, the Borrower may require such Indemnitee to agree in writing to the terms of this Section 8(a) prior to making any payment to such Indemnitee under this Section 8(a).

 

(b)           Tax Indemnities.  The [**] withholding Tax indemnities are specified in Schedule III hereto, which provisions are incorporated herein by reference.

 

(c)           Increased Costs.

 

(i)            If, by reason of any Change in Law occurring after the date hereof:

 

(x)            a Loan Participant or any Holding Company of such Loan Participant has a reduction on its rate of return on its capital as relates to the class of assets and liabilities that includes its commitments and Loans (taking into account any Hedge Transaction) made under this Agreement below that which such Loan Participant or Holding Company would have achieved but for such 

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

33

 

Change in Law (taking into account the capital adequacy policies developed by such Loan Participant in connection with the adoption and/or implementation of the Basel II and Basel III accords);

 

(y)           a Loan Participant or any Holding Company of such Loan Participant incurs a cost as a result of such Loan Participant entering into or assuming or maintaining a commitment or performing its obligations (including its obligation to participate in the making of the Loan or enter into any Hedge Transaction) under this Agreement; or

 

(z)            there is any increase in the cost to a Loan Participant or any Holding Company of such Loan Participant of funding or maintaining all or any of the Loans (including any Hedge Transaction) comprised in a class of loans formed by or including such Loan Participant’s share of the Loans made or to be made by such Loan Participant, including any reserve, special deposit or similar requirement assessed against assets of, deposits with or for account of, or credit extended by, such Loan Participant;

 

then, subject to the provisions of this Section 8(c), the Borrower shall, from time to time on demand of the Security Trustee (on behalf of any Loan Participant), promptly pay to the Security Trustee for the account of that Loan Participant, amounts sufficient to hold harmless and indemnify such Loan Participant on an After-Tax Basis, from and against, as the case may be, (x) the reasonably allocable portion of any such reduction in the rate of return on capital, (y) any such actual cost, (z) any such increased cost (or such proportion of such increased cost as is reasonably attributable to its participating in the funding or maintaining of the Loans or any Hedge Transaction) (together, “Increased Costs”); provided, that:

 

(1)           the Borrower shall have no liability under this Section 8(c) in respect of any Taxes (other than amounts necessary to make payments on an After-Tax Basis);

 

(2)           the Borrower shall have no liability under this Section 8(c) if (i) the Borrower elects to direct the transfer or to repay the affected Loans and cancels the affected Commitments pursuant to Section 3(i) hereof (provided that the Borrower shall nevertheless be liable under this Section 8(c) for increased costs relating to the period prior to such prepayment and cancellation), (ii) such Loan Participant is not also seeking indemnification against similar increased costs, to the extent it is entitled to do so, in transactions with similarly situated borrowers (it being agreed that an officer’s certificate to the contrary from any such Loan Participant shall constitute sufficient evidence of such fact) or (iii) the claim for Increased Costs arises out of a voluntary relocation by such Loan Participant of its Facility Office;

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

34

 

(3)           such Loan Participant shall only be entitled to receive compensation for such Increased Costs from and after the time that is 150 days prior to the date the Increased Cost Notice referred to below is received by the Borrower; and

 

(4)           such Loan Participant will (at Borrower’s expense) use commercially reasonable efforts to mitigate the amount of the Increased Costs associated with such event, including designating a different Facility Office to hold the Loans if such designation will avoid or reduce such Increased Costs and will not, in the sole opinion of such Loan Participant, result in any economic, legal or regulatory disadvantage to such Loan Participant (other than economic disadvantages for which the Borrower has provided an indemnity acceptable to such Loan Participant).

 

(ii)           A Loan Participant intending to make a claim for Increased Costs pursuant to Section 8(c)(i) shall, within 60 days after becoming aware of the same, provide written notice to the Security Trustee and the Borrower of the event by reason of which it is entitled to do so (the “Increased Cost Notice”); provided, that:

 

(x)            the Increased Cost Notice shall describe, in reasonable detail, the events giving rise to such Increased Costs, the basis for determining and allocating such Increased Costs and the amount of each request by such Loan Participant for compensation under this Section 8(c), together with a statement that the determinations and allocations made in respect of the Increased Costs comply with the provisions of this Section 8(c); and

 

(y)           such Loan Participant shall not be required to disclose any confidential information relating to the organization of its affairs, or its capital structure or return on capital.

 

(iii)          Certificate of Loan Participants.  A certificate of a Loan Participant as to (i) any amount payable to it under this Agreement or (ii) the amount of any indemnity payable to it, or for its account, under this Section 8(c) shall, in either case and in the absence of manifest error, be prima facie evidence of the existence and amount of such obligation of the Borrower so long the underlying determinations and allocations are made on a reasonable basis.

 

(iv)          No Greater Obligation.  Notwithstanding any other provision of this Agreement, if a Loan Participant changes its Facility Office or a Loan Participant assigns or transfers the whole or any part of the Loan or its rights, benefits or obligations under this Agreement and such change, assignment or transfer would at the date of such change, assignment or transfer subject the Borrower to any greater obligation or liability under this Agreement or any other Operative Documents than it would have been under on such date if no such change, assignment or transfer had then taken place, then unless

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

35

 

such change, assignment or transfer was made at the request of the Borrower in order to mitigate or avoid the requirement for payment of additional amounts or increased costs or after the occurrence and continuation of an Event of Default, the Borrower shall not be obliged to pay any amounts in excess of the amount that it would have been obliged to pay had no change, assignment or transfer then taken place.

 

(d)           Illegality.

 

(i)            Notwithstanding any other provision in this Agreement, if any Change in Law or Illegality Event shall make it unlawful for any Loan Participant to maintain its Commitment or its portion of the Loans in respect of the Designated Aircraft, then the affected Loan Participant shall deliver to Borrower and the Security Trustee a written certification describing in reasonable detail the events giving rise to such unlawfulness.  Upon receipt by Borrower of such notice, the Borrower and such Loan Participant shall negotiate for a period of 60 days in an effort to mitigate such illegality.  During such mitigation period the affected Loan Participant shall not be required to advance any Loans to the Borrower hereunder.  If after such mitigation period, such unlawfulness cannot be resolved, then the provisions of clause (ii) below shall apply.

 

(ii)           If there shall have occurred and be continuing an event with respect to a Loan Participant of the type described in clause (i) above (an “Impaired Loan Participant”), then such Impaired Loan Participant may and, if so instructed by the Borrower shall:

 

(x)            notify the Borrower and each other Loan Participant that such unlawfulness has occurred and give notice that (a) if no Loan shall then have been made by such Impaired Loan Participant, no Loan shall be made to the Borrower by such Impaired Loan Participant or (b) if a Loan shall then have been made by such Impaired Loan Participant and remain outstanding, no further Loans shall be made to the Borrower by such Impaired Loan Participant, and request each other Loan Participant to take up the relevant portion of such Impaired Loan Participant’s unfunded Commitments, if any, in which case each such other Loan Participant may (but shall not be obligated to) in its sole discretion assume its pro rata share of such Impaired Loan Participant’s Commitment by providing written notice of such assumption to such Impaired Loan Participant, the Security Trustee and the Borrower within five Business Days, and if such other Loan Participant does not so elect in writing to assume its pro rata share of the Impaired Loan Participant’s commitments, such Impaired Loan Participant shall send a further notice to each remaining Loan Participant, which in turn may (but shall not be obligated to) in its sole discretion assume the remaining available commitments of such Impaired Loan Participant on a pro rata basis by providing written notice of such assumption to such Impaired Loan Participant, the Security Trustee and the Borrower within five Business Days; and

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

36

 

(y)           notify the Borrower and each other Loan Participant that such unlawfulness has occurred and, to the extent that applicable laws do not require the immediate repayment of all or a portion of such Impaired Loan Participant’s Loans, request each other Loan Participant to assume the relevant portion of such Impaired Loan Participant’s Loans, in which case each such other Loan Participant may (but shall not be obligated to) in its sole discretion assume its pro rata share of such Impaired Loan Participant’s Loans by providing written notice of such assumption to such Impaired Loan Participant, the Security Trustee and the Borrower within five Business Days and otherwise complying with the procedure set out in Section 16(c) hereof, and if any other Loan Participant does not so elect in writing to assume its pro rata share of the Impaired Loan Participant’s Loans, such Impaired Loan Participant shall send a further notice to each remaining Loan Participant and the Borrower, and (A) each remaining Loan Participant in turn may (but shall not be obligated to) in its sole discretion assume the remaining available Loans of such Impaired Loan Participant on a pro rata basis by providing written notice of such assumption to such Impaired Loan Participant, the Security Trustee and the Borrower within five Business Days and otherwise complying with the procedure set out in Section 16(c) hereof or (B) the Borrower may elect to require the Impaired Loan Participant to transfer its Loans, Commitments and other rights and obligations hereunder (and, if such Loan is a Fixed Rate Loan, cancel, terminate or otherwise unwind the related Hedge Transaction) in accordance with Section 3(i) hereof; and

 

(z)            to the extent that any of such Impaired Loan Participant’s Loans are not assumed by one or more of the other Loan Participants or a third party as contemplated in clause (x) or (y) above, or that applicable laws require the immediate repayment of all or a portion of such Impaired Loan Participant’s Loans, require the Borrower to repay the Loans advanced by such Impaired Loan Participant in full together with accrued interest and Break Amount, if any, and all other amounts accrued and owing to such Impaired Loan Participant under the Operative Documents, whereupon the Borrower shall on the date specified in such notice (which shall be the earlier of the date on which applicable laws require the immediate repayment of all or a portion of such Impaired Loan Participant’s Loans and the Interest Payment Date first occurring not earlier than ten Business Days from the date of such notice), repay in full all such amounts.  In the case of any prepayment effected pursuant to this clause (z), in respect of the Break Amount payable to any Type A Loan Participant in association therewith, [**] of the component thereof constituting Liquidity Break Amount shall be payable.

 

For the avoidance of doubt, the failure by any Loan Participant to provide written notice of assumption of an Impaired Loan Participant’s Commitments or Loans within the relevant time frame contemplated by clause (x) or (y) above, as applicable, shall be conclusive evidence that such Loan Participant has elected not to assume any such additional Commitments or Loans.  To 

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

37

 

the extent that any of such Impaired Loan Participant’s Commitments or Loans are not assumed by one or more of the other Loan Participants as contemplated in clause (x) or (y) above, as applicable, the unassumed portion will be cancelled and the Commitments will be reduced accordingly.  Nothing in this Section (d) shall affect the obligation of any Loan Participant other than an Impaired Loan Participant to make or maintain its Loan in accordance with the terms of this Agreement.

 

SECTION 9            Covenants of the Borrower.

 

(a)           Borrower Merger.  The Borrower may not enter into any transaction (whether by way of reconstruction, reorganization, consolidation, amalgamation, merger, transfer, sale, lease or otherwise, a “Merger”) whereby all or substantially all of its liabilities, property and assets would become the property of any other Person or, in the case of any such Merger, of the continuing corporation or limited liability company resulting therefrom (collectively, the “Successor”) unless: (i) no Event of Default has occurred and is continuing or would result therefrom; (ii) the Successor will be liable for the obligations of the Borrower under the Operative Documents to which it is a party, and each Loan Participant shall have received evidence reasonably satisfactory to it of such liability; (iii) the Successor is a corporation or limited liability company formed under the laws of the United States or one of its States (and, if not a Delaware corporation or limited liability company, all UCC filings shall have been effected in order to ensure that the Security Trustee continues to have a first priority and perfected lien against the Mortgage Estate in respect of the Designated Aircraft) and is a certified air carrier; (iv) all registrations, recordings and filings, and such other actions with respect to the Operative Documents, shall have been effected as shall be necessary or advisable in the reasonable opinion of the Loan Participants to protect their security interest in the Designated Aircraft; and (v) such Person or the Successor  has a Tangible Net Worth after giving effect to such Merger no less than the Tangible Net Worth of the Borrower immediately prior to such Merger (and the Loan Participants shall have received evidence reasonably satisfactory to them to such effect).  As used herein,

 

“Tangible Net Worth” means, as at any date for any Person, the sum for such Person and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following:

 

(a)           the amount of capital stock, plus

 

(b)           the amount of surplus and retained earnings (or, in the case of a surplus or retained earnings deficit, minus the amount of such deficit), minus

 

(c)           the sum of the following: cost of treasury shares and the book value of all assets which should be classified as intangibles, including goodwill, minority interests, research and development costs, trademarks, trade names, copyrights, patents and franchises, and unamortized debt discount and expense.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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(b)           U.S. Air Carrier.  The Borrower covenants and agrees that at all times until the Lien of the Mortgage for the Designated Aircraft shall be discharged pursuant to Section 14.01 thereof, it will be an “air carrier” within the meaning of the Federal Aviation Act operating under certificates issued pursuant to Section 41102(a) of such Act and shall otherwise meet the standards of the definition of U.S. Air Carrier.

 

(c)           Further Assurances.  The Borrower covenants and agrees with each party hereto as follows:

 

(i)            The Borrower will cause to be done, executed, acknowledged and delivered all and every such further acts, conveyances and assurances as any Holder shall reasonably require for accomplishing the purposes of this Agreement and the other Operative Documents; provided that any instrument or other document so executed by the Borrower will not expand any obligations or limit any rights of the Borrower in respect of the transactions contemplated by any Operative Documents.  The Borrower shall cause the Designated Aircraft to remain duly registered, in the name of the Borrower, except as otherwise required or permitted hereunder or under the Mortgage, under the Federal Aviation Act.

 

(ii)           The Borrower, at its expense, will cause (A) the Mortgage, all Mortgage Supplements and all amendments to the Mortgage, in each case, for the Designated Aircraft, to be promptly filed and recorded, or filed for recording, to the extent permitted under the Federal Aviation Act, or required under any other applicable law, (B) subject only to the consent of the Security Trustee (or the Aircraft Manufacturer, in the case of the FAA Bill of Sale for the Designated Aircraft), the registration with the International Registry of the contract of sale and the international interests with respect to each FAA Bill of Sale and/or Warranty Bill of Sale, the Mortgage and Mortgage Supplement, in each case, for the Designated Aircraft, and (C) the Lien of the Mortgage for the Designated Aircraft to at all times be and remain a first priority and perfected Lien on the Mortgage Estate thereunder (subject to Permitted Liens ranking junior in priority to such Lien).  The Borrower agrees to furnish the Security Trustee and the Loan Participants with copies of the foregoing documents with recording and registration data as promptly as practicable following the issuance of same by the FAA and the International Registry.

 

The Borrower shall pay all reasonable costs and expenses (including reasonable costs and disbursements of outside counsel, provided that the Borrower shall no obligation to reimburse the reasonable costs and disbursements of more than one counsel to the Security Trustee and one counsel to the Holders) incurred by the Security Trustee and the Holders after the date hereof in connection with (x) any supplements or amendments of the Operative Documents (including, without limitation, any related recording and registration costs) requested by Borrower or otherwise reasonably required to effectuate the intent of the Operative Documents, (y) any Event of Default and any enforcement or collection proceedings resulting therefrom or in connection 

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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with the negotiation of any restructuring or “work-out” (whether or not consummated), or (z) the enforcement of this Section 9(c).

 

(d)           Financial Information.  The Borrower shall supply or procure the supply to the Loan Participants, to the extent such materials are not made available on the Borrower’s or Holdings’ website or the EDGAR system:

 

(i)            as soon as practicable and in any event within 120 days after the end of each fiscal year of Holdings and the Borrower, consolidated statements of income and cash flows and a consolidated statement of stockholders’ equity of each such Person and its Subsidiaries (including, in the case of Holdings, the Borrower) for such year, and a consolidated balance sheet of such Person and its Subsidiaries (including, in the case of Holdings, the Borrower) as at the end of such year, setting forth in each case in comparative form corresponding consolidated figures from the preceding annual audit (or, in the case of the Borrower, the preceding annual unaudited financial statements), all in reasonable detail and (A) in the case of Holdings, reported on by independent public accountants of recognized national standing selected by Holdings (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Holdings and its Subsidiaries (including the Borrower) on a consolidated basis in accordance with GAAP consistently applied (except for inconsistencies required by changes to GAAP and changes approved by such accountants in accordance with GAAP) and (B) in the case of the Borrower, certified by the Borrower’s chief executive officer or chief financial officer as having been prepared on a consolidated basis in accordance with GAAP consistently applied (except for inconsistencies required by changes to GAAP and changes approved by the accountants referred to in clause (A) above in accordance with GAAP), subject to the absence of footnotes;

 

(ii)           as soon as practicable and in any event within 90 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year of Holdings and the Borrower beginning after March 31, 2011, consolidated statements of income, stockholders’ equity and cash flows of each such Person and its Subsidiaries (including, in the case of Holdings, the Borrower) for the period from the beginning of the current fiscal year to the end of such quarterly period, and a consolidated balance sheet of such Person and its Subsidiaries (including, in the case of Holdings, the Borrower) as at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and presenting fairly in all material respects the financial condition and results of operations of such Person and its Subsidiaries (including, in the case of Holdings, the Borrower), certified by the Borrower’s chief executive officer or chief financial officer as having been prepared on a consolidated basis in accordance with GAAP consistently applied (except for inconsistencies required by changes to GAAP and changes approved 

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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by the accountants referred to in clause (i) above in accordance with GAAP), subject to normal year-end audit adjustments and the absence of footnotes; and

 

(iii)          promptly, any documents or information that Holdings files with the Securities and Exchange Commission and that is disclosable to Holdings’ shareholders; and

 

(iv)          promptly following any reasonable request therefor by a Finance Party, such further non-confidential information that is of the kind that would generally be made available by the Borrower upon request by a secured lender regarding the Mortgage Estate in respect of the Designated Aircraft, financial condition, business and operations of the Borrower.

 

SECTION 10          Notices.

 

All notices, demands, instructions and other communications required or permitted to be given to or made upon any party hereto shall be in writing and shall be personally delivered or sent by registered or certified mail, postage prepaid, or by facsimile, or by prepaid courier service, and shall be effective upon receipt.

 

Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this Section 10, notices, demands, instructions and other communications in writing shall be given to or made upon the respective parties hereto at their respective addresses (or to their respective facsimile numbers) as follows:  (a) if to the Borrower or the Security Trustee, to the respective addresses set forth in Section 14.06 of the Mortgage in respect of the Designated Aircraft, (b) if to a Loan Participant, to the address set forth on Schedule I hereto, or (c) if to any subsequent Holder, addressed to such Holder at its address set forth in the Certificate Register maintained pursuant to the Mortgage in respect of the Designated Aircraft.

 

A notice sent by facsimile will be deemed received on the date set forth on the confirmation of receipt produced by the sender’s fax machine immediately after the fax is sent.  A notice sent by registered or certified mail will be deemed received upon actual receipt.

 

SECTION 11          Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.

 

(a)           This Agreement shall in all respects be governed by, and construed in accordance with, the law of the State of New York, including all matters of construction, validity and performance.

 

(b)           Each party hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Operative Document, or for recognition or 

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

41

 

enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or any other Operative Document shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any other Operative Document against another party or its properties in the courts of any jurisdiction.

 

(c)           Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(d)           Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.  Nothing in this Agreement or any other Operative Document will affect the right of any party to this Agreement or any other Operative Document to serve process in any other manner permitted by law.

 

(e)           EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 12          Invoices and Payment of Expenses.

 

The Security Trustee and the Loan Participants shall promptly submit to the Borrower for its prompt approval copies of invoices of the Transaction Expenses (as defined below) as they are received.  The Borrower agrees to pay Transaction Expenses promptly upon receipt of invoices of such Transaction Expenses.  For the purposes hereof, “Transaction Expenses” means (i) with respect to the preparation, negotiation, execution and delivery of this Agreement (and the term sheet relating hereto) and the closing or anticipated closing of the Designated Aircraft on the Delivery Date, the reasonable fees, and out-of-pocket expenses and disbursements of McAfee 

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

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& Taft, special counsel in Oklahoma City, Oklahoma and Vedder Price P.C., special counsel to the Loan Participants (subject to any fee arrangements as separately agreed), (ii) all fees, taxes and other charges payable in connection with the recording or filing of instruments and financing statements, or registration of any international interest with the International Registry, (iii) each Loan Participant’s reasonable and documented out-of-pocket costs and expenses relating to the negotiation and closing of this transaction (but excluding any syndication costs), provided that if any Loan Participant shall not disburse its portion of the Loan despite all conditions precedent having been satisfied or waived, each such Loan Participant shall pay its own fees and expenses (including, without limitation, the fees and expenses of Vedder Price P.C.), and (iv) the structuring fee of the Underwriters as separately agreed and the Security Trustee fee as separately agreed; provided the Transaction Expenses of a Loan Participant (including the fees and expenses of its special counsel) which fails to fund its Loan for the Designated Aircraft notwithstanding the satisfaction of the applicable conditions precedent shall not be subject to reimbursement. All costs associated with an assignment by a Holder of its Commitment and/or Loan Certificate pursuant to Section 16(c)(iii) of this Agreement (including reasonable fees and expenses of outside counsel to the Borrower) shall be for account of such assigning Holder so long as no Event of Default is continuing.

 

SECTION 13          Section 1110 Compliance.  Notwithstanding any provision herein or elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Agreement, and the other Operative Documents are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of 11 U.S.C. Section 1110, as amended from time to time, and any successor provision thereto.

 

SECTION 14          Confidentiality.  Each party hereto shall, and shall use all reasonable efforts to ensure that its respective officers, directors, employees and agents, maintain as confidential and shall not, without the prior written consent of the Borrower and the Loan Participants, disclose to any third party the terms of any Operative Document, or any of the information, reports, invoices or documents (except to the extent that it is available on the Borrower’s website) supplied by or on behalf of any of the Parties, save that such party shall be entitled to disclose any such terms, information, reports, invoices or documents:

 

(a)           in connection with any proceedings arising out of or in connection with any of the Operative Documents to the extent that such party is advised by legal counsel that it is necessary to protect its interests or is legally required to do so; or if required to do so by an order of a court of competent jurisdiction whether in pursuance of any procedure for discovering documents or otherwise; or

 

(b)           pursuant to any law or regulation having the force of law (including rules and regulations of the SEC); or

 

(c)           to any fiscal, monetary, Tax, governmental or other competent authority or supervisory boards and bodies; or

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

43

 

(d)           to any transferee or potential transferee of a Loan Certificate or interest therein (which agrees to be bound by confidentiality provisions similar to those set forth herein); or

 

(e)           to its auditors, bankers, legal or other professional advisers (or those of any person covered by the preceding paragraph (d)) (which are under an ethical obligation to or agree to hold such information confidential); or

 

(f)            in any manner contemplated by any of the Operative Documents; or

 

(g)           for due diligence purposes in connection with significant transactions or dealings involving any party, and which are outside the ordinary course of that party’s business, including investments, acquisitions or financings, to other potential parties to such dealings or transactions or their professional advisors, provided that such other parties (i) shall not be permitted to retain any copies of any of the Operative Documents or to disclose same to any third party; and (ii) shall enter into a confidentiality agreement on terms substantially similar to those contained in this Section 14, except that such confidentiality agreement shall not provide for any disclosure of the terms of the Operative Documents or any non-public information, including pursuant to this due diligence exemption; or

 

(h)           if the information contained therein shall have emanated in conditions free from confidentiality restrictions from some person other than such party and such party would, but for the preceding provisions of this Section 14, have been free to disclose or use the same.

 

SECTION 15          Nondisturbance.

 

The Security Trustee and each Loan Participant each agrees that neither it nor anyone acting on its behalf will interfere in the Borrower’s or any permitted Lessee’s quiet enjoyment of the Designated Aircraft so long as no Event of Default under the Mortgage shall have occurred and be continuing.

 

SECTION 16          Miscellaneous.

 

(a)           The representations, warranties, indemnities and agreements of the Borrower, the Security Trustee and each Loan Participant provided for in this Agreement and each party’s obligations under any and all thereof, shall survive the expiration or other termination of this Agreement or any other Operative Document to the extent expressly provided herein or therein.

 

(b)           This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.  Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified, 

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

44

 

except by an instrument in writing signed by the Borrower, the Security Trustee and the Majority in Interest of Holders (or all Holders, as the case may be).

 

(c)           (i)            This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns including each successive holder of any Loan Certificate(s) issued and delivered pursuant to this Agreement or the Mortgage for the Designated Aircraft whether or not an express assignment to any such holder of rights under the Agreement has been made (but only to the extent such express assignment would otherwise be permitted by the terms hereof).

 

(ii)           The Borrower may not assign any of its rights or obligations under this Agreement or the other Operative Documents except to the extent expressly provided hereby or thereby.

 

(iii)          Each Holder may assign its Commitments and/or Loan Certificates, in whole or in part, to any Person as provided in Section 2.06 of the Mortgage, which assignment shall be effected pursuant to an agreement substantially in the form of Exhibit B hereto.  Notwithstanding anything to the contrary contained herein, without the consent of the Borrower, no Holder may assign its Loan Certificates, in whole or in part, (i) in any manner which would result in a violation of the Securities Act or any other applicable law, (ii) so long as no Event of Default shall have occurred and be continuing, to any Person other than (A) another financial institution, (B) an insurance company, (C) a trust company, (D) a single purpose company, which is guaranteed by a Loan Participant or (E) any European central bank or Federal Reserve Bank and (iii) if the effect of such assignment were to in any way diminish as at the date of such assignment Borrower’s rights or increase the Borrower’s liability or obligations or amounts owing in respect thereof (including, without limitation, with respect to withholding Taxes, increased costs, interest rate adjustments (including, without limitation, those arising from differences in Liquidity Margin or Liquidity Reserve Differentials) or Hedge Breakage Loss) above that which would result or would have been incurred as at the date of such assignment had such assignment or participation not occurred.  For the avoidance of doubt, in the event that a Holder assigns or transfers a Loan Certificate in accordance with the foregoing (other than upon request by the Borrower or after the occurrence and continuation of an Event of Default) and, as a result of circumstances existing at the date the assignment or transfer occurs the Borrower’s rights or obligations are so diminished or increased, as applicable, then the Borrower shall have no liability or obligations or owe any amounts in respect thereof (including, without limitation, with respect to withholding taxes, increased costs, interest rate adjustments (including, without limitation, those arising from differences in Liquidity Margin or Liquidity Reserve Differentials) or Hedge Breakage Loss) above that which would result or would have been incurred had such assignment or participation not occurred as at such date.  Subject to Section 2(a), effective upon the assignment of any Commitment, the assigning Loan Participant shall be relieved of its obligations in respect

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

45

 

of such Commitment to the extent the assignee thereof shall have become obligated in respect thereof.  The Borrower shall not be liable for any costs, fees or expenses in connection with any assignment of Commitments or transfer of Loan Certificates.

 

(d)           No Loan Participant shall have any obligation or duty to the Borrower, or to other Persons with respect to the transactions contemplated hereby except those obligations or duties of such Loan Participant expressly set forth in this Agreement and the other Operative Documents and no Loan Participant shall be liable for performance by any other party hereto of such other party’s obligations or duties hereunder.  Without limitation of the generality of the foregoing, under no circumstances whatsoever shall any Loan Participant be liable to the Borrower for any action or inaction on the part of the Security Trustee in connection with the transactions contemplated herein, whether or not such action or inaction is caused by willful misconduct or gross negligence of the Security Trustee.

 

(e)           Any reference herein to an approval, consent or waiver to be given by such Loan Participants shall be deemed hereunder to be an approval, consent or waiver, as the case may be, if a Majority in Interest of Holders approve, consent or waive, as the case may be.

 

(f)            Anything herein to the contrary notwithstanding, any Loan Participant may pledge its Loans and related Loan Certificate to a Federal Reserve Bank, any European central bank or any other bank or other financial institution or authority in connection with a programmatic financing by such Loan Participant of certain of its assets.

 

(g)           The Operative Documents constitute the entire understanding of the parties relating to the subject matter thereof and supersedes all previous agreements, whether written or oral, concerning such subject matter.

 

(h)           If, at any time, any provision of the Operative Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

 

(i)            In no event shall any Party be liable on any theory of liability for any special, indirect, incidental, consequential or punitive damages, and each Party hereby waives, releases and agrees not to sue upon any such claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

 

(j)            The Borrower has not relied on and will not rely on the Loan Participants for any explicit or implicit advice in relation to the fixing of the interest rate or any of the other transactions contemplated by the Facility Agreement, including the structuring thereof or any accounting, tax, legal or regulatory or other consequences of such transactions.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

46

 

SECTION 17          Patriot Act; Money Laundering.

 

(a)           Each of the Security Trustee and the Loan Participants hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow each of the Security Trustee and the Loan Participants (as the case may be) to identify the Borrower in accordance with the Act.

 

(b)           For the purpose of the German Money Laundering Act (Geldwäschegesetz), the Borrower hereby confirms that it is acting for its own account.

 

SECTION 18          Registrations with the International Registry.

 

Each of the parties hereto consents to the registration with the International Registry of the international interests with respect to the Mortgage and each Mortgage Supplement, and each party hereto covenants and agrees that it will take all such action reasonably requested by the Borrower or the Security Trustee in order to make any registrations with the International Registry, including becoming a registry user entity with the International Registry and providing consents to any registration as may be contemplated by the Operative Documents.

 

*          *          *

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

47

 

IN WITNESS WHEREOF, the parties hereto have caused this Facility Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

 

	
 
    	
HAWAIIAN   AIRLINES, INC., as Borrower
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BANK   OF UTAH, as Security Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NORDDEUTSCHE   LANDESBANK GIROZENTRALE, as a Loan Participant
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BNP   PARIBAS, as a Loan Participant
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

48

 

Schedule I

 

Loan Participants

 

	
LOAN PARTICIPANTS
    	
 
    	
LOAN CERTIFICATE TYPE
    
	
Norddeutsche   Landesbank Girozentrale
    	
 
    	
Type A
    
	
BNP   Paribas
    	
 
    	
Type B
    

 

Notice & Account Information

 

Security Trustee and Payment Office:

 

Bank of Utah, as Security Trustee

 

Bank of Utah

200 E. South Temple, Suite 210

Salt Lake City, UT 84111

Fax: (801) 746-3519

Attention: Corporate Trust Services

 

Payment Details:

ABA # [**]

Acct # [**]

Acct Name: Bank of Utah Trust

RE:  Hawaiian Airlines A330-200 MSN 1259

 

Loan Participants

 

Norddeutsche Landesbank Girozentrale

 

Address:

Ship and Aircraft Finance Department / New York Branch

1114 Avenue of the Americas-20th Floor

New York, N.Y. 10036

Phone +1 (212) 812-6826

Fax +1 (212) 812-6920

E-mail: Claudia.ziemer@nordlb.de
 Attention: Aviation Group (0990/6826)

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE I

 

1

 

Copy:

Ship and Aircraft Finance Department

Friedrichswall 10

30159 Hannover

Telephone No: +49 511 361 8965

Facsimile No.: + 49 511 361 4785

 

Payment Details:

Bank: JPMorgan Chase Bank, New York

SWIFT: [**]

City: New York, USA

ABA: [**]

Account No: [**]

Beneficiary: Norddeutsche Landesbank Girozentrale NY Branch

Ref: Hawaiian Airlines A330-200 MSN 1259

 

BNP Paribas

 

Address:

520 Madison Avenue

New York, NY 10022

Attention:  Robert Papas, Aviation Finance Group / Stephanie Klein, Aviation Finance Group

Telephone No.:  917-472-4879 / 212-841-8083

Facsimile No.:  212-841-2748

E-mail:  robert.papas@us.bnpparibas.com / stephanie.klein@americas.bnpparibas.com

 

Payment Details:

NAME OF BANK:  BNP Paribas

CITY, STATE, ZIP:  New York, NY

SWIFT:  [**]

ABA NUMBER:  [**]

ACCOUNT NAME:  BNP Paribas, Loan Servicing Clearing Account

ACCOUNT NUMBER:  [**]

REF:  Hawaiian Airlines, Inc.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE I

 

2

 

Borrower

 

Hawaiian Airlines, Inc.

 

3375 Koapaka Street

Suite G350

Honolulu, Hawaii 96819

USA

 

Telephone No.: 808-835-3700

Fax:  808-835-3699

E-mail: Peter.Ingram@hawaiianair.com / Hoyt.Zia@hawaiianair.com

Attention:  Executive Vice President and Chief Financial Officer;

Executive Vice President and General Counsel

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE I

 

3

 

Schedule II

 

Commitments

 

	
Aircraft
    	
 
    	
Participation
   Percentage –
   Nord/LB(1)
    	
 
    	
Participation
   Percentage -
   BNP(2)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Designated Aircraft
    	
 
    	
50
    	
%
    	
50
    	
%
    

 

(1)  Norddeutsche Landesbank Girozentrale

 

(2)  BNP Paribas

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE II

 

1

 

Schedule III

 

Tax Provisions

 

(a)                                  Taxes Indemnified.  Subject to the exclusions stated in paragraph (b) below, the Borrower agrees to indemnify, protect, defend and hold harmless on an After-Tax Basis each Tax Indemnitee against Taxes imposed on or with respect to any Tax Indemnitee, the Borrower, any other Person, the Designated Aircraft, the Airframe, any Engine or any Part, the Mortgage Estate, the Designated Aircraft, the Loan or the Operative Documents in connection therewith, upon or with respect to or relating to:

 

[**]

 

(b)                                 Taxes Excluded.  The provisions of paragraph (a) of this Schedule III shall not apply to, and the Borrower shall have no indemnity liability to a Tax Indemnitee pursuant to paragraph (a) of this Schedule III with respect to:

 

[**]

 

(c)                                  Certain Agreements.

 

[**]

 

(d)                                 Withholding on Payments.

 

(i)                                     All amounts payable by or on behalf of the Borrower pursuant to the Operative Documents and all amounts payable to any Loan Participant under a Hedge Transaction shall be free of withholding on account of any Taxes, unless such withholding is required by applicable law.  If any Tax is required to be withheld from any such amount payable by the Borrower to or for the benefit of a Tax Indemnitee under any Operative Document, or payable by a Hedge Transaction Counterparty to or for the benefit of a Loan Participant under a Hedge Transaction, the Borrower (A) shall, subject to the exceptions set forth below in paragraphs (d)(ii), (v) and (ix), pay an additional amount such that the net amount actually or constructively received by such Tax Indemnitee will, after such withholding (including withholding from any additional amount payable pursuant to this sentence), equal the full amount of the payment then due, (B) shall pay, or cause to be paid, to the relevant Tax authority the full amount required to be withheld (including the full amount required to be withheld from any additional amount paid pursuant to this sentence) in accordance with applicable law, and (C) shall furnish to the affected Tax Indemnitee and the Security Trustee as soon as practicable an official receipt (or a certified copy thereof) if reasonably obtainable or such other documentation as is reasonably obtainable and reasonably acceptable to such Tax Indemnitee evidencing payment of the withheld Tax.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE III

 

1

 

(ii)                                  Notwithstanding anything to the contrary in this Agreement, the Borrower shall not be required to pay any additional amounts to a Tax Indemnitee under paragraph (d)(i) of this Schedule III in respect of its Excluded Taxes.

 

(iii)                               Each Non-U.S. Loan Participant shall deliver to the Borrower and the Security Trustee on the date of the Facility Agreement (or, if such Non-U.S. Loan Participant becomes a Loan Participant after the date of the Facility Agreement, on the date on which such Non-U.S. Loan Participant becomes a Loan Participant) a properly completed and duly signed Internal Revenue Service Form W-8BEN, W-8ECI or W-8EXP (or applicable successor form) evidencing such Loan Participant’s entitlement to a complete exemption from or to a reduced rate of United States withholding Taxes on interest and all other amounts payable to such Loan Participant pursuant to the Operative Documents.  Each Loan Participant that is a “United States person” (as defined in Section 7701(a)(30) of the Code), but is not a Person described in Section 6049(b)(4) of the Code, shall deliver to the Borrower and the Security Trustee on the date of this Agreement (or, if such Loan Participant becomes a Loan Participant after the date of this Agreement, on the date on which such Loan Participant becomes a Loan Participant) and the Security Trustee shall deliver to the Borrower on the date of this Agreement a properly completed and duly signed Internal Revenue Service Form W-9 (or applicable successor form), evidencing such Loan Participant’s or the Security Trustee’s, as the case may be, entitlement to a complete exemption from United States back-up withholding Taxes on interest and all other amounts payable to such Loan Participant or the Security Trustee, as the case may be, pursuant to the Operative Documents.  If a Non-U.S. Loan Participant shall be effecting a Hedge Transaction with a U.S. Hedge Transaction Counterparty, such Non-U.S. Loan Participant shall deliver to such Hedge Transaction Counterparty on the date of the relevant Hedge Transaction a properly completed and duly signed Internal Revenue Service Form W-8BEN, W-8ECI or W-8EXP (or applicable successor form) evidencing such Non-U.S. Loan Participant’s entitlement to a complete exemption from or to a reduced rate of United States withholding Taxes on interest and all other amounts payable to such Loan Participant pursuant to the Hedge Transaction.  If a Loan Participant that is a “United States person” (as defined in Section 7701(a)(30) of the Code), but is not a Person described in Section 6049(b)(4) of the Code, shall be effecting a Hedge Transaction with a U.S. Hedge Transaction Counterparty, such Loan Participant shall deliver to such Hedge Transaction Counterparty on the date of the relevant Hedge Transaction a properly completed and duly signed Internal Revenue Service Form W-9 (or applicable successor form), evidencing such Loan Participant’s entitlement to a complete exemption from United States withholding Taxes on interest and all other amounts payable to such Loan Participant pursuant to the Hedge Transaction.  In addition, and without limiting the foregoing, the Security Trustee shall be responsible for preparing and filing Internal Revenue Service Forms 1042 and 1042S (or any similar or successor forms), as well as any governmental filings and information requirements in connection therewith.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE III

 

2

 

(iv)                              If any Internal Revenue Service form delivered by the Security Trustee or any Loan Participant pursuant to this paragraph (d) expires or becomes inaccurate or obsolete, the Security Trustee or such Loan Participant (as the case may be) shall deliver to the Borrower and the Security Trustee a replacement Internal Revenue Service form (or applicable successor form).

 

(v)                                 For the avoidance of doubt, the Borrower shall not be required to pay any additional amounts to a Tax Indemnitee under paragraph (d)(i) of this Schedule III if such Tax Indemnitee shall have failed to satisfy the requirements of paragraph (d)(iii) or (d)(iv) of this Schedule III, as the case may be; provided that if a Non-U.S. Loan Participant shall have satisfied the requirements of paragraph (d)(iii) of this Schedule III on the date such Non-U.S. Loan Participant becomes party to this Agreement, nothing in this paragraph (d)(v) shall relieve the Borrower of its obligation to pay any additional amounts pursuant to paragraph (d)(i) in the event that, as a result of a Change in Law, such Non-U.S. Loan Participant is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Loan Participant is not subject to withholding.

 

(vi)                              The Security Trustee and each Loan Participant agrees (and each other Loan Participant, by its execution hereof and by acceptance of the assignment of the Loan, shall be deemed to agree) to indemnify and hold harmless on an After-Tax Basis each of the Loan Participants, the Security Trustee and the Borrower, within 30 days after receipt of written demand therefor, for all liabilities, losses, costs and expenses paid or incurred by the Loan Participants, the Security Trustee or the Borrower (as the case may be) as a result of its failure to comply with the provisions of this paragraph (d) or the inaccuracy of any Internal Revenue Service form delivered by it pursuant to this paragraph (d).

 

(vii)                           If the Borrower or the Security Trustee fails to withhold from any payment to a Loan Participant pursuant to this Agreement or any Operative Document any Tax which such Person is required by applicable law to withhold from such payment, but for which it is not responsible under this paragraph (d), the Security Trustee or such Loan Participant (as the case may be) shall repay to such Person, within ten Business Days after receipt of such Person’s written demand therefor, the amount which such Person was required to withhold.

 

(viii)                        If any party hereto determines that any withholding Tax is required by applicable law to be withheld from any amount payable to the Security Trustee or any Loan Participant pursuant to any Operative Document for which the Borrower is responsible under paragraph (d)(i) of this Schedule III, the party making such determination shall give written notice thereof to the other parties hereto and to the affected Tax Indemnitees, and if requested by the Borrower in writing, each other party hereto and the affected Tax Indemnitees, at the cost and expense of the Borrower, shall use commercially reasonable efforts to take appropriate action to eliminate or minimize

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE III

 

3

 

the Borrower’s indemnity liability or gross-up obligation under this Schedule III for such withholding Taxes, provided that no such Person shall be obligated to accept any amendment of any Operative Document or to take any other action if such amendment or other action might in such Person’s sole discretion be adverse to it.  In addition, without limiting the foregoing, if a Loan Participant determines that any withholding Tax is required by applicable law to be withheld from any amount payable pursuant to a Hedge Transaction for which the Borrower is responsible under paragraph (d)(i) of this Schedule III, such Loan Participant shall give written notice thereof to the Borrower, the counterparty to the Hedge Transaction and any other Loan Participant (if any), and (if permitted by applicable law) the Borrower shall have the right to replace the party to the Hedge Transaction that is not eligible for an exemption from withholding Tax (if doing so would eliminate or reduce such withholding Tax) with a bank or financial institution that is acceptable to the remaining counterparty to the Hedge Transaction (on terms and conditions reasonably acceptable to the remaining party and without recourse to the party that is replaced); provided, further, that if the Borrower determines to so replace such a party to a Hedge Transaction, the Borrower shall provide written notice to the counterparty to the Hedge Transaction, all of the Loan Participants and the Security Trustee and shall be responsible for the costs and expenses in connection with the same (including, without limitation, any Hedge Breakage Loss).

 

(ix)                                Notwithstanding anything to the contrary in this Agreement, the Borrower shall have no obligation to make a payment to any Tax Indemnitee under paragraph (d)(i) above with respect to any Taxes imposed on amounts payable to such Tax Indemnitee at the time such Tax Indemnitee becomes a party to this Agreement, except to the extent that the Borrower was required to make a payment under paragraph (d)(i) above in respect of such Taxes to or for the benefit of such Tax Indemnitee’s transferor or assignor (if any) at the time of assignment.

 

(e)                                  Survival.  The indemnities and other obligations of the Borrower, and the obligations of each Tax Indemnitee, under this Schedule III shall survive the Loan Participants’ making their respective Commitments available in respect of the Designated Aircraft, the Maturity Date of all of the Loans in respect of the Designated Aircraft and the expiration or other termination of the Operative Documents.

 

(f)                                    Non-Parties.  In the case of any Tax Indemnitee that is not a party to this Agreement, the Borrower may require such Tax Indemnitee to agree in writing, in form and substance reasonably acceptable to the Borrower, to perform its obligations under the provisions of this Schedule III before making any payment to such Tax Indemnitee under this Schedule III.

 

*                                         *                                         *

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE III

 

4

 

Schedule 3(a)(i)

 

[**]

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE 3(a)(i)

 

1

 

Schedule 3(a)(ii)

 

[**]

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

SCHEDULE 3(a)(ii)

 

1

 

EXHIBIT A

 

NOTICE OF BORROWING [HAWAIIAN A330 [1259]]

 

NOTICE OF BORROWING dated                            , 2011 (this “Notice”) by Hawaiian Airlines, Inc. (“Hawaiian”).

 

Reference is made to the Facility Agreement [Hawaiian A330 [1259]] dated as of June 29, 2011 among Hawaiian, such Loan Participants party thereto (collectively, the “Loan Participants”) and Bank of Utah, as Security Trustee (as executed and delivered and as in effect from time to time, the “Facility Agreement”) relating to the proposed financing of the Designated Aircraft identified as:  one Airbus Model A330-200 aircraft bearing manufacturer’s serial number [1259] together with the two Rolls Royce Trent Model 772B-60 engines originally installed thereon (the “Aircraft”).  For convenience of reference, unless specified herein, capitalized terms used herein have the same meanings attributed thereto in the Facility Agreement (or the Mortgage referred to therein).

 

We hereby give you notice requesting a Loan Pursuant to Section 2(b)(i) of the Facility Agreement, and in connection therewith we set forth below the required information relating to such Loan.

 

Hawaiian hereby irrevocably notifies each Loan Participant that (a) the scheduled Delivery Date is                      , 2011 (the “Funding Date”), (b) the aggregate principal amount of the Loan is $[                    ], [and] (c) the related Loan will amortize in the manner specified in an amortization schedule separately exchanged by parties hereto [and (d) Hawaiian elects to have the related Loan be a Fixed Rate Loan].  Proceeds of the Participation Amount are to be wired by no later than 10:00 a.m. (New York city time) on the Funding Date in immediately available funds to the Security Trustee to the following account:                          .

 

Aircraft Manufacturer’s account is [                    ].

 

[Please contact [                    ] at phone number [                  ] with the Rate Quote.]

 

Section 2(b) of the Facility Agreement is incorporated herein by reference, mutatis mutandis.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT A

1

 

IN WITNESS WHEREOF, Hawaiian has caused this Notice of Borrowing to be duly executed by its officer thereunto duly authorized on the day and year first above written.

 

	
 
    	
HAWAIIAN   AIRLINES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT A

 

2

 

EXHIBIT B

 

ASSIGNMENT AGREEMENT

 

ASSIGNMENT AGREEMENT [Hawaiian A330 [1259]] dated as of                          ,          between                                                                  (the “Assignee”) and                                                            (the “Assignor”).

 

RECITALS

 

WHEREAS, the Assignor is the holder of the Loan Certificate No.          dated                          ,          (the “Assignor’s Loan Certificate”) issued under the Facility Agreement [Hawaiian A330 [1259]], dated as of June 29, 2011 (the “Facility Agreement”) among Hawaiian Airlines, Inc. (“Hawaiian”), the Loan Participants party thereto and Bank of Utah, as Security Trustee (the “Security Trustee”);

 

WHEREAS, the Assignor proposes to assign to the Assignee $                         of the $                           Assignor’s Loan Certificate and a pro rata portion of all of the rights and obligations of the Assignor under the Facility Agreement and the other Operative Documents (as defined below) in respect thereof, on the terms and subject to the conditions set forth herein, and the Assignee proposes to accept the assignment of such rights and obligations from the Assignor on such terms and subject to such conditions;

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

 

Section 1.  Definitions.  Unless otherwise defined herein, terms defined in the Facility Agreement are used herein as therein defined.

 

Section 2.  Assignment.  The Assignor hereby sells, assigns and transfers to the Assignee effective on                                    (the “Effective Date”), and on the terms and subject to the conditions set forth herein, without recourse to or representation, express or implied, by the Assignor (except as expressly set forth in Section 5 hereof), a $                       portion of the Assignor’s Loan Certificate No.                    (the “Assignor’s Loan Certificate”) and a pro rata portion of the rights and obligations of the Assignor under the Facility Agreement and the other Operative Documents in respect thereof (but not with respect to any indemnity or other claim, interest thereon at the Past Due Rate and breakage amounts, if any, accrued and unpaid as of the Effective Date or thereafter payable to the Assignor in respect of the period prior to the Effective Date), and the Assignee accepts such assignment from the Assignor and assumes all of the obligations of the Assignor accruing from and after the Effective Date under the Facility Agreement and the other Operative Documents relating to the Assignor’s Loan Certificate on such terms and subject to such conditions.  Upon the satisfaction of the conditions set forth in Section 4 hereof, (A) the Assignee shall, on the Effective Date, succeed to the rights and be obligated to perform the obligations of a Loan Participant and Holder under the Facility

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT B

 

1

 

Agreement and the other Operative Documents, and (B) the Assignor shall be released from its obligations under the Facility Agreement and the other Operative Documents accrued from and after the Effective Date, in each case to the extent such obligations have been assumed by the Assignee.

 

Section 3.  Payments.  As consideration for the sale, assignment and transfer contemplated in Section 2 hereof, the Assignee shall pay to the Assignor, on the Effective Date, in lawful currency of the United States and in immediately available funds, to the account specified below its signature on the signature pages hereof, an amount equal to $                              .

 

Section 4.  Conditions.  This Assignment Agreement shall be effective upon the due execution and delivery of this Assignment Agreement by the Assignor and the Assignee and the effectiveness of the assignment contemplated by Section 2 hereof is subject to (a) the receipt by the Assignor of the payment provided for in Section 3 hereof, (b) the delivery to the Security Trustee of the Assignor’s Loan Certificate, duly endorsed for [partial] transfer to the Assignee, together with a request in the form attached hereto as Exhibit A that a new Loan Certificate as the Assignor’s Loan Certificate be issued to the Assignee [and Assignor] and (c) satisfaction of the conditions to such transfer set out in Section 16(c) of the Facility Agreement.

 

Section 5.  Representations and Warranties of the Assignor.  The Assignor represents and warrants as follows:  (a) the Assignor has full power and authority, and has taken all action necessary to execute and deliver this Assignment Agreement and any other documents required or permitted to be executed or delivered by it in connection with this Assignment Agreement and to fulfill its obligations under, and to consummate the transactions contemplated by, this Assignment Agreement, and no governmental authorizations or other authorizations are required in connection therewith, (b) the Assignor’s interest in the Assignor’s Loan Certificate is free and clear of any and all Liens created by or through the Assignor, (c) this Assignment Agreement constitutes the legal, valid and binding obligation of the Assignor, enforceable against the Assignor in accordance with its terms, (d) the Assignor has received no written notice of any Default having occurred and continuing on the date of execution hereof, and (e) the Assignor makes no representations and warranties other than those in (a)-(d) above and consequently assumes no liability or responsibility for the legality, validity, effectiveness, adequacy or enforceability of the Operative Documents or any other documents; the financial condition of the Borrower; the performance and observance by the Borrower of its obligations under the Operative Document or any other documents; or the accuracy of any statements made in or in connection with the Operative Documents or any other documents.

 

Section 6.  Representations and Warranties of the Assignee.  The Assignee hereby represents and warrants to the Assignor that (a) the Assignee has full power and authority, and has taken all action necessary to execute and deliver this Assignment Agreement and any and all other documents required or permitted to be executed or delivered by it in connection with this Assignment Agreement and to fulfill its obligations under, and to consummate the transactions contemplated by, this Assignment Agreement, and no governmental authorizations or other

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT B

 

2

 

authorizations are required in connection therewith, (b) this Assignment Agreement constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with its terms, (c) the Assignee has fully reviewed the terms of the Operative Documents and has independently and without reliance upon the Assignor and based on such information as the Assignee has deemed appropriate, made its own credit analysis and decision to enter into this Assignment Agreement and (d) the Assignee irrevocably declares to follow the same refinancing approach as the Type [A/B] Loan Participant which is the Assignor from which it is taking an assignment hereunder.

 

Section 7.  Further Assurances.  The Assignor and the Assignee hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment Agreement.

 

Section 8.  Governing Law.  This Assignment Agreement shall be governed by, and construed in accordance with, the law of the State of New York.

 

Section 9.  Notices.  All communications between the parties or notices in connection herewith shall be in writing, hand-delivered or sent by ordinary mail or facsimile transmitter, addressed as set forth on the signature pages hereof.  All such communications and notices shall be effective upon receipt.

 

Section 10.  Binding Effect.  This Assignment Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

Section 11.  Interpretation.  The headings of the various sections hereof are for convenience of reference only and shall not affect the meaning or construction of any provision hereof.

 

Section 12.  Integration of Terms.  This Assignment Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and other writings with respect to the subject matter hereof.

 

Section 13.  Counterparts.  This Assignment Agreement may be executed in one or more counterparts, each of which shall be an original but all of which, taken together, shall constitute one and the same instrument.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT B

 

3

 

IN WITNESS WHEREOF, the parties have caused this Assignment Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

 

	
 
    	
[ASSIGNEE]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address   for Notices:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Wire   Instructions:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[ASSIGNOR]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address   for Notices:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Wire   Instructions:
    

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT B

 

4

 

Exhibit A
 to Assignment Agreement

 

Request for Loan Certificate and Registration

 

,

 

To:                              Bank of Utah, as Security Trustee

 

Ladies and Gentlemen:

 

We refer to the assignment by                                                          (the “Assignor”), of certain of its rights and obligations with respect to Type [A/B] Loan Certificate No.              in the principal amount of $                         (the “Assignor’s Loan Certificate”) to                                                        (the “Assignee”), pursuant to an Assignment Agreement [Hawaiian A330 [1259]] dated as of                    ,          between the Assignor and the Assignee. Capitalized terms not otherwise defined herein shall have the meanings assigned thereto in such Assignment Agreement.  The Assignor hereby delivers the Assignor’s Loan Certificate to Bank of Utah, in its capacity as Security Trustee.  The Assignor requests Hawaiian to issue to (i) the Assignee a new Type [A/B] Loan Certificate (the “New Loan Certificate”) in the principal amount of $                         and (ii) to the Assignor a new Type [A/B] Loan Certificate (the “Assignor’s New Loan Certificate”) in the principal amount of $                            , each with a [Delivery Date] issue date.

 

The Security Trustee is hereby instructed to pay all interest on the portion of the Assignor’s Loan Certificate being assigned hereunder accrued through the date hereof directly to Assignor on the Interest Payment Date such interest is payable and paid.

 

The Assignor requests the Security Trustee to deliver the New Loan Certificate to the Assignee at its address set forth below and to deliver the Assignor’s New Loan Certificate to the undersigned.

 

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
[ASSIGNOR]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

Exhibit A to Assignment Agreement

 

1

 

	
 
    	
[ASSIGNEE]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address   for Notices:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Wire   Instructions
    
	
 
    	
 
    
	
 
    	
 
    
	
Accepted   and Agreed
    	
 
    
	
 
    	
 
    
	
BANK   OF UTAH
    	
 
    
	
 
    	
 
    
	
as   Security Trustee
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    
					

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

Exhibit A to Assignment Agreement

 

2

 

EXHIBIT C

 

[Form of Loan Certificates]

 

LOAN CERTIFICATE
 HAWAIIAN AIRLINES, INC.
 CERTIFICATE DUE 2023
 ISSUED IN CONNECTION WITH ONE AIRBUS MODEL A330-200 AIRCRAFT
 WITH MANUFACTURER’S SERIAL NUMBER 1259 AND INITIALLY BEARING
 UNITED STATES FEDERAL AVIATION ADMINISTRATION REGISTRATION NO. N384HA AND TWO ROLLS ROYCE TRENT MODEL 772B-60 ENGINES

 

New York, New York

 

Type:  [A/B]

 

Tranche:  [1/2]

 

No.:  XX

 

	
$
    	
[Delivery Date]
    

 

Hawaiian Airlines, Inc. (the “Borrower”) hereby promises to pay to                                     , or registered transferees, the principal sum of                                              Dollars, in [[**]] installments, equal to the amount, and payable on the dates, set forth in Annex A hereto, together with interest on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full.  Interest shall accrue with respect to each Interest Period at the Applicable Rate in effect for such Interest Period and shall be payable in arrears on each Interest Payment Date and on the date this Loan Certificate is paid in full.  This Loan Certificate shall bear interest at the applicable Past Due Rate on any principal hereof, and, to the extent permitted by applicable law, interest and other amounts due hereunder, not paid when due (whether at stated maturity, by acceleration or otherwise), for any period during which the same shall be overdue, payable on demand by the Holder hereof given through the Security Trustee.

 

Interest shall be payable with respect to the first but not the last day of each Interest Period.  Interest shall be calculated on the basis of (i) if the related Loan is a Floating Rate Loan, a year of 360 days and actual number of days elapsed or (ii) if the related Loan is a Fixed Rate Loan, a year of 360 days consisting of 12 30-day months.  If any sum payable hereunder falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day; provided that, in the case of principal of and interest hereon payable on an Interest Payment Date, if by virtue of such extension such payment would fall in the next succeeding month, such sum shall be payable on the next preceding Business Day.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT C

 

1

 

All payments of principal, Break Amount (if any), interest and other amounts to be made to the Holder hereof or under the Mortgage and Security Agreement [Hawaiian A330 [1259]] dated as of June 29, 2011 (as amended or supplemented from time to time, herein called the “Mortgage”, the terms defined therein and not otherwise defined herein being used herein with the same meanings) between the Borrower and Bank of Utah, as Security Trustee thereunder, shall be made in accordance with the terms of the Facility Agreement and the Mortgage.

 

Principal and interest and other amounts due hereon shall be payable in Dollars in immediately available funds prior to 11:00 a.m., New York City time, on the due date thereof, to the Security Trustee at the Payment Office.  All such payments by the Borrower shall be made free and clear of and without reduction for or on account of all wire or other like charges.

 

The Holder hereof, by its acceptance of this Loan Certificate, agrees that, except as otherwise expressly provided in the Mortgage, each payment received by it in respect hereof shall be applied, first, to the payment of any amount (other than the principal of or interest on this Loan Certificate) due in respect of this Loan Certificate, second, to the payment of interest hereon (as well as any interest on overdue principal and, to the extent permitted by law, interest and other amounts payable hereunder) due and payable hereunder, third, to the payment of the principal of this Loan Certificate then due and fourth, the balance, if any, remaining thereafter, to the payment of the principal of this Loan Certificate remaining unpaid, in the manner set forth in the last sentence of Section 2.04 of the Mortgage.

 

This Loan Certificate is one of the Type [A/B] Loan Certificates referred to in the Mortgage which have been or are to be issued by the Borrower pursuant to the terms of the Mortgage.  The Mortgage Estate is held by the Security Trustee as security, in part, for the Loan Certificates.  Reference is hereby made to the Mortgage and the Facility Agreement referred to therein for a statement of the rights and obligations of the Holder hereof, and the nature and extent of the security for this Loan Certificate and of the rights and obligations of the other Holders, and the nature and extent of the security for the other Loan Certificates, as well as for a statement of the terms and conditions of the trusts created by the Mortgage, to all of which terms and conditions in the Mortgage and such Facility Agreement each Holder hereof agrees by its acceptance of this Loan Certificate.

 

There shall be maintained a Certificate Register for the purpose of registering transfers and exchanges of Loan Certificates at the Payment Office of the Security Trustee or at the office of any successor security trustee in the manner provided in Section 2.06 of the Mortgage.  As provided in the Mortgage and subject to certain limitations set forth therein and in the Facility Agreement, this Loan Certificate or any interest herein may, subject to the next following paragraph, be assigned or transferred, and the Loan Certificates are exchangeable for a like aggregate original principal amount of Loan Certificates of any authorized denomination, as requested by the Holder surrendering the same.

 

Prior to the due presentment for registration of transfer of this Loan Certificate, the Borrower and the Security Trustee shall deem and treat the person in whose name this Loan

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT C

 

2

 

Certificate is registered on the Certificate Register as the absolute owner of this Loan Certificate and the Holder for the purpose of receiving payment of all amounts payable with respect to this Loan Certificate and for all other purposes whether or not this Loan Certificate is overdue, and neither the Borrower nor the Security Trustee shall be affected by notice to the contrary.

 

This Loan Certificate is subject to prepayment as permitted by Sections 2.09 and 2.10 of the Mortgage and to acceleration by the Security Trustee as provided in Section 9.01 of the Mortgage, and the Holder hereof, by its acceptance of this Loan Certificate, agrees to be bound by said provisions.

 

This Loan Certificate shall be governed by and construed in accordance with the law of the State of New York.

 

*   *   *

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT C

 

3

 

IN WITNESS WHEREOF, the Borrower has caused this Loan Certificate to be executed in its corporate name by its officer thereunto duly authorized, as of the date hereof.

 

	
 
    	
HAWAIIAN AIRLINES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Its:
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Its:
    

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT C

 

4

 

ANNEX A
 TO
 LOAN CERTIFICATE
 SCHEDULE OF PRINCIPAL PAYMENTS

 

	
Interest Payment
   Date
   (falling on or
   closest to)
    	
 
    	
Outstanding Principal
   Balance (Beginning of
   Period)
    	
 
    	
Principal Amount to be

paid(3)
    	
 
    	
Outstanding Principal
   Balance (After
   Repayment)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

(3)   The amounts in this column for any Loan Certificate shall be equal, for any Interest Payment Date, to the product of (a) the “Principal Amount to be Paid” for such Interest Payment Date as set forth in the Schedule of Principal Payments in Schedule 3(a)(i) (if such Loan Certificate is issued in respect of a Tranche 1 Loan) or Schedule 3(a)(ii) (if such Loan Certificate is issued in respect of a Tranche 2 Loan) to the Facility Agreement for the Aircraft and (b) a fraction, the numerator of which is the original principal amount of such Loan Certificate and the denominator of which is aggregate original principal amount of all Loan Certificates issued in respect of the applicable Tranche.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT C

 

5

 

EXHIBIT D

 

[Form of Mortgage]

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

EXHIBIT D

 

1

 

APPENDIX X

 

DEFINITIONS AND RULES OF USAGE

 

(a)                                  Unless a contrary indication appears, a reference in this Agreement to:

 

(i)                                     the “agreed form” of any Operative Document means the form of such Operative Document which on the date hereof has been agreed by the Borrower and the Security Trustee (acting on the instructions of the Loan Participants);

 

(ii)                                  any “applicable law” means (a) applicable laws, statutes, decrees, decree laws, acts, codes, regulations, legislation, treaties, conventions and similar instruments and, in respect of any of the foregoing, unless the context otherwise requires, any instrument passed in substitution therefor or for the purposes of consolidation thereof with any other instrument or instruments, in each case, unless the context otherwise requires, as amended, modified, varied or supplemented from time to time, (b) applicable final judgments, orders, determinations or awards of any court from which there is no right of appeal or if there is a right of appeal such appeal is not prosecuted within the allowable time and (c) applicable orders, guidelines, notices, guidance, rules and regulations of any state or government or any government entity, in each case having the force of law;

 

(iii)                               any person includes its and any subsequent successors in title, permitted assigns and permitted transferees;

 

(iv)                              “assets” includes present and future properties, revenues and rights of every description;

 

(v)                                 “indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

 

(vi)                              an “Operative Document” or any other agreement or instrument is a reference to that Operative Document or other agreement or instrument as amended, supplemented or novated in accordance with the terms thereof and of this Agreement or any other Operative Document, together with all exhibits, schedules and other attachments thereto;

 

(vii)                           a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self regulatory or other authority or organization;

 

(viii)                        a reference to a “third party” is a reference to any person other than a Party;

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

(ix)                                a reference to a “Schedule” is a reference to such Schedule as it may be amended from time to time in accordance herewith;

 

(x)                                   unless the context shall otherwise require, a provision of law is a reference to that provision as amended or re enacted; and

 

(xi)                                a time of day is, unless stated otherwise, a reference to New York time.

 

(b)                                 Section and Schedule headings are for ease of reference only.

 

(c)                                  Unless a contrary indication appears, a term used in any other Operative Document or in any notice given under or in connection with any Operative Document has the same meaning in that Operative Document or notice as in this Agreement.

 

(d)                                 “$” and “dollars” denote the lawful currency of the United States of America.

 

DEFINED TERMS

 

“Additional Parts” has the meaning set forth in Section 4.03 of the Mortgage.

 

“Additional Insured(s)” is defined in Paragraph D(i) of Schedule 1 to the Mortgage.

 

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or under common control with, such Person.  The term “control” means the possession, directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“After-Tax Basis” means, with respect to any payment to be received (actually or constructively) by a Person, the amount of such payment plus a further payment or payments so that the net amount received (actually or constructively) by such Person, after deducting from such payments the amount of all Taxes imposed on such Person by any government or taxing authority with respect to such payments (net of any current credits, deductions or other Tax benefits arising from the actual or constructive payment by such Person of any amount, including Taxes, with respect to the payment received or arising by reason of the receipt or accrual (computed at the highest marginal rate then applicable to such Person) by such Person of the payment received) is equal to the original payment required to be received.

 

“Aircraft” means the Airframe together with the two Engines referenced in the Mortgage Supplement relating to the Airframe (or any Replacement Engine substituted therefor) and including buyer furnished equipment, whether or not such Engines are installed on the Airframe or any other airframe, and, where the context permits, all logs, manuals and data and inspection, modification and overhaul records required to be maintained with respect to the foregoing property.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

“Aircraft Manufacturer” means Airbus S.A.S., in its capacity as manufacturer of the Aircraft.

 

“Aircraft Purchase Agreement” means the Airbus A330/A350 XWB Purchase Agreement, dated as of January 31, 2008, entered into between the Aircraft Manufacturer and the Borrower, including for the avoidance of doubt all the attachments, exhibits and schedules thereto.

 

“Airframe” means:  (i) the Airbus A330-200 aircraft (excluding Engines or engines from time-to-time installed thereon) specified by United States Registration Number and Manufacturer’s Serial Number in a particular Mortgage Supplement relating to this Mortgage; (ii) any and all related Parts; and (iii) any Replacement Airframe which may from time to time be substituted for the Airframe then subject to this Mortgage pursuant to Section 5.01(b) hereof.

 

“Applicable Margin” has the meaning set forth in Section 1 of the Facility Agreement.

 

“Applicable Rate” means, for any Interest Period, a rate per annum equal to (i) in the case of a Floating Rate Loan, the Floating Rate for such Interest Period and (ii) in the case of a Fixed Rate Loan, the Fixed Rate for such Interest Period, in each case, subject to Section 3(j) of the Facility Agreement for Type B Loan Certificates.

 

“Assigned Warranties” means all right, title and interest of the Borrower in, to and under (i) the relevant parts and exhibits of the Aircraft Purchase Agreement relating to the Aircraft and referred to in the Consent and Agreement as subject to collateral assignment, and (ii) the relevant parts and exhibits of the General Terms Agreement referred to in the Engine Consent and Agreement as subject to collateral assignment.

 

“Aviation Authority”  means the FAA or, if the Aircraft is permitted to be, and is, registered with any other Governmental Body under and in accordance with Section 3.01(b), such other Governmental Body.

 

“Aviation Law” means the Federal Aviation Act, or such other applicable law of any jurisdiction in which the Aircraft is registered.

 

“Bills of Sale” means the FAA Bill of Sale and a Warranty Bill of Sale in favor of Borrower in respect of the Aircraft.

 

“Break Amount” means, as at any date of determination and for the Loan Certificates of any Tranche, the amount, if any, equal to the sum of (i) LIBOR Break Amount, (ii) in the case of a Type A Loan Certificate, Liquidity Break Amount and (iii) in the case of a Fixed Rate Loan, Hedge Breakage Loss.

 

“Business Day” means (i) a day (other than a Saturday or Sunday) on which banks are open for general business in New York, New York, Honolulu, Hawaii, and Salt Lake City, Utah and (ii) as relates to any Interest Payment Date, any payment or prepayment of a Loan, any

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

Quotation Date, LIBOR or any notice in relation to the foregoing, a day on which banks are open for dealings in dollar deposits in the London interbank market.

 

“Cape Town Convention” means the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment that were signed in Cape Town, South Africa on November 16, 2001, together with all regulations and procedures issued in connection therewith, and all other rules, amendments, supplements, modifications and revisions thereto, as in effect under the laws of the United States of America as a contracting state.

 

“Certificate Register” has the meaning specified in Section 2.06 of the Mortgage.

 

“Change in Law” means the occurrence, after the date of the Facility Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Body or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Body; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel II, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Civil Reserve Air Fleet Program” or “CRAF” means the Civil Reserve Air Fleet Program administered by the U.S. Government or any substantially similar program.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.

 

“Commitment” means, as to each Loan Participant, its Tranche 1 Commitment and its Tranche 2 Commitment.

 

“Commitment Termination Date” has the meaning specified in Section 1 of the Facility Agreement.

 

“Consent and Agreement” means the Consent and Agreement [Hawaiian A330 [1259]], dated as of the Delivery Date for the Aircraft, of the Aircraft Manufacturer in respect of the Aircraft, in form and substance reasonably satisfactory to the Borrower and the Security Trustee.

 

“Cutoff Date” is defined in Section 2(b)(vi) of the Facility Agreement.

 

“Default” means any event which with the giving of notice or the lapse of time or both if not timely cured or remedied would become an Event of Default pursuant to Article VIII of the Mortgage.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

“Delivery Date” means the date of the initial Mortgage Supplement for the Aircraft, which date shall be the date the Loan Participants deliver the Loan in respect of the Aircraft to or for account of the Borrower.

 

“DERA” means a deregistration power of attorney in respect of the Aircraft by the Borrower in favor of the Security Trustee (if applicable).

 

“Dollars”, “Dollar” and “$” means the lawful currency of the United States of America.

 

“Engine” means (i) each of the two Rolls Royce Trent model 772B-60 engines listed by Manufacturer’s Serial Numbers in the initial Mortgage Supplement for the Aircraft, whether or not from time to time installed on the Airframe or any other airframe; (ii) any Replacement Engine which may from time to time be substituted for any Engine pursuant to the terms hereof; and (iii) in each case, any and all related Parts.  The term “Engines” means, as of any date of determination and in respect of the Airframe or Aircraft, both Engines then subject to the lien hereof and relating to the Aircraft or Airframe.  An Engine is “related” to the Airframe/Aircraft in respect of which it shares a common Mortgage Supplement.  Except as otherwise set forth herein, at such time as a Replacement Engine shall be substituted for an Engine pursuant to the terms hereof, such replaced Engine shall cease to be an Engine hereunder.

 

“Engine Consent and Agreement” means the Engine Manufacturer Consent and Agreement [Hawaiian A330 [1259]], dated as of the Delivery Date for the Aircraft, of the Engine Manufacturer in respect of the Engines, in form and substance reasonably satisfactory to the Borrower and the Security Trustee.

 

“Engine Manufacturer” means Rolls Royce plc.

 

“Event of Default” has the meaning specified in Article VIII of the Mortgage.

 

“Event of Loss” with respect to the Aircraft, the Airframe or any Engine means any of the following events with respect to such property:  (i) the loss of such property, or of the use thereof, due to the destruction of or damage to such property which renders repair uneconomical or which renders such property permanently unfit for normal use by the Borrower for any reason whatsoever; (ii) any damage to such property which results in the receipt of insurance proceeds with respect to such property on the basis of an actual, constructive or compromised total loss; (iii) theft, hijacking or disappearance of such property for a period in excess of 180 days (or, if earlier, the date on which the Borrower has confirmed to the Security Trustee in writing that it cannot recover such property); (iv) the confiscation, condemnation, or seizure of, or requisition of (x) title to such property by any governmental or purported governmental authority or (y) use by any governmental or purported governmental authority for a period in excess of 90 consecutive days (other than a requisition of use by the government of the United States of America or any agency or instrumentality thereof which bears the full faith and credit of the government of the United States of America and such requisition for use is for a period in excess of 180 consecutive days); (v) as a result of any law, rule, regulation, order or other action by the FAA or other similar governmental body of the government of registry of the Aircraft having jurisdiction, use of such type of property in the normal course of the business of air

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

transportation shall have been prohibited for a period of twelve consecutive months; and (vi) any event treated as an Event of Loss pursuant to Section 3.03(d).

 

An Event of Loss with respect to the Aircraft shall be deemed to have occurred if an Event of Loss occurs with respect to the related Airframe.

 

“Excluded Parts” means any audio-visual, entertainment, telephonic or other passenger convenience equipment owned by third parties (or owned jointly by the Borrower and others) and leased or otherwise furnished to the Borrower in the ordinary course of business.

 

“Excluded Taxes” means, with respect to a Tax Indemnitee or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) Taxes imposed on or measured by its overall net income or capital (however denominated), franchise Taxes imposed on it (in lieu of net income Taxes) and branch profits Taxes imposed on it, by a jurisdiction (or any political subdivision thereof) as a result of the recipient being organized or having its principal office or, in the case of a Loan Participant, its Facility Office in such jurisdiction and (b) in the case of a Non-U.S. Loan Participant, (i) any U.S. federal withholding Tax that is imposed on amounts payable to such Non-U.S. Loan Participant at the time such Non-U.S. Loan Participant becomes a party to the Facility Agreement (or designates a new Facility Office), except (x) to the extent that such Non-U.S. Loan Participant (or its assignor, if any) was entitled, immediately prior to the time of designation of a new Facility Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Tax pursuant to paragraph (d) of Schedule III to the Facility Agreement or (y) if such Non-U.S. Loan Participant is an assignee pursuant to a request by the Borrower under paragraph (d)(ix) of Schedule III to the Facility Agreement or pursuant to any other request of the Borrower, or pursuant to any other provision in any Operative Document, or (ii) is attributable to such Non-U.S. Loan Participant’s failure to comply with paragraph (d)(iii) or (d)(v) of Schedule III to the Facility Agreement and (c) in the case of any Tax Indemnitee, any U.S. federal withholding Tax that is imposed on amounts payable to such Tax Indemnitee under Section 1471 of the Code or under Section 1472 of the Code attributable to such Tax Indemnitee’s failure to comply with the requirements of Section 1472 of the Code.

 

“Expense” or “Expenses” means any and all liabilities, losses, damages, penalties, claims, actions, suits, out of pocket costs, expenses and disbursements (including reasonable legal fees and expenses) of whatever kind and nature but excluding internal costs and expenses such as salaries, any amounts that would be included in Break Amount, and overhead of whatsoever kind and nature.

 

“FAA Bill of Sale” means, for the Aircraft (if FAA-registered), a bill of sale on AC Form 8050-2 or such other form as may be approved by the FAA in favor of the Borrower from the Aircraft Manufacturer in respect of the Aircraft.

 

“FAA War Risk Policy” is defined in Section 6.03 of the Mortgage.

 

“Facility Agreement” means that certain Facility Agreement [Hawaiian A330 [1259]], dated as of June 29, 2011, among the Borrower, the Loan Participants, and the Security Trustee

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

as such Facility Agreement may be amended or supplemented from time to time pursuant to the applicable provisions thereof.

 

“Facility Office” means the office or offices notified by a Loan Participant to the Security Trustee and the Borrower in writing on or before the date it becomes a Loan Participant (or, following that date, by not less than five Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.

 

“Federal Aviation Act” means part A of subtitle VII of Title 49 of the United States Code, or any successor provision.

 

“Federal Aviation Administration” and “FAA” mean the United States Federal Aviation Administration and any successor agency or agencies thereto.

 

“Federal Reserve Bank” means any Federal Reserve Bank of the United States.

 

“FedWire” means the funds transfer system used to transfer reserve balances for immediately available credit among the member banks of the United States Federal Reserve System.

 

“Fee Letter” means that certain letter agreement, dated as of April 29, 2011, between the Borrower and the Underwriters, pursuant to which the Borrower has agreed to pay certain Fees.

 

“Fees” means any commitment fee, structuring fee or other fee payable by the Borrower to any Finance Party pursuant to or in relation to the transactions contemplated by the Operative Documents.

 

“Finance Parties” means, together, the Loan Participants and the Security Trustee (each, a “Finance Party”).

 

“Fixed Rate” means, if the Loan Certificates are to bear interest at a fixed rate, for the applicable Type of Loan Certificate, the Fixed Rate determined in accordance with Section 3(b)(ii) of the Facility Agreement.  The Fixed Rate for each Type of Loan Certificate for (i) any Tranche 1 Loan shall be the rate specified on Schedule 1 to the Mortgage Supplement and (ii) any Tranche 2 Loan shall be the rate specified on Schedule 2 to the Mortgage Supplement; provided that in the case of a Fixed Rate established pursuant to a Conversion Notice after the Funding Date, such rates shall be as specified in a supplement to the Mortgage as required by Section 3(b)(ii)(2) of the Facility Agreement.

 

“Fixed Rate Loan” means the Loan if evidenced by Loan Certificates which bear interest at the Fixed Rate.

 

“Fixed Rate Conversion Option” has the meaning specified in Section 3(b)(ii)(2) of the Facility Agreement.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

“Floating Rate” means, for any Interest Period and Type and Tranche of Loan Certificate, the sum of (1) LIBOR for such Interest Period, plus (2) the Applicable Margin applicable to such Type and Tranche of Loan Certificate (calculated on a basis of actual number of days elapsed in a year of 360 days).

 

“Floating Rate Loan” means the Loan if evidenced by Loan Certificates which bear interest at the Floating Rate.  The Loan shall be a Floating Rate Loan unless the Borrower shall have made an election to have the Loan bear interest at a Fixed Rate in accordance with Section 3(b)(ii) of the Facility Agreement.

 

“Foreign Air Carrier” means any air carrier which is not a U.S. Air Carrier and which performs maintenance, preventative maintenance and inspections for the Aircraft, the Airframe and/or any Engine to standards which are approved by, or which are substantially equivalent to those required by, the FAA, the Civil Aviation Authority of the United Kingdom, the Direction Generale de l’Aviation Civile of the French Republic, the Luftfahrt-Bundesamt of the Federal Republic of Germany, the Nederlandse Luchtvaart Authoriteit of the Kingdom of the Netherlands, the Ministry of Transportation of Japan, the Federal Ministry of Transport of Canada, the Office Federal de l’Aviation Civile of the Swiss Confederation, the Civil Aviation Safety Authority of Australia, the Federal Ministry of Transport, Innovation and Technology of Austria, the Service Public Fédéral Mobilité et Transports of Belgium, the Civil Aviation Authority of Denmark, the Irish Aviation Authority, Ente Nazionale per l’Aviazione Civile (Italy), the Civil Aviation Authority of New Zealand, the Civil Aviation Authority of Norway or the Swedish Transport Agency (and any agency or instrumentality of the applicable government succeeding to the functions of any of the foregoing entities).

 

“Forward Fix Unwind” means [**].

 

“Funding Date” has the meaning specified in Section 2(b) of the Facility Agreement.

 

“GAAP” means (a) generally accepted accounting principles applicable in the United States of America  as in effect from time to time or (b) International Financial Reporting Standards and International Accounting Standards (and interpretations thereof) published by the International Accounting Standards Board, as in effect at the relevant time, and, in each case as applied by the Borrower in the preparation of its public financial statements.

 

“Governmental Body” means (a) any federal, state or similar government, and any body, board, department, commission, court, tribunal, authority, agency or other instrumentality of any such government or otherwise exercising any executive, legislative, judicial, administrative or regulatory functions of such government or (b) any other government entity having jurisdiction over any matter contemplated by the Operative Documents or relating to the observance or performance of the obligations of any of the parties to the Operative Documents.

 

“Hedge Break Amount” means, as of any date on which Break Amount may be payable under the Operative Documents in respect of a Fixed Rate Loan and for any Holder’s related Hedge Transaction, the amount a floating rate payor would require in accordance with the “Close-out Amount” (as defined in the Swap Form) to have paid to it on such date by such

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

Holder (such amount to be expressed as a positive number), or the amount the such floating rate payor would be willing to pay in accordance with market practice on the basis of “Close-out Amount” to such Holder on such date (such amount to be expressed as a negative number), in either case, to terminate such Hedge Transaction on such date with respect to, and to the extent of, the then outstanding principal amount of all of the Loan Certificates relating to Fixed Rate Loans that are subject to prepayment or purchase (or the entire Commitment), provided that where a Holder has not entered into a Hedge Transaction, such amount shall be calculated on the basis of a deemed fixed-for-floating interest rate swap on market terms that meets the definition of Hedge Transaction below for a notional amount equal to the outstanding principal amount of the Fixed Rate Loans of such Holder (taking into account any required amortization of such Fixed Rate Loans) and where “Close-out Amount” is calculated based on clauses (i) and (ii) but not clause (iii) of the definition thereof set forth in the Swap Form.

 

“Hedge Breakage Gain” means, as to any Holder, the absolute value of the Hedge Break Amount for such Holder received by it if the Hedge Break Amount is a negative number.

 

“Hedge Breakage Loss” means, as to any Holder, the value of the Hedge Break Amount for such Holder if the Hedge Break Amount is a positive number.

 

“Hedge Transaction” means, for any Holder and in respect of the Loan Certificates of any Tranche, an interest rate Hedge Transaction entered into by such Holder in connection with a Fixed Rate Loan (documented (or deemed documented)) by the Swap Form and a hedge confirmation incorporating the terms of this definition) where such Holder will (i) pay to a floating rate payor under such Hedge Transaction on each Interest Payment Date for such Tranche following the Hedge Effective Date or Fixed Rate Conversion Date (as such terms are defined in Section 3(b)(ii) of the Facility Agreement), as the case may be, an amount equal to the interest scheduled to be paid to such Holder on such Loan Certificates calculated at the Fixed Rate and (ii) receive from such floating rate payor on each such Interest Payment Date an amount equal to the amount of interest that would have accrued on such Loan Certificates during the Interest Period for such Tranche ending on such Interest Payment Date at the Floating Rate for such Interest Period whether or not such terms are the same terms of any actual hedge entered into by such Holder.

 

“Holder” means, at any time, any holder of one or more Loan Certificates.

 

“Holding Company” means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.

 

“Holdings” means Hawaiian Holdings, Inc., a Delaware corporation.

 

“Illegality Event” means the occurrence of any of the following events or circumstances:

 

(a)                                  it becomes unlawful or contrary to any applicable law for any party to any of the Operative Documents to perform any of its material obligations under the Operative Documents and/or to continue as a party to any of the Operative Documents; or

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

(b)                                 all or any material part of any Operative Document becomes void, illegal, invalid, unenforceable or of limited force and effect.

 

“Inchoate Liens” mean any Permitted Lien of the type described in clauses (i), (ii), (iii), (v) or (vi) of Section 7.01, except that “Inchoate Liens” shall not include any such Lien that is a Lien of record, whether filed with the FAA or any other applicable aviation authority, filed pursuant to the Uniform Commercial Code in any applicable jurisdiction or registered with the International Registry.

 

“Indemnitee” or “Indemnitees” means the Loan Participants, the Security Trustee and each of their respective successors, permitted assigns, directors, officers and employees.

 

“Interest Payment Date” means, each of the four quarterly anniversary dates of the Funding Date (or Projected Funding Date, if applicable) (or if there is no comparable day in any applicable month, the last day of such month); provided that, if any such date shall not be a Business Day, then the relevant Interest Payment Date shall be the next succeeding Business Day unless by virtue of such extension such date would fall in the next succeeding calendar month, in which case the relevant Interest Payment Date shall be the next preceding Business Day.  The Interest Payment Dates shall be the dates specified in the amortization schedule relating thereto attached to the Mortgage Supplement (subject to modification by the above proviso).

 

“Interest Period” means (a) initially, the period commencing on the Funding Date for the Aircraft and ending on the first Interest Payment Date thereafter and (b) thereafter, each successive three-month (or other applicable) period commencing on the final day of the preceding Interest Period and ending on the next succeeding Interest Payment Date; provided that, for interest accrual purposes only, in the case of a Fixed Rate Loan, there shall be no adjustment for period end dates as provided in the definition of Interest Payment Date.

 

“international interest” is defined in the Cape Town Convention.

 

“International Registry” is defined in the Cape Town Convention.

 

“Lease” means any lease agreement permitted by the terms of Section 3.03 hereof.

 

“Lease Assignment” means, for any Lease with a term exceeding 12 months (including mandatory renewals and extensions), an instrument evidencing the collateral assignment thereof in favor of the Security Trustee, which shall be (together with any associated Lessee consent) in for and substance reasonably satisfactory to the Loan Participants.

 

“Lessee” means any lessee under a Lease.

 

“LIBOR” means, for any Interest Period, the rate per annum equal to:

 

(a)                                  the Screen Rate for such Interest Period; or

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

(b)                                 if no Screen Rate is available for dollars or for such Interest Period, the arithmetic mean of the rates (rounded up to the nearest 1/100th of one per cent) as supplied to the Borrower at its request quoted by the Loan Participants to leading banks in the London interbank market,

 

in each case, as of 11.00 a.m. (London time) on the Quotation Date for the offering of deposits in dollars in an amount comparable to the aggregate outstanding principal amount of the Loan Certificates for such Interest Period.

 

“LIBOR Break Amount” has the meaning set forth in Section 3(g) of the Facility Agreement.

 

“Lien” means any mortgage, pledge, lien, claim, encumbrance, lease, security interest or other lien of any kind on property.  “Lien” shall include any interest registered on the International Registry other than the Borrower’s ownership interest registered on the International Registry as a contract of sale with respect to the Aircraft.

 

“Liquidity Break Amount” has the meaning set forth in Section 3(h)(i) of the Facility Agreement.

 

“Liquidity Event” means, [**].

 

“Liquidity Margin” means, [**].

 

“Liquidity Reserve Differential” means, [**].

 

“Loans” means the loan(s) made by the Loan Participants to the Borrower pursuant to Section 2 of the Facility Agreement.

 

“Loan Certificate” means a loan certificate issued pursuant to Section 2.02 of this Mortgage and any such certificates issued in exchange or replacement therefor pursuant to Section 2.06 or 2.07 of this Mortgage.

 

“Loan Participant” means each Holder initially a party to the Facility Agreement, and its successors and permitted assigns.

 

“Loan Participant Lien” means any Lien which arises from acts or claims against a Loan Participant.

 

“Maintenance Program” means the maintenance program for the Aircraft of the Borrower (or any applicable Lessee) which is approved by the aviation authority in the country of registry of the Aircraft.

 

“Majority in Interest of Holders” means, as of any date of the determination thereof, (i) if no amount in respect of any Loan is then outstanding, a Loan Participant or Loan Participants whose Commitments aggregate more than fifty per cent (50%) of the aggregate Commitments of all Loan Participants, or (ii) otherwise, the Holders of more than 50% in

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

aggregate outstanding principal amount of all Loan Certificates.  For all purposes of the foregoing definition, in determining as of any date the then aggregate outstanding principal amount of any Loan Certificates, there shall be excluded all Loan Certificates, if any, held by the Borrower or any Affiliate thereof.

 

“Market Disruption Event” has the meaning specified in Section 3(j) of the Facility Agreement.

 

“Market Disruption Fixed Interest Rate” has the meaning specified in Section 3(j) of the Facility Agreement.

 

“Market Disruption Floating Interest Rate” has the meaning specified in Section 3(j) of the Facility Agreement.

 

“Material Adverse Change” means a material adverse change in the Borrower’s financial condition that, in the opinion of the Majority in Interest of Holders, materially adversely affects the Borrower’s ability to perform its obligations under the Operative Documents.

 

“Maturity Date” means, for the Loan Certificates of any Tranche and its related Loan, the final Interest Payment Date set forth on Schedule 1 or Schedule 2 to the initial Mortgage Supplement relating to, and on the Loan Certificates for, such Tranche.

 

“Mortgage” and “this Mortgage” mean this Mortgage and Security Agreement [Hawaiian A330 [1259]], including any Mortgage Supplement and each other supplement from time to time entered into pursuant hereto.

 

“Mortgage Documents” means, collectively, this Mortgage, and the Mortgage Supplement.

 

“Mortgage Estate” means the “Mortgage Estate” as defined in the Granting Clause hereof.

 

“Mortgage Supplement” means a supplement to this Mortgage substantially in the form of Exhibit A, which shall particularly describe the Airframe and associated Engines, or any Replacement Airframe or Replacement Engine, included in the property of the Borrower covered by this Mortgage, or any other supplement hereto.

 

“Non-U.S. Person” means any Person other than (i) a citizen or resident of the United States of America (for purposes of this definition, the “United States”), (ii) a corporation, partnership, limited liability company or other entity created or organized under the laws of the United States or any political subdivision thereof or therein or (iii) an estate or trust that is subject to United States federal income taxation regardless of the source of its income.

 

“Non-U.S. Loan Participant” means a Loan Participant that is not a “United States person” as such term is defined in Section 7701(a)(30) of the Code.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

“Obsolete Part Amount” has the meaning specified in Section 1 of the Facility Agreement.

 

“OECD” means the Organization of Economic Cooperation and Development.

 

“Operative Documents” means the Facility Agreement, the Mortgage, the Mortgage Supplement, the Loan Certificates, the Fee Letter, the DERA (if applicable) and the Consent and Agreement, and any amendments or supplements of any of the foregoing.

 

“Original Amount” with respect to a Loan Certificate, means the stated original principal amount of such Loan Certificate, and, with respect to all the Loan Certificates of any Tranche, means the aggregate stated original principal amounts of the Loan Certificates of such Tranche.

 

“Original Financial Statements” means the audited consolidated financial statements of Holdings for the fiscal year ended December 31, 2010 and the unaudited consolidated financial statements of Holdings for the fiscal quarter ended March 31, 2011.

 

“Parts” means all appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than Engines or engines and Excluded Parts), which are from time to time incorporated or installed in or attached to the Airframe or any Engine and all such items which are subsequently removed therefrom so long as the Lien of this Mortgage shall cover the same pursuant to the terms hereof.

 

“Past Due Rate” means, in respect of any amount owing to any Holder of any Tranche and Type of Loan Certificates or any amount owing under any Operative Document, a per annum rate equal to (A) in the case of a Floating Rate Loan for any Tranche, the Floating Rate for such Tranche and Type of Loan Certificates for the applicable Interest Period plus 2.0% and (B) in the case of a Fixed Rate Loan for any Tranche, 2.0% plus the higher of (x) the Fixed Rate for such Tranche and Type of Loan Certificates plus and (y) the Floating Rate for such Tranche and Type of Loan Certificates for the applicable Interest Period, in each case calculated by the Loan Participants on the basis of a year of 360 days and actual number of days elapsed; provided, that if a Market Disruption Event shall be continuing, “Past Due Rate” means, in respect of any amount owing to any Holder of any Type B Loan Certificate of any Tranche or any amount owing under any Operative Document to a Type B Loan Participant, a per annum rate equal to, in the case of a Floating Rate Loan for any Tranche, the Market Disruption Floating Interest Rate for such Tranche for the applicable Interest Period, and, in the case of a Fixed Rate Loan, the Market Disruption Fixed Interest Rate for such Tranche for the applicable Interest Period, in each case plus 2.0%; provided that in each case such rate shall not exceed the maximum interest rate permitted by law.

 

“Payment Office” means the bank and account number referred to in Schedule I to the Facility Agreement.

 

“Permitted Investment” means each of (i) obligations of, or guaranteed by the U.S. Government or agencies of either thereof entitled to the full faith and credit of the U.S.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

Government, (ii) open market commercial paper of any corporation incorporated under the laws of the United States of America or any member of the European Union rated at least P-1 or its equivalent by Moody’s Investors Service Inc. (“Moody’s”) or at least A-1 or its equivalent by Standard & Poor’s (“S&P”), (iii) certificates of deposit issued by commercial banks organized under the laws of the United States or any member of the European Union or of any political subdivision thereof having a combined capital and surplus in excess of $250,000,000.00 which banks or their holding companies have a rating of A or its equivalent by Moody’s or S&P; provided, however, that the aggregate amount at any one time so invested in certificates of deposit issued by any one bank shall not exceed 5% of such bank’s capital and surplus, (iv) repurchase agreements with any financial institution meeting the standards set forth in clause (iii) above with any of the obligations described in clauses (i) through (iii) as collateral, (v) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any instrumentality thereof, in each case having, at the time of the acquisition thereof, the highest rating obtainable from either S&P or Moody’s, and (vi) shares of any money market mutual fund that (A) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (i) and (vi) above, (B) has net assets of not less than $500,000,000, and (C) has the highest rating obtainable from either S&P or Moody’s; provided that any such investment shall be denominated in Dollars and shall mature within 30 days from the date of making such investment.

 

“Permitted Lessee” means [**].

 

“Permitted Lien” means any Lien permitted under Section 7.01.

 

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

 

“Projected Funding Date” has the meaning specified in Section 3(c)(ii) of the Facility Agreement.

 

“Quotation Date” means, in relation to any Interest Period, two London business days before the first day of such Interest Period.

 

“Related Aircraft” means the Airbus A330-200 aircraft (with manufacturer’s serial number expected to be 1302), which is subject to the security interest of the Related Mortgage.

 

“Related Event of Default” means an “Event of Default” under and as defined in the Related Mortgage.

 

“Related Mortgage” means [**].

 

“Related Secured Obligations” means the “Secured Obligations” under and as defined in the Related Mortgage.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

“Replacement Aircraft” means any aircraft substituted for the Aircraft pursuant to Section 10.01.

 

“Replacement Airframe” means any airframe substituted for the Airframe pursuant to Section 10.01.

 

“Replacement Engine” means any engine substituted for an Engine pursuant to Section 10.01.

 

“Responsible Officer” means, with respect to the Borrower, any corporate officer who, in the normal performance of his or her responsibilities, with respect to the subject matter of any covenant, agreement or obligation of the Borrower pursuant to any Operative Document, would have responsibility for and knowledge of such matter and the requirements of any Operative Document with respect thereto.

 

“Screen Rate” means, for any Interest Period, the rate displayed on the LIBOR01 page of the Bloomberg Page BBAM 1 (or any successor or substitute page of such service, or any successor to or substitute for such service providing rate quotations comparable to those currently provided on such page of such service).  If the agreed page is replaced or service ceases to be available, the Security Trustee may specify another page or service displaying the appropriate rate after consultation with the Loan Participants and with the agreement of the Borrower (not to be unreasonably withheld or delayed).

 

“Secured Obligations” has the meaning set forth in the Granting Clause of this Mortgage.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security Trustee” means Bank of Utah in its capacity as Security Trustee hereunder, and any successor thereto in such capacity.

 

“Special Default” means an Event of Default or a Default under any of Section 8.01, 8.02, 8.06 or 8.07.

 

“Stipulated Insured Amount” means, as of any date of determination, an amount equal to 110% (or 115% if the Loans are Fixed Rate Loans) of the aggregate principal amount then outstanding on the Loan Certificates.

 

“Structuring  Fee Letter” means the letter agreement between the Borrower and the Underwriters, pursuant to which the Borrower has agreed to pay certain Fees.

 

“Subsidiary” means, as to any Person, any other Person of which at least a majority of the voting stock (or equivalent equity interests) is owned or controlled by such first Person and/or by one or more other Subsidiaries.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

“Swap Form” means a 2002 Master Agreement of the International Swaps and Derivatives Association in the form published in 2002 (or any comparable form) and supplemented by the 2006 ISDA Definitions (as amended).

 

“Tax” means all present and future fees (including, without limitation, license, documentation and registration fees), taxes, levies, imposts, withholdings, deductions, duties or charges of any nature whatsoever, and wheresoever imposed or withheld, including (without limitation) value added tax or any other tax in respect of added value (including, without limitation, goods and services, sales and harmonized sales taxes) and any franchise, transfer, sales, use, business, occupation, excise, income, gross receipt, personal property, real property, stamp or other tax, in each case imposed by any taxing or governmental authority or agency, together with any penalties, additions to tax, fines or interest thereon (and “Taxes” and “Taxation” shall be construed accordingly).

 

“Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

 

“Tax Indemnitee” means the Security Trustee, the Loan Participants, and the respective successors and permitted assigns of each of the foregoing Persons and shall also include any combined, consolidated or affiliated tax group of which any such person is or shall become a member and any member of such group.

 

“Tranche” has the meaning specified in Section 2(a)(iii) of the Facility Agreement.

 

“Tranche 1 Commitment” has the meaning specified in Section 2(a)(i) of the Facility Agreement.

 

“Tranche 1 Loan” has the meaning specified in Section 2(a)(i) of the Facility Agreement.

 

“Tranche 2 Commitment” has the meaning specified in Section 2(a)(ii) of the Facility Agreement.

 

“Tranche 2 Loan” has the meaning specified in Section 2(a)(ii) of the Facility Agreement.

 

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

 

“Type” has the meaning specified in Section 2(a)(ii) of the Facility Agreement.

 

“Type A Loan Certificate” as to any Loan Certificate of any Tranche, means its designation as being “Type A” as provided in Section 2(a)(ii) of the Facility Agreement.

 

“Type A Loan Participant” means a Loan Participant that designated itself as “Type A” as provided in Section 2(a)(ii) of the Facility Agreement.

 

“Type B Loan Certificate” as to any Loan Certificate of any Tranche, means its designation as being “Type B” as provided in Section 2(a)(ii) of the Facility Agreement.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

 

“Type B Loan Participant” means a Loan Participant that designated itself (or was deemed designated) as a “Type B” as provided in Section 2(a)(ii) of the Facility Agreement.

 

“U.S. Air Carrier” means any United States air carrier which is a “citizen of the United States” (as defined in 49 U.S.C. § 40102(a)(15)) holding an air carrier operating certificate issued pursuant to chapter 447 of title 49 (or the equivalent authority issued by the Civil Aeronautics Board under the predecessor regulatory laws, rules and regulations) for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo, and as to which there is in force an air carrier operating certificate issued pursuant to Part 121 of the FAA Regulations, or which may operate as an air carrier by certification or otherwise under any successor or substitute provisions therefor or in the absence thereof.

 

“U.S. Government” means the federal government of the United States of America, or any instrumentality or agency thereof the obligations of which are guaranteed by the full faith and credit of the federal government of the United States of America.

 

“Underwriters” means the Loan Participants originally party to the Facility Agreement.

 

“Unpaid Sum” means any sum due and payable but unpaid by the Borrower under the Operative Documents.

 

“Unscheduled Prepayment” means [**].

 

“War Risk Insurance” has the meaning assigned to such term in Paragraph C of Schedule 1 to the Mortgage.

 

“Warranty Bill of Sale” means, for the Aircraft, a full warranty bill of sale in favor of the Borrower from the Aircraft Manufacturer in respect of the Aircraft.

 

“Wet Lease” means any arrangement whereby the Borrower or any Lessee agrees to furnish the Aircraft, Airframe or Engine to a third party pursuant to which the Aircraft, Airframe or Engine shall at all times be under the operational control, and full ownership, of the Borrower or such Lessee and shall be maintained, insured and otherwise used and operated in accordance with the provisions hereof, provided that such insurance with respect to legal liabilities for passenger and cargo may be on a contingent basis for the duration of any such arrangement as long as such wet lessee under such arrangement maintains primary coverage for such insurance in favor of the Secured Trustee and the Borrower in accordance with the terms and conditions of this Mortgage, provided further that the Borrower’s obligations under this Mortgage (except with respect to legal liability insurance as set forth in the preceding proviso) shall continue in full force and effect notwithstanding any such arrangement and the Aircraft remains registered in the United States.

 

[**] — Confidential treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.exhibit101.htm

EXHIBIT 10.1

 

 

[***]   Represents material information 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.

 

 

JOINT VENTURE AGREEMENT

 

THIS JOINT VENTURE AGREEMENT (this "Agreement") is made and entered into this 6th day of September, 2011 by and among Allied Moral Holdings, Ltd., a company incorporated under the laws of the British Virgin Islands with its principal place of business located at Huiheng Building, Gaoxin 7 Street South, Keyuannan Road, Nanshan District, Shenzhen Guangdong, P.R. China 518057 (hereinafter “Allied”), Intact Medical Corporation, a Delaware corporation with its principal place of business at 550 Cochituate Road, Suite 25, East Wing, Floor 4, Framingham MA 01701 (hereinafter "Intact"), and  BMG Diamond Holdings Limited, a company incorporated
under the laws of the British Virgin Islands with its principal place of business at Flat A, 15/F, Hillier Commercial Building, No. 65-67 Bonham Strand East, Sheung Wan, Hong Kong (hereinafter “BMG”).  Allied, Intact and BMG are sometimes referred to singularly as a “Party” and collectively “Parties.

 

WITNESSETH:

 

WHEREAS, Allied is wholly owned by Huiheng Medical, Inc., a Nevada corporation, and is engaged in the design, manufacture and sale of large-scale radiotherapy equipment and is in the process of manufacturing and distributing a breast brachytherapy system throughout Asia;

 

WHEREAS, Intact is engaged in the design, production and sale of a product known as the Intact Breast Lesion Excision System; and

 

WHEREAS, the parties wish to expand the sales of the Intact Breast Lesion Excision System in the Territory (as defined below) and possibly other markets, it will be useful to establish a manufacturing and development facility in China in order to gain a competitive advantage with regard to costs of developing, manufacturing, delivering and servicing the Breast Lesion Excision System, and intend to establish a new joint venture company  to develop, manufacture and sell the Breast Lesion Excision System in order to achieve this goal;

 

NOW, THEREFORE, in consideration of the mutual premises and obligations set forth herein and the mutual benefits to be derived therefrom, the parties have agreed as follows:

 

Article 1 - Definitions

 

1.1           “Articles of Association” shall mean the official articles of the New Company to be established pursuant to this Agreement.

 

1.2           “Board of Directors” shall mean the Board of Directors of the New Company.

 

1.3           “Confidential Information” means any information disclosed by one Party  to the other Party, either directly or indirectly, in writing, orally, electronically or by inspection of tangible objects (including without limitation (a) intellectual property, such as, but not limited to, patents, patent applications, copyrights, copyright registrations, and trade secrets and/or (b) confidential information, including without limitation ideas, physical, chemical or biological materials, and techniques for their handling and use, assays, techniques, schematics, drawings, designs, inventions, preclinical
and clinical data, know-how, technical documentation, processes, equipment, algorithms, software programs, software source documents, formulae, information concerning research and development projects, design details and specifications, financial information, information relating to procurement requirements, purchasing, manufacturing, customer lists, product plans, product ideas, business strategies, marketing or business plans, financial or personnel matters, investors, employees, business and contractual relationships, business forecasts, sales and merchandising, and information regarding third parties, suppliers, customers, employees, investors or facilities).  Confidential Information may also include information previously disclosed to the disclosing Party by third parties.

 

 

  

- 1 -

  

 

 

1.4           “Effective Tax Rate” shall mean all taxes (domestic and foreign) paid (or to be paid) by New Company on all taxable income for the applicable period  divided by all taxable income before taxes during such applicable period, express as a percentage.

 

1.5           “BMG Affiliate” shall mean a legal entity (i) at least 50% of whose capital is directly or indirectly owned by BMG, (ii) at least 50% of whose capital is directly or indirectly owned by a company which owns, directly or indirectly, at least 50% of the capital of BMG, or (iii) that owns directly or indirectly at least 50% of the capital of BMG.

 

1.6           “Allied Affiliate” shall mean a legal entity (i) at least 50% of whose capital is directly or indirectly owned by Allied, (ii) at least 50% of whose capital is directly or indirectly owned by a company which owns, directly or indirectly, at least 50% of the capital of Allied, or (iii) that owns directly or indirectly at least 50% of the capital of Allied.

 

1.7           “Intact Affiliate” shall mean a legal entity (i) at least 50% of whose capital is directly or indirectly owned by Intact, (ii) at least 50% of whose capital is directly or indirectly owned by a company which owns, directly or indirectly, at least 50% of the capital of Intact, or (iii) that owns directly or indirectly at least 50% of the capital of Intact.

 

1.8           “Intact Intellectual Property” means all of Intact’s present and future rights in relation to copyright, trade marks, designs, patents, inventions and confidential information whether or not registrable, registered or patentable relating to or connected with the Product;

 

1.9           “License” shall mean the License, Supply Marketing and Distribution Agreement in substantially the form attached hereto as Exhibit A in which  Intact grants an exclusive license to the New Company to manufacture, promote, distribute and sell the Product in the Territory.

 

1.10           “Product” shall mean Intact’s Breast Lesion Excision System and all improvements related thereto including, but not limited to, the Intact RF generator, Intact handles, and Intact wands.

 

1.11           “SFDA Approval” shall mean the approval of the Product by China State Food and Drug Administration for sale in China.

 

1.12           “Territory” shall mean China, including Hong Kong SAR and Macua SAR.

 

1.13           “Year 2” shall mean months 13th – 24th after receipt of SFDA Approval

 

1.14           “Year 3” shall mean months 25th – 36th after receipt of SFDA Approval

 

1.15           “Year 4” shall mean months 37th – 48th after receipt of SFDA Approval

 

 

  

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Article 2 - Establishment of the New Company

 

2.1           As soon as practical following the effective date of this Agreement, the parties shall establish a New Company under the laws of British Virgin Islands in accordance with the Memorandum and Articles of Association (“New Company”) as approved by Intact and Allied in writing. Intact and Allied will have the right to terminate this Agreement by written notice to the other parties to this Agreement if they are unable to agree to the form of Memorandum and Articles of Association..

 

2.2           The corporate name of the New Company shall be H & I Medical China Limited.

 

2.3           The New Company shall be primarily engaged in developing, manufacturing, marketing, selling and supporting of the Product in the Territory pursuant to the License.  New Company will also manufacture all components of the Product including the RF Generator, the reusable handle tool and the disposable wand. New Company, in its sole discretion, shall have the right to subcontract for the manufacturing of the Product and related components.

 

2.4           The New Company may establish a wholly-foreign owned enterprise in China for the purpose of facilitating the developing, manufacturing, marketing, selling and supporting of the Product in the Territory (the “Operating Subsidiary”).  Subject to Intact approval, the Operating Subsidiary’s principal office shall be in China as determined by the New Company.

 

2.5           All costs with respect to the New Company and the Operating Subsidiary incurred after its establishment will be borne by the New Company.  Costs incurred in connection with the organization of the New Corporation will be borne by Allied.

 

2.6           In the event there are any inconsistencies between the terms of New Company’s charter documents, including the Articles of Association, and this Agreement, Allied, as the majority shareholder of the New Company, agrees to vote its shares to amend, modify or change the inconsistent terms of such charter documents, including the Articles of Association, to conform to the terms of this Agreement.

 

Article 3 - Capitalization of the New Company

 

3.1           The New Company will have an initial authorized capital of (1) two thousand (2,000) shares of voting common stock ; (2) 300 shares of non-voting Series A Preferred Stock; and (3) 700 shares of non-voting Series B Preferred Stock; each share having a par value of ($0.001).

 

3.2           The initial shareholders of the New Company, including the number of shares subscribed and paid for shall be as follows:

 

 

  

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Name and Address

 

	
No. of 

Common Shares

	
Consideration

	
Series A

	
Series B

	
Preferred 

Stock 

Consideration

	
Allied Moral Holdings, Ltd.

Huiheng Building,

Gaoxin 7 Street South, Keyuannan Road, Nanshan District, Shenzhen Guangdong, P.R. China 518057

	
650

	
$650

	
0

	
650

	
$650

	 	 	 	 	 	 
	
Intact Medical Corporation

550 Cochituate Road, Suite 25, East Wing, Floor 4,

Framingham MA 01701

	
300

	
$300

	
300

	
0

	
$300

	 	 	 	 	 	 
	
BMG Diamond Holdings Limited

Flat A, 15/F, Hillier Commercial Building

No. 65-67 Bonham Strand East

Sheung Wan, Hong Kong

	
50

	
$50

	
0

	
50

	
$50

 

3.3           New Company may not change its registered capital and share structure without the prior written consent of Allied and Intact, and in accordance with respective shareholders' resolutions and applicable laws.  In the case of any capital increases, each party shall have the right to subscribe to the amount of such additional capital in accordance with its respective proportional equity interest at that time.  If the parties do not subscribe to its pro-rata share of any newly issued shares, the other parties may choose to subscribe to purchase such shares. Any capital increases shall be approved by both Allied and Intact as provided
in Section 6.1.3.4.

 

3.4           Each party shall timely subscribe and pay for its shares in accordance with applicable laws.

 

3.5           The holders of Series A preferred stock will be entitled to preference distributions when and as declared by the Board of Directors in an amount equal to (i) $1,100,000 less any proportional taxes accrued by New Company for Year 2 (which tax calculation shall be based on the Effective Tax Rate as determined by the Board of Directors) (“Year 2 Dividend”); (ii) $2,250,000 less any proportional taxes accrued by New Company for Year 3 (which tax calculation shall be based on the Effective Tax Rate as determined by the Board of Directors) (“Year 3 Dividend”); and (iii)$3,250,000 less any proportional taxes accrued by New Company
for Year 4 (which tax calculation shall be based on the Effective Tax Rate as determined by the Board of Directors) (“Year 4 Dividend”)(collectively the “Series A Accrued Dividend”).

 

 

  

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3.6           Once the holders of the Series A preferred stock have received their preference distributions for the year indicated, then the holders of Series B preferred stock will be entitled to distributions out of available funds thereof if and when declared by the Board of Directors in amount equal to (i) $3,666,667 - $1,100,000 less any proportional taxes accrued by New Company for Year 2 (which tax calculation shall be based on the Effective Tax Rate as determined by the Board of Directors); (ii) $7,500,000 - $2,250,000 less any proportional taxes accrued by New Company for Year 3 (which tax calculation shall be based on the Effective Tax Rate as
determined by the Board of Directors); and (iii) $10,833,333 - $3,250,000 less any proportional taxes accrued by New Company for Year 4 (which tax calculation shall be based on the Effective Tax Rate as determined by the Board of Directors)(collectively the “Series B Accrued Dividend”).  If New Company is unable to make a full distribution to the holders of Series B preferred stock in any given year, any such deficit in distribution will accumulate. In any given year, however, Intact shall receive its preference distribution regardless of any accumulation amount from prior periods owed to the holders of Series B preferred stock and any unpaid accumulated amounts for the account of holders of Series B preferred stock shall continue to accumulate and be paid in subsequent years out of available funds.

 

3.7           Once the holders of Series A and B preferred stock have received their preference distributions, including any accumulated distributions, any further distributions as determined by the Board of Directors of New Company will be made to the holders of common shares.

 

3.8           To the extent permitted under applicable law, the New Company shall pay, out of funds legally available therefor, all accrued and unpaid dividends on common shares and preferred stock, when and as declared by the Board of Directors.  If and to the extent not paid, such dividends shall accrue, accumulate, and shall remain accumulated and unpaid dividends until paid.

 

3.9           Upon (i) payment in full of the Series A Accrued Dividend and Series B Accrued Dividend after Year 4, (ii) upon Intact’s election to terminate the License as a result of New Company not meeting the minimum targets as identified in the License, or (iii) upon New Company’s election to terminate the License pursuant to Section 7.B.(ii) of the License, all of the outstanding shares of Series A and Series B preferred stock will automatically be converted into common shares of the New Company on a one-for-one basis.

 

Article 4 – Loan by Allied

 

4.1           Upon execution of the License, Allied (or Allied’s Affiliate) will advance an amount equal to $150,000.00 (“Loan”) to Intact pursuant to the form of Promissory Note attached hereto as Exhibit B. The Loan will be unsecured, non interest bearing, and will be repaid out of Intact’s distributions of retained earning from the New Company.  Intact will direct New Company to direct its portion of any and all cash distributions to Allied (or Allied’s Affiliate as the case may be) until the Loan is paid in
full.

 

Article 5 - Transfers of Shares

 

5.1           The shares of the New Company shall not be transferred by any party without the prior written consent of the other parties.

 

5.2           The shares of the New Company shall not be encumbered or mortgaged by any party without the prior written consent of the other parties.

 

 

  

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5.3           If any party wishes to transfer all or part of its shares, it shall first offer said shares to the other parties in accordance with this Agreement.  It shall be a condition to any transfer of shares that the transferee shall agree in writing to be bound by the provisions of this Agreement.  Any transfer not in accordance with the provisions of this Agreement shall be void.

 

5.4           Notwithstanding any provision of this Agreement to the contrary, Intact may transfer the Intact’s shares in the New Company to an Intact Affiliate, Allied may transfer the Allied’s shares in the New Company to a Allied Affiliate, and BMG may transfer the BMG’s shares in the New Company to a BMG Affiliate without the consent of the other Parties.

 

5.5           The board of directors of the New Company shall have the right to refuse to register in the New Company's shareholder register the shares belonging to any person or entity who owns such shares as a result of a transfer not in conformity with the provisions of this Agreement.

 

5.6           If any party hereto (hereinafter "Offering Shareholder") receives a bona fide third party offer to purchase any or all of its shares in New Company (hereinafter "Offered Shares"), the Offering Shareholder shall, before selling the Offered Shares to said third party, provide the other parties hereto all such information relating to the third party and its principals as the other parties hereto may reasonably request to the extent legally permissible and consistent with any contractual obligations of the disclosing party) as well as with reliable written evidence setting forth the price and other material terms and conditions of the proposed sale
(the "Offer Price and Terms"), including but not limited to, written evidence that such offer is firm and irrevocable, provided that this Section 5.6 (including subsections 5.6.1 through 5.6.3) shall not apply to any offer to purchase all or substantially all of the assets of Intact, whether by merger, acquisition, change of control, stock purchase or otherwise.  Upon receipt of all such requested information as well as the Offer Price and Terms in writing, the other parties hereto shall each have the option of purchasing said shares as follows:

 

5.6.1  If Intact is the Offering Shareholder, Allied shall have the right within thirty (30) days after its receipt of the Offer Price and Terms, (hereinafter "Option Period") to purchase all, but not less than all, of the Offered Shares at the Option Price and Terms by giving written notice to each other party within the Option Period specifying a date for the purchase being not more than thirty (30) days after the end of the Option Period.  If Allied does not elect to purchase said shares and (a) the third party to which Intact intends to sell its shares is unacceptable to Allied, or (b) following the sale of such shares it would no longer be
possible, in Allied’s opinion, for the New Company to successfully pursue the goals for which it was established, Allied shall have the option of terminating this Agreement and dissolving the New Company following written notice to Intact dispatched during the Option Period.  If Allied fails to purchase the Offered Shares pursuant to this Article 5.6.1 but does not exercise its right to dissolve the New Company, Intact shall have the right, within thirty (30) days following its receipt of written notice of Allied’s decision not to purchase said shares, or from the end of the Option Period, whichever is earlier, to sell all, but not less than all, of the Offered Shares at the Option Price and Terms to said third party offeror. This Section 5 shall not prevent or prohibit the Parties from selling its own shares or transferring substantially all of the assets provided
that such transfer does not impair the rights granted to the New Company under the License.

 

 

  

- 6 -

  

 

5.6.2  If Allied is the Offering Shareholder, Intact shall have the right within thirty (30) days after its receipt of the Offer Price and Terms, (hereinafter "Option Period") to purchase all, but not less than all, of the Offered Shares at the Option Price and Terms by giving written notice to Allied within the Option Period specifying a date for the purchase being not more than thirty (30) days after the end of the Option Period.  If Intact does not elect to purchase said shares and (a) the third party to which Allied intends to sell its shares is unacceptable to Intact, or (b) following the sale of such shares it would no longer be possible, in
Intact’s opinion, for the New Company to successfully pursue the goals for which it was established, Intact shall have the option of terminating this Agreement and dissolving the New Company following written notice to Allied dispatched during the Option Period.  If Intact fails to purchase the Offered Shares pursuant to this Article 5.6.2 above but Intact does not exercise its right to dissolve the New Company, Allied shall have the right, within thirty (30) days following its receipt of written notice of Intact’s decision not to purchase said shares or from the end of the Option Period, whichever is earlier, to sell all, but not less than all, of the Offered Shares at the Option Price and Terms to said third party offeror.

 

5.6.3           If BMG is the Offering Shareholder, both Allied and Intact (on a pro-rata basis unless the other parties elects to purchase less than its pro-rata share) shall have the right within thirty (30) days after its receipt of the Offer Price and Terms, (hereinafter "Option Period") to purchase all, but not less than all, of the Offered Shares at the Option Price and Terms by giving written notice to BMG within the Option Period specifying a date for the purchase being not more than thirty (30) days after the end of the Option Period.  If Allied and/or Intact fails to purchase the Offered Shares
pursuant to this Article 5.6.3 above, BMG shall have the right, within thirty (30) days following its receipt of written notice of Allied’s and Intact’s decision not to purchase said shares or from the end of the Option Period, whichever is earlier, to sell all, but not less than all, of the Offered Shares at the Option Price and Terms to said third party offeror.

 

5.7           The certificates representing the shares of the New Company shall each bear an inscription notifying third parties that such shares are subject to the restrictions on transfer set forth in this Agreement and that the transferee will be bound to the obligations of this Agreement.

 

Article 6 - Management and Operation of the New Company

 

6.1           Shareholders Meetings.

 

6.1.1           Ordinary Meeting:  An ordinary annual Shareholders Meeting for holders of common shares shall be held at the New Company's head office or at any other location designated by the Board of Directors on a date determined by the Board of Directors in accordance with laws of the place of incorporation; provided, however, that shareholder resolutions which are unanimously approved by the shareholders of common shares may be set forth in minutes signed by all shareholders
without the necessity of actually holding a meeting if permitted under the place of incorporation.  The agenda of the meeting shall be established in accordance with the requirements of applicable law and of the Articles of Association.

 

6.1.2           Extraordinary Meetings:  Extraordinary shareholders meeting(s) of common shares may be convened at any time by the Board of Directors or otherwise in accordance with the laws of the place of incorporation.

 

 

  

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6.1.3           Quorum and Voting:

 

6.1.3.1        Only holders of common shares of the New Company shall be entitled to vote.  Each shareholder may be represented by proxy at the shareholders' meeting and such proxy may exercise such shareholder's voting rights in common shares.  It will constitute sufficient authorization if power of attorney is given to such proxy in writing and submitted at the meeting.

 

6.1.3.2       Except as otherwise mandatory under applicable law or under the Articles of Association, the quorum for shareholders meetings consisting of shareholders present and shareholders represented by proxies shall be a simple majority of the New Company's outstanding common shares.

 

6.1.3.3       Except as otherwise provided by laws of the place of incorporation or in the Articles of Association, the majority of the common shares at the shareholders meetings shall be the simple majority of those present and represented by proxy.

 

6.1.3.4  The decisions on the matters listed below shall be reached only by super-majority representing more than seventy-five percent (75%) of the total outstanding common shares:

 

(i)        amendment of the Articles of Association of the New Company;

 

(ii)       the creation of any new series or class of capital stock of New Company, or any securities convertible into or exchangeable for such capital stock, or any increase or decrease in the New Company's capital stock;

 

(iii)      dissolution and liquidation of the New Company, for reasons other than those defined in law or by exercise of the rights set forth in Article 5 hereof;

 

(iv)      decisions or agreements to merge or consolidate, or sell substantially all of New Company’s assets or intellectual property, including without limitation by way of the grant of an exclusive license to such assets or intellectual property, or otherwise reorganize or recapitalize;

 

(v)       changes in the objectives of the New Company;

 

(vi)      issue additional shares of the New Company (after the initial issuance of the New Company)

 

(vii)     the raising of additional capital;

 

 

 

 

  

- 8 -

  

 

 

(viii)    a material acquisition, joint venture or partnership;

 

(ix)       authorization of any indebtedness, lease, guaranty, letter of credit or financing arrangement in an amount exceeding $100,000, except as otherwise authorized in a then current Board approved budget;

 

(x)        declare dividend to holders of common stock; or

 

(xi)       the creation of affiliates or subsidiaries;

 

(xii)      the initiation or settlement of any lawsuit, administrative proceeding, tax matter or other legal claim involving in excess of $250,000;

 

(xiii)     any amendment, or modification of, or waiver under, this Agreement; or

 

(xiv)    any other decision that falls outside the ordinary course of business of the New Company.

 

6.1.4  Minutes. The minutes shall be drawn up in English, at the expense of the New Company and without undue delay, following any shareholders resolution and must be signed by all participants in the resolution. The minutes shall be kept in the New Company's minute books.

 

6.2           Board of Directors.

 

6.2.1 Board of Directors.  The New Company shall be governed by a Board of Directors consisting of three (3) members which shall meet a minimum of once each calendar year.  So long as Allied is a shareholder of the New Company, two (2) members of the Board of Directors shall be elected among persons nominated by Allied (or its permitted successors).  So long as Intact is a shareholder of the New Company, one (1) member of the Board of Directors shall be elected among persons nominated by Intact (or
its permitted successors).

 

 

 

  

- 9 -

  

 

 

6.2.2  Meetings.  Meetings of the Board of Directors shall be held at the New Company's head office or other location in or outside China which may be agreed upon by the Board of Directors.  The proceedings of meetings of the Board of Directors will be in English and the official minutes of meetings and resolutions of the Board of Directors shall be drafted in English and shall be kept in the New Company's minutes book.  Directors shall not be entitled to any compensation or reimbursement of costs
or expenses.

 

6.2.3  Quorum for Meeting:    The quorum required for meetings of the Board of Directors shall be all three members of the Board of Directors, provided, however, if any director fails to attend two consecutive meetings after due notice, the quorum requirement for the following meeting shall be reduced to two members of the Board of Directors. Decisions may be taken by the Board of Directors without a meeting if a proposal for action is submitted in writing in turn to each of the members of the Board of Directors and each such member consents in writing to such action, or
to vote upon the proposal in writing. A director may by written notice appoint an alternate who need not be a director. The alternate can attend meetings in the absence of the appointing director and vote or consent in his place.

 

6.2.4  Decisions:  All actions by consent (without a call meeting) of the Board of Directors shall be by unanimous written consent.  All corporate actions during a called meeting requiring Board of Directors approval shall be approved by a majority of the members of the Board of Directors with the exception of the following actions which requires unanimous approval of all members of the Board of Directors.

 

6.2.4.1   Any corporate action which, in the reasonable opinion of the Intact designated Board member as communicated to the New Company's Chairman at or before the called meeting, is likely to affect adversely Intact's reputation, Intact Intellectual Property, or its financial performance outside of the Territory and separate from the New Company; provided, however, such Intact Board member shall provide the Board a written statement presenting the basis of his opinion within 15 days after said meeting; 

 

6.2.4.2   Approval of the Company’s annual budget and/or business plan, if any, each year (such approval, to the extent that any member of the Board of Directors deems it necessary, shall be approved within a reasonable time (15 days after presentment of the proposed annual budget and/or business plan), and to the extent that the Board is unable to timely approve the annual budget and/or business plan, the New Company shall continue to operate its business consistent (within 15%) with the prior years excluding extraordinary expenses); and

 

6.2.4.3  Any proposal by New Company to appoint a sub-distributor of the Product pursuant to the License.

 

 

6.2.5  Authority; Delegation:  The administration and representation of the New Company shall be the exclusive authority of the Board of Directors, which may delegate such authority to the officers of the New Company.

 

6.3.           Delegation.  The power to direct and represent the New Company is vested with the Board of Directors, which may delegate that power to the officers or a general manager.

 

 

 

  

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Article 7 - Fiscal Year

 

7.1           Fiscal Year.  The fiscal year of the New Company shall be the calendar year.

 

Article 8 - Audit

 

8.1           Audit.  The New Company’s financial statement shall be audited by Huiheng Medical, Inc.’s then current auditors.  The books and records of New Company shall be prepared in accordance with US GAAP.

 

8.2.           Expenses of the New Company.  All expenses, including any reasonable expenses incurred by Parties and approved by the Board, related to the developing, manufacturing, marketing and selling of the Product and related accessories will be charged to the New Company. Pursuant to the License, the initial manufacturing, marketing and sale of the Product shall be borne by Allied at its sole cost and expense until the New Company has adequate working capital from operations.

 

Article 9 - Mutual Assistance

 

9.1           Payment of Capital Contributions.  The Parties shall respectively be responsible for timely paying their contribution in full to the registered capital and any additional registered capital in accordance with the provisions herein.

 

9.2           Permits and Approvals.  On behalf of the New Company, Allied will be responsible, at its sole cost and expense, for (i) obtaining the various permits and regulatory approvals required to market the Product in the Territory, including SFDA Approval, (ii) manufacturing the Product in China, including all of the costs associated with manufacturing the Product in
China, and (iii) marketing the Product in the Territory, including all of the costs associated with marketing the Product in the Territory.  All of the costs associated with obtaining approvals, and developing, manufacturing and selling the Product will be undertaken by Allied at its sole cost and expense.

 

9.3           License.  Intact will grant to the New Company an exclusive license and rights to develop, manufacture, promote, distribute and sell the Product, including any improvements made thereon, in the Territory.  Intact will make its best efforts to provide Allied with all of the information, including marketing information, and other support necessary to train Allied, on behalf of the New Company, to manufacture the Product in China.

 

9.4           Sales to Intact; Cost of Components.  At Intact’s request, New Company will sell the Product to Intact at New Company’s [***] for the Product that will be sold by Intact in the markets outside of the Territory.  At Intact’s request at any time, New Company will provide Intact with a current component price list for the Product.

 

9.5           Additional Countries.  Intact and New Company agree that they will have further discussions in good faith for the opportunity of New Company to market the Product in Vietnam, and Taiwan, or other countries, where Allied has sales channels.

 

 

 

  

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Article 10 – Confidentiality

 

10.1           Use, Nondisclosure. With respect to the Confidential Information of the other Party, each Party agrees, during the term of this Agreement and for seven (7) years after this Agreement is terminated: (a) to hold such Confidential Information in confidence and to take reasonable precautions to protect the same (including, without limitation, all precautions such Party employs with respect to its own confidential information), (b) not to divulge any such Confidential Information to any third party or to make
any use whatsoever at any time of such Confidential Information, except for the purpose of performing the Party’s obligations under this Agreement, (c) not to use any such Confidential Information as the basis for beginning any new research and development programs; and (d) not to copy or reverse engineer any such Confidential Information.

 

10.2           Termination or Expiry.  At the conclusion of this Agreement, each party shall within thirty (30) days of such termination or expiry, either return the other’s Confidential Information in its possession (including all copies) or shall, at the disclosing party’s direction, destroy such Confidential Information (including all copies) and certify its destruction to the disclosing party.

 

10.3           Exclusions. The term “Confidential Information” shall not include any information which: (a) is in the public domain at the time of disclosure or enters the public domain following disclosure through no fault of the receiving party, (b) is already in the receiving party’s possession prior to disclosure hereunder (as reflected by such party’s written records) or is subsequently disclosed to the receiving party with no obligation of confidentiality
by a third party having the right to disclose it, (c) is independently developed by the receiving party without reference to the disclosing party’s Confidential Information, or (d) is required to be disclosed pursuant to an order of any competent court or government agency or rules of a securities exchange with prior notice to disclosing party, or as required by any regulatory authority or for any regulatory filing, but shall notify the other Party prior to disclosing such information, and shall cooperate with the other Party either to enable the disclosing Party to seek protective measures for the Confidential Information, or to seek confidential treatment of such Confidential Information, and will limit any disclosure required to be made to any such agency to the minimum required for to meet the requirements of such order or regulatory filing.

 

10.4           Necessary disclosures.  Each Party may disclose the Confidential Information it receives under this Agreement to (a) its employees, contractors and permitted sublicensees, (b) to a potential or actual acquirer of, or an investor or potential investor in, such Party or the assets of such Party to which this Agreement relates, (c) for the purposes of Patent filing, prosecution and enforcement and (d) to its advisors, provided that in each case the disclosure is
limited to the extent required for the performance of either Party’s obligations under this Agreement, and provided that in the case of subsections (a), (b) and (d), the individuals are subject to obligations of confidentiality in relation to such information no less stringent than those contained in this Agreement.

 

10.5           Publicity.  The Parties agree that no public disclosure, publicity release or announcement concerning the transactions contemplated hereby will be issued without the advance written consent of the other Parties except as such disclosure, release or announcement may be required (a) by applicable Laws, (b) for filings with governmental agencies, (c) for prosecuting or defending litigation, and (d) for complying with applicable governmental regulations, court
orders, and legal requirements, including filings with the U.S. Securities Exchange Commission and with regulatory authorities, in each of which cases the Party required to make such disclosure, release or announcement will, to the extent reasonably practicable before making any such disclosure, release or announcement, afford the other Party with a reasonable opportunity to review and comment upon such release or announcement and use reasonable efforts to seek confidential treatment of such information.

 

 

 

  

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10.6           Allied Required Disclosure.  Each party understands that Huiheng Medical, Inc. is a reporting company with the U.S. Securities and Exchange Commission and is required to make disclosure of certain information regarding the New Company.  Each party understands that this Agreement and the contents thereto will be filed as a exhibit to Huiheng Medical, Inc. periodic filings.

 

Article 11 – IP Ownership and Licenses

 

11.1           Licenses.  Upon incorporation of the New Company, Intact and the New Company will promptly (within 20 days from the date of incorporation) enter into the License which will grant the New Company, pursuant to terms of the License, a license to use the Intact Intellectual Property necessary for the New Company to undertake the activities set forth herein.

 

11.2           IP Ownership.  Each of New Company and Allied acknowledge that Intact owns all right, title and interest in and to the Product, and the Intact Intellectual Property and agrees that it does not by this Agreement and will not otherwise have or acquire ownership in the Intact Intellectual Property and further warrants that it will not at any time, either during the term of the Agreement or after termination of this Agreement contest (or assist any third party in
contesting) the validity or ownership of the Intact Intellectual Property or any of its constituent elements, including any improvements to the Intact Intellectual Property or the Product.

 

Article 12 - Term and Termination

 

12.1           Term.  Unless earlier terminated or amended in accordance with any applicable provision hereto, this Agreement shall remain in force and binding on the parties for a term equal to the License, including any and all extensions including the Wind Down Period, as that term is defined in the License. 

 

12.2           Material Breach.  In the event of failure or neglect of any party hereto to fulfill any of the provisions hereof to be performed by it, and if any other party gives written notice of such default and such default is not cured within sixty (60) days after the giving of such notice, the party giving such notice shall have the right to terminate this Agreement at any time thereafter by giving a written notice of such termination to the defaulting
party.

 

12.3           Mutual Termination.  This Agreement may be terminated by mutual written agreement by Allied and Intact.

 

12.4           Survival.  Articles 10, 11, 12 and 13, and such other Sections as by their nature should survive, and such obligations shall survive any expiration or termination of this Agreement.

 

12.5           Effect of Termination.  Upon the termination or expiration of this Agreement, each Party will immediately cease using all of the Confidential Information of the other Parties, including the Intact Intellectual Property, and return all such Confidential Information to the owning party, or at the owning party’s option, destroy all such Confidential Information.  On request, the Party returning or destroying such Confidential Information will
promptly provide the owning party with a  written certification of such return or destruction.

 

 

 

  

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Article 13 - General Provisions

 

13.1           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of Commonwealth of Massachusetts without regard to the conflicts of laws principles thereof.

 

13.2           Arbitration.  All disputes, controversies or differences which may arise between the parties, and/or between a party and the New Company, out of or in relation to or in connection with this Agreement which cannot be settled by full discussion between appropriate senior representatives of the parties will be settled, by arbitration in Boston, Massachusetts, according to the commercial arbitration rules of the American Arbitration Association and applying the procedural laws of the State of
Massachusetts. The proceedings shall take place in the local language with provision for simultaneous interpretation at the expense of the party desiring it.  The decision of the arbitrator(s) will be final and binding and enforceable in any court with appropriate jurisdiction.

 

13.3           Attorney Fees.  If any action at law or equity or arbitration is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and necessary disbursements in addition to any other relief to which the party may be entitled.

 

13.4           Notices.  Any notice or request which shall or may be given under this Agreement shall be made by airmail, registered mail with return receipt requested or facsimile and shall be directed to the intended recipient at its address set forth below or at such other address as such party may notify the other parties in accordance with this paragraph.  The effective date of delivery of such notice shall, in the case of airmail or registered airmail, be seven (7) business days following
dispatch, or in the case of facsimile or e-mail, the date of successful transmission as evidenced by a transmission report.

 

Allied Moral Holdings, Ltd.

Huiheng Building,

Gaoxin 7 Street South,

Keyuannan Road, Nanshan District,

Shenzhen Guangdong, P.R. China 518057

Facsimile: 0755-2674 5291

 

Intact Medical Corporation

550 Cochituate Road, Suite 25, East Wing, Floor 4,

Framingham MA 01701

Facsimile:(508) 655-7822

 

BMG Diamond Holdings Limited

Flat A, 15/F, Hillier Commercial Building

No. 65-67 Bonham Strand East

Sheung Wan, Hong Kong

Facsimile: 949-388-3409

 

 

 

 

  

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13.5           Waiver.  The failure, delay or omission of any party hereto at any time to require due performance by any other party of any provision under this Agreement shall in no way affect the right of such party to require performance which may be due thereafter pursuant to such provision and shall constitute neither a future waiver of the same provision nor a waiver of any subsequent provision on the same matter.  Any failure by any party hereto to protest a breach of any provision under
this Agreement shall not constitute waiver of its right to protest any subsequent breach of the same or any other provision.

13.6           Cumulative Remedies.  No remedy conferred by any of the provisions of this Agreement is intended to be exclusive of any other remedy which is otherwise available at law, in equity, by statute or otherwise and each and every other remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity, by statute or otherwise.  The election of any one or more of such remedies by either of
the Parties shall not constitute a waiver by such party of the right to pursue any other available remedy.

 

13.7           Assignment.  Neither Party may assign or otherwise transfer this Agreement without the other Party’s prior, express written consent, except that no such consent shall be required for Intact to assign its rights or transfer its obligations (i) to its Affiliates or (ii) in connection with the sale or transfer of the majority of its stock or all or substantially all of its assets to which this Agreement relates, whether as part of a merger, acquisition, or
asset sale.  Any assignment or transfer in violation of this Agreement will be null and void.  This Agreement benefits and binds the parties and their respective successors and permitted assigns.

 

13.8           Language.  This Agreement shall be executed both in the English language and the Chinese language, but in the event of inconsistency or difference between the English language version and the Chinese language version of this Agreement, the English language version shall prevail.

 

13.9           Severability.  If any provision or part of this Agreement is rendered void, illegal or unenforceable in any respect under any enactment or rule of law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

13.10           Construction.  The headings to the clauses, sub-clause and parts of this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.  Any ambiguity in this Agreement shall be interpreted equitably without regard to which party drafted the Agreement or any provision thereof.  The terms “this Agreement,” “hereof,”
“hereunder” and any similar expressions refer to this Agreement and not to any particular Section or other portion hereof.  The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party will not be applied in the construction or interpretation of this Agreement.  As used in this Agreement, the words “include” and “including,” and variations thereof, will be deemed to be followed by the words “without limitation” and “discretion” means sole discretion.

 

13.11           Further Assurances.  Each of the parties agrees to take such actions, including but not limited to the execution and/or delivery of additional agreements and other written documents, as may be required to assure that each party to this Agreement enjoys all rights accorded to such party under this Agreement.

 

 

 

 

  

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13.12           Relationships of the Parties.  This Agreement shall not constitute any party the legal agent of any other party.  No party shall have the right or authority to assume, create, or incur any liability of any kind, express or implied, against or on behalf of any other party.

13.13           Limitation of Liability.  Except for breaches of confidentiality obligations, in no event shall either party have any liability to the other, or to any party claiming through or under the other, for any lost profits, or any indirect, incidental, special or consequential damages of any kind in any way arising out of or related to this Agreement and however caused and under any theory of liability, even if such party has been advised of the possibility of such
damages.

 

13.14           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.  Copies of executed counterparts transmitted by telecopy, or other electronic transmission service shall be considered original executed counterparts for purposes of this paragraph, provided that receipt of copies of such counterparts is confirmed.

 

13.15           Entire Agreement; Amendments.  The terms and conditions of this Agreement constitute the entire agreement and understanding between the parties concerning its contents, and supersede all previous communications, whether oral or in writing, between the parties, including any previous agreement or understanding varying or extending the same, and may not be released, discharged, abandoned, changed or modified except by an instrument in writing signed personally or by the duly authorized
officers or representatives of the respective parties hereto.

 

 

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in triplicate original counterparts, personally or by their duly authorized officers or representatives, as of the day and year first above written.

 

Allied Moral Holdings, Ltd.

 

 

By:  /s/  Hui Xiaobing                                                           

Name:    Hui Xiaobing

Title:      Chairman

 

 

Intact Medical Corporation

 

 

By:  /s/   John F. Vacha                                                         

Name:    John F. Vacha 

Title:      President and CEO

 

 

BMG Diamond Holdings Limited

 

 

By:   /s/ Michael
Walas                                                           

Name:   Michael Walas

Title:     Principal

 

 

 

  

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Exhibit A

 

LICENSE, SUPPLY, MARKETING AND DISTRIBUTION AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

  

  

  

 

[***]   Represents material information 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.

 

Exhibit A

 

LICENSE, SUPPLY, MARKETING AND DISTRIBUTION AGREEMENT

 

This License, Supply, Marketing and Distribution Agreement (“Agreement”) is entered into as of September___, 2011 (the “Effective Date”) by and between H & I Medical China Limited, a British Virgin Islands company with its principal place of business at Huiheng Building, Gaoxin 7 Street South, Keyuannan Road, Nanshan District, Shenzhen Guangdong, P.R. China 518057 (hereinafter “Newco”), and Intact Medical Corporation, a Delaware corporation with its principal place of business at
550 Cochituate Road, Suite 25, East Wing, Floor 4, Framingham MA 01701 (hereinafter "Intact").  Newco and Intact are sometimes referred to singularly as a “party” and collectively “parties”.

RECITALS

 

WHEREAS, Intact is engaged in the design, production and sale of a product known as the Intact Breast Lesion Excision System, as described in Exhibit A, attached hereto, and Intact owns certain Intellectual Property (as defined below) rights with respect to Product (as defined below);

 

WHEREAS, Newco has been organized and formed to engage in the development, manufacturing, promotion and distribution of the Product in the Territory (as defined below); and

 

WHEREAS, Intact desires to grant to Newco, and Newco desires to receive an exclusive license to manufacture, have manufactured, market, develop, distribute and sell the Product in the Territory, and a limited license thereafter pursuant to the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby covenant and agree as follows:

 

AGREEMENT

 

1.       Definitions.

 

For the purposes of this Agreement the following capitalized terms are defined in this Section 1 and shall have the meaning specified herein.  Other terms that are capitalized but not specifically defined in this Section 1 or in the body of this Agreement shall have the meanings set forth in the Joint Venture Agreement.

 

“Affiliate” means, with respect to an entity, any Person that, directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, that entity.

 

“Acceptance Criteria” means the visual inspection criteria, performance test parameters and other criteria for each Product as set forth in Exhibit B-1, to be met by Newco prior to commercialization of Product in the Territory.

 

 

 

  

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“Confidential Information” means all proprietary, confidential and other non-public information, Know-How and data (oral, written, graphic, demonstrative, machine recognizable or otherwise) relating to the proprietary technology and/or business of (i) the Disclosing Party, and (ii) a third party who has disclosed such information, Know-How, and data to the Disclosing Party under obligations of confidentiality, and which in either case is disclosed by the Disclosing Party to the Receiving Party within the context of this Agreement; provided, that, it shall be explicitly understood that Confidential Information includes, information
specifically related to the Product, and “Disclosing Party” means the party disclosing Confidential Information to the other party pursuant to this Agreement and “Receiving Party” means the party receiving Confidential Information from the other party pursuant to this Agreement.

 

“Control” or “Controlled” shall mean with respect to Know-How or Patents, that the applicable Party has licensed (or otherwise obtained rights to or under) such Know-How or Patents from a third party and such Party has the right to grant sublicenses at no additional cost to such Know-How or Patents.

 

“Huiheng” means Allied Moral Holdings, Ltd., a British Virgin Islands company, with its   principal place of business located at Huiheng Building, Gaoxin 7 Street South, Keyuannan Road, Nanshan District, Shenzhen Guangdong, P.R. China 518057 and wholly owned by Huiheng Medical, Inc., a Nevada corporation, with its principal place of business located at Huiheng Building, Gaoxin 7 Street South, Keyuannan Road, Nanshan District, Shenzhen Guangdong, P.R. China 518057.

 

“Improvement” means all improvements, variations, updates, modifications, and enhancements to the Product that is made by either Party in performing activities under this Agreement, in each case whether or not patentable or protectable,

 

“Intact Breast Lesion Excision System” means the system developed by Intact for the purposes of capture of breast tissue for histological review in a human patient using radiofrequency energy.

 

“Intact Handles” means the reusable handle tool known as Intact Handle that is an integral component of the Product.

 

“Intact’s Knowledge” means the actual knowledge of any of the executive officers and board of directors of Intact.

 

 “Intact Wands” means the disposable wand known as Intact Wand that is an integral component of the Product.

 

“Intellectual Property” shall mean a Patent, industrial design, invention (whether patentable or unpatentable and whether or not reduced to practice), design, idea, work, methodology, innovation, creation, concept, development research, copyright, all confidential and/or proprietary assays, substances and materials, Know-How, and any registration, application, right or other grant analogous thereto with respect to any of the foregoing, but excluding trademarks and service mark.

 

“Joint Venture Agreement” means the agreement by and among Huiheng, Intact and BMG Diamond Holdings Limited, a company incorporated under the laws of British Virgin Islands, dated as of September 6, 2011.

 

 

  

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“Know-How” shall mean any and all confidential information, trade secrets, technology,  technical information, genetic information (including information relating to any impairment, variance, or mutation thereof) discoveries, formulae, algorithms, developments, improvements, system, techniques, methods, test methods, procedures, processes, data (including development data), instructions, analysis, experiment, drawings and specifications, whether or not patentable or protectable.

 

“Licensed Technology” means (i) the Patents listed on Exhibit C, and other U.S. and international pending Patents Controlled by Intact or its Affiliates related to the Product, including any patents issuing from any of the patent applications included in such Patents and any reissues, re-examinations, confirmations, extensions, renewals, substitutions, continuations, divisions, patent term extensions, and continuation-in-part applications of the foregoing; (ii) Know-How regarding the manufacture and use of the Product; including the Process Technology and (iii) any and all
Improvements made or conceived during the term of this Agreement.

 

“Patents” means any and all original (priority-establishing) patents and patent applications filed anywhere in the world, including provisional and non-provisional applications, and all related applications thereafter filed or including a common priority right, including any continuations, continuations-in-part, divisional and substitute applications, any patents issued or granted from any such patent applications, and any reissues, renewals, reexaminations, extensions (including by virtue of any supplementary protection certificates) of any such patents, and any confirmation patents, inventor’s certificates or registration patents
or patents of addition based on any such patents, and all foreign counterparts or equivalents in any country or jurisdiction.

 

“Patent Offices” means the United States Patent and Trademark Office, and the equivalents in the Territory.

 

“Process Technology” means the confidential and proprietary process technology, including its family and derivatives, supplied by Intact to Newco hereunder to produce Product pursuant to this Agreement, which includes but is not limited to the instructional DVD videos which provide instructions on how to make the Product.

 

“Product” means Intact’s Breast Lesion Excision System, including all related components, and all Improvements related thereto including, but not limited to, the Intact RF generator, Intact Handles, and Intact Wands.

 

“Qualification” means Intact’s determination that the Product meets the Acceptance Criteria in accordance with the Qualification Plan.

 

“Qualification Plan” means the plan and process determined by Intact at its sole discretion to ascertain whether the Product as manufactured by Newco meets Intact’s reliability and quality specifications, as attached hereto as Exhibit B-2.

 

“SFDA” means China State Food and Drug Administration.

 

“SFDA Approval” means the approval of the Product by China State Food and Drug Administration for sale in China.

 

“Territory” means China, including Hong Kong SAR and Macau SAR.

 

  

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“Trademarks” means the trademarks currently used in relation to the Product as listed on Exhibit D attached hereto, including “Intact® ,”n-bloc®, and the trade name “Intact.”

 

“Year 2 Dividend” has the ascribed meaning set forth under the Joint Venture Agreement.

 

“Year 3 Dividend” has the ascribed meaning set forth under the Joint Venture Agreement.

 

“Year 4 Dividend” has the ascribed meaning set forth under the Joint Venture Agreement.

 

2.     License Grant; and First Right of Refusal.

 

A.  License. Subject to the terms and conditions of this Agreement, Intact hereby grants to Newco an exclusive (even as to Intact), fee-bearing, non-transferable license (with the right of sublicense pursuant to the terms of this Agreement) under and to the Licensed Technology to manufacture, have manufactured by subcontracted manufacturers pre-approved in writing by Intact, use, promote, market, have marketed, distribute, have distributed, service, sell, offer for sale, the
Product solely in the Territory to end users in the Territory, and to import and export the Product outside the Territory solely to Intact. Newco may appoint one or more sub-distributors and subcontractors to manufacture, market, distribute, offer to sell and sell the Product in the Territory without Intact’s consent, provided that such sub-distributor or subcontractor shall be required to comply with the terms of this Agreement, and Newco shall remain fully liable to Intact for the performance of, and compliance with the terms of this Agreement by, such third parties.

 

B. Trademark and Trade Names License. Subject to the terms and conditions of this Agreement, Intact hereby further grants to Newco an exclusive license to use the Trademarks in the Territory for the purposes of the manufacture, distribution, marketing, use and sale of the Product, subject to the terms of this Agreement, which license shall also include Newco’s right to use the name “Intact Medical Corporation.” “Intact” or other trade names associated with the Product in accordance with the terms of this Agreement,
provided that the license to use the names “Intact Medical Corporation” and “Intact” shall be granted solely for the purposes of identifying the Product as having been designed by Intact.  In the event Newco uses such Trademarks in the Territory, Newco shall use such Trademarks at all times in accordance with the specifications and guidelines for use of such Trademarks notified to it in writing by Intact from time to time, and the license granted under this Section 2B may be revoked at any time at Intact’s sole discretion if, in Intact’s reasonable opinion, Newco does any act or omission that may damage the goodwill in, or reputation of, the Trademarks. Newco may not use the Trademarks on any packaging, or on any marketing, promotional, advertising or any other materials in relation to the Product (together the
“Branded Materials”) without Intact’s prior consent in writing, which may be withheld at Intact’s sole discretion; provided however, Intact agrees not to withhold consent on Newco’s use of Trademarks on packaging, marketing, promotional, advertising, or any other material relating to the Product currently used or used during the term of this Agreement by Intact so long as they have only been modified to reflect direct translation into Mandarin and to comply with the SFDA and China law.   Intact understands that the Branded Materials will be primarily in Mandarin and Intact’s review of such materials will require Intact to have the resources to have such materials translated in English.   Newco will provide Intact no less than fifteen (15) days in advance
with samples of the Branded Materials which

 

  

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will be primarily in Mandarin on which Newco proposes to use the Trademarks, and Intact will consider such Branded Materials within fifteen (15) days of receipt, and provide Newco with its consent, rejection, or its suggestions on modifications required to make the Branded Materials suitable for use.   In the event Newco does not receive a written response from Intact within such fifteen (15) days of receipt, Newco may use the Branded Materials.  Newco agrees to use its best efforts to maintain a high standard of quality for any marketing materials, packaging, facilities or goods with which the Product is associated, consistent with the specifications for use. In the event that Intact
determines that Newco’s method or manner of use of the Trademarks is inconsistent with Intact’s approved quality standards, Intact shall provide Newco with a written itemization of such defects.  Newco shall use its best efforts to cure any such defects within fifteen (15) days of receipt of such notice, and immediately take all reasonable steps to correct such deficiency.  If Newco does not cure such deficiency within fifteen (15) days, Intact shall have the right to suspend the Trademark license until such deficiency has been cured.  For clarification, Intact retains the right to use the “Intact” trademark on its website and in promotional materials, such as brochures, case studies, white papers, and advertising related to the Product outside the Territory.  As long as Newco maintains its exclusivity under Section 2A,
Intact agrees not to otherwise use the Trademarks in the Territory.

 

C. Right of First Offer. Intact hereby grants Newco a first right of first offer to have the sole and exclusive right to manufacture, market, distribute, license, promote, service and sell the Product in Vietnam, and Taiwan. Intact shall first negotiate or commence discussions with Newco regarding such new territories before commencing such discussion with any third parties.  Intact and Newco shall engage in such negotiations in good faith and upon agreement by both parties not to pursue further discussions, or following thirty (30)
days good faith negotiation, Intact may then commence discussions with third parties.

 

3.      Assistance from Intact; Commercialization by Newco.

 

A. Delivery of Materials.  Intact will deliver and explain the Process Technology to Newco, or at the written request of Newco, Authorized Manufacturer (as defined in Section 4E) in accordance with an implementation plan to be agreed upon in writing by the Parties.  In addition, Intact agrees to deliver to Newco labels, brochures, packaging, instructions materials, and all other marketing and promotional materials currently being used by Intact for the Product, to be translated and used by Newco in connection with the
commercialization of the Product in the Territory.

 

B. Commercialization Plan and Progress Reports. All manufacturing and sales and marketing activities for the Product in the Territory will be the responsibility of Newco.  Newco agrees that it shall use commercially reasonable efforts to carry out the manufacturing, marketing and commercialization of the Product throughout the Territory.

 

C. Technical Support and Training. For no additional consideration, Intact shall, as reasonably requested by Newco, use its commercially reasonable efforts to render the  technical support and training, and advice in connection with familiarizing Newco or its Authorized Manufacturer in the specifications, characteristics and use of the Product to enable Newco to manufacture and commercialize the Product in the Territory as contemplated by this Agreement (For the purpose of this Section 3C, the Parties
agree that commercially reasonable efforts shall, at a minimum, be substantially the same effort that Intact provided to other manufacturers and distributors of the Product).  Unless otherwise agreed in writing by the Parties, any assistance and training provided by Intact at Intact’s site in the United States, and all ancillary expenses (including without limitation travel and accommodation) associated with the attendance of any personnel at such training, excluding Intact staff, will be the sole responsibility of

 

 

  

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Newco, or its Authorized Manufacturer if the Authorized Manufacturer receives the training.  If initial training requires that Intact personnel visit the operations in China, then Intact shall cover those expenses, so long as those expenses are reasonable.  Such expenses would exclude any expenses associated with the attendance of Huiheng or Newco personnel at such training in China.  Both Parties agree that Newco shall establish a budget to cover reasonable travel expenses for Newco and Intact personnel relating to the business of Newco
once Newco is cash flow positive.

 

D. Expenses of Newco. Newco will assume and pay all costs incurred in manufacturing, marketing and commercializing the Product in the Territory, including without limitation all costs associated with set-up of any manufacturing facilities and tooling for production, unless otherwise specifically provided for herein.

 

4.      Manufacture and Supply

 

A. Newco’s Manufacturing Obligation. Newco will have the exclusive right to manufacture or have manufactured and supply the Product, including the Intact RF Generator, the reusable handle tool known as Intact Handle and the disposable wand know as Intact Wand, in the Territory pursuant to the terms of this Agreement. Subject to prior written approval of Intact, which approval will not be unreasonably withheld pursuant to Section 4D, Newco shall have the right to subcontract for the manufacturing of the Product.

 

B. Initial Product Manufacturing and Evaluation.  Prior to any commercialization of the Product in the Territory, Newco will manufacture Product or have it manufactured using the Process Technology, and deliver an initial sample or batch of samples of the Product to Intact for testing.  Upon fifteen (15) days of receipt of the sample(s), using the Qualification Plan, Intact will evaluate the Product and provide written notification to Newco informing Newco of results of its evaluation which will either (i) confirm satisfaction
of Acceptance Criteria resulting in approval of Product, or (ii) identify any material deficiencies, by itemizing and describing such deficiencies and corrective measures.  Once the Product receives Qualification, the manufacturing process established by Newco, whether at its own manufacturing facility or at the manufacturing facility of an Authorized Manufacturer, will be deemed qualified. Newco may not market or sell any Product until Intact has given its confirmation that the Product meets the Acceptance Criteria following evaluation of the Product in accordance with the Qualification Plan provided by Intact and agreed upon by Newco.

 

C. Changes to Manufacturing Process or Product.  Newco may not make any material changes to the Product or to the manufacturing process after it has been qualified pursuant to Section 4B, without the prior written consent of Intact on a case-by-case basis which will not be unreasonably withheld

 

D. General Manufacturing.  Upon Qualification, Newco will manufacture the Product to conform to the Acceptance Criteria.  Newco shall not (i) have any third party manufacture the Product, or (ii) source from any third party any component of the Product, for any purpose without Intact’s express prior consent in writing, such consent not to be unreasonably withheld.  Any third party to which Intact gives consent, which consent will not be unreasonable withheld by Intact  if such third party meets current
U.S., European and Chinese commonly accepted manufacturing standards,  that is appointed to manufacture the Product or a component of the Product  in the Territory (including pursuant to Section 4E) shall be an “Authorized Manufacturer” for the purposes of this Agreement.

 

  

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E. Authorized Manufacturers.  Intact acknowledges that as of the Effective Date, Newco does not currently have the capability to manufacture the Product in the Territory, and that Newco intends to appoint Huiheng as an Authorized Manufacturer.  Intact hereby consents to the appointment of Huiheng as an Authorized Manufacturer, provided that (i) Huiheng agrees to be bound by the terms of this Agreement, and (ii) Huiheng may not subcontract or otherwise delegate any of its manufacturing obligations to any third party without the
express consent in writing of Intact, and (iii) Intact shall be an express intended third party beneficiary for any agreement between Huiheng and Newco to enforce the applicable provisions under this Agreement regarding Authorized Manufacturers, including without limitation any provisions regarding protection of Intact’s Intellectual Property, Intact’s inspection rights, and the Qualification of Product.

 

F. Core Components.  Newco acknowledges that the quality of components utilized in the manufacture and assembly of the Product is of critical importance to Intact, and that certain components may not be able to be manufactured or supplied by Newco or an Authorized Manufacturer at the time of commencement of manufacturing operations under this Agreement (the “Core Components”).  A list of such Core Components is attached to this Agreement as
Exhibit E.  Newco agrees that it will use its commercially reasonable efforts to purchase, and ensure that its Authorized Manufacturer purchase, the Core Components from third party suppliers identified  by Intact in writing, until such time as Newco evidences that such Core Components meeting the applicable Acceptance Criteria can be manufactured by Newco or an Authorized Manufacturer in the Territory.

 

G. Supply Prices. At Intact’s option, Intact shall have the right to purchase the Product from Newco to sell outside of the Territory.  At Intact’s request and sole discretion, Newco agrees to sell the Product to Intact.  The cost of the Product to Intact shall be [***].  As soon as available, Newco will provide Intact with a current component price list for the Product and a detailed accounting of the parts and labor costs
[***]  In addition at Intact’s request, Newco will provide Intact with a current component price list for the Product.  Notwithstanding the generality of the foregoing, Newco will provide Intact at the end of each calendar year and upon a material changes in price list defined as a change in a component price greater than [***], with an updated price list report of its costs for parts and labor, including a breakdown of how those costs have been calculated.  Intact shall have the right, upon reasonable written notice to Newco, to request that Newco provides additional validation of the costs charged or notified to Intact for any component or ancillary costs or combination thereof. [***].  The
parties agree that the foregoing costs are estimates only, and are non-binding upon the parties.  Newco agrees to provide Intact with reasonable notice in writing of any material changes in the estimated cost of such components.

 

H. Inspection of Manufacturing Facility.  Upon Intact’s reasonable advance request and at Intact’s sole expense,  Intact shall have the right to perform a reasonable technical audit and inspection of any Newco manufacturing facilities or Authorized Manufacturer manufacturing facilities, as reasonably necessary for Intact to verify Newco’s and its Authorized Manufacturers’ compliance with this Agreement and the Qualification Plan, including an audit and inspection of yields, delivery, performance, and
financial and operational records.  In the event an inspection of any manufacturing facility for the Product or any components of the Product reveals any deficiency, Newco shall promptly take action to remedy such deficiency and may not sell any Product affected by such deficiency or manufacture any further Product or Product components at the deficient facility until such Product or Product components have passed Qualification.  Intact’s right to audit and inspect any Product manufacturing facility shall continue for a period of five(5) years after the expiration or termination of this Agreement for the sole purpose of allowing Intact to verify that neither Newco or any of its
Authorized Manufacturers possess, or continue to use, Intact’s Confidential Information and Process Technology.

 

 

  

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I. Financial Audits.  Intact will also have the right to engage at its own expense an internationally recognized independent auditor reasonably acceptable to Newco to examine Newco’s records from time to time to the extent necessary to verify the costs and financial information to justify the pricing under Section 4G; provided, however, that (i)Intact will provide Newco reasonable prior written notice of such audit and may conduct audits no more than once every twelve (12) months, (ii) no such examination may be of a period previously examined and (iii) such results are provided to Newco.  If any such audit reveals (a) an over-charge of more than five percent (5%) invoiced for the audited period, such audit will be at the expense of Newco and all such over-charges will be, at Intact’s option, either
refunded or credited to Intact, or (b) an under-charge of more than five percent (5%), such audit will be at the expense of Intact, and all such under charges will be, at Newco's option, charged to Intact for immediate payment or credited.

 

5. Order and Delivery

 

A.   Orders.  Any such orders placed by Intact shall be evidenced by a written purchase order identifying the number, requested delivery date(s) and any shipping instructions, including preferred carrier and shipping destination.  Upon receipt of an order, Newco shall advise Intact within three (3) days of the acceptance of an order and of the lead time required for the manufacture (not to exceed the standard lead time) and delivery of such order in its entirety.  Unless the Parties otherwise agree in writing, the standard lead time for the Product will be
60-90 days.  Once such delivery date is identified and agreed to by the parties, Newco shall fully comply therewith.

 

B. Rescheduling and Cancellation. Intact may cancel or reschedule all or any part of a purchase order without charge, by providing written notice to Newco at least 45 days prior to the commencement of manufacturing of the Product impacted by such cancellation. Intact may also cancel or reschedule its order for Product that are already in production, provided that if an order is cancelled and not rescheduled within forty-five (45) of the notice of cancellation or rescheduling,  Intact will pay to Newco a cancellation fee equal to the cost of the material and labor costs for the Product already in
production.  If the order is rescheduled within forth-five (45) days then no cancellation fee will be due.  Newco will notify Intact promptly if it becomes aware that delivery times cannot be met and advise Intact of its anticipated production and shipping schedules

 

C. Risk of Loss and Title.  Delivery of all Product shall be made F.C.A.. (INCOTERMS 2000) Intact delivery point in China.  Risk of loss for the Product shall pass to Intact at the Intacts delivery point in China.  Title to the Product will pass to Intact at the Intact delivery destination in China.

 

D. Delivery.  Newco shall deliver the Product to Intact in accordance with the shipping instructions in the order with regard to the requested delivery date, ship-to address, carrier and means of transportation or routing.  Intact shall be responsible for paying all freight, handling, shipping and insurance charges to the destination point.   Intact may return any unauthorized under-shipment or any over-shipment or any portions thereof, at Newco’s expense and without charge to Intact.    Newco shall inform Intact immediately if a delivery cannot be
made within five (5) days of the scheduled delivery date, in which case Newco shall ship the Product by airfreight or other expedited routing, at Newco’s expense.

 

 

  

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E. Payment.  Upon shipment of Product ordered, Newco will submit to Intact an invoice showing invoice number and date, remit to address, the purchase order number, part number and revision, quantity of each Product, unit prices, each applicable tax and totals.  Intact shall pay each invoice by the later of thirty (30) days after the receipt of invoice, or (ii) thirty (30) days after receipt of the shipment by wire transfer.

 

6.      Minimum Requirements and Milestones.

 

A. Year 1 Minimum Milestone Requirements. Within the first twelve (12) months after receipt of SFDA approval (“Term Year 1”), Newco agrees that it shall achieve the following (“Year 1 Milestone”):

 

i.    Install Intact RF generators in no less than 20 different hospitals in the Territory;

 

ii.   Sell a minimum of 100 Intact Handles in the Territory; and

 

iii.  Sell a minimum of 4,000 Intact Wands in Territory.

 

In the event Newco fails to achieve Year 1 Milestone, this Agreement will automatically terminate within forty-five (45) days after Term Year 1 after Intact gives Newco written notice of termination pursuant to Section 7B, unless Huiheng, in its sole option and discretion, pays Intact $150,000 to maintain Newco's rights under this Agreement.

 

B. Year 2-4 Minimum Targets.  In each of the following respective Term Years (referred to as the “Target Milestones”): Intact shall have the right to terminate this Agreement pursuant to 7, if Newco fails to satisfy the following milestones for the respective year:

 

i.   For Term Year 2 (a period of twelve (12) months commencing at end of Term Year 1 (“Term Year 2”)) if Newco fails to pay out the Year 2 Dividend on or before 90 calendar days following the end of Term Year 2 (“Year 2 Dividend Date”), provided. however that Huiheng or an affiliate of Huiheng will have the right, at its sole option, to purchase the balance of the Year 2 Dividend owed to Intact from Intact for cash on a dollar-for-dollar basis on or before the Year 2 Dividend Date to maintain Newco’s rights under this Agreement.  Newco shall make an effort in good faith to declare some portion of the Year 2 Dividend after the end of each quarter, provided that Newco has accumulated available, free cash and
provided that distributing that cash will not have a negative effect on Newco’s ability to execute its business plan. The cumulative Year 2 Dividend as ascribed in the Joint Venture Agreement will be the total of the four quarterly dividends in Year 2;

 

ii. For Term Year 3 (a period of twelve (12) months commencing at end of Term Year 2 (“Term Year 2”) if Newco fails to pay out the Year 3 Dividend on or before 90  calendar days following the end of Term Year 3 (“Year 3 Dividend Date”), provided  however that Huiheng  or its affiliate of Huiheng will have the right, at its sole option, to purchase the balance of the Year 3 Dividend owed to Intact from Intact for cash on a dollar-for-dollar basis on or before the Year 3 Dividend Date to maintain Newco’s rights under this Agreement.  Newco shall make an effort in good faith to declare some portion of the Year 3 Dividend after the end of each quarter, provided that Newco has accumulated available, free cash and provided that distributing that cash will not have a negative effect on
Newco’s ability to execute its business plan.  The cumulative Year 3 Dividend as ascribed in the Joint Venture Agreement will be the total of the four quarterly dividends in Year 3;

 

 

 

  

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iii. For Term Year 4 (a period of twelve (12) months commencing at end of Term Year 3 (“Term Year 4”) if Newco fails to pay out the Year 4 Dividend on or before 90 calendar days following the end of Term Year 4 (“Year 4 Dividend Date”), provided  however that Huiheng or its affiliate of Huiheng will have the right, at its sole option, to purchase the balance of the Year 4 Dividend owed to Intact from Intact for cash on a dollar-for-dollar basis on or before the Year 4 Dividend Date to maintain Newco’s rights under this Agreement.  Newco shall make an effort in good faith to declare some portion of the Year 4 Dividend after the end of each quarter, provided that Newco has accumulated available, free cash and
provided that distributing that cash will not have a negative effect on Newco’s ability to execute its business plan.  The cumulative Year 4 Dividend as ascribed in the Joint Venture Agreement will be the total of the four quarterly dividends in Year 4.

 

C. Subsequent to Term Year 4.  Following the end of Term Year 4 (and if renewed, each year thereafter), this Agreement will be automatically renewed on its terms for successive one (1) year terms without further conditions until terminated by Newco, or by the terms of this Agreement, provided however, that if in any subsequent Renewal Term Newco’s revenues from Wand sales fall below 60% of the average of the two years revenue from Wand sales (“Wand Revenue
Milestone”), then Intact shall have the right to terminate this Agreement.

 

7.    Term and Termination

 

A. Term. This Agreement shall commence on the Effective Date and, unless earlier terminated as provided for herein, shall continue in effect for four (4) years from the date of SFDA Approval (the “Initial Term”). Subject to Section 6C, upon expiration of the Initial Term, this Agreement shall automatically extended for additional successive one (1) year terms (each, a “Renewal Term”) until
terminated pursuant to Section 7B. The Initial Term and the Renewal Term will be collectively referred to as the “Term”.

 

B. Termination Rights. The parties may terminate this Agreement at any time by mutually agreeing in writing to do so.  In addition, each party shall have the right to terminate as set forth below:

 

i. Intact shall have the right to terminate the Agreement upon forty-five (45) days prior written notice if any of the following occurs:

 

	
  

	
     (a)

	
Newco materially breaches its obligations, representations or warranties under this Agreement and fails to cure such breach within such forty-five (45) day period;

 

	
  

	
     (b)

	
Newco fails to achieve the Target Milestones or Wand Revenue Milestone as set out in Section 6;

 

	
  

	
     (c)

	
Newco is or becomes bankrupt or insolvent, enters into an arrangement, readjustment of debt, general assignment for the benefit of creditors, dissolution or liquidation proceeding; or

 

	
  

	
     (d)

	
if the Joint Venture Agreement is terminated

 

ii. Newco shall have the right to terminate this Agreement upon forty-five (45) days prior written notice under the following:

 

  

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    (a)

	
Intact materially breaches its obligations, representation or warranties under this Agreement and fails to cure such breach within such forty-five (45) day period;

 

	
   

	
    (b)

	
in its sole discretion in any Renewal Term; or

 

	
  

	
    (c)

	
The Product ceases to have valid and enforceable patent protection in the United States.

 

	
  

	
    (d)

	
if the Joint Venture Agreement is terminated.

 

C. Effects of Termination. Subject to the remainder of this Section 7D, upon termination or expiration of this Agreement, Newco will have (i) the right to sell the RF generators remaining in its inventory (“Residual Inventory”), (ii) for a period of five (5) years commencing on the expiration or termination of this Agreement (“Wind-Down Period”), Newco will retain and have the non-exclusive right to continue to manufacture the Intact Wands and Intact Handles and the exclusive right to market, distribute, sell and supply to customers who purchased the Residual Inventory in the Territory, or the RF Generators units sold by Newco  prior to the termination or expiration of this
Agreement (“Installed Base”), and (iii) a continuing license to the Licensed Technology and Trademarks granted hereunder to supply the Intact Wands and Intact Handles during the Wind-Down Period; provided that if this Agreement has been terminated by Intact for material breach by Newco, Newco shall not have any rights with respect to the Product following such termination during the Wind-Down Period, including the rights set out in (ii) and (iii) above; provided, however, that if this Agreement has been terminated as a result of the termination of the Joint Venture Agreement by Huiheng for material breach by Intact, Newco  (y) will also retain and have the non-exclusive right to continue to manufacture the Product and the Product components, and the exclusive right to market, distribute, and sell the Product and the
Product components in the Territory during the Wind Down Period, and (z) will have a continuing license to the Licensed Technology and Trademarks granted hereunder to supply and market the Product and Product components during the Wind-Down Period.  For the purpose of the rights granted to Newco during the Wind-Down Period under this Section 7C, failure to meet the Target Milestone or Wand Revenue Milestone as provided in Section 6 does not constitute as a material breach by Newco. Notwithstanding anything to the contrary in this Agreement, upon termination or expiration of this Agreement all licenses granted by Intact to Newco hereunder, express or implied, shall automatically terminate except to the extent necessary for Newco to sell Product, Intact Wands and Intact Handles after termination as permitted by this Section 7C.

 

D. Survival. Expiration or termination of this Agreement shall not affect the rights or obligations of either party hereto which shall have accrued hereunder prior to such expiration or termination, or the rights and obligations of the parties intended hereunder to survive the expiration or termination of this Agreement.  Without limiting the generality of the foregoing, no expiration or termination of this Agreement, whether by lapse of time or otherwise, shall serve to terminate the obligations of the Parties hereto under Sections 1,
3D, 4H, 4I, 7C, 7D, and 8 through 22.

 

E. Representations and Warranties of Each Party. Each party represents and warrants that:

 

  

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(i)     this Agreement has been duly executed and delivered by such party and constitutes a valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equitable principles;

 

(ii)    as of the Effective Date, the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of such party, its officers and directors and does not conflict with any agreement, instrument or understanding, oral or written, to which such party is a party or by which it may be bound, and, to the best of its knowledge, does not violate any material law or regulation of any court, governmental body or administrative or other agency having authority over it;

 

(iii)   this Agreement and the performance hereunder does not and shall not contravene with any agreement by which such party is bound by; and the consummation of the transactions contemplated hereby and the fulfillment of the terms hereof do not and will not conflict with or result in a violation of or default under the charter or under any agreement, lease, contract, loan agreement, indenture or other instrument or obligation to which such party is a party;

 

(iv)   such party has full power and authority to perform the obligations set forth herein;

 

(v)    such party is not subject to any order, decree or injunction by a court of competent jurisdiction which may prevent or materially delay the consummation of the transactions contemplated by this Agreement; and

 

(vi)   such party is duly organized, validly existing and in good standing under the laws of the jurisdiction where it is organized.

 

F.      Additional Representations of Intact.  Intact represents, warrants and covenants to Newco that  (i) it is the sole owner of the Licensed Technology; (ii) Exhibits C and D lists each Patent, that is included among the Intellectual Property owned by Intact  and Trademarks related to the Product; (iii) Intact has all right, title and interest in and to the Intellectual Property it Controls that is related to the Product (iv) the clinical studies done on the Product prior to the date hereof were conducted in good faith and not
in contravention of any applicable laws, rules, regulations or guidelines concerning the performance of such studies and the interpretation of data collected,  (iv) to Intact’s Knowledge as of the Effective Date, Intact has not received any written  claim or notice of infringement of the Intellectual Property rights of any other person pending or threatened in writing against Intact relating to the Product or operation of  Intact’s business, (v) as of the Effective Date, no payments are due to others by reason of the sale of the Product or licensing of the Licensed Technology as contemplated hereunder (vi) to Intact’s Knowledge as of the Effective Date, the granting of the Licensed Technology hereunder does not infringe upon the rights of any other third parties, vii) to Intact’s Knowledge as of the Effective Date, Intact has taken
reasonable precautions to protect trade secrets constituting material Intellectual Property owned or used by Intact in connection with Product, including the execution of appropriate agreements, and (xii)to Intact’s Knowledge as of the Effective Date, Intact’s current use of the Licensed Technology does not not infringe, misappropriate or violate any intellectual property rights of any person.

 

  

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G.  Additional Representations and Warranties of Newco.

 

i. Performance; Defective Product.  Newco warrants that all Product delivered hereunder shall meet all applicable specifications for the Product provided by Intact and shall be free from defects in material and workmanship under normal use and service for a period of 12 months from the date of shipment from Newco.  Intact shall not be obligated to pay for any Product delivered to it of such Product does not conform to approved sample under Section 4B (“Defective
Product”).  Intact may at its sole discretion request that Newco replace or repair such Defective Product, or Intact may return such Defective Product to Newco, at Newco’s sole cost

 

ii. Service Levels; Performance of Third Parties.  Newco will use its best efforts to perform, and as necessary cause its authorized sub-distributors or authorized subcontractors to perform, all manufacturing and other services pursuant to this Agreement in a timely and professional manner and in accordance with industry standards for manufacturing services.

 

iii. Compliance with Laws.  Newco will comply with all applicable federal, state, and local laws and regulations, and will obtain all applicable permits and licenses, necessary to manufacture and sell the Product, provided, however, that Intact shall solely be responsible for all permits and licenses required by any US, state or foreign country or international agency that Intact needs for it’s sales of the Product outside of the Territory.

 

iv. Anticorruption Matters.  Newco represents and warrants that it has not taken and covenants that it will not take during the Term any action in violation of any applicable anticorruption law, including the U.S. Foreign Corrupt Practices Act (“FCPA”) (15 U.S.C. § 78 dd-1 et seq.); or (ii) has corruptly, offered, paid, given, promised to pay or give, or authorized the payment or gift of anything of value, directly or indirectly, to any “Public
Official,” as defined in this Section 8C, for purposes of (A) influencing any act or decision of any Public Official in his official capacity; (B) inducing such Public Official to do or omit to do any act in violation of his lawful duty; (C) securing any improper advantage; or (D) inducing such Public Official to use his or her influence with a government, governmental entity, or commercial enterprise owned or controlled by any government (including state-owned or controlled veterinary or medical facilities), in order to assist the business of Newco or any party related in any way to the business of Newco.  For purposes of this Section 8C, “Public Official” means:  (i) any officer, employee or representative of any regional, federal, state, provincial, county or municipal government or government department, agency, or other division; (ii) any
officer, employee or representative of any commercial enterprise that is owned or controlled by a government, including any state-owned or controlled medical facility; (iii) any officer, employee or representative of any public international organization, such as the African Union, the International Monetary Fund, the United Nations or the World Bank; (iv) any person acting in an official capacity for any government or government entity, enterprise, or organization identified above; and (v) any political party, party official or candidate for political office.  Newco does not have knowledge of any actual or potential issues under the FCPA or any other applicable anticorruption law involving any of its directors or officers, employee, acting on behalf of Newco in any way relating to its business.

 

  

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v.  Export Controls and Sanctions Matters.  Neither Newco nor any of its directors, or officers, employees, nor, to Newco's knowledge, any distributor, agent, representative, sales intermediary or other third party acting on behalf of Newco,  has taken or will take during the Term any action in violation of any applicable export control law, trade or economic sanctions law, or anti-boycott law, in the United States or any other jurisdiction, including:  the Arms Export Control Act (22
U.S.C.A. § 2278), the Export Administration Act (50 U.S.C. App. §§ 2401-2420), the International Traffic in Arms Regulations (22 C.F.R. 120-130), the Export Administration Regulations (15 C.F.R. 730 et seq.), the Office of Foreign Assets Control Regulations (31 C.F.R. Chapter V), the Customs Laws of the United States (19 U.S.C. § 1 et seq.), the International Emergency Economic Powers Act (50 U.S .C. § 1701-1706), the U.S. Commerce Department anti-boycott regulations (15 C.F.R. 560), the U.S. Treasury Department anti-boycott requirements (26 U.S.C. § 999), any other export control regulations issued by the agencies listed in Part 730 of the Export Administration Regulations, or any applicable non-U.S. Laws of a similar nature.

 

vi.  Neither Newco nor, to Newco's knowledge any of its director or officers, employee, distributor, agent, representative, sales intermediary or other third party acting on behalf of Newco, is listed on the U.S. Office of Foreign Assets Control “Specially Designated Nationals and Blocked Persons” (“SDN List”) or any other similar list.

 

vii.  All export licenses, license exceptions and other consents, notices, waivers, approvals, orders, authorizations, registrations, declarations, classifications and filings required for the export, import and re-export of the Product (“Export Approvals”) will be obtained; and to the Knowledge of Newco, no Export Approvals are required by the laws identified in Section 8C(v) for continued export, re-export or import of the Product.

 

viii. Newco has taken and will take during the Term, all reasonable measures, to ensure that its directors, employees, agents, distributors, representatives and sales intermediaries take all reasonable measures, to protect the Confidential Information and any trade secrets included in the Licensed Technology.

 

ix. No Warranty Pass Through  Except for the limited warranty expressly set forth in Section 8C(i) above, Newco shall not be entitled to make or pass through any warranties to any third parties regarding the Product unless specifically authorized in writing by Intact on a case-by-case basis.   Newco shall be responsible for all representations and warranties it makes to customers.

 

9.          Indemnification.

 

A.                      Indemnification by Newco.  Newco agrees to indemnify and hold Intact, its officers, directors, employees, successors and assigns (the “Intact Indemnities”) harmless from and against all losses, damages, action, suit, claim, demand, liability, penalty, expense (including, without limitation, reasonable attorneys’ fees and expenses), bodily injury, death, or property damage (collectively, “Losses”), finally
awarded against Intact Indemnitees by a court of competent jurisdiction or agreed upon by Newco in settlement which the Intact Indemnitees, or any of them, resulting from any claims, actions or suits (including a governmental investigation) by third parties to the extent arising from; (i) any gross negligent or wrongful act or omission of Newco or its directors, officers, Affiliates, employees or agents; (ii) violation by Newco (or any of its directors, officers, Affiliates, employees or agents) of any applicable law, rule, regulation or order), or (iii) defects in manufacturing of the Product.

 

  

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B.           Indemnification by Intact. Intact agrees to indemnify and hold Newco, its officers, directors, employees, successors and assigns (the “Newco Indemnitees”) harmless from and against all Losses, finally awarded against Newco Indemnitees by a court of competent jurisdiction or agreed upon by Intact in settlement which the Newco Indemnitees, or any of them, resulting from, any claims, actions or suits (including a governmental investigation) by third parties to the extent arising from; (i) any gross negligent or wrongful act or omission of Intact or its directors, officers, Affiliates, employees or agents; (ii) violation by Intact (or any of its directors, officers, Affiliates, employees or agents) of any
applicable law, rule, regulation or order; (iii) an inherent defect in the design or functionality of the Product; or (iv) the infringement of intellectual property rights in the Territory by the Product as designed by Intact, but not as a result of any modifications to design or manufacturing by or on behalf of Newco, and not for combinations of the Product with any other products or use of the Product for any other purpose than the use to which the Product is put by Intact as of the Effective Date .

C.           Indemnification Procedure. If indemnification is sought pursuant to Sections 9A or B above, the indemnified party shall: (i) give written notice to the indemnifying party within fifteen (15) days after receipt by the indemnified party of such claim, suit or demand; provided, however, that the failure to give notice within such time period shall not relieve the indemnifying party of its obligation to indemnify, unless it shall be materially prejudiced by
such failure; (ii) permit the indemnifying party to assume direction and control of the defense of claims resulting therefrom; and (iii) at its own cost and expense, cooperate fully as requested by the indemnifying party in the defense of the claims. No offer of settlement, settlement or compromise by the indemnifying party shall be binding on an indemnified party without its prior written consent (which consent shall not be unreasonably withheld or delayed), unless such settlement fully releases the indemnified party without any liability, loss, cost or obligation incurred by such indemnified party. No offer of settlement, settlement or compromise by the indemnified party shall be binding on an indemnifying party without its prior written consent (which consent shall not be unreasonably withheld or delayed).

D.           Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH PARTY MAKES NO REPRESENTATIONS OR WARRANTIES AS TO ANY MATTER, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES, INCLUDING, ALL IMPLIED WARRANTIES OF, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE.

E.           Limitation of Liability.  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOSS OF PROFITS OR OTHER COMMERCIAL OR ECONOMIC LOSS, OR LOSS OR INTERRUPTION OF BUSINESS, OR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES OF ANY KIND ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 9E IS INTENDED TO LIMIT OR RESTRICT THE AMOUNTS PAYABLE TO THIRD PARTIES TO FULFILL INDEMNITY OBLIGATIONS SECTIONS 9A OR 9B, A BREACH OF LICENSE
RESTRICTIONS, OR DAMAGES AVAILABLE FOR A BREACH OF CONFIDENTIALITY OBLIGATIONS IN SECTION 11.  The foregoing provision shall not be construed to limit a party’s indemnification obligation under this Agreement for third party claims which may include consequential, punitive or other types of damages.

 

  

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10.      Dispute Resolution.

 

A.       Negotiation of Parties. In the event of any dispute, claim or controversy arising out of or relating to the interpretation of any provision of this Agreement, to the performance of either party under this Agreement or to any other matter under this Agreement, including any action in tort, contract or otherwise, at equity or at law, and any claims of fraud in the inducement (a “Dispute”), either party may at any time provide the other party written notice specifying the terms of such
Dispute in reasonable detail. As soon as practicable after receipt of such notice, the Chief Executive Officers of both Newco and Intact shall meet (in person or otherwise) at a mutually agreed upon time and location for the purpose of resolving such Dispute. They shall engage in good faith discussions and/or negotiations for a period of up to thirty (30) days to resolve the Dispute or negotiate an interpretation or revision of the applicable portion of this Agreement which is mutually agreeable to both parties, without the necessity of formal procedures relating thereto. During the course of such discussion and/or negotiation, the parties shall reasonably cooperate and provide information that is not materially confidential in order so that each of the parties may be fully informed with respect to the issues in Dispute.

 

B.       Arbitration. All disputes, controversies or differences which may arise between the parties, and/or between a party and the Newco, out of or in relation to or in connection with this Agreement which cannot be settled by full discussion between appropriate senior representatives of the parties will be settled, by arbitration in Boston, Massachusetts, according to the commercial arbitration rules of the American Arbitration Association and applying the procedural laws of the State of Massachusetts. The proceedings shall take place in the local language with
provision for simultaneous interpretation at the expense of the party desiring it.  The decision of the arbitrator(s) will be final and binding and enforceable in any court with appropriate jurisdiction. Notwithstanding the generality of the foregoing, nothing in this Section 10B shall be construed to limit either Party’s right to apply for injunctive or other equitable relief to which it may be entitled to preserve any of its rights under this Agreement.

 

11.      Confidential Information.

 

A.       Confidentiality.  It has been contemplated that in the course of the negotiation and the performance of this Agreement each party may have access to, or may disclose, Confidential Information of or to the other, as the case may be. Each party agrees that for the Term and for ten (10) years thereafter, the Receiving Party shall keep confidential and shall not publish or otherwise disclose, and will not use any Confidential Information of the Disclosing Party except for the limited purposes set forth in this Agreement;
provided, however that if any disclosure of Confidential Information to a third party is authorized by this Agreement, the Receiving Party shall obtain from such third party an agreement to hold such information in strictest confidence, and not to make use of such information for any purpose other than as permitted by this Agreement.  No provision of this Agreement shall be construed to preclude such disclosure of Confidential Information as may be necessary or appropriate (i) to obtain from any governmental agency any necessary approval contemplated by this Agreement, (ii) solely in the case of Intact, to file patent applications or obtain patents that are
included in the Licensed Technology consistent with the terms of this Agreement.  If any disclosure of Confidential Information is required under the foregoing subsection (ii), the Receiving Party shall notify as soon as possible the Disclosing Party of such disclosure and the Receiving Party shall, if requested by the Disclosing Party, use reasonable good faith efforts, at the expense of the Disclosing Party, to assist in seeking a protective order (or equivalent) with respect to such disclosure or otherwise avoid making such disclosure, and in each case of (i) or (ii) above, the disclosure by the Receiving Party shall be limited to the minimum required to comply with the requirement to disclose the Confidential Information. The Receiving Party will take all precautions as are reasonably necessary to prevent unauthorized access to, reproduction,

 

 

  

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duplication, disclosure or use of the other party’s Confidential Information and shall only disclose the Confidential Information of the other party to those of its officers, directors and employees, or to officers, directors and employees of its Affiliates, on a “need to know basis” provided each such officer, director, contractor or employees agrees in writing in favor of the Disclosing Party to be bound by the same obligations of secrecy and confidentiality that the Receiving Party is bound to under this Agreement and provided, further, that the Receiving Party shall be strictly responsible to the Disclosing Party for any losses or damages suffered as a result of the breach of such obligations
by the Receiving Party’s directors, officers, contractors or employees.

 

B.      Exceptions.  The obligations of confidentiality contained in Section 11 will not apply to the extent that such Confidential Information: (i) was already known to the Receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the Disclosing Party; (ii) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party; (iii) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or
omission of the Receiving Party in breach of this Agreement; (iv) was disclosed to the Receiving Party, other than under an obligation of confidentiality, by a third party who had no obligation not to disclose such information to others; (v) was developed independently by the Receiving Party without any use of Confidential Information; or (vi) is required to be disclosed publicly by applicable law.

 

12.     Relationship of Parties. Nothing herein shall be deemed to create an agency, joint venture, amalgamation, partnership, franchise or similar relationship between Newco and Intact. Notwithstanding any of the provisions of this Agreement, neither party shall at any time enter into, incur, or hold itself out to third parties as having authority to enter into or incur, on behalf of the other party, any commitment, expense, or liability whatsoever, and all such commitments, expenses and liabilities undertaken or incurred by one party in connection with or relating to the
development, manufacture or sale of Product or components thereof shall be undertaken, incurred or paid exclusively by that party, and not as an agent or representative of the other party.

 

13.      Intellectual Property

 

A.       IP Ownership.  The parties agree that Intact is the sole owner of all legal and beneficial right, title and interest in and to the Licensed Technology and any Improvements thereto, and nothing in this Agreement shall be interpreted as granting any rights of ownership to Newco in any Licensed Technology.  Ownership of all inventions and all intellectual property rights therein, relating to the Licensed Technology and, arising out of the activities conducted under this Agreement, including Improvements and other inventions relating to methods of making or using, configuration, performance or other attributes of the Product, that are made by employees, independent contractors, agents or
Affiliates of one or both of the Parties (“Inventions”) shall be owned solely by Intact, regardless of creator.  All such Inventions and intellectual property rights shall be included within the scope of the Licensed Technology and are licensed to Newco pursuant to Section 2 of this Agreement.  Notwithstanding the generality of the foregoing, the parties agree that any inventions conceived and reduced to practice solely by or on behalf of Newco that are not derived from the Licensed Technology, or which relate to the manufacturing process (the “Process Improvements”) shall be owned by Newco.

 

Newco hereby grants to Intact, and agrees to cause to be granted by any Authorized Manufacturer to Intact, a worldwide, perpetual, non-exclusive, royalty free, fully paid, transferable license in and to the Process Improvement.

 

  

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B.       Further Assurances.  Except as otherwise mutually agreed upon, Intact and Newco agree that without additional consideration, Newco hereby assigns all of its right, title and interest in and to Inventions, excluding Process Improvements, and related intellectual property rights (including enforcement rights) to Intact.  Newco shall promptly notify Intact in writing of all Inventions and if Intact desires to secure protection on such Inventions, Newco will cooperate with Intact for the purpose of filing and prosecuting patent applications, including the execution of any and all legal papers which may be deemed necessary or desirable by Intact to record such assignment or for the filing and prosecution of patent applications and for assignment of
such applications to Intact.  Newco hereby designates Intact as its agent for, and grants to Intact a power of attorney, which power of attorney shall be deemed coupled with an interest, solely for the purpose of effecting the foregoing assignment from Newco to Intact.

 

C.        Patents and Related Expenses. Intact shall, at its own expense, apply for, prosecute before the Patent Offices and maintain in the Patent Offices all Patents and all trademark applications and trademarks listed on Exhibit D. Upon request of Newco, Intact may at its own discretion, agree to undertake to apply for, prosecute and maintain all Patents in the Territory at Intact’s sole expense.

 

D.        Infringement of Patents.  Intact shall have the first right, at its sole discretion, but is not obligated, to take any and all action that it deems appropriate, at its expense, to assert any or all of the Licensed Technology against any party(s) deemed by Intact or Newco (by written notice to Intact) to infringe said Licensed Technology (the “Infringing Party”) anywhere in the world.  If Intact elects to enforce or assert its Licensed Technology against an Infringing Party, Newco agrees to cooperate with Intact and shall provide all reasonable assistance reasonably requested by Intact in pursuit of such action(s), at Intact’s sole expense.  If Intact elects not to
assert or otherwise enforce the Licensed Technology against any Infringing Party, it shall notify Newco in writing within thirty (30) days of making that decision, and Newco shall be entitled, but shall have no obligation to take any and all action that it deems appropriate, at its expense, to assert any or all of the Licensed Technology against any Infringing Party in the Territory only, and Intact hereby agrees to cooperate with Newco as reasonably requested and reasonably necessary in the pursuit of said action(s), at Newco’s sole expense. Newco shall promptly keep Intact informed of and provide copies of all material correspondence and documents relating to any such actions, and shall consult with Intact on all material decisions regarding such actions, and Intact shall have the right to consent to material decisions which are reasonably likely to affect Intact, which consent
shall not be unreasonably withheld, conditioned or delayed.

 

E.         Infringement by Third Party Product.  In the event that an infringement suit is filed in the Territory naming Intact and/or Newco as defendants and alleging that the Product infringes one or more patent(s) held by a third party, then Intact shall be obligated to take any and all action that it deems reasonably appropriate, at its expense, to defend the Licensed Technology against the third party alleging infringement, and Newco hereby agrees to cooperate with Intact as reasonably necessary in the pursuit of said action(s).

 

F.         Force Majeure. Neither party shall be liable for any delay in or failure of performance hereunder due to any contingency beyond its reasonable control. Should the delay or failure continue for more than twelve (12) months, then the other party shall have the right to immediately terminate this Agreement upon written notice to the other party. However, nothing contained herein shall relieve either party from its obligation to make all payments due hereunder when such payments are due.

 

  

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G.        Notices.  Any notice or request which shall or may be given under this Agreement shall be made by airmail, registered mail with return receipt requested or facsimile and shall be directed to the intended recipient at its address set forth below or at such other address as such party may notify the other parties in accordance with this paragraph.  The effective date of delivery of such notice shall, in the case of airmail or registered airmail, be seven (7) business days following dispatch, or in the case of facsimile or e-mail, the date of successful transmission as evidenced by a
transmission report.

 

H & I Medical China Limited

Gaoxin 7 Street South,

Keyuannan Road, Nanshan District,

Shenzhen Guangdong, P.R. China 518057

Facsimile: 0755-2674 5291

Intact Medical Corporation

550 Cochituate Road, Suite 25, East Wing, Floor 4,

Framingham MA 01701

Facsimile: (508) 655-7822

 

H.       Assignment; Successor and Assigns. Neither party may assign or otherwise transfer this Agreement without the prior written consent of the other party; provided, however, that Intact may assign this Agreement to a successor in interest to Intact without Newco’s consent upon a merger, acquisition, reorganization, change of control, or sale of all or substantially all of the assets of Intact    Subject to the foregoing, this Agreement is binding upon, and shall inure to the benefit of the parties hereto and
their respective permitted successors and assigns. Any purported assignment not in compliance with this Section 16 shall be null and void from the beginning.

 

14.       Governing Law. This Agreement shall be governed by the laws of the State of Massachusetts, without regard to any rules on conflicts of laws.

 

15.       Entire Agreement; Modifications; Waiver. This Agreement, together with all Exhibits hereto, fully expresses the entire understanding between the parties, and supersedes any prior agreements, understandings, or discussions between the parties. It may not be hereafter added to, altered, or modified except by written instrument signed by both parties. No delay, or omission in the exercise of any right, power, or remedy hereunder by either party shall impair such right, power, or remedy or be considered to be a waiver of any default or acquiescence therein by
such party.

 

16.        Headings. The section headings contained herein are not part of this Agreement and are included solely for the convenience of the parties.

 

17.        Language.  This Agreement shall be executed both in the English language and the Chinese language, but in the event of inconsistency or difference between the English language version and the Chinese language version of this Agreement, the English language version shall prevail.

 

18.        Further Assurances.  Each of the parties agrees to take such actions, including but not limited to the execution and/or delivery of additional agreements and other written documents, as may be required to assure that each party to this Agreement enjoys all rights accorded to such party under this Agreement.

 

 

  

A - 19

  

 

19.     Execution in Counterpart. This Agreement may be executed in counterpart by the parties, either through original copies or by facsimile or electronic copies. An executed copy of this Agreement delivered by facsimile or electronically will constitute valid execution and delivery of this Agreement.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

 

H & I Medical China Limited

By: ________________________________

Name:______________________________

Title:_______________________________

Intact Medical Corporation

By: ________________________________

Name: ______________________________

Title: _______________________________

 

 

 

 

  

A - 20

  

 

 

Exhibit A

 

 

Description of Intact Breast Lesion Excision System

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

  

 

  

 

  

 

  

 

  

 

 

 

 

Exhibit B-1

 

Acceptance Criteria

 

[***]

 

[***]   Represents material information 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.

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

Exhibit B-2

 

Qualification Plan

 

The Qualification Plan for product produced by NEWCO Intact's reliability and quality specifications will be the same as the current reliability and quality standards required by Intact's current manufacturers of its products. These standards are being obtained and will be provided. Intact ensures that the standards will not change.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

Exhibit C

 

Status of Intact Medical Patents and Applications—December 2010

 

DRAFT

	
MSO Docket No.

	
Patent/Appln

No.

	
Title

	
Issue/Filing

Date

	
Status

	 
	
NET 2-019-2

	
5,928,159

	
Apparatus and Method for Characterization and Treatment of Tumors

	
07/27/1999

	
Patented

$01/27/2011

 

	
NET 2-019-2-3A

	
5,947,964

	
Method and Apparatus for the Therapeutic Cauterization of Predetermined Volumes of Tissue

	
07/27/1999

	
Patented

$03/09/2011

 

	
NET 2-019-2-3C

	
6,106,524

	
Method and Apparatus for the Therapeutic Cauterization of Predetermined Volumes of Tissue

	
08/22/2000

	
Patented

$02/22/2012

 

	
NET 2-019-2-3NL

	
Dutch

1,006,903

 

	
Method and Apparatus for the Therapeutic Cauterization of Predetermined Volumes of Tissue

	
10/27/2004

	
Patented

	
NET 2-019-3NL

	
Dutch

1,440,665

 

	
Method and Apparatus for the Therapeutic Cauterization of Predetermined Volumes of Tissue

	
05/04/2005

	
Patented

	
NET 2-019AU

	
Australian

696,729

 

	
Apparatus and Method for Characterization and Treatment of Tumors

	
01/07/1999

	
Patented

	
NET 2-035

	
6,287,304

	
Interstitial Cauterization of Tissue Volumes with Electrosurgically Deployed Electrodes

	
09/11/2001

	
(Petition?)

Expired

9/11/2009

 

	
NET 2-035IL

	
Israeli

148,990

 

	
Interstitial Cauterization of Tissue Volumes with Electrosurgically Deployed Electrodes

	
11/20/2007

	
Patented

	
NET 2-039

	
6,277,083

	
Minimally Invasive Intact Recovery of Tissue

	
08/21/2001

	
Patented

$02/21/2013

 

	
NET 2-039AU

	
Australian

780,936

 

	
Minimally Invasive Intact Recovery of Tissue

	
09/18/2005

	
Patented

 

 

 

 

 

  

  

  

 

Intact Medical Patent Portfolio

December 15, 2010

Page 2 of 5

 

 

	
MSO Docket No.

	
Patent/Appln

No.

	
Title

	
Issue/Appl.

Date

	
Status

	 
	
NET 2-039CA

	
Canadian

2,394,682

 

	
Minimally Invasive Intact Recovery of Tissue

	
11/29/2005

	
Patented

	
NET 2-039EP

	
EPO

00959852.5

 

	
Minimally Invasive Intact Recovery of Tissue

	
09/01/2000

	
Pending?

	
NET 2-039IL

	
Israeli

150,159

 

	
Minimally Invasive Intact Recovery of Tissue

	
09/04/2007

	
Patented

	
NET 2-039-31L

	
Israeli

159,830

 

	
Minimally Invasive Intact Recovery of Tissue

	
06/13/2006

	
Patented

	
NET 2-040

	
6,740,079

	
Electrosurgical Generator

	
05/25/2004

	
Patented

$11/25/2011

 

	
NET 2-040-3

	
6,923,804

	
Electrosurgical Generator

	
08/02/2005

	
Patented

$02/02/2013

 

	
NET 2-040-3CA

	
Canadian

2,529,758

 

	
Electrosurgical Generator

	
07/10/2007

	
Pending

	
NET 2-040-3IL

	
Israeli

173,247

 

	
Electrosurgical Generator

	
07/12/2004

	
Pending

	
NET 2-053

	
6,514,248

	
Accurate Cutting About and into Tissue Volumes with Electro-surgically Deployed Electrodes

	
02/04/2003

	
Patented

Fee due now

 

	
NET 2-053-2

	
7,335,198

	
Electrosurgical Generator

	
02/26/2008

	
Patented

$10/26/2011

 

	
NET 2-053-2B

	
12/371,740

	
Electrosurgical Generator

	
01/16/2009

	
Pending

 

	
NET 2-053AU

	
Australian

781,381

 

	
Electrosurgical Generator

	
09/01/2005

	
Patented

 

 

 

 

  

  

  

 

Intact Medical Patent Portfolio

December 15, 2010

Page 3 of 5

 

 

 

	
MSO Docket No.

	Patent/Appln 

No.

	Title	Issue/Appl. 

Date

	
Status

	 	 	 	 	 
	
NET 2-053IL

	
Israeli

148,989

 

	
Electrosurgical Generator

	
10/25/2007

	
Patented

	
NET 2-055

	
D457,960

	
Electrosurgical Instrument Handle

	
05/28/2002

	
Patented

 

	
NET 2-056

	
D457,628

	
Electrosurgical Instrument Handle

	
05/21/2002

	
Patented

 

	
NET 2-057

	
D461,479

	
Electrosurgical Instrument Icon Array

	
08/13/2002

	
Patented

 

	
NET 2-058

	
D461,192

	
Electrosurgical Instrument Icon Array

	
08/06/2002

	
Patented

 

	
NET 2-059

	
D461,194

	
Electrosurgical Instrument Icon

	
07/06/2002

	
Patented

 

	
NET 2-060

	
D462,697

	
Electrosurgical Instrument Icon

	
09/10/2002

	
Patented

 

	
NET 2-061

	
D465,280

	
Electrosurgical Instrument Icon

	
04/05/2002

	
Patented

 

	
NET 2-062

	
D461,193

	
Electrosurgical Instrument Icon

	
08/06/2002

	
Patented

 

	
NET 2-069

	
10/235,131

	
Method & Apparatus for Positioning a Tissue Recovery Instrument

	
09/05/2002

	
Pending

 

	
NET 2-082

	
7,004,174

	
Electrosurgery with Infiltration Anesthesia

	
08/28/2006

	
Patented

$08/28/2013

 

	
NET 2-082A

	
11/194,800

	
Electrosurgery with Infiltration Anesthesia

	
08/11/2005

	
(Petition?)

Allowed,

fee not paid

 

	
NET 2-082EP

	
EPO

03716195.5

 

	
Electrosurgery with Infiltration Anesthesia

	
02/27/2003

	
Pending

	
NET 2-082HK

	
Hong Kong

05101897.7

 

	
Electrosurgery with Infiltration Anesthesia

	
03/04/2005

	
Pending

	
NET 2-097

	
6,955,653

	
Electrosurgical method and apparatus with dense tissue recovery capability

[Spring pre-tensioning of capture component]

	
10/18/2005

	
Patented

$04/20/2013

 

 

 

 

  

  

  

 

Intact Medical Patent Portfolio

December 15, 2010

Page 4 of 5

 

 

	
MSO Docket No.

	
Patent/Appln

No.

	
Title

	
Issue/Appl.

Date

	
Status

	 	 	 	 	 
	
NET 2-097CA

	
Canadian

2,524,250

	
Electrosurgical method and apparatus with dense tissue recovery capability

[Spring pre-tensioning of capture component]

	
07/12/2004

	
Pending

(Request

Exam

07/12/09)

 

	
NET 2-097JP

	
Japanese

2006-521864

	
Electrosurgical method and apparatus with dense tissue recovery capability

[Spring pre-tensioning of capture component]

 

	
07/12/2004

	
Pending

	
NET 2-098

	
7,041,101

	
Electrosurgical accessing of tissue with controlled collateral thermal phenomena

[Evacuation system]

	
05/09/2006

	
(Petition?)

Expired

05/09/2010

$11/09/2013

 

	
NET 2-098A

	
11/265,582

	
Electrosurgical accessing of tissue with controlled collateral thermal phenomena

[Evacuation system]

 

	
11/02/2005

	
Pending

	
NET 2-098CA

	
Canadian

2,529,552

	
Electrosurgical accessing of tissue with controlled collateral thermal phenomena

[Evacuation system]

	
11/30/2006

	
Pending

(Request

Exam

07/12/09)

 

	
NET 2-098IL

	
Israeli

173,248

	
Electrosurgical accessing of tissue with controlled collateral thermal phenomena

[Evacuation system]

 

	
07/12/2004

	
Pending

	
NET 2-099

	
6,923,809

	
Minimally Invasive Instrumentation for Recovering Tissue

[improved eyelet structure and improved cable composition]

	
08/02/2005

	
Patented

$02/02/2013

 

 

 

 

  

  

  

 

Intact Medical Patent Portfolio

December 15, 2010

Page 5 of 5

 

 

	
MSO Docket No.

	
Patent/Appln

No.

	
Title

	
Issue/Appl.

Date

	
Status

	  	  
	
NET 2-100

	
7,494,473

	
Electrosurgery Apparatus & System with Improved Tissue Capture Component

	
02/24/2009

	
Patented

$10/24/2012

 

	
NET 2-123

	
7,569,053

	
Bladed Ceramic Precursor

	
08/04/2009

	
Patented

$02/05/2013

 

	
NET 2-123A

	
12/487,307

	
Bladed Ceramic Precursor

	
06/18/2009

	
Pending

 

 

 

 

 

 

 

  

  

  

 

 

Exhibit D

 

Trademarks

 

 

 

USA

Word Mark: Intact

Filing Date: _9/12/2005

Published for Opposition: 8/1/2006

Serial Number: 3220764

Owner: (ApplicantIntact Medical Corporation

 

 

 

 

 

 

 

 

 

 

 

  

  

  

 

Exhibit E

 

Core Components

 

 

 

 

 

Parylene Coated Stew Assembly

Parylene Coated Trocar Tube

L605 Cable

Tungsten Cable ( Excise XL only)

Teflon Coated Trocar Tube ( Excise XL only)

Fischer Connector Pair ( Handle Cable and Controller)

 

 

 

 

 

 

 

 

 

  

  

  

 

 

Exhibit B

 

Form of  Promissory Note

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

 

UNSECURED PROMISSORY NOTE

 

	
$150,000.00

	
Made as of __________, 2011

 

For value received, the undersigned, Intact Medical Corporation, a Delaware corporation  (the “Maker”), promises to pay to the order of Allied Moral Holdings, Ltd., a company incorporated under the law of British Virgin Islands (the “Holder”) or its assign, the principal sum of one hundred and fifty thousand dollars ($150,000), without interest.  The principal balance of the Note, which is outstanding and unpaid from time to time, is referred to as the “Principal Amount.”

 

Pursuant to the Joint Venture Agreement, dated _________, 2011, by and between the Maker, the Holder and BMG Diamond Holdings Limited, Maker hereby assign its rights to any and all cash distributions from H&I Medical China Limited (“Newco”), an entity incorporated under the laws of British Virgin Islands, up to the Principal Amount. Holder hereby agrees to take payment(s) up to the Principal Amount from Newco from time to time as declared by Newco’s board of directors. Maker may prepay this Note in whole or in part at any time without penalty.

 

Maker shall waive presentment by Holder for payment, demand, notice of dishonor and nonpayment of this Note, and consent to any and all extensions of time, renewals, waivers or modifications that may be granted by Holder with respect to the payment or other provisions of this Note, with or without substitution.

 

If for any reason one or more of the provisions of this Note or their application to any person or circumstances shall be held to be invalid, illegal or unenforceable in any respect or to any extent, such provisions shall nevertheless remain valid, legal and enforceable in all such other respects and to such extent as may be permissible.  In addition, any such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained therein.

 

MAKER:

Intact Medical Corporation

a Delaware corporation

 

 

                                                                                              

Name:                                                                                   

Title:                                                                                     

 

Agreed to and accepted by:

 

HOLDER:

Allied Moral Holdings, Ltd.,

 

 

                                                                                          

Name:                                                                                

Title:

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