form10-q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended March 31, 2010.
OR
¨ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from
to ___________
Commission
file number 1-8957
ALASKA
AIR GROUP, INC.
(Exact
name of registrant as specified in its charter)
|
|
Delaware
|
91-1292054
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
19300
International Boulevard, Seattle, Washington 98188
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (206) 392-5040
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer x
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.): Yes ¨ No x
APPLICABLE
ONLY TO CORPORATE ISSUERS:
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
The
registrant has 35,766,831
common shares, par value $1.00, outstanding at April 30,
2010.
ALASKA
AIR GROUP, INC.
Quarterly
Report on Form 10-Q for the three months ended March 31, 2010
TABLE
OF CONTENTS
As used
in this Form 10-Q, the terms “Air Group,” “our,”
“we” and the “Company” refer to Alaska Air Group, Inc. and its subsidiaries,
unless the context indicates otherwise. Alaska Airlines, Inc. and
Horizon Air Industries, Inc. are referred to as “Alaska” and “Horizon,”
respectively, and together as our “airlines.”
Cautionary
Note Regarding Forward-Looking Statements
In
addition to historical information, this Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the
Private Securities Litigation Reform Act of
1995. Forward-looking statements are those that predict or
describe future events or trends and that do not relate solely to historical
matters. You can generally identify forward-looking statements as statements
containing the words "believe," "expect," "will," "anticipate," "intend,"
"estimate," "project," "assume" or other similar expressions, although not all
forward-looking statements contain these identifying
words. Forward-looking statements involve risks and uncertainties
that could cause actual results to differ materially from historical experience
or the Company’s present expectations. Some
of the things that could cause our actual results to differ from our
expectations are:
|
·
|
general
economic conditions, including the impact of the current economic
environment on customer travel
behavior;
|
· changes
in our operating costs, including fuel, which can be volatile;
|
·
|
our
significant indebtedness;
|
· the
competitive environment in our industry;
|
·
|
our
ability to meet our cost reduction
goals;
|
|
·
|
an
aircraft accident or incident;
|
|
·
|
labor
disputes and our ability to attract and retain qualified
personnel;
|
|
·
|
operational
disruptions;
|
|
·
|
the
concentration of our revenue from a few key
markets;
|
|
·
|
actual
or threatened terrorist attacks, global instability and potential U.S.
military actions or activities;
|
|
·
|
our
reliance on automated systems and the risks associated with changes made
to those systems;
|
|
·
|
our
reliance on third-party vendors and partners;
and
|
|
·
|
changes
in laws and regulations.
|
You
should not place undue reliance on our forward-looking statements because the
matters they describe are subject to known and unknown risks, uncertainties and
other unpredictable factors, many of which are beyond our
control. Our forward-looking statements are based on the information
currently available to us and speak only as of the date on which this report was
filed with the SEC. We expressly disclaim any obligation to issue any
updates or revisions to our forward-looking statements, even if subsequent
events cause our expectations to change regarding the matters discussed in those
statements. Over time, our actual results, performance or
achievements will likely differ from the anticipated results, performance or
achievements that are expressed or implied by our forward-looking statements,
and such differences might be significant and materially adverse to our
shareholders. For a discussion of these and other risk factors, see
"Item 1A: Risk Factors” of the Company’s annual report on Form 10-K for the year
ended December 31, 2009. Please consider our forward-looking
statements in light of those risks as you read this report.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
|
|
|
Alaska
Air Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
December
31,
|
|
(in
millions)
|
|
2010
|
|
|
2009
|
|
Current
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
117.7 |
|
|
$ |
164.2 |
|
Marketable
securities
|
|
|
1,053.5 |
|
|
|
1,027.9 |
|
Total
cash and marketable securities
|
|
|
1,171.2 |
|
|
|
1,192.1 |
|
Receivables
- net
|
|
|
137.3 |
|
|
|
111.8 |
|
Inventories
and supplies - net
|
|
|
49.1 |
|
|
|
45.8 |
|
Deferred
income taxes
|
|
|
133.0 |
|
|
|
120.3 |
|
Fuel
hedge contracts
|
|
|
58.9 |
|
|
|
66.2 |
|
Prepaid
expenses and other current assets
|
|
|
102.1 |
|
|
|
98.1 |
|
Total
Current Assets
|
|
|
1,651.6 |
|
|
|
1,634.3 |
|
|
|
|
|
|
|
|
|
|
Property
and Equipment
|
|
|
|
|
|
|
|
|
Aircraft
and other flight equipment
|
|
|
3,667.6 |
|
|
|
3,660.1 |
|
Other
property and equipment
|
|
|
635.9 |
|
|
|
631.3 |
|
Deposits
for future flight equipment
|
|
|
219.5 |
|
|
|
215.5 |
|
|
|
|
4,523.0 |
|
|
|
4,506.9 |
|
Less
accumulated depreciation and amortization
|
|
|
1,387.0 |
|
|
|
1,339.0 |
|
|
|
|
|
|
|
|
|
|
Total
Property and Equipment - Net
|
|
|
3,136.0 |
|
|
|
3,167.9 |
|
|
|
|
|
|
|
|
|
|
Fuel
Hedge Contracts
|
|
|
48.1 |
|
|
|
50.8 |
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
180.0 |
|
|
|
143.2 |
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
5,015.7 |
|
|
$ |
4,996.2 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
|
|
|
Alaska
Air Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
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|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
December
31,
|
|
(in
millions except share amounts)
|
|
2010
|
|
|
2009
|
|
Current
Liabilities
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
53.3 |
|
|
$ |
63.3 |
|
Accrued
aircraft rent
|
|
|
35.8 |
|
|
|
54.0 |
|
Accrued
wages, vacation and payroll taxes
|
|
|
113.3 |
|
|
|
155.4 |
|
Other
accrued liabilities
|
|
|
510.0 |
|
|
|
474.5 |
|
Air
traffic liability
|
|
|
468.9 |
|
|
|
366.3 |
|
Current
portion of long-term debt
|
|
|
158.2 |
|
|
|
156.0 |
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
1,339.5 |
|
|
|
1,269.5 |
|
|
|
|
|
|
|
|
|
|
Long-Term
Debt, Net of Current Portion
|
|
|
1,657.2 |
|
|
|
1,699.2 |
|
|
|
|
|
|
|
|
|
|
Other
Liabilities and Credits
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
170.1 |
|
|
|
151.1 |
|
Deferred
revenue
|
|
|
419.1 |
|
|
|
435.1 |
|
Obligation
for pension and postretirement medical benefits
|
|
|
412.8 |
|
|
|
421.0 |
|
Other
liabilities
|
|
|
131.6 |
|
|
|
148.2 |
|
|
|
|
1,133.6 |
|
|
|
1,155.4 |
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
|
Preferred
stock, $1 par value
|
|
|
|
|
|
|
|
|
Authorized: 5,000,000
shares, none issued or outstanding
|
|
|
- |
|
|
|
- |
|
Common
stock, $1 par value
|
|
|
|
|
|
|
|
|
Authorized: 100,000,000
shares
|
|
|
|
|
|
|
|
|
Issued: 2010
- 36,174,693 shares
|
|
|
|
|
|
|
|
|
2009
- 35,843,092 shares
|
|
|
36.2 |
|
|
|
35.8 |
|
Capital
in excess of par value
|
|
|
779.7 |
|
|
|
767.0 |
|
Treasury
stock (common), at cost: 2010 - 438,734 shares
|
|
|
|
|
|
|
|
|
2009
- 252,084 shares
|
|
|
(13.8 |
) |
|
|
(5.7 |
) |
Accumulated
other comprehensive loss
|
|
|
(237.0 |
) |
|
|
(240.0 |
) |
Retained
earnings
|
|
|
320.3 |
|
|
|
315.0 |
|
|
|
|
885.4 |
|
|
|
872.1 |
|
Total
Liabilities and Shareholders' Equity
|
|
$ |
5,015.7 |
|
|
$ |
4,996.2 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
|
|
|
|
|
Alaska
Air Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31
|
|
(in
millions except per share amounts)
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Operating
Revenues
|
|
|
|
|
|
|
Passenger
|
|
$ |
748.4 |
|
|
$ |
684.1 |
|
Freight
and mail
|
|
|
23.0 |
|
|
|
19.4 |
|
Other
- net
|
|
|
58.5 |
|
|
|
38.9 |
|
Total
Operating Revenues
|
|
|
829.9 |
|
|
|
742.4 |
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
Wages
and benefits
|
|
|
239.3 |
|
|
|
246.0 |
|
Variable
incentive pay
|
|
|
17.9 |
|
|
|
9.3 |
|
Aircraft
fuel, including hedging gains and losses
|
|
|
207.3 |
|
|
|
157.7 |
|
Aircraft
maintenance
|
|
|
57.0 |
|
|
|
59.7 |
|
Aircraft
rent
|
|
|
37.0 |
|
|
|
38.0 |
|
Landing
fees and other rentals
|
|
|
55.9 |
|
|
|
54.2 |
|
Contracted
services
|
|
|
39.6 |
|
|
|
38.4 |
|
Selling
expenses
|
|
|
33.6 |
|
|
|
25.0 |
|
Depreciation
and amortization
|
|
|
56.2 |
|
|
|
52.8 |
|
Food
and beverage service
|
|
|
12.3 |
|
|
|
11.6 |
|
Other
|
|
|
47.8 |
|
|
|
56.8 |
|
Fleet
transition costs - Q200
|
|
|
- |
|
|
|
4.8 |
|
Total
Operating Expenses
|
|
|
803.9 |
|
|
|
754.3 |
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss)
|
|
|
26.0 |
|
|
|
(11.9 |
) |
|
|
|
|
|
|
|
|
|
Nonoperating
Income (Expense)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
7.5 |
|
|
|
8.3 |
|
Interest
expense
|
|
|
(25.6 |
) |
|
|
(27.8 |
) |
Interest
capitalized
|
|
|
1.7 |
|
|
|
2.8 |
|
Other
- net
|
|
|
0.6 |
|
|
|
(1.0 |
) |
|
|
|
(15.8 |
) |
|
|
(17.7 |
) |
Income
(loss) before income tax
|
|
|
10.2 |
|
|
|
(29.6 |
) |
Income
tax expense (benefit)
|
|
|
4.9 |
|
|
|
(10.4 |
) |
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$ |
5.3 |
|
|
$ |
(19.2 |
) |
|
|
|
|
|
|
|
|
|
Basic
Earnings (Loss) per Share:
|
|
$ |
0.15 |
|
|
$ |
(0.53 |
) |
Diluted
Earnings (Loss) Per Share:
|
|
$ |
0.15 |
|
|
$ |
(0.53 |
) |
Shares
used for computation:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
35.667 |
|
|
|
36.326 |
|
Diluted
|
|
|
36.393 |
|
|
|
36.326 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
|
|
|
|
|
|
|
|
Alaska
Air Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
Capital
in
|
|
|
Treasury
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Common
|
|
|
Excess
of
|
|
|
Stock,
|
|
|
Comprehensive
|
|
|
Retained
|
|
(in
millions)
|
|
Outstanding
|
|
|
Stock
|
|
|
Par
Value
|
|
|
at
Cost
|
|
|
Loss
|
|
|
Earnings
|
|
|
Total
|
|
Balances
at December 31, 2009
|
|
|
35.591 |
|
|
$ |
35.8 |
|
|
$ |
767.0 |
|
|
$ |
(5.7 |
) |
|
$ |
(240.0 |
) |
|
$ |
315.0 |
|
|
$ |
872.1 |
|
Net
income for the three months ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.3 |
|
|
|
5.3 |
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
to marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
Reclassification
to earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.8 |
) |
|
|
|
|
|
|
|
|
Income
tax effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0 |
|
|
|
|
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
related to employee benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
to earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.4 |
|
|
|
|
|
|
|
|
|
Income
tax effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.7 |
|
|
|
|
|
|
|
3.7 |
|
Related
to interest rate derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.8 |
) |
|
|
|
|
|
|
|
|
Income
tax effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.7 |
) |
|
|
|
|
|
|
(1.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of treasury stock
|
|
|
(0.279 |
) |
|
|
|
|
|
|
|
|
|
|
(10.5 |
) |
|
|
|
|
|
|
|
|
|
|
(10.5 |
) |
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.0 |
|
Treasury
stock issued under stock plans
|
|
|
0.092 |
|
|
|
|
|
|
|
|
|
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
2.4 |
|
Stock
issued for employee stock purchase plan
|
|
|
0.016 |
|
|
|
0.1 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.3 |
|
Stock
issued under stock plans
|
|
|
0.316 |
|
|
|
0.3 |
|
|
|
7.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.8 |
|
Balances
at March 31, 2010
|
|
|
35.736 |
|
|
$ |
36.2 |
|
|
$ |
779.7 |
|
|
$ |
(13.8 |
) |
|
$ |
(237.0 |
) |
|
$ |
320.3 |
|
|
$ |
885.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
|
|
|
|
|
|
Alaska
Air Group, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31 |
|
(in
millions)
|
|
2010
|
|
|
2009
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
5.3 |
|
|
$ |
(19.2 |
) |
Adjustments
to reconcile net income (loss) to net cash
|
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
|
Fleet
transition costs - Q200
|
|
|
- |
|
|
|
4.8 |
|
Depreciation
and amortization
|
|
|
56.2 |
|
|
|
52.8 |
|
Stock-based
compensation
|
|
|
5.0 |
|
|
|
5.4 |
|
Increase
in air traffic liability
|
|
|
102.6 |
|
|
|
26.9 |
|
Changes
in other assets and liabilities-net
|
|
|
(114.6 |
) |
|
|
(60.6 |
) |
Net
cash provided by operating activities
|
|
|
54.5 |
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Property
and equipment additions:
|
|
|
|
|
|
|
|
|
Aircraft
and aircraft purchase deposits
|
|
|
(5.0 |
) |
|
|
(199.5 |
) |
Other
flight equipment
|
|
|
(14.2 |
) |
|
|
(17.0 |
) |
Other
property and equipment
|
|
|
(6.7 |
) |
|
|
(9.7 |
) |
Total
property and equipment additions
|
|
|
(25.9 |
) |
|
|
(226.2 |
) |
Proceeds
from disposition of assets
|
|
|
1.4 |
|
|
|
2.3 |
|
Purchases
of marketable securities
|
|
|
(284.0 |
) |
|
|
(160.5 |
) |
Sales
and maturities of marketable securities
|
|
|
261.0 |
|
|
|
151.9 |
|
Restricted
deposits and other
|
|
|
(0.4 |
) |
|
|
(3.3 |
) |
Net
cash used in investing activities
|
|
|
(47.9 |
) |
|
|
(235.8 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of long-term debt
|
|
|
- |
|
|
|
64.0 |
|
Proceeds
from sale-leaseback transaction, net
|
|
|
- |
|
|
|
230.0 |
|
Long-term
debt payments, including line of credit
|
|
|
(39.8 |
) |
|
|
(121.5 |
) |
Purchase
of treasury stock
|
|
|
(10.5 |
) |
|
|
- |
|
Proceeds
from issuance of common stock
|
|
|
11.1 |
|
|
|
2.0 |
|
Other
financing activities
|
|
|
(13.9 |
) |
|
|
5.2 |
|
Net
cash provided by (used in) financing activities
|
|
|
(53.1 |
) |
|
|
179.7 |
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
(46.5 |
) |
|
|
(46.0 |
) |
Cash
and cash equivalents at beginning of year
|
|
|
164.2 |
|
|
|
283.1 |
|
Cash
and cash equivalents at end of period
|
|
$ |
117.7 |
|
|
$ |
237.1 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
(net of amount capitalized)
|
|
$ |
29.5 |
|
|
$ |
28.7 |
|
Income
taxes
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
|
|
|
|
|
|
|
|
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Alaska
Air Group, Inc.
NOTE
1.
|
BASIS
OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES
|
Organization
and Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements of Alaska Air
Group, Inc. (Air Group or the Company) include the accounts of the parent
company, Alaska Air Group, Inc., and its principal subsidiaries, Alaska
Airlines, Inc. (Alaska) and Horizon Air Industries, Inc. (Horizon), through
which the Company conducts substantially all of its operations. These interim
condensed consolidated financial statements are unaudited and should be read in
conjunction with the consolidated financial statements in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009. In the opinion of
management, all adjustments have been made that are necessary to present fairly
the Company’s financial position as of March 31, 2010, as well as the results of
operations for the three months ended March 31, 2010 and 2009. The adjustments
made were of a normal recurring nature.
The
Company’s interim condensed consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America (GAAP). In preparing these statements, the Company is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent liabilities, as well as the
reported amounts of revenues and expenses. Significant estimates made include
assumptions used to record expenses and revenues associated with the Company’s
Mileage Plan; assumptions used in the calculations of pension expense in the
Company’s defined-benefit plans; and the amounts of certain accrued liabilities.
Actual results may differ from the Company’s estimates.
Reclassifications
Certain
reclassifications have been made to conform the prior year’s data to the current
format.
Prospective
Accounting Pronouncements
New
accounting standards on “Revenue Arrangements with Multiple Deliverables” were
issued in September 2009 and update the current guidance pertaining to
multiple-element revenue arrangements. This new guidance will be
effective for the Company’s annual reporting period beginning January 1,
2011. Management is currently evaluating the impact of this new
standard on the Company’s financial position, results of operations, cash flows,
and disclosures.
NOTE
2. FAIR
VALUE OF FINANCIAL INSTRUMENTS
Fair
Value Measurements
Accounting
standards define fair value as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. The standards also establish a fair
value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
There are three levels of inputs that may be used to measure fair
value:
Level 1 - Quoted prices in
active markets for identical assets or liabilities.
Level 2 - Observable inputs
other than Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs
that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities.
Cash,
Cash Equivalents and Marketable Securities
The
Company uses the “market approach” as defined in the accounting standards in
determining the fair value of its cash, cash equivalents and marketable
securities. The securities held by the Company are valued based on observable
prices in active markets and considered to be liquid and easily
tradable.
Amounts
measured at fair value as of March 31, 2010 are as follows (in
millions):
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Cash
and cash equivalents
|
|
$ |
85.3 |
|
|
$ |
32.4 |
|
|
$ |
— |
|
|
$ |
117.7 |
|
Marketable
securities
|
|
|
139.6 |
|
|
|
913.9 |
|
|
|
— |
|
|
|
1,053.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
224.9 |
|
|
$ |
946.3 |
|
|
$ |
— |
|
|
$ |
1,171.2 |
|
All of
the Company’s marketable securities are classified as
available-for-sale. The securities are carried at fair value, with
the unrealized gains and losses, excluding credit losses, reported in
shareholders’ equity under the caption “accumulated other comprehensive loss”
(AOCL). Realized gains and losses are included in other nonoperating
income (expense) in the condensed consolidated statements of
operations.
The cost
of securities sold is based on the specific identification
method. Interest and dividends on marketable securities are included
in interest income in the condensed consolidated statements of
operations.
Marketable
securities consisted of the following (in millions):
|
|
March
31, 2010
|
|
|
December
31, 2009
|
|
Amortized
cost:
|
|
|
|
|
|
|
Government
securities/agencies
|
|
$ |
359.5 |
|
|
$ |
376.7 |
|
Asset-backed
obligations
|
|
|
196.1 |
|
|
|
215.4 |
|
Other
corporate obligations
|
|
|
482.2 |
|
|
|
421.8 |
|
|
|
$ |
1,037.8 |
|
|
$ |
1,013.9 |
|
Fair
value:
|
|
|
|
|
|
|
|
|
Government
securities/agencies
|
|
$ |
363.1 |
|
|
$ |
381.2 |
|
Asset-backed
obligations
|
|
|
195.5 |
|
|
|
214.7 |
|
Other
corporate obligations
|
|
|
494.9 |
|
|
|
432.0 |
|
|
|
$ |
1,053.5 |
|
|
$ |
1,027.9 |
|
Of the
marketable securities on hand at March 31, 2010, 22% mature in 2010, 24% in 2011
and 54% thereafter. Gross realized gains and losses for the three
months ended March 31, 2010 and 2009 were not material to the condensed
consolidated financial statements.
Some of
the Company’s asset-backed securities held at March 31, 2010 had credit losses,
as defined in the accounting standards. These credit losses total
$2.2 million and were recorded through earnings in 2009 and represent the
difference between the present value of future cash flows and the amortized cost
basis of the affected securities. No additional credit losses were recorded in
the first quarter of 2010.
Management
does not believe the securities associated with the remaining $3.3 million
unrealized loss recorded in AOCL are “other-than-temporarily” impaired, as
defined in the accounting standards, based on the current facts and
circumstances. Management currently does not intend to sell these
securities prior to their recovery nor does it believe that it will be
more-likely-than-not that the Company would need to sell these securities for
liquidity or other reasons.
Gross
unrealized gains and losses, including credit losses, at March 31, 2010 are
presented in the table below (in millions):
|
|
|
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
Unrealized
Gains in AOCL
|
|
|
Less
than 12 months
|
|
|
Greater
than 12 months
|
|
|
Total
Unrealized Losses
|
|
|
Less:
Credit Loss Previously Recorded in Earnings
|
|
|
Net
Unrealized Losses in AOCL
|
|
|
Net
Unrealized Gains/(Losses) in AOCL
|
|
|
Fair
Value of Securities with Unrealized Losses
|
|
Government
Securities/Agencies
|
|
$ |
3.9 |
|
|
$ |
(0.3 |
) |
|
$ |
-- |
|
|
$ |
(0.3 |
) |
|
$ |
-- |
|
|
$ |
(0.3 |
) |
|
$ |
3.6 |
|
|
$ |
127.2 |
|
Asset-backed
obligations
|
|
|
2.2 |
|
|
|
(0.3 |
) |
|
|
(4.7 |
) |
|
|
(5.0 |
) |
|
|
(2.2 |
) |
|
|
(2.8 |
) |
|
|
(0.6 |
) |
|
|
61.1 |
|
Other
corporate obligations
|
|
|
12.9 |
|
|
|
(0.2 |
) |
|
|
-- |
|
|
|
(0.2 |
) |
|
|
-- |
|
|
|
(0.2 |
) |
|
|
12.7 |
|
|
|
69.6 |
|
Total
|
|
$ |
19.0 |
|
|
$ |
(0.8 |
) |
|
$ |
(4.7 |
) |
|
$ |
(5.5 |
) |
|
$ |
(2.2 |
) |
|
$ |
(3.3 |
) |
|
$ |
15.7 |
|
|
$ |
257.9 |
|
Fair
Value of Financial Instruments
The
majority of the Company’s financial instruments are carried at fair
value. These include, cash, cash equivalents and marketable
securities (Note 2); restricted deposits (Note 6); fuel hedge contracts (Note
3); and interest rate swap agreements (Note 3). The Company’s
long-term fixed-rate debt is not carried at fair value. The estimated
fair value of the Company’s long-term debt is as follows (in
millions):
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
Long-term
debt at March 31, 2010
|
|
$ |
1,815.4 |
|
|
$ |
1,791.5 |
|
Long-term
debt at December 31, 2009
|
|
$ |
1,855.2 |
|
|
$ |
1,821.3 |
|
The fair
value of cash and cash equivalents approximates carrying values due to the short
maturity of these instruments. The fair value of marketable
securities is based on market prices. The fair value of fuel hedge
contracts is based on commodity exchange prices. The fair value of
restricted deposits approximates the carrying amount. The fair value
of interest rate swap agreements is based on quoted market swap
rates. The fair value of long-term debt is based on a discounted cash
flow analysis using the Company’s current borrowing rate.
NOTE
3. DERIVATIVE
INSTRUMENTS
Fuel
Hedge Contracts
The
Company’s operations are inherently dependent upon the price and availability of
aircraft fuel. To manage economic risk associated with fluctuations in aircraft
fuel prices, the Company periodically enters into call options for crude oil and
swap agreements for jet fuel refining margins. The Company records these
instruments on the balance sheet at their fair value. Changes in the
fair value of these fuel hedge contracts are recorded each period in aircraft
fuel expense.
The
following table summarizes the components of aircraft fuel expense for the three
months ended March 31, 2010 and 2009 (in millions):
|
|
2010
|
|
|
2009
|
|
Raw
or “into-plane” fuel cost
|
|
$ |
195.2 |
|
|
$ |
141.9 |
|
Losses
in value and settlement of fuel hedge contracts
|
|
|
12.1 |
|
|
|
15.8 |
|
Aircraft
fuel expense
|
|
$ |
207.3 |
|
|
$ |
157.7 |
|
Cash
received, net of premiums expensed, for hedges that settled in the first quarter
of 2010 totaled $0.4 million. In the first quarter of 2009, the
Company recorded a net expense of $25.8 million for hedges settled in that
period.
The
Company uses the “market approach” in determining the fair value of its hedge
portfolio. The Company’s fuel hedge contracts consist of over-the-counter
contracts, which are not traded on an exchange. The fair value of
these contracts is determined based on observable inputs that are readily
available in active markets or can be derived from information available in
active, quoted markets. Therefore, the Company has categorized these
contracts as Level 2 in the fair value hierarchy described in Note
2.
Outstanding
future fuel hedge positions are as follows:
|
|
Approximate
% of Expected Fuel Requirements
|
|
|
Gallons
Hedged
(in
millions)
|
|
|
Approximate
Crude Oil Price per Barrel
|
|
Second
Quarter 2010
|
|
|
50 |
% |
|
|
45.9 |
|
|
$ |
69 |
|
Third
Quarter 2010
|
|
|
50 |
% |
|
|
48.3 |
|
|
$ |
74 |
|
Fourth
Quarter 2010
|
|
|
50 |
% |
|
|
44.5 |
|
|
$ |
83 |
|
Remainder
of 2010
|
|
|
50 |
% |
|
|
138.7 |
|
|
$ |
75 |
|
First
Quarter 2011
|
|
|
50 |
% |
|
|
44.9 |
|
|
$ |
87 |
|
Second
Quarter 2011
|
|
|
41 |
% |
|
|
39.2 |
|
|
$ |
83 |
|
Third
Quarter 2011
|
|
|
36 |
% |
|
|
35.6 |
|
|
$ |
86 |
|
Fourth
Quarter 2011
|
|
|
29 |
% |
|
|
26.4 |
|
|
$ |
87 |
|
Full
Year 2011
|
|
|
39 |
% |
|
|
146.1 |
|
|
$ |
85 |
|
First
Quarter 2012
|
|
|
23 |
% |
|
|
21.6 |
|
|
$ |
87 |
|
Second
Quarter 2012
|
|
|
14 |
% |
|
|
14.0 |
|
|
$ |
90 |
|
Third
Quarter 2012
|
|
|
13 |
% |
|
|
12.8 |
|
|
$ |
95 |
|
Fourth
Quarter 2012
|
|
|
11 |
% |
|
|
10.5 |
|
|
$ |
93 |
|
Full
Year 2012
|
|
|
15 |
% |
|
|
58.9 |
|
|
$ |
91 |
|
First
Quarter 2013
|
|
|
6 |
% |
|
|
5.2 |
|
|
$ |
95 |
|
Full
Year 2013
|
|
|
1 |
% |
|
|
5.2 |
|
|
$ |
95 |
|
The
Company also has financial swap agreements in place to fix the refining margin
component for approximately 50%, 21%, and 2% of second, third, and fourth
quarter 2010 jet fuel purchases, respectively, at an average price per gallon of
23 cents per gallon, 27 cents per gallon, and 30 cents per gallon,
respectively.
As of
March 31, 2010 and December 31, 2009, the net fair values of the Company’s fuel
hedge positions were as follows (in millions):
|
|
March
31, 2010
|
|
|
December
31, 2009
|
|
Crude
oil call options or “caps”
|
|
$ |
106.1 |
|
|
$ |
115.9 |
|
Refining
margin swap contracts
|
|
|
0.9 |
|
|
|
1.1 |
|
Total
|
|
$ |
107.0 |
|
|
$ |
117.0 |
|
The
balance sheet amounts include capitalized premiums paid to enter into the
contracts of $91.5 million and $88.9 million at March 31, 2010 and December 31,
2009, respectively.
Interest
Rate Swap Agreements
In the
third quarter of 2009, the Company entered into interest rate swap agreements
with a third party designed to hedge the volatility of the underlying variable
interest rate in the Company’s aircraft lease agreements for six B737-800
aircraft. The agreements stipulate that the Company pay a fixed
interest rate over the term of the contract and receive a floating interest
rate. All significant terms of the swap agreement match the terms of
the lease agreements, including interest-rate index, rate reset dates,
termination dates and underlying notional values. The agreements
expire beginning in June 2020 through March 2021 to coincide with the lease
termination dates.
The
Company has formally designated these swap agreements as hedging instruments and
records the effective portion of the hedge as an adjustment to aircraft rent in
the condensed consolidated statement of operations in the period of contract
settlement. The effective portion of the changes in fair value for
instruments that settle in the future is recorded in AOCL in the condensed
consolidated balance sheets.
At March
31, 2010, the Company had a net liability of $0.4 million associated with these
contracts recorded in other accrued liabilities in the condensed consolidated
balance sheets, all of which is expected to be reclassified into earnings within
the next twelve months. The fair value of these contracts is
determined based on the difference between the fixed interest rate in the
agreements and the observable LIBOR-based interest forward rates at period end,
multiplied by the total notional value. As such, the Company places
these contracts in Level 2 of the fair value hierarchy.
Long-term
debt obligations were as follows (in millions):
|
|
March
31, 2010
|
|
|
December
31, 2009
|
|
Fixed-rate
notes payable due through 2024
|
|
$ |
1,406.3 |
|
|
$ |
1,440.2 |
|
Variable-rate
notes payable due through 2024
|
|
|
409.1 |
|
|
|
415.0 |
|
Long-term
debt
|
|
|
1,815.4 |
|
|
|
1,855.2 |
|
22BLess
current portion
|
|
|
(158.2 |
) |
|
|
(156.0 |
) |
|
|
$ |
1,657.2 |
|
|
$ |
1,699.2 |
|
During
the first three months of 2010, the Company had no new debt borrowings and made
scheduled debt payments of $39.8 million.
Bank
Lines of Credit
The
Company terminated is previous $185 million credit facility effective March 30,
2010. That facility was replaced with two new $100 million credit
facilities. Both facilities have variable interest rates based on
LIBOR plus a specified margin. Borrowings on one of the $100 million
facilities, which expires in March 2013, are secured by
aircraft. Borrowings on the other $100 million facility, which
expires in March 2014, are secured by certain accounts receivable, spare
engines, spare parts and ground service equipment. The Company has no
immediate plans to borrow using either of these facilities. These
facilities have a requirement to maintain a minimum unrestricted cash and
marketable securities balance of $500 million. The Company is in
compliance with this covenant at March 31, 2010.
Pre-delivery
Payment Facility
Subsequent
to March 31, 2010, the Company terminated its variable-rate pre-delivery payment
facility that had been used to provide a portion of the pre-delivery funding
requirements for the purchase of new Boeing 737-800 aircraft. There
were no borrowings on this facility as of December 31, 2009 or March 31,
2010.
NOTE
5. COMMON
STOCK REPURCHASE
In June
2009, the Board of Directors authorized the Company to repurchase up to $50
million of its common stock. Through March 31, 2010, the Company had repurchased
1,603,478 shares of its common stock for $34.3 million under this
program. In the first quarter of 2010, 278,900 shares were purchased
for $10.5 million.
NOTE
6. EMPLOYEE
BENEFIT PLANS
Pension
Plans - Qualified Defined Benefit
Net
pension expense for the three months ended March 31 included the following
components (in millions):
|
|
2010
|
|
|
2009
|
|
Service
cost
|
|
$ |
8.1 |
|
|
$ |
11.1 |
|
Interest
cost
|
|
|
16.9 |
|
|
|
16.7 |
|
Expected
return on assets
|
|
|
(17.7 |
) |
|
|
(12.8 |
) |
Amortization
of prior service cost
|
|
|
(0.2 |
) |
|
|
1.1 |
|
Actuarial
loss
|
|
|
5.5 |
|
|
|
7.2 |
|
Net
pension expense
|
|
$ |
12.6 |
|
|
$ |
23.3 |
|
25BThe
Company contributed $15.2 million to its qualified defined-benefit plans during
the three months ended March 31, 2010, and expects to contribute an additional
$30.4 million to these plans during the remainder of 2010. The
Company made $10.6 million in contributions to its defined-benefit pension plans
during the three months ended March 31, 2009.
Pension
Plans - Nonqualified Defined Benefit
Net
pension expense for the unfunded, noncontributory defined-benefit plans was $0.8
million for the three months ended March 31, 2010 and 2009.
Postretirement
Medical Benefits
Net
periodic benefit cost for the post-retirement medical plans for the three months
ended March 31, 2010 and 2009 was $3.1 million and $3.3 million,
respectively.
NOTE
7. OTHER
ASSETS
Other
assets consisted of the following (in millions):
|
|
March 31,
2010
|
|
|
December
31, 2009
|
|
Restricted
deposits (primarily restricted investments)
|
|
$ |
87.1 |
|
|
$ |
86.7 |
|
Deferred
costs and other*
|
|
|
92.9 |
|
|
|
56.5 |
|
|
|
$ |
180.0 |
|
|
$ |
143.2 |
|
*Deferred
costs and other includes deferred financing costs, long-term prepaid rent, lease
deposits and other items.
NOTE
8. MILEAGE
PLAN
Alaska’s
Mileage Plan deferrals and liabilities are included under the following balance
sheet captions (in
millions):
|
|
March
31, 2010
|
|
|
December
31, 2009
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Other
accrued liabilities
|
|
$ |
287.7 |
|
|
$ |
267.9 |
|
Other
Liabilities and Credits (non-current):
|
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
|
395.1 |
|
|
|
410.6 |
|
Other
liabilities
|
|
|
12.6 |
|
|
|
13.2 |
|
|
|
$ |
695.4 |
|
|
$ |
691.7 |
|
Alaska’s
Mileage Plan revenue is included under the following condensed consolidated
statements of operations captions for the three months ended March 31 (in
millions):
|
|
2010
|
|
|
2009
|
|
Passenger
revenues
|
|
$ |
41.1 |
|
|
$ |
38.8 |
|
Other
- net revenues
|
|
|
42.0 |
|
|
|
24.5 |
|
|
|
$ |
83.1 |
|
|
$ |
63.3 |
|
NOTE
9. STOCK-BASED
COMPENSATION PLANS
The
Company has stock awards outstanding under a number of long-term incentive
equity plans, one of which continues to provide for the grant of stock awards to
directors, officers and employees of the Company and its
subsidiaries. Compensation expense is recorded over the shorter of
the vesting period or the period between the grant date and the date the
employee becomes retirement-eligible as defined in the applicable plan. All
stock-based compensation expense is recorded in wages and benefits in the
condensed consolidated statements of operations.
Stock
Options
During
the three months ended March 31, 2010 the Company granted 129,970 options with a
weighted-average fair value of $18.05 per share. During the same
period in the prior year, the Company granted 384,268 options with a
weighted-average fair value of $14.00 per share.
12BThe
Company recorded stock-based compensation expense related to stock options of
$1.8 million and $2.3 million for the three months ended March 31, 2010 and
2009, respectively. As of March 31, 2010, $4.9 million of
compensation cost associated with unvested stock option awards attributable to
future service had not yet been recognized. This amount will be
recognized as expense over a weighted-average period of 2.2 years.
As of
March 31, 2010, options to purchase 2,046,098 shares of common stock were
outstanding with a weighted-average exercise price of $29.90. Of that
total, 1,305,791 were exercisable at a weighted-average exercise price of
$30.32.
Restricted
Stock Awards
During
the three months ended March 31, 2010, the Company awarded 123,650 restricted
stock units (RSUs) to certain employees, with a weighted-average grant date fair
value of $33.26. This amount reflects the value of the total RSU
awards at the grant date based on the closing price of the Company’s common
stock.
The
Company recorded stock-based compensation expense related to RSUs of $2.5
million and $2.8 million for the three-month period ended March 31, 2010 and
2009, respectively. As of March 31, 2010 $6.9 million of compensation
cost associated with unvested restricted stock awards attributable to future
service had not yet been recognized. This amount will be recognized
as expense over a weighted-average period of 1.9 years.
Performance
Stock Awards
From time
to time, the Company issues performance stock unit awards (PSUs) to certain
executives. PSUs are similar to RSUs, but vesting is based on
performance or market conditions.
PSUs
issued in early 2008 vest based on a performance condition tied to the Company
achieving a specified pretax margin over a three-year period ending December 31,
2010. PSUs issued in 2010 vest based on a market condition tied to
the Company’s total shareholder return as defined in the plan relative to an
airline peer group measured over the three-year period commencing January 1,
2010. The total grant-date fair value of the PSUs issued in 2010 was
$2.5 million.
The
Company recorded $0.6 million of compensation expense related to PSUs in the
first quarter of 2010. No expense was recorded in the first
quarter of 2009.
Employee
Stock Purchase Plan
35BCompensation
expense recognized under the Employee Stock Purchase Plan was $0.1 million and
$0.3 million for the three months ended March 31, 2010 and 2009,
respectively.
Summary
of Stock-Based Compensation
The table
below summarizes the components of total stock-based compensation for the three
months ended March 31, 2010 and 2009 (in millions):
|
|
2010
|
|
|
2009
|
|
Stock
options
|
|
$ |
1.8 |
|
|
$ |
2.3 |
|
Restricted
stock units
|
|
|
2.5 |
|
|
|
2.8 |
|
Performance
stock awards
|
|
|
0.6 |
|
|
|
-- |
|
Employee
stock purchase plan
|
|
|
0.1 |
|
|
|
0.3 |
|
Total
stock-based compensation
|
|
$ |
5.0 |
|
|
$ |
5.4 |
|
NOTE
10. FLEET
TRANSITION
26BHorizon Transition to All-Q400
Fleet
Horizon’s
long-term goal is to transition to an all-Q400 fleet. During 2009, Horizon had
either terminated its remaining Q200 leases or subleased Q200 aircraft to a
third party. The total charge associated with removing
these
aircraft from operation in the first quarter of 2009 was $4.8
million. This charge represented the estimated loss under potential
disposal transactions.
Horizon
has 16 Q200 aircraft that are subleased to a third-party carrier, for which an
accrual for the estimated sublease loss has been recorded. The
Company is evaluating alternatives to the existing sublease arrangements for
these aircraft. The Company may be required to record a charge if the
original lease or sublease arrangements are modified in the
future. However, the nature, timing or amount of any such charge
cannot be reasonably estimated at this time.
Horizon operates
18 CRJ-700 aircraft, which the Company plans to remove from its fleet in the
future. Market conditions have hindered the remarketing efforts for
these CRJ-700 aircraft resulting in a delay of the fleet transition
plan. Depending on the ultimate disposition of the CRJ-700 aircraft,
there may be further associated exit charges. The Company expects to
remove between one and three of these CRJ-700 aircraft from operations in the
second quarter of 2010 and sublease them to a third party. At this
time, management expects the loss on the sublease to be approximately $5 million
per aircraft. The nature, timing or amount of any potential gain or
loss on any future potential transactions on the remaining aircraft cannot be
reasonably estimated at this time. Horizon also subleases two CRJ-700
aircraft to a third-party carrier.
NOTE
11. OPERATING SEGMENT
INFORMATION
Operating
segment information for Alaska and Horizon for the three months ended March 31
was as follows (in millions):
|
|
Three
Months Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Operating
revenues:
|
|
|
|
|
|
|
Alaska
– mainline (1)
|
|
$ |
661.1 |
|
|
$ |
591.3 |
|
Alaska
– purchased capacity (1)
|
|
|
U76.5 |
|
|
|
U61.8 |
|
Total
Alaska
|
|
|
737.6 |
|
|
|
653.1 |
|
Horizon
– brand flying
|
|
|
92.0 |
|
|
|
89.0 |
|
Horizon
– capacity purchase arrangement with Alaska
|
|
|
66.4 |
|
|
|
57.8 |
|
Total
Horizon
|
|
|
158.4 |
|
|
|
146.8 |
|
Other
(2)
|
|
|
0.3 |
|
|
|
0.3 |
|
Elimination
of intercompany revenues
|
|
|
(66.4 |
) |
|
|
(57.8 |
) |
29BConsolidated
|
|
$ |
30B829.9 |
|
|
$ |
30B742.4 |
|
Income
(loss) before income tax:
|
|
|
|
|
|
|
|
|
Alaska
– mainline
|
|
$ |
13.2 |
|
|
$ |
(17.4 |
) |
Alaska
– purchased capacity
|
|
|
U4.0 |
|
|
|
(0.9 |
) |
Total
Alaska
|
|
|
17.2 |
|
|
|
(18.3 |
) |
Horizon
|
|
|
(6.2 |
) |
|
|
(10.5 |
) |
Other
(2)
|
|
|
(0.8 |
) |
|
|
(0.8 |
) |
32BConsolidated
|
|
$ |
33B10.2 |
|
|
$ |
(29.6 |
) |
|
|
March
31, 2010
|
|
|
December
31, 2009
|
|
Total
assets at end of period:
|
|
|
|
|
|
|
Alaska
|
|
$ |
4,599.5 |
|
|
$ |
4,541.3 |
|
Horizon
|
|
|
758.7 |
|
|
|
724.1 |
|
Other
(2)
|
|
|
1,075.6 |
|
|
|
1,052.4 |
|
Elimination
of intercompany accounts
|
|
|
(1,418.1 |
) |
|
|
(1,332.8 |
) |
Consolidated
|
|
$ |
5,015.7 |
|
|
$ |
4,985.0 |
|
(1) Alaska
mainline revenue represents revenue from passengers aboard Alaska jets, freight
and mail revenue, and all other revenue. Purchased capacity revenue
represents that revenue earned by Alaska on capacity purchased from and provided
by Horizon and a small third party under a capacity purchase
arrangement.
(2)
Includes the parent company, Alaska Air Group, Inc., including its investments
in Alaska and Horizon, which are eliminated in consolidation.
NOTE
12. CONTINGENCIES
Grievance
with International Association of Machinists
In June
2005, the International Association of Machinists (IAM) filed a grievance under
its Collective Bargaining Agreement (CBA) with Alaska alleging that Alaska
violated the CBA by, among other things, subcontracting the ramp service
operation in Seattle. The dispute was referred to an arbitrator and
hearings on the grievance commenced in January 2007, with a final hearing date
in August 2007. In July 2008, the arbitrator issued a final decision
regarding liability. In that decision, the arbitrator found that
Alaska had violated the CBA and instructed Alaska and the IAM to negotiate a
remedy. In February 2010, the arbitrator issued a final decision on
the remedy. That decision does not require Alaska to alter the existing
subcontracting arrangements for ramp service in Seattle. The award sustains the
right to subcontract other operations in the future so long as the requirements
of the CBA are met. The award imposed monetary remedies which were paid in the
first quarter of 2010. The amount was not material to the Company’s
financial position, statements of operations or cash flows.
Other
items
The
Company is a party to routine litigation matters incidental to its business and
with respect to which no material liability is expected.
Management
believes the ultimate disposition of the matters discussed above is not likely
to materially affect the Company’s financial position or results of operations.
This forward-looking statement is based on management’s current understanding of
the relevant law and facts, and it is subject to various contingencies,
including the potential costs and risks associated with litigation and the
actions of arbitrators, judges and juries.
OVERVIEW
The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) is intended to help the reader understand the
Company, our operations and our present business
environment. MD&A is provided as a supplement to – and should be
read in conjunction with – our condensed consolidated financial statements and
the accompanying notes. All statements in the following discussion
that are not statements of historical information or descriptions of current
accounting policy are forward-looking statements. Please consider our
forward-looking statements in light of the risks referred to in this report’s
introductory cautionary note and the risks mentioned in the Company’s filings
with the Securities and Exchange Commission including those listed in Part I,
“Item 1A. Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2009. This overview summarizes MD&A,
which includes the following sections:
|
·
|
First Quarter in Review
– highlights from the first quarter of 2010 outlining some of the major
events that happened during the period and how they affected our financial
performance.
|
|
·
|
Results of Operations –
an in-depth analysis of the results of operations of Alaska and Horizon
for the three months ended March 31, 2010. We believe this
analysis will help the reader better understand our condensed consolidated
statements of operations. This section also includes
forward-looking statements regarding our view of the remainder of
2010.
|
|
·
|
Liquidity and Capital
Resources – an analysis of cash flows, sources and uses of cash,
contractual obligations, commitments and off-balance sheet arrangements,
an overview of financial position and the impact of inflation and changing
prices.
|
Air Group’s filings with the Securities and Exchange
Commission, including its annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to those reports are accessible
free of charge at www.alaskaair.com. The information contained on our website is
not a part of this quarterly report on Form 10-Q.
FIRST
QUARTER IN REVIEW
Our
consolidated pretax income was $10.2 million for the first quarter of 2010
compared to a $29.6 million pretax loss in the first quarter of
2009. The year-over-year improvement was due to an $87.5 million
increase in operating revenues and flat non-fuel operating expenses, partially
offset by a $49.6 million increase in our aircraft fuel costs.
|
·
|
Consolidated
unit revenues increased 11% over the first quarter of 2009, stemming from
significant increases in passenger unit revenues that were driven by
higher load factors at both Alaska and Horizon. Baggage fees
contributed $22.7 million to the revenue improvement, reflecting the
benefit of our first bag fee that was introduced during the third quarter
of 2009.
|
|
·
|
Economic
fuel averaged $2.25 per gallon in the first quarter of 2010, compared to
$1.91 in 2009. This increase, partially offset by a slight
decline in consumption, resulted in a $27.1 million increase in our
economic fuel expense for the
quarter.
|
Other
significant developments during the first quarter of 2010 and through the filing
of this Form 10-Q are described below.
Operational
Performance
Our
operational results continue to be among the best in the
industry. For the 12 months ended February 2010, Alaska held the No.
1 spot in on-time performance among the 10 largest U.S. airlines. And
recently, Horizon was ranked among the world’s top five airlines in 2009 on-time
performance.
New
Lines of Credit
In the
first quarter, we established two new $100 million variable-interest rate credit
facilities. These facilities replaced the previous $185 million
credit facility that was terminated in March 2010. Borrowings on one
of the $100 million facilities, which expires in March 2013, are secured by
aircraft. Borrowings on the other $100 million facility, which
expires in March 2014, are secured by certain accounts receivable, spare
engines, spare parts and ground service equipment. We have no
immediate plans to borrow using either of these facilities.
New
Markets
In the
first quarter, Alaska began daily non-stop service between Sacramento and Maui,
non-stop service between San Jose and Maui three times per week, and between San
Jose and Kona four times per week.
Alaska
also recently announced daily non-stop service between Portland and Honolulu
beginning in September 2010, between San Diego and Maui beginning in October
2010, and between San Diego and Puerto Vallarta, Mexico beginning in November
2010; and seasonal service four times weekly between Portland and Kona beginning
in November 2010. By the end of the year, Alaska will operate 101
round-trip flights per week to Hawaii – from Seattle, Anchorage, Portland,
Oakland, San Jose, Sacramento, and San Diego.
Horizon
announced four daily non-stop flights between Los Angeles and San Jose, Calif.
beginning in August 2010.
Changes
to Certain Fees
We
announced that we will begin charging $20 for each of the first three
checked bags. This increases the current service charge for the first
bag from $15, but decreases the charges for the second and third
bags. We also announced that we would reduce and simplify fees for
unaccompanied minors and eliminate free same-day standby travel and courtesy
holds on tickets purchased through Alaska/Horizon reservations or our websites.
We expect these changes to provide incremental revenue of approximately $30
million annually. These changes will be effective beginning
June 16, 2010.
On-Board
Wi-Fi
In the
first quarter of 2010, Alaska announced its selection of Aircell to provide
inflight Wi-Fi service, discontinuing its testing with Row 44 satellite-based
equipment. Installation of Aircell’s equipment began in March and we
expect that most of the fleet will be equipped by the end of 2010.
Horizon
Maintenance
In the
course of business, Horizon periodically evaluates outsourcing certain
functions. Management is currently evaluating the potential cost
savings related to outsourcing a portion of heavy maintenance work
currently performed by Horizon. No final decisions have been made at
this time.
Outlook
Given our
normal seasonal pattern, we are encouraged that we are starting out the year
with a first-quarter profit. We have typically reported a loss in the
first quarter.
Looking
ahead, advance bookings for May and June are up on average across the Air Group
system compared to the same periods in 2009 and early yield trends are
encouraging. With the new service described above, we now
expect Alaska’s mainline capacity to grow by 4% - 5% as compared to
2009. We expect Horizon system-wide capacity to be relatively flat in
2010 as compared to 2009.
RESULTS
OF OPERATIONS
COMPARISON
OF QUARTER ENDED MARCH 31, 2010 TO QUARTER ENDED MARCH 31, 2009
Our
consolidated net income for the first quarter of 2010 was $5.3 million, or $0.15
per diluted share, compared to a net loss of $19.2 million, or $0.53 per share,
in 2009. Both periods include adjustments to reflect the timing of
gain or loss recognition resulting from mark-to-market accounting related to our
fuel hedge portfolio. In the first quarter of 2010, we recognized net
mark-to-market losses of $12.5 million ($7.8 million after tax, or $0.21 per
share), compared to gains of $10.0 million ($6.2 million after tax, or $0.17 per
share) in the first quarter of 2009.
We
believe disclosure of earnings excluding the impact of these individual charges
is useful information to investors and other readers because:
|
•
|
It
is consistent with how we present information in our quarterly earnings
press releases;
|
|
•
|
We
believe it is the basis by which we are evaluated by industry
analysts;
|
|
•
|
Our
results excluding these items are most often used in internal management
and board reporting and decision-making;
|
|
•
|
Our
results excluding these adjustments serve as the basis for our various
employee incentive plans, thus the information allows investors to better
understand the changes in variable incentive pay expense in our condensed
consolidated statements of operations;
and
|
|
•
|
It
is useful to monitor performance without these items as it improves a
reader’s ability to compare our results to those of other
airlines.
|
Although
we are presenting these non-GAAP amounts for the reasons above, investors and
other readers should not necessarily conclude that these amounts are
non-recurring, infrequent, or unusual in nature.
Excluding
the mark-to-market adjustments noted above, and as shown in the following table,
our consolidated net income for the first quarter of 2010 was $13.1 million, or
$0.36 per diluted share, compared to an adjusted consolidated net loss of $25.4
million, or $0.70 per share, in the first quarter of 2009.
|
|
Three
Months Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
(in millions except per-share
amounts) |
|
Dollars
|
|
|
Diluted
EPS
|
|
|
Dollars
|
|
|
Diluted
EPS
|
|
Net
income (loss) and diluted EPS, excluding
noted items
|
|
$ |
13.1 |
|
|
$ |
0.36 |
|
|
$ |
(25.4 |
) |
|
$ |
(0.70 |
) |
Mark-to-market
fuel hedge adjustments, net
of tax
|
|
|
(7.8 |
) |
|
|
(0.21 |
) |
|
|
6.2 |
|
|
|
0.17 |
|
Net
income (loss) and diluted EPS as reported
|
|
$ |
5.3 |
|
|
$ |
0.15 |
|
|
$ |
(19.2 |
) |
|
$ |
(0.53 |
) |
INDIVIDUAL
SUBSIDIARY RESULTS
Our
consolidated results are primarily driven by the results of our two operating
carriers. Alaska reported pretax income of $17.2 million and Horizon reported a
pretax loss of $6.2 million in the first quarter of 2010. Financial and
statistical data for Alaska and Horizon are shown on pages 22 and 29,
respectively. An in-depth discussion of the results of Alaska and Horizon begins
on pages 23 and 30, respectively.
Alaska
Airlines Financial and Statistical Data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31 |
|
|
|
|
|
|
|
|
|
|
|
Financial
Data (in
millions):
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
$ |
587.0 |
|
|
$ |
539.8 |
|
|
|
8.7 |
|
Freight
and mail
|
|
|
22.0 |
|
|
|
18.3 |
|
|
|
20.2 |
|
Other
- net
|
|
|
52.1 |
|
|
|
33.2 |
|
|
|
56.9 |
|
Total
mainline operating revenues
|
|
|
661.1 |
|
|
|
591.3 |
|
|
|
11.8 |
|
Passenger
- purchased capacity
|
|
|
76.5 |
|
|
|
61.8 |
|
|
|
23.8 |
|
Total
Operating Revenues
|
|
|
737.6 |
|
|
|
653.1 |
|
|
|
12.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages
and benefits
|
|
|
191.2 |
|
|
|
197.4 |
|
|
|
(3.1 |
) |
Variable
incentive pay
|
|
|
14.8 |
|
|
|
7.1 |
|
|
|
108.5 |
|
Aircraft
fuel, including hedging gains and losses
|
|
|
171.7 |
|
|
|
131.9 |
|
|
|
30.2 |
|
Aircraft
maintenance
|
|
|
42.1 |
|
|
|
46.3 |
|
|
|
(9.1 |
) |
Aircraft
rent
|
|
|
25.9 |
|
|
|
26.5 |
|
|
|
(2.3 |
) |
Landing
fees and other rentals
|
|
|
41.7 |
|
|
|
40.8 |
|
|
|
2.2 |
|
Contracted
services
|
|
|
30.6 |
|
|
|
30.5 |
|
|
|
0.3 |
|
Selling
expenses
|
|
|
26.7 |
|
|
|
19.1 |
|
|
|
39.8 |
|
Depreciation
and amortization
|
|
|
45.7 |
|
|
|
43.3 |
|
|
|
5.5 |
|
Food
and beverage service
|
|
|
11.8 |
|
|
|
11.0 |
|
|
|
7.3 |
|
Other
|
|
|
34.8 |
|
|
|
42.8 |
|
|
|
(18.7 |
) |
Total
mainline operating expenses
|
|
|
637.0 |
|
|
|
596.7 |
|
|
|
6.8 |
|
Purchased
capacity costs
|
|
|
72.5 |
|
|
|
62.7 |
|
|
|
15.6 |
|
Total
Operating Expenses
|
|
|
709.5 |
|
|
|
659.4 |
|
|
|
7.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss)
|
|
|
28.1 |
|
|
|
(6.3 |
) |
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
8.6 |
|
|
|
10.1 |
|
|
|
|
|
Interest
expense
|
|
|
(22.1 |
) |
|
|
(23.9 |
) |
|
|
|
|
Interest
capitalized
|
|
|
1.7 |
|
|
|
2.5 |
|
|
|
|
|
Other
- net
|
|
|
0.9 |
|
|
|
(0.7 |
) |
|
|
|
|
|
|
|
(10.9 |
) |
|
|
(12.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Before Income Tax
|
|
$ |
17.2 |
|
|
$ |
(18.3 |
) |
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
passengers (000)
|
|
|
3,641 |
|
|
|
3,573 |
|
|
|
1.9 |
|
RPMs
(000,000) "traffic"
|
|
|
4,472 |
|
|
|
4,179 |
|
|
|
7.0 |
|
ASMs
(000,000) "capacity"
|
|
|
5,541 |
|
|
|
5,520 |
|
|
|
0.4 |
|
Passenger
load factor
|
|
|
80.7 |
% |
|
|
75.7 |
% |
|
5.0
|
pts |
Yield
per passenger mile
|
|
|
13.13 |
¢ |
|
|
12.92 |
¢ |
|
|
1.6 |
|
Operating
revenue per ASM
|
|
|
11.93 |
¢ |
|
|
10.71 |
¢ |
|
|
11.4 |
|
Passenger
revenue per ASM
|
|
|
10.59 |
¢ |
|
|
9.78 |
¢ |
|
|
8.3 |
|
Operating
expenses per ASM
|
|
|
11.50 |
¢ |
|
|
10.81 |
¢ |
|
|
6.4 |
|
Operating
expenses per ASM, excluding fuel
|
|
|
8.40 |
¢ |
|
|
8.42 |
¢ |
|
|
(0.2 |
) |
Aircraft
fuel cost per gallon
|
|
$ |
2.38 |
|
|
$ |
1.80 |
|
|
|
32.3 |
|
Economic
fuel cost per gallon
|
|
$ |
2.25 |
|
|
$ |
1.91 |
|
|
|
17.8 |
|
Fuel
gallons (000,000)
|
|
|
72.3 |
|
|
|
73.3 |
|
|
|
(1.4 |
) |
Average
number of full-time equivalent employees
|
|
|
8,537 |
|
|
|
9,021 |
|
|
|
(5.4 |
) |
Aircraft
utilization (blk hrs/day)
|
|
|
9.3 |
|
|
|
9.9 |
|
|
|
(6.1 |
) |
Average
aircraft stage length (miles)
|
|
|
1,068 |
|
|
|
1,016 |
|
|
|
5.1 |
|
Operating
fleet at period-end
|
|
|
112 |
|
|
|
112 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
Capacity Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
RPMs
(000,000)
|
|
|
271 |
|
|
|
215 |
|
|
|
26.0 |
|
ASMs
(000,000)
|
|
|
369 |
|
|
|
316 |
|
|
|
16.8 |
|
Passenger
load factor
|
|
|
73.4 |
% |
|
|
68.0 |
% |
|
5.4
|
pts |
Yield
per passenger mile
|
|
|
28.23 |
¢ |
|
|
28.74 |
¢ |
|
|
(1.8 |
) |
Operating
revenue per ASM
|
|
|
20.73 |
¢ |
|
|
19.56 |
¢ |
|
|
6.0 |
|
Operating
expenses per ASM
|
|
|
19.65 |
¢ |
|
|
19.84 |
¢ |
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM
= Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
ALASKA
AIRLINES
Alaska
reported income before income taxes of $17.2 million during the first quarter of
2010 compared to an $18.3 million pretax loss in the first quarter of
2009.
Excluding
the mark-to-market adjustments in each period as noted in the table below,
Alaska would have reported pretax income of $26.5 million in the first quarter
of 2010, compared to a pretax loss of $26.6 million in the same period of
2009.
|
|
Three
Months Ended March 31
|
|
(in
millions)
|
|
2010
|
|
|
2009
|
|
Income
(loss) before income taxes, excluding items
below
|
|
$ |
26.5 |
|
|
$ |
(26.6 |
) |
Mark-to-market
fuel hedge adjustments
|
|
|
(9.3 |
) |
|
|
8.3 |
|
Income
(loss) before income taxes as reported
|
|
$ |
17.2 |
|
|
$ |
(18.3 |
) |
The
discussion below outlines significant variances between the two
periods.
ALASKA
REVENUES
Total
operating revenues increased $84.5 million, or 12.9%, during the first quarter
of 2010 as compared to the same period in 2009. The components of
Alaska’s revenue are summarized in the following table:
|
|
Three
Months Ended March 31
|
|
(in
millions)
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Passenger
revenue - mainline
|
|
$ |
587.0 |
|
|
$ |
539.8 |
|
|
|
8.7 |
|
Freight
and mail
|
|
|
22.0 |
|
|
|
18.3 |
|
|
|
20.2 |
|
Other
- net
|
|
|
52.1 |
|
|
|
33.2 |
|
|
|
56.9 |
|
Total
mainline operating revenues
|
|
$ |
661.1 |
|
|
$ |
591.3 |
|
|
|
11.8 |
|
Passenger
revenue - purchased capacity
|
|
|
76.5 |
|
|
|
61.8 |
|
|
|
23.8 |
|
Total
Operating Revenues
|
|
$ |
737.6 |
|
|
$ |
653.1 |
|
|
|
12.9 |
|
Operating
Revenue – Mainline
Mainline
passenger revenue increased 8.7% on an 8.3% increase in passenger revenue per
available seat mile (PRASM) on relatively flat capacity. The increase
in PRASM was driven by a five-point increase in load factor and a 1.6% increase
in yields compared to the first quarter of 2009.
Our load
factor in April 2010 was 82.9%,
compared to 78.9% in April 2009. Our advance bookings currently
suggest that load factors will be up about four points in May and 3
½ points in June compared to the prior year.
Ancillary
revenues included in passenger revenue increased from $24.3 million in the first
quarter of 2009 to $38.0 million in the first quarter of 2010. The
increase is primarily due to the implementation of a first checked bag service
charge in the third quarter of 2009. Revenue from the first bag
service charge for mainline operations was $16.6 million in the first quarter of
2010. Without the first bag service charge revenue, yields would have
declined by 1.3% compared to the first quarter of 2009.
Freight
and mail revenue increased by $3.7 million, or 20.2%, primarily as a result of
higher volumes and yields and higher fuel surcharges.
Other –
net revenues increased $18.9 million, or 56.9%. Mileage Plan revenues
increased by $17.5 million primarily because of an increase in the rate paid to
us by our credit card partner under the affinity card agreement. This
agreement was finalized in the second quarter of 2009.
Passenger
Revenue – Purchased Capacity
Passenger
revenue – purchased capacity increased by $14.7 million to $76.5 million because
of a 16.8% increase in capacity and a 6.0% increase in unit revenues compared to
the prior year. Unit revenues have increased as a result of a
5.4-point increase in load factors, partially offset by a 1.8% decline in
yields. The decline in yields was tempered by $2.8 million revenue
from the first bag service charge.
ALASKA
EXPENSES
For the
quarter, total operating expenses increased $50.1 million compared to the same
period in 2009 mostly as a result of an increase in fuel expense. We believe it
is useful to summarize operating expenses as follows, which is consistent with
the way expenses are reported internally and evaluated by
management:
|
|
Three
Months Ended March 31
|
|
(in
millions)
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Mainline
fuel expense
|
|
$ |
171.7 |
|
|
$ |
131.9 |
|
|
|
30.2 |
|
Mainline
non-fuel expenses
|
|
|
465.3 |
|
|
|
464.8 |
|
|
|
0.1 |
|
Mainline
operating expenses
|
|
|
637.0 |
|
|
|
596.7 |
|
|
|
6.8 |
|
Purchased
capacity costs
|
|
|
72.5 |
|
|
|
62.7 |
|
|
|
15.6 |
|
Total
Operating Expenses
|
|
$ |
709.5 |
|
|
$ |
659.4 |
|
|
|
7.6 |
|
Mainline
Operating Expenses
Total
mainline operating expenses increased $40.3 million from the first quarter of
2009. The increase was primarily due to the $39.8 million increase in aircraft
fuel expense compared to the first quarter of 2009 and relatively flat non-fuel
operating expenses. Significant individual expense variances from the
first quarter of 2009 are described more fully below.
Wages
and Benefits
Wages and
benefits declined $6.2 million, or 3.1%, compared to the first quarter of
2009. The components of wages and benefits are shown in the following
table:
|
|
Three
Months Ended March 31
|
|
(in
millions)
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Wages
|
|
$ |
133.8 |
|
|
$ |
134.6 |
|
|
|
(0.6 |
) |
Pension
and defined-contribution retirement benefits
|
|
|
21.2 |
|
|
|
29.1 |
|
|
|
(27.1 |
) |
Medical
benefits
|
|
|
21.7 |
|
|
|
18.9 |
|
|
|
14.8 |
|
Other
benefits and payroll taxes
|
|
|
14.5 |
|
|
|
14.8 |
|
|
|
(2.0 |
) |
Total
wages and benefits
|
|
$ |
191.2 |
|
|
$ |
197.4 |
|
|
|
(3.1 |
) |
Wages
were relatively flat on a 5.4% reduction in full-time equivalent employees (FTE)
compared to the first quarter of 2009. Wages have not declined in
step with the FTE reduction because of higher wage rates for the pilot group in
connection with their new contract (which was effective April 1, 2009), and
higher average wage rates for other employees following 2009 furloughs, which
are generally seniority-based.
The 27.1%
decline in pension and other retirement-related benefits is primarily due to an
$11.3 million decline in our defined-benefit pension cost driven by the improved
funded status at the end of 2009 as compared to the previous year and the
closing of the defined-benefit pension plan to new pilot entrants effective with
their new contract in 2009. The defined-benefit pension plan is now
closed to all new entrants.
Medical
benefits increased 14.8% from the prior-year period primarily as a result of
higher post-retirement medical cost for the pilot group in connection with their
new contract effective April 2009 and generally higher costs of medical and
dental services.
We expect
wages and benefits to be lower in 2010 than in 2009 because of the same reasons
discussed above.
Variable
Incentive Pay
Variable
incentive pay increased from $7.1 million in the first quarter of 2009 to $14.8
million in the first quarter of 2010. Pilots, flight attendants, mechanics, and
ramp service agents were all added to the Performance-Based Pay (PBP) incentive
plan throughout 2009. These groups, other than the flight attendants, were not
included in the PBP plan in the first quarter of 2009. The increase
also reflects our expectations for the full year as of the end of the first
quarter this year compared to where our expectations were at the end of the
first quarter of 2009. For the full year of 2010, we currently expect
incentive pay to be approximately $60 million compared to the $61.6 million we
ultimately recorded in 2009.
Aircraft
Fuel
Aircraft
fuel expense includes both raw
fuel expense (as defined below) plus the effect of mark-to-market
adjustments to our fuel hedge portfolio included in our condensed consolidated
statement of operations as the value of that portfolio increases and decreases.
Our aircraft fuel expense is very volatile, even between quarters, because it
includes these gains or losses in the value of the underlying instrument as
crude oil prices and refining margins increase or decrease. Raw fuel expense is defined
as the price that we generally pay at the airport, or the “into-plane” price,
including taxes and fees. Raw fuel prices are impacted by world oil prices and
refining costs, which can vary by region in the U.S. Raw fuel expense approximates
cash paid to suppliers and does not reflect the effect of our fuel
hedges.
Aircraft
fuel expense increased $39.8 million, or 30.2%, compared to the first quarter of
2009. The elements of the change are illustrated in the following
table:
|
|
Three
Months Ended March 31
|
|
(in
millions, except per-gallon amounts)
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Fuel
gallons consumed
|
|
|
72.3 |
|
|
|
73.3 |
|
|
|
(1.4 |
) |
Raw
price per gallon
|
|
$ |
2.25 |
|
|
$ |
1.62 |
|
|
|
38.9 |
|
Total
raw fuel expense
|
|
$ |
162.7 |
|
|
$ |
118.8 |
|
|
|
37.0 |
|
Net
impact on fuel expense from losses arising from
fuel-hedging activities
|
|
|
9.0 |
|
|
|
13.1 |
|
|
NM
|
|
Aircraft
fuel expense
|
|
$ |
171.7 |
|
|
$ |
131.9 |
|
|
|
30.2 |
|
NM = Not meaningful
Fuel
gallons consumed decreased by 1.4% primarily as a result of a longer average
aircraft stage length as we continue to add more capacity to long-haul routes
such as Hawaii.
The raw
fuel price per gallon increased by 38.9% as a result of higher West Coast jet
fuel prices that were primarily due to an increase in crude oil
costs.
We also
evaluate economic fuel
expense, which we define as raw fuel expense less the
cash we receive from hedge counterparties for hedges that settle during the
period, offset by the premium expense that we paid for those contracts. A key
difference between aircraft
fuel expense and economic fuel expense is the
timing of gain or loss recognition on our hedge portfolio. When we refer to
economic fuel expense,
we include gains and losses only when they are realized for those contracts that
were settled during the period based on their original contract
terms. We believe this is the best measure of the effect that fuel
prices are currently having on our business because it most closely approximates
the net cash outflow associated with purchasing fuel for our operations.
Accordingly, many industry analysts evaluate our results using this measure, and
it is the basis for most internal management reporting and incentive pay
plans.
Our economic fuel expense is
calculated as follows:
|
|
Three
Months Ended March 31
|
|
(in
millions, except per-gallon amounts)
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Raw
fuel expense
|
|
$ |
162.7 |
|
|
$ |
118.8 |
|
|
|
37.0 |
|
Plus
or minus: net of cash received from settled hedges and
premium expense recognized
|
|
|
(0.3 |
) |
|
|
21.4 |
|
|
NM
|
|
Economic
fuel expense
|
|
$ |
162.4 |
|
|
$ |
140.2 |
|
|
|
15.8 |
|
Fuel
gallons consumed
|
|
|
72.3 |
|
|
|
73.3 |
|
|
|
(1.4 |
) |
Economic
fuel cost per gallon
|
|
$ |
2.25 |
|
|
$ |
1.91 |
|
|
|
17.8 |
|
NM = Not
meaningful
As noted
in the above table, the total net benefit recognized for hedges that settled
during the period was $0.3 million in the first quarter of 2010, compared to net
expense of $21.4 million in the same period of 2009. These amounts
represent the net of the premium expense recognized for those hedges and any
cash received or paid upon settlement.
Aircraft
Maintenance
Aircraft
maintenance declined by $4.2 million, or 9.1%, compared to the prior-year
quarter because of fewer airframe maintenance events during the period and lower
component costs. The number of events is mostly due to timing and we
expect that the full-year maintenance cost will be relatively flat as compared
to 2009.
Selling
Expenses
Selling
expenses increased by $7.6 million, or 39.8%, compared to the first quarter of
2009 as a result of higher credit card and travel agency commissions and ticket
distribution costs resulting from the increase in passenger traffic and average
fares. We expect selling expense to be higher than 2009 levels for
these same reasons.
Other
Operating Expenses
Other
operating expenses decreased by $8.0 million, or 18.7%, from the first quarter
of 2009 because of a decline in professional services, lower de-icing costs
stemming from a milder winter on the West coast, lower personnel non-wage costs
such as hotels, a decline in passenger inconvenience costs as a result of the
improvement in operational reliability, and lower legal costs.
Mainline
Unit Costs per Available Seat Mile
Our
mainline operating costs per ASM are summarized below:
|
|
Three
Months Ended March 31
|
|
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Total
mainline operating expenses per ASM (CASM)
|
|
|
11.50 |
¢ |
|
|
10.81 |
¢ |
|
|
6.4 |
|
Less
the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft
fuel cost per ASM
|
|
|
3.10 |
¢ |
|
|
2.39 |
¢ |
|
|
29.7 |
|
CASM,
excluding fuel
|
|
|
8.40 |
¢ |
|
|
8.42 |
¢ |
|
|
(0.2 |
) |
We have
listed separately in the above table our fuel costs per ASM and our unit costs,
excluding fuel. These amounts are included in CASM, but for internal
purposes we consistently use unit cost metrics that exclude fuel and certain
special items to measure our cost-reduction progress. We believe that
such analysis may be important to investors and other readers of these financial
statements for the following reasons:
|
·
|
By
eliminating fuel expense and certain special items from our unit cost
metrics, we believe that we have better visibility into the results of our
non-fuel cost-reduction initiatives. Our industry is highly
competitive and is characterized by high fixed costs, so even a small
reduction in non-fuel operating costs can result in a significant
improvement in operating results. In addition, we believe that
all domestic carriers are similarly impacted by changes in jet fuel costs
over the long run, so it is important for management (and thus investors)
to understand the impact of (and trends in) company-specific cost drivers
such as labor rates and productivity, airport costs, maintenance costs,
etc., which are more controllable by
management.
|
|
·
|
Cost
per ASM excluding fuel and certain special items is one of the most
important measures used by management of both Alaska and Horizon and by
the Board of Directors in assessing quarterly and annual cost
performance. For Alaska Airlines, these decision-makers
evaluate operating results of the “mainline” operation, which includes the
operation of the B737 fleet branded in Alaska Airlines
livery. The revenue and expenses associated with purchased
capacity are evaluated separately.
|
|
·
|
Cost
per ASM excluding fuel (and other items as specified in our plan
documents) is an important metric for the employee incentive plan that
covers the majority of our
employees.
|
|
·
|
Cost
per ASM excluding fuel and certain special items is a measure commonly
used by industry analysts, and we believe it is the basis by which they
compare our airlines to others in the industry. The measure is
also the subject of frequent questions from
investors.
|
|
·
|
Although
we disclose our “mainline” passenger unit revenues for Alaska, we do not
(nor are we able to) evaluate mainline unit revenues excluding the impact
that changes in fuel costs have had on ticket prices. Fuel
expense represents a large percentage of our total mainline operating
expenses. Fluctuations in fuel prices often drive changes in
unit revenues in the mid-to-long term. Although we believe it
is useful to evaluate non-fuel unit costs for the reasons noted above, we
would caution readers of these financial statements not to place undue
reliance on unit costs excluding fuel as a measure or predictor of future
profitability because of the significant impact of fuel costs on our
business.
|
We
currently forecast our mainline costs per ASM excluding fuel and other special
items for the second quarter and full year of 2010 to be down approximately 4% -
5% and 3% - 4%, respectively, compared to 2009.
Purchased
Capacity Costs
Purchased
capacity costs increased $9.8 million, or 15.6%, compared to the first quarter
of 2009 to $72.5 million. Of the total, $66.4 million was paid to
Horizon under the CPA for 353 million ASMs, a capacity increase of 18.1% from
the first quarter of 2009. This expense is eliminated in
consolidation.
Horizon
Air Financial and Statistical Data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31 |
|
|
|
|
|
|
|
|
|
|
|
Financial
Data (in
millions):
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
Passenger
- brand flying
|
|
$ |
89.3 |
|
|
$ |
86.6 |
|
|
|
3.1 |
|
Passenger
- Alaska capacity purchase arrangement
|
|
|
66.4 |
|
|
|
57.8 |
|
|
|
14.9 |
|
Total
passenger revenue
|
|
|
155.7 |
|
|
|
144.4 |
|
|
|
7.8 |
|
Freight
and mail
|
|
|
0.6 |
|
|
|
0.7 |
|
|
|
(14.3 |
) |
Other
- net
|
|
|
2.1 |
|
|
|
1.7 |
|
|
|
23.5 |
|
Total
Operating Revenues
|
|
|
158.4 |
|
|
|
146.8 |
|
|
|
7.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages
and benefits
|
|
|
45.4 |
|
|
|
46.4 |
|
|
|
(2.2 |
) |
Variable
incentive pay
|
|
|
3.1 |
|
|
|
2.2 |
|
|
|
40.9 |
|
Aircraft
fuel, including hedging gains and losses
|
|
|
35.6 |
|
|
|
25.8 |
|
|
|
38.0 |
|
Aircraft
maintenance
|
|
|
14.9 |
|
|
|
13.4 |
|
|
|
11.2 |
|
Aircraft
rent
|
|
|
11.1 |
|
|
|
11.5 |
|
|
|
(3.5 |
) |
Landing
fees and other rentals
|
|
|
14.5 |
|
|
|
13.7 |
|
|
|
5.8 |
|
Contracted
services
|
|
|
8.3 |
|
|
|
7.5 |
|
|
|
10.7 |
|
Selling
expenses
|
|
|
6.9 |
|
|
|
5.9 |
|
|
|
16.9 |
|
Depreciation
and amortization
|
|
|
10.2 |
|
|
|
9.2 |
|
|
|
10.9 |
|
Food
and beverage service
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
(16.7 |
) |
Other
|
|
|
9.5 |
|
|
|
11.0 |
|
|
|
(13.6 |
) |
Fleet
transition costs - Q200
|
|
|
- |
|
|
|
4.8 |
|
|
NM
|
|
Total
Operating Expenses
|
|
|
160.0 |
|
|
|
152.0 |
|
|
|
5.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Loss
|
|
|
(1.6 |
) |
|
|
(5.2 |
) |
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
0.5 |
|
|
|
0.4 |
|
|
|
|
|
Interest
expense
|
|
|
(5.1 |
) |
|
|
(6.0 |
) |
|
|
|
|
Interest
capitalized
|
|
|
- |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
(4.6 |
) |
|
|
(5.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
Before Income Tax
|
|
$ |
(6.2 |
) |
|
$ |
(10.5 |
) |
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
passengers (000)
|
|
|
1,584 |
|
|
|
1,546 |
|
|
|
2.5 |
|
RPMs
(000,000) "traffic"
|
|
|
566 |
|
|
|
524 |
|
|
|
8.0 |
|
ASMs
(000,000) "capacity"
|
|
|
793 |
|
|
|
787 |
|
|
|
0.8 |
|
Passenger
load factor
|
|
|
71.4 |
% |
|
|
66.6 |
% |
|
4.8
|
pts |
Yield
per passenger mile
|
|
|
27.51 |
¢ |
|
|
27.56 |
¢ |
|
|
(0.2 |
) |
Operating
revenue per ASM
|
|
|
19.97 |
¢ |
|
|
18.65 |
¢ |
|
|
7.1 |
|
Passenger
revenue per ASM
|
|
|
19.63 |
¢ |
|
|
18.35 |
¢ |
|
|
7.0 |
|
Operating
expenses per ASM
|
|
|
20.18 |
¢ |
|
|
19.31 |
¢ |
|
|
4.5 |
|
Operating
expenses per ASM, excluding fuel
|
|
|
15.69 |
¢ |
|
|
16.04 |
¢ |
|
|
(2.2 |
) |
Q200
fleet transition costs per ASM
|
|
|
0.00 |
¢ |
|
|
0.61 |
¢ |
|
NM
|
|
Aircraft
fuel cost per gallon
|
|
$ |
2.51 |
|
|
$ |
1.78 |
|
|
|
41.0 |
|
Economic
fuel cost per gallon
|
|
$ |
2.28 |
|
|
$ |
1.90 |
|
|
|
20.0 |
|
Fuel
gallons (000,000)
|
|
|
14.2 |
|
|
|
14.5 |
|
|
|
(2.1 |
) |
Average
number of full-time equivalent employees
|
|
|
3,161 |
|
|
|
3,382 |
|
|
|
(6.5 |
) |
Aircraft
utilization (blk hrs/day)
|
|
|
7.6 |
|
|
|
8.3 |
|
|
|
(8.4 |
) |
Average
aircraft stage length (miles)
|
|
|
326 |
|
|
|
315 |
|
|
|
3.5 |
|
Operating
fleet at period-end
|
|
|
58 |
|
|
|
55 |
|
|
|
3 |
a/c |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM
= Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
HORIZON
AIR
Horizon
reported a loss before income taxes of $6.2 million during the first quarter of
2010 compared to $10.5 million in the same period of 2009. The
improvement is primarily due to higher operating revenues, relatively flat
non-fuel expenses, and the absence this year of Q200 fleet transition costs,
partially offset by a 38.0% increase in fuel costs.
Excluding
the mark-to-market adjustments in each period as noted in the table below,
Horizon would have reported a pretax loss of $3.0 million in the first quarter
of 2010, compared to a pretax loss of $12.2 million in the same period of
2009.
|
|
Three
Months Ended March 31,
|
|
(in millions) |
|
2010
|
|
|
2009
|
|
Loss
before income taxes, excluding items
below
|
|
$ |
(3.0 |
) |
|
$ |
(12.2 |
) |
Mark-to-market
fuel hedge adjustments
|
|
|
(3.2 |
) |
|
|
1.7 |
|
Loss
before income taxes as reported
|
|
$ |
(6.2 |
) |
|
$ |
(10.5 |
) |
The
discussion below outlines significant variances between the two
periods.
HORIZON
REVENUES
For the
first quarter of 2010, operating revenues increased $11.6 million, or 7.9%,
compared to 2009. Horizon’s passenger revenues are summarized in the
table below:
|
|
Three
Months Ended March 31
|
|
|
|
2010
|
|
|
2009
|
|
(dollars
in millions)
|
|
Revenues
|
|
|
%
ASMs
|
|
|
Revenues
|
|
|
%
ASMs
|
|
Passenger
revenue from Horizon "brand" flying
|
|
$ |
89.3 |
|
|
|
55 |
|
|
$ |
86.6 |
|
|
|
62 |
|
Revenue
from CPA with Alaska
|
|
|
66.4 |
|
|
|
45 |
|
|
|
57.8 |
|
|
|
38 |
|
Total
passenger revenue and % of ASMs
|
|
$ |
155.7 |
|
|
|
100 |
|
|
$ |
144.4 |
|
|
|
100 |
|
Line-of-business
information is presented in the table below. In the CPA arrangement,
Alaska assumes the market revenue risk and pays Horizon an agreed-upon rate
based on capacity. As a result, yield and load factor
information for the CPA arrangement are not presented.
|
|
Three
Months Ended March 31, 2010
|
|
|
|
Capacity
and Mix
|
|
|
Load
Factor
|
|
Yield
|
|
|
RASM
|
|
|
|
2010
Actual (in
millions)
|
|
|
Change
Y-O-Y
|
|
|
Current
% Total
|
|
|
Actual
|
|
|
Point
Change
Y-O-Y
|
|
Actual
|
|
|
Change
Y-O-Y
|
|
|
Actual
|
|
|
Change
Y-O-Y
|
|
Brand
Flying
|
|
|
440 |
|
|
|
(9.8 |
%) |
|
|
55 |
|
|
|
69.3 |
% |
|
|
3.8 |
|
pts
|
|
|
29.27 |
¢ |
|
|
8.0 |
% |
|
|
20.90 |
¢ |
|
|
14.6 |
% |
Alaska
CPA
|
|
|
353 |
|
|
|
18.1 |
% |
|
|
45 |
|
|
NM
|
|
|
NM
|
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
System
Total
|
|
|
793 |
|
|
|
0.8 |
% |
|
|
100 |
|
|
|
71.4 |
% |
|
|
4.8 |
|
pts
|
|
|
27.51 |
¢ |
|
|
(0.2 |
%) |
|
|
19.97 |
¢ |
|
|
7.1 |
% |
NM = Not
meaningful
Horizon
brand flying includes those routes in the Horizon system not included in the
Alaska CPA. Horizon has the inventory and revenue risk in those
markets. Passenger revenue from Horizon brand flying increased $2.7
million or 3.1% on a 14.3% increase in passenger unit revenues, partially offset
by a nearly 10% decline in brand capacity. The increase in unit revenues is
primarily due to a 3.8-point increase in brand load factor and an 8% improvement
in yield in those markets.
Revenue
from the CPA flying performed on behalf of Alaska totaled $66.4 million during
the first quarter of 2010 compared to $57.8 million in the first quarter of
2009. The increase is primarily due to an 18.1% increase in capacity provided
under this arrangement. Under the CPA, the fee paid by Alaska is based on an
agreed-upon capacity rate, which we expect to be adjusted in the future as we
move to closer to market rates. This revenue is eliminated in
consolidation.
HORIZON
EXPENSES
Total operating expenses increased $8.0 million, or 5.3%, as compared to the same period in
2009. Significant period-over-period changes in the components of operating
expenses are as follows:
Wages
and Benefits
Wages and
benefits decreased $1.0 million, or 2.2%, compared to the first quarter of 2009.
The primary components of wages and benefits are shown in the following
table:
|
|
Three
Months Ended March 31
|
|
(in
millions)
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Wages
|
|
$ |
33.4 |
|
|
$ |
34.2 |
|
|
|
(2.3 |
) |
Medical
benefits
|
|
|
5.6 |
|
|
|
4.8 |
|
|
|
16.7 |
|
Other
benefits and payroll taxes
|
|
|
6.4 |
|
|
|
7.4 |
|
|
|
(13.5 |
) |
Total
wages and benefits
|
|
$ |
45.4 |
|
|
$ |
46.4 |
|
|
|
(2.2 |
) |
Wages
declined 2.3% primarily as a result of a 6.5% decline in full-time equivalent
employees, offset by slightly higher wages per employee. The increase
in average wages per employee is due to a higher average employee seniority
level as recent furloughs have involved less senior employees.
We expect
that wages and benefits will be lower for the full year when compared to 2009
for these same reasons.
Aircraft
Fuel
Aircraft
fuel increased $9.8 million, or 38.0%, compared to the first quarter of
2009. The elements of the change are illustrated in the following
table:
|
|
Three
Months Ended March 31
|
|
(in
millions, except per-gallon amounts)
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Fuel
gallons consumed
|
|
|
14.2 |
|
|
|
14.5 |
|
|
|
(2.1 |
) |
Raw
price per gallon
|
|
$ |
2.29 |
|
|
$ |
1.59 |
|
|
|
44.0 |
|
Total
raw fuel expense
|
|
$ |
32.5 |
|
|
$ |
23.1 |
|
|
|
40.7 |
|
Impact
on fuel expense from (gains) and losses arising from fuel-hedging
activities
|
|
|
3.1 |
|
|
|
2.7 |
|
|
NM
|
|
Aircraft
fuel expense
|
|
$ |
35.6 |
|
|
$ |
25.8 |
|
|
|
38.0 |
|
NM = Not
meaningful
The raw
fuel price per gallon increased by 44% as a result of higher West Coast jet fuel
prices. Based on the current price of jet fuel, we expect that the
raw price per gallon in 2010 will be higher than in 2009.
Our economic fuel expense is
calculated as follows:
|
|
Three
Months Ended March 31
|
|
(in
millions, except per-gallon amounts)
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Raw
fuel expense
|
|
$ |
32.5 |
|
|
$ |
23.1 |
|
|
|
40.7 |
|
Plus
or minus: net of cash received from settled hedges and
premium expense recognized
|
|
|
(0.1 |
) |
|
|
4.4 |
|
|
NM
|
|
Economic
fuel expense
|
|
$ |
32.4 |
|
|
$ |
27.5 |
|
|
|
17.8 |
|
Fuel
gallons consumed
|
|
|
14.2 |
|
|
|
14.5 |
|
|
|
(2.1 |
) |
Economic
fuel cost per gallon
|
|
$ |
2.28 |
|
|
$ |
1.90 |
|
|
|
20.0 |
|
NM = Not
meaningful
The total
net benefit recognized for hedges that settled during the period was $0.1
million in the first quarter of 2010 compared to net expense of $4.4 million in
the first quarter of 2009. These amounts represent the premium
expense recognized hedges that settle during the reported period net of any cash
received or paid upon settlement.
Fleet
Transition Costs
Fleet
transition costs associated with the sublease of Q200 aircraft were $4.8 million
during the first quarter of 2009, compared to none this year. The
first quarter 2009 charge represents the estimated lease termination cost
associated with the final six Q200 aircraft that were completely removed from
operation in that quarter.
Operating
Costs per Available Seat Mile (CASM)
Our
operating costs per ASM are summarized below:
|
|
Three
Months Ended March 31
|
|
|
|
2010
|
|
|
2009
|
|
|
%
Change
|
|
Total
operating expenses per ASM (CASM)
|
|
|
20.18 |
¢ |
|
|
19.31 |
¢ |
|
|
4.5 |
|
Less
the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft
fuel cost per ASM
|
|
|
4.49 |
¢ |
|
|
3.27 |
¢ |
|
|
37.3 |
|
CASM,
excluding fuel
|
|
|
15.69 |
¢ |
|
|
16.04 |
¢ |
|
|
(2.2 |
) |
Fleet
transition costs per ASM
|
|
|
0.00 |
¢ |
|
|
0.61 |
¢ |
|
NM
|
|
CASM,
excluding fuel and fleet transition costs
|
|
|
15.69 |
¢ |
|
|
15.43 |
¢ |
|
|
1.7 |
|
NM = Not
meaningful
We
currently expect our costs per ASM excluding fuel to be flat in the second
quarter and down 2% - 3% for the full year of 2010 compared to
2009.
Consolidated Nonoperating Income
(Expense)
Net
nonoperating expense was $15.8 million in the first quarter of 2010 compared to
$17.7 million in the first quarter of 2009. Interest expense declined
$2.2 million primarily resulting from lower interest rates on our variable-rate
debt. Capitalized interest was $1.1 million lower than in the first
quarter of 2009 because of lower advance aircraft purchase
deposits.
Consolidated
Income Tax Expense (Benefit)
We
provide for income taxes each quarter based on either our estimate of the
effective tax rate for the full year or the actual year-to-date effective tax
rate if it is our best estimate of our annual rate. For the first
quarter of 2010, we used the actual year-to-date effective tax rate, as we
believe it to be our best estimate of the full-year rate at this time because of
the difficulty in estimating the full-year pretax income or loss and our
resulting effective tax rate. Our effective income tax rate on pretax
earnings for the first quarter of 2010 was 48.0%, compared to 35.1% in the first
quarter of 2009. In arriving at this rate, we considered a variety of
factors, including year-to-date pretax results, the U.S. federal rate of 35%,
estimated nondeductible expenses and estimated state income taxes.
We
evaluate our tax rate each quarter and make adjustments when necessary. Our
final effective tax rate for the full year is highly dependent on the level of
pretax income or loss and the magnitude of any nondeductible expenses in
relation to that pretax amount.
Critical
Accounting Estimates
For
information on our critical accounting estimates, see Item 7 of our Annual
Report on Form 10-K for the year ended December 31, 2009.
Health
Care Legislation
In March
2010, the Patient Protection and Affordable Care Act and the Health Care and
Education Act of 2010 (the Acts) became law. Based on our preliminary
review, the Acts do not appear to create any substantial, immediate
costs. Because we do not provide retirees with medical coverage once
they have reached Medicare eligibility, the elimination of the tax deduction
related to the Medicare Part D subsidy in the Patient Protection and Affordable
Care Act will not impact our financial statements. We are continuing
to evaluate the impact, if any, of the Acts on our financial position and
results of operations. Given the scope and complexity of the legislation and the
fact that extensive implementing regulations remain to be finalized, it is
difficult to predict future impacts of this legislation.
LIQUIDITY
AND CAPITAL RESOURCES
Our
primary sources of liquidity are our existing cash and marketable securities
balance of $1.2 billion (which represents 34% of trailing twelve months revenue)
and our expected cash flow from operations. We also have other
sources of liquidity such as the ability to finance unencumbered aircraft, our
combined $200 million bank line-of-credit facilities, and a “forward sale” of
mileage credits to our affinity card bank partner. Because of the severe
economic uncertainty in 2009 and the volatility of fuel prices in recent years,
we intentionally increased our balance of cash and marketable securities to
current levels. As the economic climate stabilizes, we plan to reduce
our cash and marketable securities to 25% to 30% of revenues over the next two
years, through debt repayment, further share repurchases, pension funding, or a
combination thereof. We will continue to focus on preserving a strong
liquidity position and evaluate our cash needs as conditions
change.
We
believe that our current cash and marketable securities balance of $1.2 billion
combined with future cash flows from operations and other sources of liquidity
will be more than adequate to fund our operations, meet our capital commitments
and debt obligations for at least the next 12 months and would continue to be
sufficient if we reduce our cash balance as described above.
In our
cash and marketable securities portfolio, we generally invest only in U.S.
government securities, asset-backed obligations and corporate debt
securities. We do not generally invest in equities and we do not
invest in auction-rate securities. As of March 31, 2010, we had a
$15.7 million net unrealized gain associated with our cash and marketable
securities balance.
Our
overall investment strategy for our marketable securities portfolio has a
primary goal of maintaining and securing the investment
principal. Our investment portfolio is managed by reputable financial
institutions and continually reviewed to ensure that the investments are aligned
with our strategy.
The table
below presents the major indicators of financial condition and
liquidity.
|
|
March
31, 2010
|
|
|
December
31, 2009
|
|
|
Change
|
|
|
|
Cash
and marketable securities
|
|
$ |
1,171.2 |
|
|
$ |
1,192.1 |
|
|
$ |
(20.9 |
) |
Cash
and marketable securities as a percentage of last twelve months
revenue
|
|
|
34 |
% |
|
|
35 |
% |
|
(1
|
)pt |
Long-term
debt, net of current portion
|
|
$ |
1,657.2 |
|
|
$ |
1,699.2 |
|
|
$ |
(42.0 |
) |
Shareholders'
equity
|
|
$ |
885.4 |
|
|
$ |
872.1 |
|
|
$ |
13.3 |
|
Long-term
debt-to-capital assuming aircraft operating leases are
capitalized
|
|
|
|
|
|
|
|
|
|
|
|
|
at
seven times annualized rent
|
|
75%:
25%
|
|
|
76%:24%
|
|
|
NA
|
|
The
following discussion summarizes the primary drivers of the decrease in our cash
and marketable securities balance and our expectation of future cash
requirements.
ANALYSIS
OF OUR CASH FLOWS
Cash
Provided by Operating Activities
During
the first quarter of 2010, net cash provided by operating activities was $54.5
million, compared to $10.1 million generated in the first quarter of 2009. The
increase in operating cash flow was primarily due to the improvement in earnings
and increase of cash inflows for advance ticket sales as compared to the first
quarter of 2009. These increases were partially offset by the payment
of 2009 incentive pay in the first quarter of 2010, which was significantly
larger than the payment of 2008 incentive pay in the first quarter of
2009.
We
typically generate positive cash flows from operations and expect to do so in
2010, but historically we have consumed substantially all of that cash plus
additional debt proceeds for capital expenditures and debt
payments. In 2010, however, we anticipate much lower capital
expenditures than in the past several years and may choose to use our operating
cash flow to prepay long-term debt, provide more funding to our pension plans,
repurchase our common stock, or a combination thereof.
Cash
Used in Investing Activities
Cash used
in investing activities was $47.9 million during the first quarter of 2010,
compared to $235.8 million during the same period of 2009. Our
capital expenditures were lower in the first quarter of 2010 as we purchased no
new aircraft in the first quarter of 2010.
We
currently expect total capital expenditures for 2010 to be as follows (in
millions):
|
|
Aircraft-related
|
|
|
Non-aircraft
|
|
|
Total
|
|
Alaska
|
|
$ |
115 |
|
|
$ |
80 |
|
|
$ |
195 |
|
Horizon
|
|
|
3 |
|
|
|
5 |
|
|
|
8 |
|
Total
Air Group
|
|
$ |
118 |
|
|
$ |
85 |
|
|
$ |
203 |
|
A
significant portion of the non-aircraft capital expenditures is for Alaska’s
planned move to Terminal 6 at Los Angeles International Airport. We
are working with Los Angeles World Airports (LAWA) on a project management
agreement, whereby we may manage and finance a significant portion of the total
cost of the project, which will then be reimbursed by LAWA and the
Transportation Security Administration. We are currently in negotiations with
LAWA to finalize the project management and funding specifics.
Cash
Provided by Financing Activities
Net cash
used for financing activities was $53.1 million during the first quarter of 2010
compared to $179.7 million of cash provided
by financing activities during the same period of 2009. The decline
is primarily due to the proceeds from the sale-leaseback transaction in the
first quarter of 2009 for six B737-800 aircraft and no new issuances of debt in
the first quarter of 2010.
Bank
Line-of-Credit Facilities
We
terminated our previous $185 million credit facility effective March 30,
2010. That facility was replaced with two new $100 million credit
facilities. Both facilities have variable interest rates based on
LIBOR plus a specified margin. Borrowings on one of the $100 million
facilities, which expires in March 2013, are secured by
aircraft. Borrowings on the other $100 million facility, which
expires in March 2014, are secured by certain accounts receivable, spare
engines, spare parts and ground service equipment. We have no
immediate plans to borrow using either of these facilities.
Pre-delivery
Payment Facility
Subsequent
to the end of the 2010 first quarter, we terminated our pre-delivery payment
facility. There were no outstanding borrowings under this facility as
of March 31, 2010.
Contractual
Obligations, Commitments and Off-Balance-Sheet Arrangements
Aircraft
Purchase Commitments
We have firm orders to purchase 23 aircraft requiring
future aggregate payments of approximately $571.5 million, as set forth below. Alaska has options to
acquire 40 additional B737s and Horizon has options to acquire 10
Q400s.
The
following table summarizes aircraft purchase commitments as of March 31, 2010
and payments by year:
|
Delivery
Period - Firm Orders
|
|
Aircraft
|
April
1 – December 31, 2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
Total
|
Boeing
737-800
|
4
|
3
|
2
|
2
|
2
|
2
|
15
|
Bombardier
Q400
|
-
|
-
|
4
|
4
|
-
|
-
|
8
|
Total
|
4
|
3
|
6
|
6
|
2
|
2
|
23
|
Payments
(in millions)
|
$107.3
|
$89.0
|
$144.8
|
$143.1
|
$55.1
|
$32.2
|
$571.5
|
The 2010
deliveries of B737-800 aircraft are all expected to occur in the second and
third quarters.
We expect
to pay for the four B737-800 aircraft deliveries in 2010 with cash on hand. We
expect to pay for the firm orders beyond 2010 and the option aircraft, if
exercised, through internally generated cash, long-term debt, or operating lease
agreements.
Contractual
Obligations
The
following table provides a summary of our principal payments under current and
long-term debt obligations, operating lease commitments, aircraft purchase
commitments and other obligations as of March 31, 2010.
|
|
April
1 – Dec. 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beyond
|
|
|
|
|
(in
millions)
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2014
|
|
|
Total
|
|
Current
and long-term debt obligations
|
|
$ |
116.2 |
|
|
$ |
191.5 |
|
|
$ |
236.3 |
|
|
$ |
195.8 |
|
|
$ |
162.6 |
|
|
$ |
913.0 |
|
|
$ |
1,815.4 |
|
Operating
lease commitments (1)
|
|
|
107.0 |
|
|
|
195.8 |
|
|
|
194.6 |
|
|
|
157.5 |
|
|
|
139.9 |
|
|
|
425.2 |
|
|
|
1,220.0 |
|
Aircraftpurchase
commitments
|
|
|
107.3 |
|
|
|
89.0 |
|
|
|
144.8 |
|
|
|
143.1 |
|
|
|
55.1 |
|
|
|
32.2 |
|
|
|
571.5 |
|
Interest
obligations (2)
|
|
|
69.0 |
|
|
|
99.2 |
|
|
|
88.6 |
|
|
|
73.3 |
|
|
|
61.8 |
|
|
|
184.0 |
|
|
|
575.9 |
|
Other
purchase obligations (3)
|
|
|
51.5 |
|
|
|
51.9 |
|
|
|
52.2 |
|
|
|
42.2 |
|
|
|
54.3 |
|
|
|
-- |
|
|
|
252.1 |
|
Total
|
|
$ |
451.0 |
|
|
$ |
627.4 |
|
|
$ |
716.5 |
|
|
$ |
611.9 |
|
|
$ |
473.7 |
|
|
$ |
1,554.4 |
|
|
$ |
4,434.9 |
|
(1)
Operating lease commitments generally include aircraft operating leases, airport
property and hangar leases, office space, and other equipment
leases. The aircraft operating leases include lease obligations for
two leased MD-80 aircraft and 16 leased Q200 aircraft, all of
which are no longer in our operating fleets. We have
accrued for these lease commitments based on their discounted future cash flows
and we remain obligated under the existing lease contracts on these
aircraft.
(2) For
variable-rate debt, future obligations are shown above using interest rates in
effect as of March 31, 2010.
(3)
Includes minimum obligations under our long-term power-by-the-hour maintenance
agreements for all B737 engines other than the B737-800.
Pension
Obligations
The
“Contractual Obligations” table above excludes contributions to our various
defined-benefit pension plans, which could be approximately $45 million to $75
million per year based on our historical funding practice. There is
no minimum required contribution in 2010, although the company does plan to
contribute approximately $45 million to the plans in 2010.
Effect of
Inflation
Inflation
and price changes other than for aircraft fuel and passenger fares do not have a
significant effect on our operating revenues, operating expenses and operating
income.
There
have been no material changes in market risk from the information provided in
Item 7A “Quantitative and Qualitative Disclosure About Market Risk” in our 2009
10-K except as follows:
Market
Risk – Aircraft Fuel
Currently,
our fuel-hedging portfolio consists almost exclusively of crude oil call options
and jet fuel refining margin swap contracts. We utilize the contracts
in our portfolio as hedges to decrease our exposure to the volatility of jet
fuel prices. Call options are designed to effectively cap our cost of
the crude oil component of fuel prices, allowing us to limit our exposure to
increasing fuel prices. With these call option contracts, we still
benefit from the decline in crude oil prices, as there is no downward exposure
other than the premiums that we pay to enter into the contracts. We
believe there is risk in not hedging against the possibility of fuel price
increases. We estimate that a 10% increase or decrease in crude oil
prices as of March 31, 2010 would increase or decrease the fair value of our
$106.1 million crude oil hedge portfolio by approximately $44.1 million and
$37.5 million, respectively.
We
continue to believe that our fuel hedge program is an important part of our
strategy to reduce our exposure to volatile fuel prices. We expect to
continue to enter into these types of contracts prospectively, although
significant changes in market conditions could affect our
decisions. For more discussion, see Note 3 to our condensed
consolidated financial statements.
Financial
Market Risk
In this
current economic environment, significant volatility in market values and
interest rates is common. We have exposure to market risk associated
with changes in interest rates related primarily to our debt obligations and
short-term investment portfolio. Our debt obligations include
variable-rate instruments, which have exposure to changes in interest
rates. This exposure is somewhat mitigated through our variable-rate
investment portfolio. We have investments in marketable securities,
which are exposed to market risk associated with changes in interest rates and
market values. We generally invest only in government and corporate
bond obligations. We do not invest in auction-rate
securities.
Evaluation
of Disclosure Controls and Procedures
As of
March 31, 2010, an evaluation was performed under the supervision and with the
participation of our management, including our chief executive officer and chief
financial officer (collectively, our “certifying officers”), of the
effectiveness of the design and operation of our disclosure controls and
procedures. These disclosure controls and procedures are designed to ensure that
the information required to be disclosed by us in our periodic reports filed
with or submitted to the Securities and Exchange Commission (the SEC) is
recorded, processed, summarized and reported within the time periods specified
by the SEC’s rules and forms, and includes, without limitation, controls and
procedures designed to ensure that such information is accumulated and
communicated to our management, including our certifying officers, as
appropriate to allow timely decisions regarding required
disclosure. Our certifying officers concluded, based on their
evaluation, that disclosure controls and procedures were effective as of March
31, 2010.
Changes
in Internal Control over Financial Reporting
We made
no changes in our internal control over financial reporting during the quarter
ended March 31, 2010, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
We are a
party to routine litigation matters incidental to our business and with respect
to which no material liability is expected.
Management
believes the ultimate disposition of these matters is not likely to materially
affect our financial position or results of operations. This
forward-looking statement is based on management’s current understanding of the
relevant law and facts; and it is subject to various contingencies, including
the potential costs and risks associated with litigation and the actions of
judges and juries.
In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2009, which could materially
affect our business, financial condition or future results. The risks described
in our Annual Report on Form 10-K are not the only risks facing the Company.
Additional risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition and/or operating
results.
ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity
Securities
|
|
Total
number of shares purchased
|
|
|
Average
price paid per share
|
|
|
Maximum
approximate remaining dollar value of shares that can be repurchased under
the plan (1)
|
|
February
11, 2010 – February 28, 2010 (1)
|
|
|
72,000 |
|
|
$ |
34.39 |
|
|
|
|
March
1, 2010 – March 31, 2010 (1)
|
|
|
206,900 |
|
|
|
38.76 |
|
|
|
|
Total
|
|
|
278,900 |
|
|
$ |
37.64 |
|
|
$ |
15,737,628 |
|
(1)
|
Purchased
pursuant to a $50 million repurchase plan authorized by the Board of
Directors in June 2009. The plan expires after twelve
months. Additional purchases have been made subsequent to March
31, 2010.
|
None.
None.
None.
See
Exhibit Index on page 39.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
ALASKA
AIR GROUP,
INC.
Registrant
Date: May
5, 2010
By: /s/ Brandon S.
Pedersen
Brandon
S. Pedersen
Vice
President/Finance and Controller (Principal Accounting Officer)
By: /s/ Glenn S.
Johnson
Glenn S.
Johnson
Executive
Vice President/Finance and Chief Financial Officer (Principal Financial
Officer)
Pursuant
to Item 601(a)(2) of Regulation S-K, this Exhibit Index immediately precedes the
exhibits.
The
following exhibits are numbered in accordance with Item 601 of Regulation
S-K.
|
Credit Agreement, dated March 31, 2010, among Alaska
Airlines, Inc., as borrower, Citibank, N.A., as administrative agent, Bank
of America, N.A. as syndication agent, and other lenders (Citibank Credit
Agreement)
|
|
Exhibits
32.1 and 32.2 are being furnished pursuant to 18 U.S.C. Section 1350 and
shall not deemed
to be “filed” for purposes of Section 18 of the Securities Exchange Act of
1934, as
|
|
amended
(“Exchange Act”,) or otherwise subject to the liability of that section.
Such exhibits shall
not be deemed to be incorporated by reference into any filing of the
Company under the Securities
Act of 1933, as amended, or the Exchange Act, whether made before or after
the date
hereof, regardless of any general incorporation language in such
filing.
|
|
#
Pursuant to 17 CFR 240.24b-2, confidential information has been omitted
and filed separately with the Securiites and Exchange Commission pursuant
to a Confidential Treatment Application filed with the
Commission.
|
ex10-1.htm
FOIA
CONFIDENTIAL TREATMENT REQUESTED
CREDIT
AGREEMENT
by
and among
ALASKA
AIRLINES, INC.
as
Borrower,
THE
LENDERS THAT ARE SIGNATORIES HERETO
as
the Lenders,
WELLS
FARGO CAPITAL FINANCE, LLC
as
Agent, as Co-Lead Arranger, and as Joint Bookrunner,
and
U.S.
BANK NATIONAL ASSOCIATION
as
Documentation Agent, as Co-Lead Arranger, and as Joint Bookrunner
Dated
as of March 31, 2010
1.
|
DEFINITIONS
AND CONSTRUCTION
|
1
|
1.1
|
Definitions
|
1
|
1.2
|
Accounting
Terms
|
1
|
1.3
|
Code
|
1
|
1.4
|
Construction
|
1
|
1.5
|
Schedules
and Exhibits
|
2
|
2.
|
LOAN
AND TERMS OF PAYMENT
|
2
|
2.1
|
Revolver
Advances
|
2
|
2.2
|
[Intentionally
Omitted]
|
2
|
2.3
|
Borrowing
Procedures and Settlements
|
3
|
2.4
|
Payments;
Reductions of Commitments; Prepayments
|
7
|
2.5
|
Overadvances
|
10
|
2.6
|
Interest
Rates: Rates, Payments, and Calculations
|
10
|
2.7
|
Crediting
Payments; Clearance Charge
|
11
|
2.8
|
Designated
Account
|
12
|
2.9
|
Maintenance
of Loan Account; Statements of Obligations
|
12
|
2.10
|
Fees
|
12
|
2.11
|
[Intentionally
Omitted]
|
13
|
2.12
|
LIBOR
Option
|
13
|
2.13
|
Capital
Requirements
|
15
|
3.
|
CONDITIONS;
TERM OF AGREEMENT
|
16
|
3.1
|
Conditions
Precedent to the Initial Extension of Credit
|
16
|
3.2
|
Conditions
Precedent to all Extensions of Credit
|
16
|
3.3
|
Term
|
16
|
3.4
|
Effect
of Termination
|
16
|
3.5
|
Early
Termination by Borrower
|
16
|
4.
|
REPRESENTATIONS
AND WARRANTIES
|
16
|
4.1
|
Due
Organization and Qualification; No Subsidiaries
|
17
|
4.2
|
Due
Authorization; No Conflict
|
17
|
4.3
|
Governmental
Consents
|
17
|
4.4
|
Binding
Obligations; Perfected Liens
|
17
|
4.5
|
Title
to Assets; No Encumbrances
|
18
|
4.6
|
Jurisdiction
of Organization; Location of Chief Executive Office; Organizational
Identification Number; Commercial Tort Claims
|
18
|
TABLE OF
CONTENTS
(continued)
Page
4.7
|
Litigation
|
18
|
4.8
|
Compliance
with Laws
|
18
|
4.9
|
No
Material Adverse Change
|
19
|
4.10
|
Fraudulent
Transfer
|
19
|
4.11
|
Employee
Benefits
|
19
|
4.12
|
Environmental
Condition
|
20
|
4.13
|
Intellectual
Property
|
20
|
4.14
|
Leases
|
20
|
4.15
|
Deposit
Accounts and Securities Accounts
|
20
|
4.16
|
Complete
Disclosure
|
20
|
4.17
|
Material
Contracts
|
21
|
4.18
|
Patriot
Act
|
21
|
4.19
|
Indebtedness
|
21
|
4.20
|
Payment
of Taxes
|
21
|
4.21
|
Margin
Stock
|
21
|
4.22
|
Governmental
Regulation
|
22
|
4.23
|
OFAC
|
22
|
4.24
|
Employee
and Labor Matters
|
22
|
4.25
|
Group
as a Holding Company
|
22
|
4.26
|
Required
Equity Documents
|
22
|
4.27
|
Other
Documents
|
23
|
4.28
|
Eligible
Accounts
|
24
|
4.29
|
Eligible
Inventory
|
25
|
4.30
|
Locations
of Inventory and Equipment
|
25
|
4.31
|
Inventory
Records
|
25
|
5.
|
AFFIRMATIVE
COVENANTS
|
25
|
5.1
|
Financial
Statements, Reports, Certificates
|
25
|
5.2
|
Collateral
Reporting
|
25
|
5.3
|
Existence
|
26
|
5.4
|
Maintenance
of Properties
|
26
|
5.5
|
Taxes
|
26
|
5.6
|
Insurance
|
26
|
5.7
|
Inspection
|
27
|
TABLE OF
CONTENTS
(continued)
Page
5.8
|
Compliance
with Laws
|
27
|
5.9
|
Environmental
|
27
|
5.10
|
Disclosure
Updates
|
28
|
5.11
|
[Intentionally
omitted]
|
28
|
5.12
|
Further
Assurances
|
28
|
5.13
|
Lender
Meetings
|
28
|
5.14
|
Material
Contracts
|
28
|
5.15
|
Location
of Inventory and Equipment
|
29
|
5.16
|
Assignable
Material Contracts
|
29
|
6.
|
NEGATIVE
COVENANTS
|
31
|
6.1
|
Indebtedness
|
31
|
6.2
|
Liens
|
31
|
6.3
|
Restrictions
on Fundamental Changes
|
31
|
6.4
|
Disposal
of Assets
|
31
|
6.5
|
Change
Name
|
31
|
6.6
|
Nature
of Business
|
31
|
6.7
|
Prepayments
and Amendments
|
32
|
6.8
|
Change
of Control
|
32
|
6.9
|
Restricted
Junior Payments
|
32
|
6.10
|
Accounting
Methods
|
33
|
6.11
|
Investments
|
33
|
6.12
|
Transactions
with Affiliates
|
33
|
6.13
|
Use
of Proceeds
|
34
|
6.14
|
Group
as Holding Company
|
34
|
6.15
|
Consignments
|
34
|
6.16
|
Inventory
and Equipment with Bailees
|
34
|
7.
|
FINANCIAL
COVENANTS
|
34
|
8.
|
EVENTS
OF DEFAULT
|
34
|
9.
|
RIGHTS
AND REMEDIES
|
36
|
9.1
|
Rights
and Remedies
|
36
|
9.2
|
Remedies
Cumulative
|
37
|
10.
|
WAIVERS;
INDEMNIFICATION
|
37
|
10.1
|
Demand;
Protest; etc
|
37
|
TABLE OF
CONTENTS
(continued)
Page
10.2
|
The
Lender Group’s Liability for Collateral
|
37
|
10.3
|
Indemnification
|
37
|
11.
|
NOTICES
|
38
|
12.
|
CHOICE
OF LAW AND VENUE; JURY TRIAL WAIVER
|
39
|
13.
|
ASSIGNMENTS
AND PARTICIPATIONS; SUCCESSORS
|
40
|
13.1
|
Assignments
and Participations
|
40
|
13.2
|
Successors
|
42
|
14.
|
AMENDMENTS;
WAIVERS
|
42
|
14.1
|
Amendments
and Waivers
|
42
|
14.2
|
Replacement
of Certain Lenders
|
43
|
14.3
|
Removal
of Tax Lenders
|
44
|
14.4
|
No
Waivers; Cumulative Remedies
|
45
|
15.
|
AGENT;
THE LENDER GROUP
|
45
|
15.1
|
Appointment
and Authorization of Agent
|
45
|
15.2
|
Delegation
of Duties
|
45
|
15.3
|
Liability
of Agent
|
46
|
15.4
|
Reliance
by Agent
|
46
|
15.5
|
Notice
of Default or Event of Default
|
46
|
15.6
|
Credit
Decision
|
46
|
15.7
|
Costs
and Expenses; Indemnification
|
47
|
15.8
|
Agent
in Individual Capacity
|
47
|
15.9
|
Successor
Agent
|
48
|
15.10
|
Lender
in Individual Capacity
|
48
|
15.11
|
Collateral
Matters
|
48
|
15.12
|
Restrictions
on Actions by Lenders; Sharing of Payments
|
49
|
15.13
|
Agency
for Perfection
|
50
|
15.14
|
Payments
by Agent to the Lenders
|
50
|
15.15
|
Concerning
the Collateral and Related Loan Documents
|
50
|
15.16
|
Audits
and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information
|
50
|
15.17
|
Several
Obligations; No Liability
|
51
|
16.
|
WITHHOLDING
TAXES
|
51
|
17.
|
GENERAL
PROVISIONS
|
54
|
17.1
|
Effectiveness
|
54
|
TABLE OF
CONTENTS
(continued)
Page
17.2
|
Section
Headings
|
54
|
17.3
|
Interpretation
|
54
|
17.4
|
Severability
of Provisions
|
54
|
17.5
|
Debtor-Creditor
Relationship
|
54
|
17.6
|
Counterparts;
Electronic Execution
|
54
|
17.7
|
Revival
and Reinstatement of Obligations
|
54
|
17.8
|
Confidentiality
|
55
|
17.9
|
Lender
Group Expenses
|
56
|
17.10
|
USA
PATRIOT Act
|
56
|
17.11
|
Integration
|
56
|
EXHIBITS
AND SCHEDULES
Exhibit
A-1 Form
of Assignment and Acceptance
Exhibit
B-1 Form
of Borrowing Base Certificate
Exhibit
C-1 Form
of Compliance Certificate
Exhibit
L-1 Form
of LIBOR Notice
Schedule
A-1 Agent’s
Account
Schedule
A-2 Authorized
Persons
Schedule
C-1 Commitments
Schedule
D-1 Designated
Account
Schedule
D-2 Designated
Engines
Schedule
P-1 Permitted
Investments
Schedule
P-2 Permitted
Liens
Schedule
1.1 Definitions
Schedule
2.6(d) Borrower
Representatives
Schedule
3.1 Conditions
Precedent
Schedule
4.6(a) States
of Organization
Schedule
4.6(b) Chief
Executive Offices
Schedule
4.6(c) Organizational
Identification Numbers
Schedule
4.7(b) Litigation
Schedule
4.11 Benefit
Plans
Schedule
4.12 Environmental
Matters
Schedule
4.15 Deposit
Accounts and Securities Accounts
Schedule
4.17 Material
Contracts
Schedule
4.19 Permitted
Indebtedness
Schedule
4.24 Employee
and Labor Matters
Schedule
4.27 Locations
of Spare Parts
|
Schedule
4.28(d)
|
Locations
of Ground Service Equipment
|
|
Schedule
4.28(e)
|
Locations
of Designated Engines
|
|
Schedule
4.29
|
Locations
of Ineligible Equipment
|
Schedule
5.1 Financial
Statements, Reports, Certificates
Schedule
5.2 Collateral
Reporting
Schedule
6.6 Nature
of Business
Schedule
6.12 Existing
Transactions with Affiliates
CREDIT
AGREEMENT
THIS CREDIT
AGREEMENT (this
“Agreement”),
is entered into as of March 31, 2010 by and among the lenders identified on the
signature pages hereof (each of such lenders, together with their respective
successors and permitted assigns, are referred to hereinafter as a “Lender”, as that term
is hereinafter further defined), WELLS FARGO CAPITAL
FINANCE, LLC, a Delaware limited liability company, as agent for the
Lenders (in such capacity, together with its successors and assigns in such
capacity, “Agent”), as co-lead
arranger, and as joint bookrunner, U.S. BANK NATIONAL
ASSOCIATION (“US Bank”), as
documentation agent, as co-lead arranger, and as joint bookrunner, and ALASKA AIRLINES,
INC., an Alaska corporation (“Borrower”).
The
parties agree as follows:
1. DEFINITIONS AND
CONSTRUCTION.
1.1 Definitions. Capitalized terms
used in this Agreement shall have the meanings specified therefor on Schedule
1.1.
1.2 Accounting
Terms. All accounting
terms not specifically defined herein shall be construed in accordance with
GAAP; provided,
however, that
if Borrower notifies Agent that Borrower requests an amendment to any provision
hereof to eliminate the effect of any Accounting Change occurring after the
Closing Date or in the application thereof on the operation of such provision
(or if Agent notifies Borrower that the Required Lenders request an amendment to
any provision hereof for such purpose), regardless of whether any such notice is
given before or after such Accounting Change or in the application thereof, then
Agent and Borrower agree that they will negotiate in good faith amendments to
the provisions of this Agreement that are directly affected by such Accounting
Change with the intent of having the respective positions of the Lenders and
Borrower after such Accounting Change conform as nearly as possible to their
respective positions as of the date of this Agreement and, until any such
amendments have been agreed upon, the provisions in this Agreement shall be
calculated as if no such Accounting Change had occurred. When used
herein, the term “financial statements” shall include the notes and schedules
thereto. Whenever the term “Borrower” is used in respect of a
financial covenant or a related definition, it shall be understood to mean
Borrower, on an unconsolidated basis, unless the context clearly requires
otherwise.
1.3 Code. Any terms used in
this Agreement that are defined in the Code shall be construed and defined as
set forth in the Code unless otherwise defined herein; provided, however, that to the
extent that the Code is used to define any term herein and such term is defined
differently in different Articles of the Code, the definition of such term
contained in Article 9 of the Code shall govern.
1.4 Construction. Unless the
context of this Agreement or any other Loan Document clearly requires otherwise,
references to the plural include the singular, references to the singular
include the plural, the terms “includes” and “including” are not
limiting, and the term “or” has, except where otherwise indicated, the inclusive
meaning represented by the phrase “and/or.” The words “hereof,”
“herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in any other
Loan Document to any agreement, instrument, or document shall include all
written alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). The words “asset” and
“property” shall be construed to have the same meaning and effect and to refer
to any and all
tangible
and intangible assets and properties, including cash, securities, accounts, and
contract rights. Any reference herein or in any other Loan Document
to the satisfaction, repayment, or payment in full of the Obligations shall mean
the repayment in Dollars in full in cash or immediately available funds of all
of the Obligations other than unasserted contingent indemnification
Obligations. Any reference herein to any Person shall be construed to
include such Person’s successors and assigns. Any requirement of a
writing contained herein or in any other Loan Document shall be satisfied by the
transmission of a Record.
1.5 Schedules
and Exhibits. All of the
schedules and exhibits attached to this Agreement shall be deemed incorporated
herein by reference.
2. LOANS AND TERMS OF
PAYMENT.
2.1 Revolver
Advances.
(a) Subject
to the terms and conditions of this Agreement, and during the term of this
Agreement, each Lender with a Commitment agrees (severally, not jointly or
jointly and severally) to make revolving loans (“Advances”) to
Borrower in an amount at any one time outstanding not to exceed the lesser of:
(i) such
Lender’s Commitment, or
(ii) such
Lender’s Pro Rata Share of an amount equal to the lesser of:
(A) the
Maximum Revolver Amount less
the principal amount of Swing Loans outstanding at such time,
and
(B) the
Borrowing Base at such time less the principal amount of
Swing Loans outstanding at such time.
(b) Amounts
borrowed pursuant to this Section 2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement. The outstanding principal
amount of the Advances, together with interest accrued thereon, shall be due and
payable on the Maturity Date or, if earlier, on the date on which they are
declared due and payable pursuant to the terms of this Agreement.
(c) Anything
to the contrary in this Section 2.1
notwithstanding, Agent shall have the right (but not the obligation) to
establish, increase, reduce, eliminate, or otherwise adjust reserves from time
to time against the Borrowing Base or the Maximum Revolver Amount in such
amounts, and with respect to such matters, as Agent in its Permitted Discretion
shall deem necessary or appropriate, including reserves with respect to
(i) sums that Borrower is required to pay under any Section of this
Agreement or any other Loan Document (such as taxes, assessments, insurance
premiums, or, in the case of leased assets, rents or other amounts payable under
such leases) and has failed to pay, and (ii) amounts owing by Borrower to any
Person to the extent secured by a Lien on, or trust over, any of the Collateral
(other than a Permitted Lien which is a purchase money Lien or the interest of a
lessor under a Capital Lease), which Lien or trust, in the Permitted Discretion
of Agent likely would have a priority superior to Agent’s Liens (such as Liens
or trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral. Agent shall endeavor to notify Borrower at or before
the time any such reserve is to be established or increased, but a non-willful
failure of Agent to so notify Borrower shall not be a breach of this Agreement
and shall not cause such establishment or increase of a reserve to be
ineffective.
2.2 [Intentionally
Omitted].
2.3 Borrowing
Procedures and Settlements.
(a) Procedure for
Borrowing. Each Borrowing shall be made by a written request
by an Authorized Person delivered to Agent. Unless Swing Lender is
not obligated to make a Swing Loan pursuant to Section 2.3(b) below,
such notice must be received by Agent no later than 10:00 a.m. (California time)
on the Business Day that is the requested Funding Date specifying (i) the amount
of such Borrowing, and (ii) the requested Funding Date, which shall be a
Business Day; provided, however, that if
Swing Lender is not obligated to make a Swing Loan as to a requested Borrowing,
such notice must be received by Agent no later than 10:00 a.m. (California time)
on the Business Day prior to the date that is the requested Funding
Date. At Agent’s election, in lieu of delivering the above-described
written request, any Authorized Person may give Agent telephonic notice of such
request by the required time. In such circumstances, Borrower agrees
that any such telephonic notice will be confirmed in writing within 24 hours of
the giving of such telephonic notice, but the failure to provide such written
confirmation shall not affect the validity of the request.
(b) Making of Swing
Loans. In the case of a request for an Advance and so long as
either (i) the aggregate amount of Swing Loans made since the last Settlement
Date, minus the amount of Collections or payments applied to Swing Loans since
the last Settlement Date, plus the amount of the requested Advance does not
exceed $25,000,000, or (ii) Swing Lender, in its sole discretion, shall agree to
make a Swing Loan notwithstanding the foregoing limitation, Swing Lender shall
make an Advance in the amount of such requested Borrowing (any such Advance made
solely by Swing Lender pursuant to this Section 2.3(b) being
referred to as a “Swing Loan” and such
Advances being referred to collectively as “Swing Loans”)
available to Borrower on the Funding Date applicable thereto by transferring
immediately available funds to the Designated Account. Anything
contained herein to the contrary notwithstanding, the Swing Lender may, but
shall not be obligated to, make Swing Loans at any time that one or more of the
Lenders is a Defaulting Lender. Each Swing Loan shall be deemed to be
an Advance hereunder and shall be subject to all the terms and conditions
(including Section 3) applicable to other Advances, except that all payments on
any Swing Loan shall be payable to Swing Lender solely for its own
account. Subject to the provisions of Section 2.3(d)(ii),
Swing Lender shall not make and shall not be obligated to make any Swing Loan if
Swing Lender has actual knowledge that (i) one or more of the applicable
conditions precedent set forth in Section 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or (ii)
the requested Borrowing would exceed the Availability on such Funding
Date. Swing Lender shall not otherwise be required to determine
whether the applicable conditions precedent set forth in Section 3 have been
satisfied on the Funding Date applicable thereto prior to making any Swing
Loan. The Swing Loans shall be secured by Agent’s Liens, constitute
Advances and Obligations hereunder, and bear interest at the rate applicable
from time to time to Advances that are Base Rate Loans.
(c) Making of Loans.
(i) In
the event that Swing Lender is not obligated to make a Swing Loan, then promptly
after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent
shall notify the Lenders, not later than 1:00 p.m. (California time) on the
Business Day immediately preceding the Funding Date applicable thereto, by
telecopy, telephone, or other similar form of transmission, of the requested
Borrowing. Each Lender shall make the amount of such Lender’s Pro
Rata Share of the requested Borrowing available to Agent in immediately
available funds, to Agent’s Account, not later than 10:00 a.m. (California time)
on the Funding Date applicable thereto. After Agent’s receipt of the
proceeds of such Advances, Agent shall make the proceeds thereof available to
Borrower on the applicable Funding Date by transferring immediately available
funds equal to such proceeds received by Agent to the Designated Account; provided, however, that,
subject to the provisions of Section 2.3(d)(ii),
Agent shall not request any Lender to make, and no Lender shall have the
obligation to make, any Advance if (1) one or more of the applicable conditions
precedent set forth in Section 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing unless such
condition has been waived, or (2) the requested Borrowing would exceed the
Availability on such Funding Date.
(ii) Unless
Agent receives notice from a Lender prior to 9:00 a.m. (California time) on the
date of a Borrowing, that such Lender will not make available as and when
required hereunder to Agent for the account of Borrower the amount of that
Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has
made or will make such amount available to Agent in immediately available funds
on the Funding Date and Agent may (but shall not be so required), in reliance
upon such assumption, make available to Borrower on such date a corresponding
amount. If any Lender shall not have made its full amount available
to Agent in immediately available funds and if Agent in such circumstances has
made available to Borrower such amount, that Lender shall on the Business Day
following such Funding Date make such amount available to Agent, together with
interest at the Defaulting Lender Rate for each day during such
period. A notice submitted by Agent to any Lender with respect to
amounts owing under this Section 2.3(c)(ii)
shall be conclusive, absent manifest error. If such amount is so made
available, such payment to Agent shall constitute such Lender’s Advance on the
date of Borrowing for all purposes of this Agreement. If such amount
is not made available to Agent on the Business Day following the Funding Date,
Agent will notify Borrower of such failure to fund and, upon demand by Agent,
Borrower shall pay such amount to Agent for Agent’s account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Advances
composing such Borrowing.
(d) Protective Advances and Optional
Overadvances.
(i) Any
contrary provision of this Agreement or any other Loan Document notwithstanding,
Agent hereby is authorized by Borrower and the Lenders, from time to time in
Agent’s sole discretion, (A) after the occurrence and during the continuance of
a Default (if the Threshold Usage Amount exists) or an Event of Default, or (B)
at any time that any of the other applicable conditions precedent set forth in
Section 3 are
not satisfied (if the Threshold Usage Amount exists), to make Advances to, or
for the benefit of, Borrower on behalf of the Lenders that Agent, in its
Permitted Discretion, deems necessary or desirable (1) to preserve or protect
the Collateral, or any portion thereof, or (2) to enhance the likelihood of
repayment of the Obligations (any of the Advances described in this Section 2.3(d)(i)
shall be referred to as “Protective
Advances”).
(ii) Any
contrary provision of this Agreement or any other Loan Document notwithstanding,
the Lenders hereby authorize Agent or Swing Lender, as applicable, and either
Agent or Swing Lender, as applicable, may, but is not obligated to, knowingly
and intentionally, continue to make Advances (including Swing Loans) to Borrower
notwithstanding that an Overadvance exists or thereby would be created, so long
as (A) after giving effect to such Advances, the outstanding Revolver Usage does
not exceed the Borrowing Base by more than $10,000,000, and (B) after giving
effect to such Advances, the outstanding Revolver Usage (except for and
excluding amounts charged to the Loan Account for interest, fees, or Lender
Group Expenses) does not exceed the Maximum Revolver Amount. In the
event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts
permitted by the immediately foregoing provisions, regardless of the amount of,
or reason for, such excess, Agent shall notify the Lenders as soon as
practicable (and prior to making any (or any additional) intentional
Overadvances (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) unless Agent determines that prior
notice would result in imminent harm to the Collateral or its value, in which
case Agent may make such Overadvances and provide notice as promptly as
practicable thereafter), and the Lenders with Commitments thereupon shall,
together with Agent, jointly determine the terms of arrangements that shall be
implemented with Borrower intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrower to an amount permitted
by the preceding sentence. In such circumstances, if any Lender with
a Commitment objects to the proposed terms of reduction or repayment of any
Overadvance, the terms of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders. The foregoing
provisions are meant for the benefit of the Lenders and Agent and are not meant
for the benefit of Borrower, which shall continue
to be
bound by the provisions of Section
2.5. Each Lender with a Commitment shall be obligated to
settle with Agent as provided in Section 2.3(e) (or
Section 2.3(g),
as applicable) for the amount of such Lender’s Pro Rata Share of any
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this Section 2.3(d)(ii),
and any Overadvances resulting from the charging to the Loan Account of
interest, fees, or Lender Group Expenses.
(iii) Each
Protective Advance and each Overadvance shall be deemed to be an Advance
hereunder, except that no Protective Advance or Overadvance shall be eligible to
be a LIBOR Rate Loan and, prior to Settlement therefor, all payments on the
Protective Advances shall be payable to Agent solely for its own
account. The Protective Advances and Overadvances shall be repayable
on demand, secured by Agent’s Liens, constitute Obligations hereunder, and bear
interest at the rate applicable from time to time to Advances that are Base Rate
Loans. The ability of Agent to make Protective Advances is separate
and distinct from its ability to make Overadvances and its ability to make
Overadvances is separate and distinct from its ability to make Protective
Advances. For the avoidance of doubt, the limitations on Agent’s
ability to make Protective Advances do not apply to Overadvances and the
limitations on Agent’s ability to make Overadvances do not apply to Protective
Advances. The provisions of this Section 2.3(d) are
for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not
intended to benefit Borrower in any way.
(e) Settlement. It is
agreed that each Lender’s funded portion of the Advances is intended by the
Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding
Advances. Such agreement notwithstanding, Agent, Swing Lender, and
the other Lenders agree (which agreement shall not be for the benefit of
Borrower) that in order to facilitate the administration of this Agreement and
the other Loan Documents, settlement among the Lenders as to the Advances, the
Swing Loans, and the Protective Advances shall take place on a periodic basis in
accordance with the following provisions:
(i) Agent
shall request settlement (“Settlement”) with the
Lenders on a weekly basis, or on a more frequent basis if so determined by Agent
(1) on behalf of Swing Lender, with respect to the outstanding Swing Loans, (2)
for itself, with respect to the outstanding Protective Advances, and (3) with
respect to Borrower’s Collections or payments received, as to each by notifying
the Lenders by telecopy, telephone, or other similar form of transmission, of
such requested Settlement, no later than 2:00 p.m. (California time) on the
Business Day immediately prior to the date of such requested Settlement (the
date of such requested Settlement being the “Settlement
Date”). Such notice of a Settlement Date shall include a
summary statement of the amount of outstanding Advances, Swing Loans,
and Protective Advances for the period since the prior Settlement
Date. Subject to the terms and conditions contained herein (including
Section
2.3(g)): (y) if the amount of the Advances (including Swing
Loans and Protective Advances) made by a Lender that is not a Defaulting Lender
exceeds such Lender’s Pro Rata Share of the Advances (including Swing Loans and
Protective Advances) as of a Settlement Date, then Agent shall, by no later than
12:00 p.m. (California time) on the Settlement Date, transfer in immediately
available funds to a Deposit Account of such Lender (as such Lender may
designate), an amount such that each such Lender shall, upon receipt of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances
(including Swing Loans and Protective Advances), and (z) if the amount of the
Advances (including Swing Loans and Protective Advances) made by a Lender is
less than such Lender’s Pro Rata Share of the Advances (including Swing Loans
and Protective Advances) as of a Settlement Date, such Lender shall no later
than 12:00 p.m. (California time) on the Settlement Date transfer in immediately
available funds to Agent’s Account, an amount such that each such Lender shall,
upon transfer of such amount, have as of the Settlement Date, its Pro Rata Share
of the Advances (including Swing Loans and Protective Advances). Such
amounts made available to Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Swing Loans or
Protective Advances and, together with the portion of such Swing Loans or
Protective Advances representing Swing Lender’s Pro Rata Share thereof, shall
constitute Advances of such Lenders. If any such
amount is
not made available to Agent by any Lender on the Settlement Date applicable
thereto to the extent required by the terms hereof, Agent shall be entitled to
recover for its account such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate.
(ii) In
determining whether a Lender’s balance of the Advances, Swing Loans, and
Protective Advances is less than, equal to, or greater than such Lender’s Pro
Rata Share of the Advances, Swing Loans, and Protective Advances as of a
Settlement Date, Agent shall, as part of the relevant Settlement, apply to such
balance the portion of payments actually received in good funds by Agent with
respect to principal, interest, fees payable by Borrower and allocable to the
Lenders hereunder, and proceeds of Collateral.
(iii) Between
Settlement Dates, Agent, to the extent Protective Advances or Swing Loans are
outstanding, may pay over to Agent or Swing Lender, as applicable, any
Collections or payments received by Agent, that in accordance with the terms of
this Agreement would be applied to the reduction of the Advances, for
application to the Protective Advances or Swing Loans. Between
Settlement Dates, Agent, to the extent no Protective Advances or Swing Loans are
outstanding, may pay over to Swing Lender any Collections or payments received
by Agent, that in accordance with the terms of this Agreement would be applied
to the reduction of the Advances, for application to Swing Lender’s Pro Rata
Share of the Advances. If, as of any Settlement Date, Collections or
payments of Borrower received since the then immediately preceding Settlement
Date have been applied to Swing Lender’s Pro Rata Share of the Advances other
than to Swing Loans, as provided for in the previous sentence, Swing Lender
shall pay to Agent for the accounts of the Lenders, and Agent shall pay to the
Lenders (other than a Defaulting Lender if Agent has implemented the provisions
of Section
2.3(g)), to be applied to the outstanding Advances of such Lenders, an
amount such that each such Lender shall, upon receipt of such amount, have, as
of such Settlement Date, its Pro Rata Share of the Advances. During
the period between Settlement Dates, Swing Lender with respect to Swing Loans,
Agent with respect to Protective Advances, and each Lender (subject to the
effect of agreements between Agent and individual Lenders) with respect to the
Advances other than Swing Loans and Protective Advances, shall be entitled to
interest at the applicable rate or rates payable under this Agreement on the
daily amount of funds employed by Swing Lender, Agent, or the Lenders, as
applicable.
(iv) Anything
in this Section
2.3(e) to the contrary notwithstanding, in the event that a Lender is a
Defaulting Lender, Agent shall be entitled to refrain from remitting settlement
amounts to the Defaulting Lender and, instead, shall be entitled to elect to
implement the provisions set forth in Section
2.3(g).
(f) Notation. Agent, as
a non-fiduciary agent for Borrower, shall maintain a register showing the
principal amount of the Advances owing to each Lender, including the Swing Loans
owing to Swing Lender, and Protective Advances owing to Agent, and the interests
therein of each Lender, from time to time and such register shall, absent
manifest error, conclusively be presumed to be correct and
accurate.
(g) Defaulting
Lenders. Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrower to Agent for the Defaulting
Lender’s benefit or any Collections or proceeds of Collateral that would
otherwise be remitted hereunder to the Defaulting Lender, and, in the absence of
such transfer to the Defaulting Lender, Agent shall transfer any such payments
(A) first, to Swing Lender to the extent of any Swing Loans that were made by
Swing Lender and that were required to be, but were not, repaid by the
Defaulting Lender, (B) second, to each non-Defaulting Lender ratably in
accordance with their Commitments (but, in each case, only to the extent that
such Defaulting Lender’s portion of an Advance (or other funding obligation) was
funded by such other non-Defaulting Lender), (C) to a suspense account
maintained by Agent, the proceeds of which shall be retained by Agent and
may
be made
available to be re-advanced to or for the benefit of Borrower as if such
Defaulting Lender had made its portion of Advances (or other funding
obligations) hereunder, and (D) from and after the date on which all other
Obligations have been paid in full, to such Defaulting Lender in accordance with
tier (L) of Section
2.4(b)(ii). Subject to the foregoing, Agent may hold and, in
its Permitted Discretion, re-lend to Borrower for the account of such Defaulting
Lender the amount of all such payments received and retained by Agent for the
account of such Defaulting Lender. Solely for the purposes of voting
or consenting to matters with respect to the Loan Documents (including the
calculation of Pro Rata Share in connection therewith) and for the purpose of
calculating the fee payable under Section 2.10(b), such
Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s
Commitment shall be deemed to be zero. The provisions of this Section 2.3(g) shall
remain effective with respect to such Defaulting Lender until the earlier of (y)
the date on which the non-Defaulting Lenders, Agent, and Borrower shall have
waived, in writing, the application of this Section 2.3(g) to
such Defaulting Lender, or (z) the date on which such Defaulting Lender makes
payment of all amounts that it was obligated to fund hereunder, pays to Agent
all amounts owing by Defaulting Lender in respect of the amounts that it was
obligated to fund hereunder, and, if requested by Agent, provides adequate
assurance of its ability to perform its future obligations
hereunder. The operation of this Section 2.3(g) shall
not be construed to increase or otherwise affect the Commitment of any Lender,
to relieve or excuse the performance by such Defaulting Lender or any other
Lender of its duties and obligations hereunder, or to relieve or excuse the
performance by Borrower of its duties and obligations hereunder to Agent or to
the Lenders other than such Defaulting Lender. Any failure by a
Defaulting Lender to fund amounts that it was obligated to fund hereunder shall
constitute a material breach by such Defaulting Lender of this Agreement and
shall entitle Borrower, at its option, upon written notice to Agent, to arrange
for a substitute Lender to assume the Commitment of such Defaulting Lender, such
substitute Lender to be reasonably acceptable to Agent. In connection
with the arrangement of such a substitute Lender, the Defaulting Lender shall
have no right to refuse to be replaced hereunder, and agrees to execute and
deliver a completed form of Assignment and Acceptance in favor of the substitute
Lender (and agrees that it shall be deemed to have executed and delivered such
document if it fails to do so) subject only to being repaid its share of the
outstanding Obligations; provided, however, that any
such assumption of the Commitment of such Defaulting Lender shall not be deemed
to constitute a waiver of any of the Lender Groups’ or Borrower’s rights or
remedies against any such Defaulting Lender arising out of or in relation to
such failure to fund. In the event of a direct conflict between the
priority provisions of this Section 2.3(g) and
any other provision contained in this Agreement or any other Loan Document, it
is the intention of the parties hereto that such provisions be read together and
construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that
cannot be resolved as aforesaid, the terms and provisions of this Section 2.3(g) shall
control and govern.
(h) Independent
Obligations. All Advances (other than Swing Loans and
Protective Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform its
obligation to make any Advance (or other extension of credit) hereunder, nor
shall any Commitment of any Lender be increased or decreased as a result of any
failure by any other Lender to perform its obligations hereunder, and (ii) no
failure by any Lender to perform its obligations hereunder shall excuse any
other Lender from its obligations hereunder.
2.4 Payments; Reductions of Commitments;
Prepayments.
(a) Payments by
Borrower.
(i) Except
as otherwise expressly provided herein, all payments by Borrower shall be made
to Agent’s Account for the account of the Lender Group and shall be made in
immediately available funds, no later than 11:00 a.m. (California time) on the
date specified herein. Any payment received by Agent later than 11:00
a.m. (California time) shall be deemed to have been
received
on the following Business Day and any applicable interest or fee shall continue
to accrue until such following Business Day.
(ii) Unless
Agent receives notice from Borrower prior to the date on which any payment is
due to the Lenders that Borrower will not make such payment in full as and when
required, Agent may assume that Borrower has made (or will make) such payment in
full to Agent on such date in immediately available funds and Agent may (but
shall not be so required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due such
Lender. If and to the extent Borrower does not make such payment in
full to Agent on the date when due, each Lender severally shall repay to Agent
on demand such amount distributed to such Lender, together with interest thereon
at the Defaulting Lender Rate for each day from the date such amount is
distributed to such Lender until the date repaid.
(b) Apportionment and
Application.
(i) So
long as no Application Event has occurred and is continuing and except as
otherwise provided herein with respect to Defaulting Lenders, all principal and
interest payments received by Agent shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Obligations to which
such payments relate held by each Lender) and all payments of fees and expenses
received by Agent (other than fees or expenses that are for Agent’s separate
account) shall be apportioned ratably among the Lenders having a Pro Rata Share
of the type of Commitment or Obligation to which a particular fee or expense
relates. All payments to be made hereunder by Borrower shall be
remitted to Agent and all (subject to Section 2.4(b)(iv),
Section
2.4(d)(ii), and Section 2.4(e)) such
payments, and all proceeds of Collateral received by Agent, shall be applied, so
long as no Application Event has occurred and is continuing, to reduce the
balance of the Advances outstanding and, thereafter, to Borrower (to be wired to
the Designated Account) or such other Person entitled thereto under applicable
law.
(ii) At
any time that an Application Event has occurred and is continuing and except as
otherwise provided herein with respect to Defaulting Lenders, all payments
remitted to Agent and all proceeds of Collateral received by Agent shall be
applied as follows:
(A) first, to pay any
Lender Group Expenses (including cost or expense reimbursements) or indemnities
then due to Agent under the Loan Documents, until paid in full,
(B) second, to pay any
fees or premiums then due to Agent under the Loan Documents until paid in
full,
(C) third, to pay
interest due in respect of all Protective Advances until paid in
full,
(D) fourth, to pay the
principal of all Protective Advances until paid in full,
(E) fifth, ratably, to
pay any Lender Group Expenses (including cost or expense reimbursements) or
indemnities then due to any of the Lenders under the Loan Documents, until paid
in full,
(F) sixth, ratably, to
pay any fees or premiums then due to any of the Lenders under the Loan Documents
until paid in full,
(G) seventh, to pay
interest accrued in respect of the Swing Loans until paid in full,
(H) eighth, to pay the
principal of all Swing Loans until paid in full,
(I) ninth, ratably, to
pay interest accrued in respect of the Advances (other than Protective Advances)
until paid in full,
(J) tenth, ratably, to
pay the principal of all Advances until paid in full,
(K) eleventh, to pay any
other Obligations other than Obligations owed to Defaulting
Lenders,
(L) twelfth, ratably to
pay any Obligations owed to Defaulting Lenders; and
(M) thirteenth, to
Borrower (to be wired to the Designated Account) or such other Person entitled
thereto under applicable law.
(iii) Agent
promptly shall distribute to each Lender, pursuant to the applicable wire
instructions received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided in Section
2.3(e).
(iv) In
each instance, so long as no Application Event has occurred and is continuing,
Section
2.4(b)(i) shall not apply to any payment made by Borrower to Agent and
specified by Borrower to be for the payment of specific Obligations then due and
payable (or prepayable) under any provision of this Agreement or any other Loan
Document.
(v) For
purposes of Section
2.4(b)(ii), “paid in full” of a type of Obligation means payment in cash
or immediately available funds of all amounts owing on account of such type of
Obligation, including interest accrued after the commencement of any Insolvency
Proceeding, default interest, interest on interest, and expense reimbursements,
irrespective of whether any of the foregoing would be or is allowed or
disallowed in whole or in part in any Insolvency Proceeding.
(vi) In
the event of a direct conflict between the priority provisions of this Section 2.4 and any
other provision contained in this Agreement or any other Loan Document, it is
the intention of the parties hereto that such provisions be read together and
construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that
cannot be resolved as aforesaid, if the conflict relates to the provisions of
Section 2.3(g)
and this Section
2.4, then the provisions of Section 2.3(g) shall
control and govern, and if otherwise, then the terms and provisions of this
Section 2.4
shall control and govern.
(c) Reduction of
Commitments.
(i) Commitments. The
Commitments shall terminate on the Maturity Date. Borrower may reduce
the Commitments, without premium or penalty, to an amount (which may be zero)
not less than the sum of (A) the Revolver Usage as of such date, plus (B) the
principal amount of all Advances not yet made as to which a request has been
given by Borrower under Section
2.3(a). Each such reduction shall be in an amount which is not
less than $10,000,000 (unless the Commitments are being reduced to zero and the
amount of the Commitments in effect immediately prior to such reduction are less
than $10,000,000), shall be made by providing not less than 5 Business Days
prior written notice to Agent and shall be irrevocable. Once reduced,
the Commitments may not be increased. Each such reduction of the
Commitments shall reduce the Commitments of each Lender proportionately in
accordance with its Pro Rata Share thereof.
(ii) [Intentionally
Omitted].
(d) Optional
Prepayments.
(i) Advances. Borrower
may prepay the principal of any Advance at any time in whole or in part, without
premium or penalty.
(ii) [Intentionally
Omitted].
(e) Mandatory
Prepayments.
(i) Borrowing Base. If,
at any time, (A) the Revolver Usage on such date exceeds (B) the Borrowing Base
(such excess being referred to as the “Borrowing Base
Excess”), then Borrower shall immediately prepay the Obligations in
accordance with Section 2.4(f)(i) in
an aggregate amount equal to the Borrowing Base Excess.
(ii) [Intentionally
Omitted].
(iii) [Intentionally
Omitted].
(iv) [Intentionally
Omitted].
(v) [Intentionally
Omitted].
(vi) [Intentionally
Omitted].
(f) Application of
Payments.
(i) Each
prepayment pursuant to Section 2.4(e)(i) shall,
(A) so long as no Application Event shall have occurred and be continuing,
be applied, to the outstanding principal amount of the Advances until paid in
full, and (B) if an Application Event shall have occurred and be
continuing, be applied in the manner set forth in Section 2.4(b)(ii).
(ii) [Intentionally
Omitted].
2.5 Overadvances. If, at any time
or for any reason, the amount of Obligations owed by Borrower to the Lender
Group pursuant to Section 2.1 is
greater than any of the limitations set forth in Section 2.1 (an
“Overadvance”),
Borrower shall immediately pay to Agent, in cash, the amount of such excess,
which amount shall be used by Agent to reduce the Obligations in accordance with
the priorities set forth in Section
2.4(b). Borrower promises to pay the Obligations (including
principal, interest, fees, costs, and expenses) in full on the Maturity Date or,
if earlier, on the date on which the Obligations become due and payable pursuant
to the terms of this Agreement.
2.6 Interest
Rates: Rates, Payments, and Calculations.
(a) Interest
Rates. Except as provided in Section 2.6(c), all
Obligations that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof as follows:
(i) if
the relevant Obligation is a LIBOR Rate Loan, at a per annum rate equal to the
LIBOR Rate plus the LIBOR Rate Margin, and
(ii) otherwise,
at a per annum rate equal to the Base Rate plus the Base Rate
Margin.
(b) [Intentionally
Omitted].
(c) Default Rate. Upon
the occurrence and during the continuation of an Event of Default and at the
election of the Required Lenders, all Obligations that have been charged to the
Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof at a per annum rate equal to 2 percentage points above the per
annum rate otherwise applicable thereunder.
(d) Payment. Except to
the extent provided to the contrary in Section 2.10 or Section 2.12(a), all
interest, all fees payable hereunder or under any of the other Loan Documents,
and all costs, expenses, Lender Group Expenses, or other amounts payable
hereunder or under any of the other Loan Documents shall be due and payable, in
arrears, on the first day of each month. Borrower hereby authorizes
Agent, from time to time without prior notice to Borrower, (i) if Borrower does
not pay any interest or scheduled fees (including the fee provided for in Section 2.10(b))
due and payable hereunder or under any other Loan Document within 3 Business
Days of the date of Borrower’s receipt of written notice thereof (which notice
shall be sent by Agent no earlier than the date on which any such amount first
becomes due and payable and shall be sent to the email addresses for the
individuals set forth on Schedule 2.6(d) hereto), to charge to the Loan Account
all such interest and scheduled fees, and (ii) if Borrower does not pay any
unscheduled fees, costs, expenses, Lender Group Expenses, or other amounts due
and payable hereunder or under any other Loan Document within 30 days of the
date of Borrower’s receipt of written notice thereof (which notice shall be sent
by Agent no earlier than the date on which any such amount first becomes due and
payable and shall be sent to the email addresses for the individuals set forth
on Schedule
2.6(d) hereto), to charge to the Loan Account all such unscheduled fees,
costs, expenses, Lender Group Expenses, or other amounts; provided, however, that if such
amounts are not paid and, instead, are charged to the Loan Account they shall be
charged thereto as of the day on which the item was first due and payable
without regard to the applicable delay and such amounts shall accrue interest
from such original date; provided further,
however, that
the applicable delays set forth in the foregoing clauses (i) and (ii) shall not
be applicable (and Agent shall be entitled to immediately charge to the Loan
Account) at any time that an Event of Default has occurred and is continuing
and, if such an Event of Default has occurred and is continuing, Agent shall be
entitled to charge such amounts to the Loan Account on the date when due and
payable hereunder or under any other Loan Document. Any interest,
fees, costs, expenses, Lender Group Expenses, or other amounts payable hereunder
or under any other Loan Document that are charged to the Loan Account shall be
compounded (by being charged to the Loan Account) and shall thereafter
constitute Advances hereunder and shall initially accrue interest at the rate
then applicable to Advances that are Base Rate Loans.
(e) Computation. All
interest and fees chargeable under the Loan Documents shall be computed on the
basis of a 360 day year, in each case, for the actual number of days elapsed in
the period during which the interest or fees accrue. In the event the
Base Rate is changed from time to time hereafter, the rates of interest
hereunder based upon the Base Rate automatically and immediately shall be
increased or decreased by an amount equal to such change in the Base
Rate.
(f) Intent to Limit Charges to Maximum
Lawful Rate. In no event shall the interest rate or rates
payable under this Agreement, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law applicable
hereto. Borrower and the Lender Group, in executing and delivering
this Agreement, intend legally to agree upon the rate or rates of interest and
manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto,
as of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.7 Crediting
Payments.
(a) The
receipt of any payment item by Agent shall not be considered a payment on
account unless such payment item is a wire transfer of immediately available
federal funds made to Agent’s Account or unless and until such payment item is
honored when presented for payment. Should any payment item not be
honored when presented for payment, then Borrower shall be deemed not to have
made such payment and interest shall be calculated
accordingly. Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into Agent’s Account on a Business Day on or before 11:00 a.m.
(California time). If any payment item is received into Agent’s
Account on a non-Business Day or after 11:00 a.m. (California time) on a
Business Day, it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business Day.
(b) [Intentionally
Omitted].
2.8 Designated
Account. Agent is
authorized to make the Advances under this Agreement based upon telephonic or
other instructions received from anyone purporting to be an Authorized Person
or, without instructions, if pursuant to Section
2.6(d). Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrower and made by Agent or the
Lenders hereunder. Unless otherwise agreed by Agent and Borrower, any
Advance or Swing Loan requested by Borrower and made by Agent or the Lenders
hereunder shall be made to the Designated Account.
2.9 Maintenance
of Loan Account; Statements of Obligations. Agent shall
maintain an account on its books in the name of Borrower (the “Loan Account”) on
which Borrower shall be charged with the amount of all Advances (including
Protective Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders
to Borrower or for Borrower’s account and, subject to the delays set forth in
clauses (a) and (b) below (if applicable), with all other payment Obligations
hereunder or under the other Loan Documents. If (a) Borrower does not
pay any interest or scheduled fees (including the fee provided for in Section 2.10(b))
due and payable hereunder or under any other Loan Document within 3 Business
Days of the date of Borrower’s receipt of written notice thereof (which notice
shall be sent by Agent no earlier than the date on which any such amount first
becomes due and payable and shall be sent to the email addresses for the
individuals set forth on Schedule 2.6(d)
hereto), Agent shall be entitled to charge such amounts to the Loan Account, and
(b) Borrower does not pay any unscheduled fees, costs, expenses, Lender Group
Expenses, or other amounts due and payable hereunder or under any other Loan
Document within 30 days of the date of Borrower’s receipt of written notice
thereof (which notice shall be sent by Agent no earlier than the date on which
any such amount first becomes due and payable and shall be sent to the email
addresses for the individuals set forth on Schedule 2.6(d)
hereto), Agent shall be entitled to charge such amounts to the Loan Account;
provided, however, that if such
amounts are not paid and, instead, are charged to the Loan Account they shall be
charged thereto as of the day on which the item was first due and payable
without regard to the applicable delay and such amounts shall accrue interest
from such original date; provided further,
however, that
the applicable delays set forth in the foregoing clauses (a) and (b) shall not
be applicable (and Agent shall be entitled to immediately charge to the Loan
Account) at any time that an Event of Default has occurred and is continuing
and, if such an Event of Default has occurred and is continuing, Agent shall be
entitled to charge such amounts to the Loan Account on the date when due and
payable hereunder or under any other Loan Document. In accordance
with Section
2.7, the Loan Account will be credited with all payments received by
Agent from Borrower or for Borrower’s account. Agent shall render
statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Group Expenses owing (and, if requested by Borrower with
respect to, and after receipt of, a particular statement, reasonable supporting
detail), and such statements, absent manifest error, shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and the Lender Group unless, within 60 days after receipt thereof by
Borrower, Borrower shall deliver to Agent written objection thereto describing
the error or errors contained in any such statements or the lack of any
requested supporting detail.
2.10 Fees. Borrower shall
pay to Agent,
(a) for
the account of Agent, as and when due and payable under the terms of the Fee
Letter, the fees set forth in the Fee Letter.
(b) for
the ratable account of those Lenders with Commitments, on the first day of each
month from and after the date of this Agreement up to the first day of the month
prior to the Payoff Date and on the Payoff Date, an unused line fee in an amount
equal to [***].
2.11 [Intentionally
Omitted].
2.12 LIBOR
Option.
(a) Interest and Interest Payment
Dates. In lieu of having interest charged at the rate based
upon the Base Rate, Borrower shall have the option, subject to Section 2.12(b) below
(the “LIBOR
Option”) to have interest on all or a portion of the Advances be charged
(whether at the time when made (unless otherwise provided herein), upon
conversion from a Base Rate Loan to a LIBOR Rate Loan, or upon continuation of a
LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of interest based upon the LIBOR
Rate. Interest on LIBOR Rate Loans shall be payable on the earliest
of (i) the last day of the Interest Period applicable thereto; (ii) the date on
which all or any portion of the Obligations become due and payable pursuant to
the terms hereof, or (iii) the date on which this Agreement is terminated
pursuant to the terms hereof. On the last day of each applicable
Interest Period, unless Borrower properly has exercised the LIBOR Option with
respect thereto to elect an Interest Period of a different duration or unless
the LIBOR Option is no longer available to Borrower, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert to a LIBOR Rate
Loan having an Interest Period of 1 month. At any time that an Event
of Default has occurred and is continuing, at the written election of the
Required Lenders, Advances shall no longer bear interest at, and Borrower no
longer shall have the option to request that Advances bear interest at, a rate
based upon the LIBOR Rate.
(b) LIBOR Election.
(i) Borrower
may, at any time and from time to time, so long as Borrower has not received a
notice from Agent, after the occurrence and during the continuance of an Event
of Default, of the election of the Required Lenders to terminate the right of
Borrower to exercise the LIBOR Option during the continuance of such Event of
Default, elect to exercise the LIBOR Option by notifying Agent prior to 11:00
a.m. (California time) at least 3 Business Days prior to the commencement of the
proposed Interest Period (the “LIBOR
Deadline”). Notice of Borrower’s election of the LIBOR Option
for a permitted portion of the Advances and an Interest Period pursuant to this
Section shall be made by delivery to Agent of a LIBOR Notice received by Agent
before the LIBOR Deadline, or by telephonic notice received by Agent before the
LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received
by Agent prior to 5:00 p.m. (California time) on the same
day). Promptly upon its receipt of each such LIBOR Notice, Agent
shall provide a copy thereof to each of the affected Lenders.
(ii) Each
LIBOR Notice shall be irrevocable and binding on Borrower. In
connection with each LIBOR Rate Loan, Borrower shall indemnify, defend, and hold
Agent and the Lenders harmless against any loss, cost, or expense actually
incurred by Agent or any Lender as a result of (A) the payment of any principal
of any LIBOR Rate Loan other than on the last day of an Interest Period
applicable thereto (including as a result of an Event of Default), (B) the
conversion of any LIBOR Rate Loan other than on the last day of the Interest
Period applicable thereto, or (C) the failure to borrow, convert, continue or
prepay any LIBOR Rate Loan on the date specified in any
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
LIBOR
Notice delivered pursuant hereto (such losses, costs, or expenses, “Funding
Losses”). A certificate of Agent or a Lender delivered to
Borrower setting forth in reasonable detail any amount or amounts that Agent or
such Lender is entitled to receive pursuant to this Section 2.12
shall be conclusive absent manifest error. Borrower shall pay such
amount to Agent or the Lender, as applicable, within 30 days of the date of its
receipt of such certificate.
(iii) Borrower
shall have not more than 5 LIBOR Rate Loans in effect at any given
time. Borrower only may exercise the LIBOR Option for proposed LIBOR
Rate Loans of at least
$1,000,000.
(c) Conversion. Borrower
may convert LIBOR Rate Loans to Base Rate Loans at any time; provided, however, that in the
event that LIBOR Rate Loans are converted or prepaid on any date that is not the
last day of the Interest Period applicable thereto, including as a result of any
automatic prepayment through the required application by Agent of proceeds of
Borrower’s Collections in accordance with Section 2.4(b) or for
any other reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, Borrower shall indemnify, defend, and hold Agent and the Lenders and
their Participants harmless against any and all Funding Losses in accordance
with Section 2.12
(b)(ii).
(d) Special Provisions Applicable to
LIBOR Rate.
(i) The
LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective
basis to take into account any additional or increased costs to such Lender of
maintaining or obtaining any eurodollar deposits or increased costs, in each
case, due to changes in applicable law occurring subsequent to the commencement
of the then applicable Interest Period, including changes in tax laws (except
changes of general applicability in corporate income tax laws) and changes in
the reserve requirements imposed by the Board of Governors of the Federal
Reserve System (or any successor), excluding the Reserve Percentage, which
additional or increased costs would increase the cost of funding or maintaining
loans bearing interest at the LIBOR Rate. In any such event, the
affected Lender shall give Borrower and Agent notice of such a determination and
adjustment and Agent promptly shall transmit the notice to each other Lender
and, upon its receipt of the notice from the affected
Lender, Borrower may, by notice to such affected Lender (y) require
such Lender to furnish to Borrower a statement setting forth the basis for
adjusting such LIBOR Rate and the method for determining the amount of such
adjustment, or (z) repay the LIBOR Rate Loans with respect to which such
adjustment is made (together with any amounts due under Section
2.12(b)(ii)).
(ii) In
the event that any change in market conditions or any law, regulation, treaty,
or directive, or any change therein or in the interpretation or application
thereof, shall at any time after the date hereof, in the reasonable opinion of
any Lender, make it unlawful or impractical for such Lender to fund or maintain
LIBOR Rate Loans or to continue such funding or maintaining, or to determine or
charge interest rates at the LIBOR Rate, such Lender shall give notice of such
changed circumstances to Agent and Borrower and Agent promptly shall transmit
the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of
such Lender that are outstanding, the Business Day specified in such Lender’s
notice shall be deemed to be the last day of the Interest Period of such LIBOR
Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter
shall accrue interest at the rate then applicable to Base Rate Loans, and (z)
Borrower shall not be entitled to elect the LIBOR Option until such Lender
determines that it would no longer be unlawful or impractical to do
so.
(e) No Requirement of Matched
Funding. Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate.
2.13 Capital
Requirements.
(a) If,
after the date hereof, any Lender determines that (i) the adoption of or change
in any law, rule, regulation or guideline regarding capital or reserve
requirements for banks or bank holding companies, or any change in the
interpretation, implementation, or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender’s or
such holding company’s capital as a consequence of such Lender’s Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender’s or such holding company’s then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity’s capital) by any amount deemed by such Lender to be material, then such
Lender may notify Borrower and Agent thereof. Following receipt of
such notice, Borrower agrees to pay such Lender on demand the amount of such
reduction of return of capital as and when such reduction is determined, payable
within 30 days after presentation by such Lender of a statement in the amount
and setting forth in reasonable detail such Lender’s calculation thereof and the
assumptions upon which such calculation was based (which statement shall be
deemed true and correct absent manifest error). In determining such
amount, such Lender may use any reasonable averaging and attribution
methods. Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s right to demand such compensation; provided that
Borrower shall not be required to compensate a Lender pursuant to this Section
for any reductions in return incurred more than 30 days prior to the date that
such Lender notifies Borrower of such law, rule, regulation or guideline giving
rise to such reductions and of such Lender’s intention to claim compensation
therefor; provided further that if such
claim arises by reason of the adoption of or change in any law, rule, regulation
or guideline that is retroactive, then the 30-day period referred to above shall
be extended to include the period of retroactive effect thereof.
(b) If
any Lender requests additional or increased costs referred to in Section 2.12(d)(i) or
amounts under Section
2.13(a) (any such Lender, an “Affected Lender”),
then such Affected Lender shall use reasonable efforts to promptly designate a
different one of its lending offices or to assign its rights and obligations
hereunder to another of its offices or branches, if (i) in the reasonable
judgment of such Affected Lender, such designation or assignment would eliminate
or reduce amounts payable pursuant to Section 2.12(d)(i) or
Section
2.13(a), as applicable, and (ii) in the reasonable judgment of such
Affected Lender, such designation or assignment would not subject it to any
material unreimbursed cost or expense and would not otherwise be materially
disadvantageous to it. Borrower agrees to pay all reasonable
out-of-pocket costs and expenses incurred by such Affected Lender in connection
with any such designation or assignment. If, after such reasonable
efforts, such Affected Lender does not so designate a different one of its
lending offices or assign its rights to another of its offices or branches so as
to eliminate Borrower’s obligation to pay any future amounts to such Affected
Lender pursuant to Section 2.12(d)(i) or
Section
2.13(a), as applicable, then Borrower (without prejudice to any amounts
then due to such Affected Lender under Section 2.12(d)(i) or
Section
2.13(a), as applicable) may, unless prior to the effective date of any
such assignment the Affected Lender withdraws its request for such additional
amounts under Section
2.12(d)(i) or Section 2.13(a), as
applicable, may seek a substitute Lender reasonably acceptable to Agent to
purchase the Obligations owed to such Affected Lender and such Affected Lender’s
Commitments hereunder (a “Replacement Lender”),
and if such Replacement Lender agrees to such purchase, such Affected Lender
shall assign to the Replacement Lender its Obligations and Commitments, pursuant
to an Assignment and Acceptance Agreement, and upon such purchase by the
Replacement Lender, such Replacement Lender shall be deemed to be a “Lender” for
purposes of this Agreement and such Affected Lender shall cease to be a “Lender”
for purposes of this Agreement.
3. CONDITIONS; TERM OF
AGREEMENT.
3.1 Conditions
Precedent to the Initial Extension of Credit. The obligation of
each Lender to make its initial extension of credit provided for hereunder is
subject to the fulfillment, to the satisfaction of Agent and each Lender, of
each of the conditions precedent set forth on Schedule 3.1 (the
making of such initial extension of credit by a Lender being conclusively deemed
to be its satisfaction or waiver of the conditions precedent).
3.2 Conditions
Precedent to all Extensions of Credit. The obligation of
the Lender Group (or any member thereof) to make any Advances hereunder (or to
extend any other credit hereunder) at any time shall be subject to the following
conditions precedent:
(a) the
representations and warranties of Borrower contained in this Agreement or in the
other Loan Documents shall be true and correct in all material respects (except
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof) on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate to an earlier date); and
(b) no
Default or Event of Default shall have occurred and be continuing on the date of
such extension of credit, nor shall either result from the making
thereof.
3.3 Maturity. This Agreement
shall continue in full force and effect for a term ending on March 31, 2014 (the
“Maturity
Date”). The foregoing notwithstanding, the Lender Group, upon
the election of the Required Lenders, shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.4 Effect of
Maturity. On the Maturity
Date, all commitments of the Lender Group to provide additional credit hereunder
shall automatically be terminated and all of the Obligations immediately shall
become due and payable without notice or demand and Borrower shall be required
to repay all of the Obligations in full. No termination of the
obligations of the Lender Group (other than payment in full of the Obligations
and termination of the Commitments) shall relieve or discharge Borrower of its
duties, obligations, or covenants hereunder or under any other Loan Document and
Agent’s Liens in the Collateral shall continue to secure the Obligations and
shall remain in effect until all Obligations have been paid in full and the
Commitments have been terminated. When all of the Obligations have
been paid in full and the Lender Group’s obligations to provide additional
credit under the Loan Documents have been terminated irrevocably, Agent will, at
Borrower’s sole expense, execute and deliver any termination statements, lien
releases, discharges of security interests, and other similar discharge or
release documents (and, if applicable, in recordable form) as are reasonably
necessary to release, as of record, Agent’s Liens and all notices of security
interests and liens previously filed by Agent.
3.5 Early
Termination by Borrower. Borrower has the
option, at any time upon 5 Business Days prior written notice to Agent, to
terminate this Agreement and terminate the Commitments hereunder by repaying to
Agent all of the Obligations in full.
4. REPRESENTATIONS AND
WARRANTIES.
In order
to induce the Lender Group to enter into this Agreement, Borrower makes the
following representations and warranties to the Lender Group which shall be
true, correct, and complete, in all material respects (except that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof), as of the Closing Date, and shall be true, correct, and complete, in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text
thereof),
as of the date of the making of each Advance (or other extension of credit) made
thereafter, as though made on and as of the date of such Advance (or other
extension of credit) (except to the extent that such representations and
warranties relate solely to an earlier date) and such representations and
warranties shall survive the execution and delivery of this
Agreement:
4.1 Due
Organization and Qualification; No Subsidiaries.
(a) Borrower
(i) is duly organized and existing and in good standing under the laws of the
jurisdiction of its organization, (ii) is qualified to do business in any state
where the failure to be so qualified could reasonably be expected to result in a
Material Adverse Change, and (iii) has all requisite power and authority to own
and operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents to which it is a
party and to carry out the transactions contemplated thereby.
(b) Borrower
is not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital Stock or any security
convertible into or exchangeable for any of its capital Stock.
(c) Borrower
has no Subsidiaries.
4.2 Due
Authorization; No Conflict.
(a) The
execution, delivery, and performance by Borrower of the Loan Documents to which
it is a party have been duly authorized by all necessary action on the part of
Borrower.
(b) The
execution, delivery, and performance by Borrower of the Loan Documents to which
it is a party do not and will not (i) violate any material provision of federal,
state, or local law or regulation applicable to Borrower, the Governing
Documents of Borrower, or any order, judgment, or decree of any court or other
Governmental Authority binding on Borrower, (ii) conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both) a default
under any Material Contract of Borrower except to the extent that any such
conflict, breach or default could not individually or in the aggregate
reasonably be expected to have a Material Adverse Change, (iii) result in
or require the creation or imposition of any Lien of any nature whatsoever upon
any assets of Borrower, other than Permitted Liens, or (iv) require any approval
of Borrower’s interestholders or any approval or consent of any Person under any
Material Contract of Borrower, other than consents or approvals that have been
obtained and that are still in force and effect and except, in the case of
Material Contracts, for consents or approvals, the failure to obtain could not
individually or in the aggregate reasonably be expected to cause a Material
Adverse Change.
4.3 Governmental
Consents. The execution,
delivery, and performance by Borrower of the Loan Documents to which Borrower is
a party and the consummation of the transactions contemplated by the Loan
Documents do not and will not require any registration with, consent, or
approval of, or notice to, or other action with or by, any Governmental
Authority, other than registrations, consents, approvals, notices, or other
actions that have been obtained and that are still in force and effect and
except for filings and recordings with respect to the Collateral to be made, or
otherwise delivered to Agent for filing or recordation, as of the Closing
Date.
4.4 Binding
Obligations; Perfected Liens.
(a) Each
Loan Document has been duly executed and delivered by Borrower that is a party
thereto and is the legally valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its respective terms, except as enforcement
may be limited by equitable principles or
by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or limiting creditors’ rights generally.
(b) Agent’s
Liens are validly created, perfected (other than (i) in respect of motor
vehicles that are subject to a certificate of title and as to which Agent has
not caused its Lien to be noted on the applicable certificate of title, and (ii)
any Deposit Accounts and Securities Accounts not subject to a Control Agreement
as permitted by Section 6.11, and
subject only to the filing of financing statements in the appropriate filing
offices and the recordation of the Engine and Spare Parts Security Agreement
with the FAA), and first priority Liens, subject only to Permitted Liens which
by operation of law or contract would have priority over the Liens securing the
Obligations.
4.5 Title to
Assets; No Encumbrances. Borrower has good
and marketable title to all of its personal property assets that constitute
Collateral and that are reflected in the most recent financial statements
delivered pursuant to Section 5.1, in each
case except for assets disposed of since the date of such financial statements
to the extent permitted hereby.
4.6 Jurisdiction
of Organization; Location of Chief Executive Office; Organizational
Identification Number; Commercial Tort Claims.
(a) The
name of (within the meaning of Section 9-503 of the Code) and jurisdiction of
organization of Borrower is set forth on Schedule 4.6 (as such
Schedule may be updated from time to time to reflect changes resulting from
transactions permitted under this Agreement).
(b) The
chief executive office of Borrower is located at the address indicated on Schedule 4.6 (as such
Schedule may be updated from time to time to reflect changes resulting from
transactions permitted under this Agreement).
(c) Borrower’s
tax identification number and organizational identification number, if any, are
identified on Schedule
4.6 (as such Schedule may be updated from time to time to reflect changes
resulting from transactions permitted under this Agreement).
4.7 Litigation.
(a) There
are no actions, suits, or proceedings pending or, to the knowledge of Borrower,
after due inquiry, threatened in writing against Borrower that either
individually or in the aggregate could reasonably be expected to result in a
Material Adverse Change.
(b) Schedule 4.7(b) sets
forth a complete and accurate description, with respect to each of the actions,
suits, or proceedings with asserted liabilities in excess of, or that could
reasonably be expected to result in liabilities in excess of, [***] that, as of
the Closing Date, is pending or, to the knowledge of Borrower, after due
inquiry, threatened against Borrower, of (i) the parties to such actions, suits,
or proceedings, (ii) the nature of the dispute that is the subject of such
actions, suits, or proceedings, (iii) the status, as of the Closing Date, with
respect to such actions, suits, or proceedings, and (iv) whether any liability
of Borrower in connection with such actions, suits, or proceedings is covered by
insurance.
4.8 Compliance
with Laws. Borrower
(a) is not in violation of any applicable laws, rules, regulations,
executive orders, or codes (including Environmental Laws) that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Change, or (b) is not subject to or in default with respect to any final
judgments, writs, injunctions, decrees, rules or regulations of any court or any
federal,
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse
Change.
4.9 No
Material Adverse Change. All historical
financial statements relating to Borrower that have been delivered by Borrower
to Agent have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and present fairly in all material respects,
Borrower’s financial condition as of the date thereof and results of operations
for the period then ended. Since September 30, 2009, no event,
circumstance, or change has occurred that has or could reasonably be expected to
result in a Material Adverse Change with respect to Borrower.
4.10 Fraudulent
Transfer.
(a) Borrower
is Solvent.
(b) No
transfer of property is being made by Borrower and no obligation is being
incurred by Borrower in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of Borrower.
4.11 Employee
Benefits; Benefit Arrangements.
(a) Employee
Benefits. Borrower and its ERISA Affiliates do not maintain,
sponsor, contribute to, administer, or have any liability with respect to any
Foreign Pension Plan or Multiemployer Plan. Schedule 4.11 sets
forth each Benefit Plan of Borrower or its ERISA Affiliates. Except
as otherwise set forth in Schedule 4.11, (i)
each Benefit Plan (and each related trust, insurance contract, or fund) is and
has at all times been operated and maintained in material compliance with its
terms and with all applicable laws, including ERISA and the IRC, (ii) each
Benefit Plan (and each related trust, if any) has received a determination
letter from the Internal Revenue Service to the effect that it meets the
requirements of Sections 401(a) and 501(a) of the IRC, (iii) no ERISA Event has
occurred that could reasonably be expected to result in liabilities in excess of
[***], (iv) no Benefit Plan has an Unfunded Benefit Liability in an amount that
could reasonably be expected to result in a Material Adverse Change, (iv) except
as otherwise required by the termination and funding requirements of ERISA and
the IRC and by any applicable collective bargaining agreements, Borrower and
each of its ERISA Affiliates may, at any time and without material liability,
terminate or cease making contributions to any “employee benefit plan,” within
the meaning of Section 3(3) of ERISA, to which such Person maintains or makes
(or has any liability to make) contributions, or with respect to which such
Person has any liability and (v) each group health plan (as defined in Section
607(l) of ERISA or Section 4980B(g)(2) of the IRC) that covers or has covered
employees or former employees of Borrower or any of its ERISA Affiliates has at
all times been operated in material compliance with the provisions of Part 6 of
subtitle B of Title I of ERISA and Section 4980B of the IRC.
(b) Benefit
Arrangements.
(i) All
liabilities under the Benefit Arrangements are (A) funded to at least the
minimum level required by applicable law including, but not limited to, ERISA
and the IRC or, if higher, to the level required by the terms of any applicable
collective-bargaining agreements, (B) insured with a reputable insurance
company, (C) provided for or recognized in the financial statements most
recently delivered to Agent pursuant to Section 5.1 hereof,
or (D) estimated in the formal notes to the financial statements most recently
delivered to Agent pursuant to Section 5.1 hereof,
where such failure
to fund, insure, provide for, recognize or estimate the liabilities arising
under such arrangements could reasonably be expected to result in a Material
Adverse Change.
(ii) There
are no circumstances that may give rise to a liability in relation to the
Benefit Arrangements that are not funded, insured, provided for, recognized or
estimated in the manner described in clause (i) above that could reasonably be
expected to result in a Material Adverse Change.
(iii) Borrower
and each of its ERISA Affiliates is in compliance with all applicable laws,
trust documentation and contracts relating to the Benefit Arrangements (and each
related trust, insurance contract, or fund), except to the extent that the
non-compliance therewith could not reasonably be expected to result in a
Material Adverse Change.
4.12 Environmental
Condition. Except as set
forth on Schedule
4.12, (a) to Borrower’s knowledge, neither Borrower’s properties or
assets has ever been used by Borrower or by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials, where such disposal, production, storage, handling,
treatment, release or transport was in material violation of any applicable
Environmental Law, (b) to Borrower’s knowledge, after due inquiry, Borrower’s
properties or assets has not ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, (c) Borrower has not received notice that a Lien arising under
any Environmental Law has attached to any revenues or to any Real Property owned
or operated by Borrower, and (d) neither Borrower nor any of its facilities or
operations is subject to any outstanding written order, consent decree, or
settlement agreement with any Person relating to any Environmental Law or
Environmental Liability that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Change.
4.13 Intellectual
Property. To Borrower’s
knowledge, Borrower owns, or hold licenses in, all trademarks, trade names,
copyrights, patents, and licenses that are necessary to the conduct of its
business as currently conducted.
4.14 Leases. Borrower enjoys
peaceful and undisturbed possession under all leases material to its business
and to which it is a party or under which it is operating, and, subject to
Permitted Protests, all of such material leases are valid and subsisting and, to
Borrower’s knowledge, no material default by Borrower exists under any of
them.
4.15 Deposit
Accounts and Securities Accounts. Set forth on
Schedule 4.15
(as updated pursuant to the provisions of the Security Agreement from time to
time) is a listing of all of Borrower’s Deposit Accounts into which the proceeds
of Accounts that constitute so-called “corporate receivables”, so-called
“general traffic receivables”, so-called “service sales receivables” or
so-called “travel agent receivables” or Interline Receivables or Mileage Plan
Receivables are deposited (or are expected to be deposited) (excluding, in each
case, any Excluded Accounts), including, with respect to each bank (a) the name
and address of such bank, and (b) the account numbers of such Deposit Accounts
maintained with bank. No proceeds of Borrower’s Accounts that
constitute so-called “corporate receivables”, so-called “general traffic
receivables”, so-called “service sales receivables” or so-called “travel agent
receivables” or Interline Receivables or Mileage Plan Receivables are deposited
(or are expected to be deposited) (excluding, in each case, any Excluded
Accounts) into any Securities Account.
4.16 Complete
Disclosure. All factual
information taken as a whole (other than forward-looking information and
projections and information of a general economic nature and general information
about Borrower’s industry) furnished by or on behalf of Borrower in writing to
Agent or any Lender (including all information contained in the Schedules hereto
or in the other Loan Documents) for purposes of or in connection with this
Agreement or the other Loan Documents, and all other such factual information
taken as a whole (other than forward-looking information and projections and
information of a general economic nature
and
general information about Borrower’s industry) hereafter furnished by or on
behalf of Borrower in writing to Agent or any Lender will be, true and accurate,
in all material respects, on the date as of which such information is dated or
certified and not incomplete by omitting to state any fact necessary to make
such information (taken as a whole) not misleading in any material respect at
such time in light of the circumstances under which such information was
provided. The Projections delivered to Agent on November 17, 2009
represent, and as of the date on which any other Projections are delivered to
Agent, such additional Projections represent, Borrower’s good faith estimate, on
the date such Projections are delivered, of Borrower’s future performance for
the periods covered thereby based upon assumptions believed by Borrower to be
reasonable at the time of the delivery thereof to Agent (it being understood
that such Projections are subject to uncertainties and contingencies, many of
which are beyond the control of Borrower, that no assurances can be given that
such Projections will be realized, and that actual
results may differ in a material manner from such
Projections).
4.17 Material
Contracts. Set forth on Schedule 4.17 (as
such Schedule shall automatically be deemed updated from time to time when new
or amended Material Contracts are filed with the SEC) is a reasonably detailed
description of the Material Contracts of Borrower as of the most recent date on
which Borrower provided its Compliance Certificate pursuant to Section
5.1.
4.18 Patriot
Act. To the extent
applicable, Borrower is in compliance, in all material respects, with the
(a) Trading with the Enemy Act, as amended, and each of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (b) Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act
of 2001) (the “Patriot
Act”). No part of the proceeds of the loans made hereunder
will be used by Borrower or any of its Affiliates, directly or indirectly, for
any payments to any governmental official or employee, political party, official
of a political party, candidate for political office, or anyone else acting in
an official capacity, in order to obtain, retain or direct business or obtain
any improper advantage, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended.
4.19 Indebtedness. Set forth on
Schedule 4.19
is a true and complete list of all Indebtedness of Borrower outstanding
immediately prior to the Closing Date that is to remain outstanding immediately
after giving effect to the closing hereunder on the Closing Date and such
Schedule accurately sets forth the aggregate principal amount of such
Indebtedness as of the Closing Date. The Chattel Mortgage dated as of
May 1, 1962 between Borrower, as mortgagor, and Home Life Insurance Company and
State Mutual Life Assurance Company of America, jointly as mortgagees, which was
recorded by the Federal Aviation Administration on May 17, 1962 and assigned
Conveyance No. A198036, as supplemented (the “Chattel Mortgage”),
is no longer of any force or effect. Borrower is not indebted to Home
Life Insurance Company, State Mutual Life Assurance Company, or either of their
respective successors or assigns under such Chattel Mortgage.
4.20 Payment
of Taxes. Except as
otherwise permitted under Section 5.5, all tax
returns and reports of Borrower required to be filed by it have been timely
filed, and all taxes shown on such tax returns to be due and payable and all
assessments, fees and other governmental charges upon Borrower or upon its
assets, income, businesses and franchises that are due and payable have been
paid when due and payable. Borrower has made adequate provision in
accordance with GAAP for all taxes not yet due and payable. Borrower
knows of no proposed tax assessment against Borrower that is not being actively
contested by Borrower diligently, in good faith, and by appropriate proceedings;
provided such
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
4.21 Margin
Stock. Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin
Stock. No part of the proceeds of the loans made to Borrower will be
used to purchase or carry any such Margin Stock or to extend credit to others
for the purpose of purchasing or carrying any such margin stock or for any
purpose that violates
the provisions of Regulation T, U or X of the Board of Governors of the United
States Federal Reserve.
4.22 Governmental
Regulation. Borrower is not
subject to regulation under the Federal Power Act or the Investment Company Act
of 1940 or under any other federal or state statute or regulation which may
limit its ability to incur Indebtedness or which may otherwise render all or any
portion of the Obligations unenforceable. Borrower is not a
“registered investment company” or a company “controlled” by a “registered
investment company” or a “principal underwriter” of a “registered investment
company” as such terms are defined in the Investment Company Act of
1940.
4.23 OFAC. Borrower is not
in violation of any of the country or list based economic and trade sanctions
administered and enforced by OFAC. Borrower (a) is not a Sanctioned
Person or a Sanctioned Entity, (b) does not have its assets located in
Sanctioned Entities, or (c) does not derive revenues from investments in, or
transactions with Sanctioned Persons or Sanctioned Entities. No
proceeds of any loan hereunder will be used to fund any operations in, finance
any investments or activities in, or make any payments to, a Sanctioned Person
or a Sanctioned Entity.
4.24 Employee
and Labor Matters. Except as set forth on Schedule 4.24, there
is (i) no unfair labor practice complaint pending or, to the knowledge of
Borrower, threatened against Borrower before any Governmental Authority and no
grievance or arbitration proceeding pending or threatened against Borrower which
arises out of or under any collective bargaining agreement and that could
reasonably be expected to result in a material liability, (ii) no strike, labor
dispute, slowdown, stoppage or similar action or grievance pending or threatened
in writing against Borrower that could reasonably be expected to result in a
material liability, or (iii) to the knowledge of Borrower, after due inquiry, no
union representation question existing with respect to the employees of Borrower
and no union organizing activity taking place with respect to any of the
employees of Borrower. Borrower has not incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act or
similar state law, which remains unpaid or unsatisfied. The hours
worked and payments made to employees of Borrower have not been in violation of
the Fair Labor Standards Act or any other applicable legal requirements, except
to the extent such violations could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change. All
material payments due from Borrower on account of wages and employee health and
welfare insurance and other benefits have been paid or accrued as a liability on
the books of Borrower, except where the failure to do so could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Change.
4.25 PDP
Facility and Bank Facility Documents.
(a) As
of the Closing Date, Borrower has delivered to Agent a complete and correct copy
of the Bank Facility Documents, including all schedules and exhibits
thereto. Borrower is not in default in the performance or compliance
with any provisions of the Bank Facility Documents.
(b) As
of the Closing Date, Borrower has made available to Agent a complete and correct
copy of the PDP Facility Documents, including all schedules and exhibits
thereto. Borrower is not in default in the performance or compliance
with any provisions of the PDP Facility Documents.
(c) To
Borrower’s knowledge, the Bank Facility Documents comply in all material
respects with all applicable laws. The Bank Facility Documents are in
full force and effect as of the Closing Date and have not been terminated,
rescinded or withdrawn as of such date.
(d) To
Borrower’s knowledge, the PDP Facility Documents comply in all material respects
with all applicable laws. The PDP Facility Documents are in full
force and effect as of the Closing Date and have not been terminated, rescinded
or withdrawn as of such date.
4.26 Eligible
Accounts. As to each
Receivable that is identified by Borrower as an Eligible Account in a Borrowing
Base Certificate submitted to Agent, such Receivable is (a) a bona fide
existing
payment
obligation of the applicable Account Debtor created by the rendition of services
to such Account Debtor or the sale of mileage awards, miles, or credits, in each
case, in the ordinary course of Borrower’s business, (b) owed to Borrower
without any known defenses, disputes, offsets, counterclaims, or rights of
return or cancellation, and (c) not excluded as ineligible by virtue of one or
more of the excluding criteria (other than Agent-discretionary criteria) set
forth in the definition of Eligible Accounts.
4.27 Spare
Parts.
(a) Borrower
keeps correct and accurate records itemizing and describing the type,
serviceability, and quantity of its Spare Parts. In the case of Spare
Parts identified by Borrower as an Eligible Extendable or Eligible Replaceable
Spare Part, as applicable, in the most recent Borrowing Base Certificate
submitted to Agent, Borrower has full legal and beneficial ownership to such
Spare Parts (other than those disposed of since such date to the extent
permitted hereunder), free and clear of all Liens (other than non-consensual
Permitted Liens).
(b) Each
Spare Part that is identified by Borrower as an Eligible Expendable or Eligible
Replaceable Spare Part, as applicable, in the most recent Borrowing Base
Certificate submitted to Agent is, as of the date of such Borrowing Base
Certificate (i) of good and merchantable quality, free from material defects,
serviceable in accordance with the Maintenance Program, in good operating
condition and ready for immediate use or operation in accordance with the
Maintenance Program and has all required FAA serviceability tags or records
applicable thereto and, if required by the FAA or the Maintenance Program, back
to birth records and all other documents required by the Maintenance Program,
(ii) not excluded as ineligible by virtue of one or more of the excluding
criteria set forth in the definition of Eligible Expendables or Eligible
Replaceable Spare Parts, as applicable, and (iii) accurately described in such
Borrowing Base Certificate (including by manufacturer’s serial number or
manufacturer’s part number, as applicable, if a serialized Spare Part that
Borrower customarily tracks by serial number, and location).
(c) Except
to the extent permitted by Section 5.17(b), the
Spare Parts of Borrower are in the possession and control of Borrower, used or
held for use in Borrower’s business, and only located at the locations
identified on Schedule
4.27 (as such Schedule may be updated pursuant to Section
5.17(b)).
(d) Schedule 1.1(S) of
the Engine and Spare Parts Security Agreement contains a true and complete
summary description by type and location of all of the Spare Parts owned by
Borrower that are located in the United States (other than Spare Parts that are
specifically excluded from Schedule 1.1(S)
pursuant to the terms of the Engine and Spare Parts Security Agreement) as of
each date that this representation and warranty is given. The Spare
Parts located in the United States are primarily maintained for the purposes of
installing such Spare Parts on Aircraft, Engines, or Appliances operated by
Borrower.
(e) Borrower
possesses all necessary certificates, permits, rights, authorizations and
concessions and consents which are material to the repair, refurbishment, or
overhaul of any of the Spare Parts (to the extent Borrower performs any of such
actions) or to the maintenance, use, operation, or sale of any of the Spare
Parts.
(f) Borrower
uses, stores, maintains, overhauls, repairs, and refurbishes (or causes a duly
authorized FAA repair station or overhaul vendor to maintain, overhaul, repair,
and refurbish) all Spare Parts and maintains books and records with respect
thereto in compliance with the material requirements of applicable law
(including the provision of all required FAA serviceability tags or records
where applicable) and with the Maintenance Program, except for such requirements
of applicable law the validity or applicability of which are being protested by
Borrower so long as (i) such protest is instituted promptly and prosecuted
diligently by Borrower in good faith, (ii) there is no material risk of any
sale,
forfeiture,
or loss of any Spare Part or diminution in value of any Spare Part as a result
of such contest, (iii) there is no risk of any criminal liability, or any
material civil liability, for Borrower, Agent, or any of the Lenders as a result
of such contest, (iv) Agent is satisfied that while such contest is pending,
there is no impairment of the enforceability, validity, or priority of any of
the Agent’s Liens on the Spare Parts, and (v) there is no material risk of any
adverse affect on the ownership interest of Borrower in such Spare
Part.
4.28 Ground
Service Equipment and Engines.
(a) Borrower
keeps correct and accurate records itemizing and describing the type and
quantity of its Ground Service Equipment and the Designated
Engines. In the case of Ground Service Equipment and Engines
identified by Borrower as an item of Eligible Ground Service Equipment or an
Eligible Engine, as applicable, in the most recent Borrowing Base Certificate
submitted to Agent, Borrower has full legal and beneficial ownership to such
Ground Service Equipment and Engines (other than assets that have been disposed
of since the date of such Borrowing Base Certificate if and so long as the
disposition of such assets was not prohibited hereby), free and clear of all
Liens (other than non-consensual Permitted Liens).
(b) Each
item of Ground Service Equipment that is identified by Borrower as an item of
Eligible Ground Service Equipment in the most recent Borrowing Base Certificate
submitted to Agent is, as of the date of such Borrowing Base Certificate (i) of
good and merchantable quality and in good operating condition (except for those
items of Eligible Ground Service Equipment that are being repaired so long as
the applicable repairs are routine repairs that are not expected to take more
than a normal service period to complete), (ii) not excluded as ineligible by
virtue of one or more of the excluding criteria set forth in the definition of
Eligible Ground Service Equipment, and (iii) accurately described in such
Borrowing Base Certificate (including by manufacturer’s serial number or
manufacturer’s part number, as applicable, if a serialized item of Ground
Service Equipment that Borrower customarily tracks by serial number, location,
and, to the knowledge of a Responsible Officer of Borrower, whether the subject
of a certificate of title).
(c) Each
Engine that is identified by Borrower as an Eligible Engine in the most recent
Borrowing Base Certificate submitted to Agent is, as of the date of such
Borrowing Base Certificate (i) either (A) of good and merchantable quality, free
from defects, serviceable in accordance with the Maintenance Program, in good
operating condition and ready for immediate use or operation in accordance with
the Maintenance Program and has all required FAA serviceability tags or records
applicable thereto and, if required by the FAA or the Maintenance Program, back
to birth records and all other documents required by the Maintenance Program or
(B) following customary repairs that are not expected to take more than a normal
service period to complete, will be of good and merchantable quality, free from
defects, serviceable in accordance with the Maintenance Program, in good
operating condition and ready for immediate use or operation in accordance with
the Maintenance Program and has all required FAA serviceability tags or records
applicable thereto and, if required by the FAA or the Maintenance Program, back
to birth records and all other documents required by the Maintenance Program,
(ii) not excluded as ineligible by virtue of one or more of the excluding
criteria set forth in the definition of Eligible Engines, and
(iii) accurately described in such Borrowing Base Certificate (including by
manufacturer’s serial number).
(d) Except
to the extent permitted by Section 5.18, the
Ground Service Equipment is in the possession and control of Borrower, is used
or held for use in Borrower’s business, and is stored at the locations
identified on Schedule
4.28(d) (as such Schedule may be updated pursuant to Section
5.18).
(e) Except
to the extent permitted by Section 5.18, the
Designated Engines are in the possession and control of Borrower, are used or
held for use in Borrower’s business, and are stored at the locations identified
on Schedule
4.28(e) (as such Schedule may be updated pursuant to Section
5.18).
(f) Except
for those Designated Engines that have been sold, leased, or disposed of
pursuant to a Permitted Exchange, Schedule D-2 contains
a true and complete summary description by type and serial number of the
Designated Engines and, unless such Designated Engines have been sold, leased,
or disposed of pursuant to a Permitted Lease or a Permitted Exchange, unless
such Designated Engines are attached to an Aircraft owned or leased by Borrower
pursuant to a Permitted Engine Installation, or unless such Designated Engines
are out for repair, such Engines are located at the locations identified on
Schedule
4.28(e)
(g) Borrower
possesses all necessary certificates, permits, rights, authorizations and
concessions and consents which are material to the repair, refurbishment, or
overhaul of any of the Designated Engines (to the extent Borrower performs any
of such actions) or to the maintenance, use, operation, or sale of any of such
Engines.
(h) Borrower
uses, stores, maintains, overhauls, repairs, and refurbishes (or causes a duly
authorized FAA repair station to maintain, overhaul, repair, and refurbish) all
of the Designated Engines and maintains books and records with respect thereto
in compliance with the material requirements of applicable law (including the
provision of all required FAA serviceability tags or records where applicable)
and with the Maintenance Program, except for such requirements of applicable law
the validity or applicability of which are being protested by Borrower so long
as (i) such protest is instituted promptly and prosecuted diligently by Borrower
in good faith, (ii) there is no material risk of any sale, forfeiture, or loss
of any such Engine or diminution in value of any such Engine as a result of such
contest, (iii) there is no risk of any criminal liability, or any material civil
liability, for Borrower, Agent, or any of the Lenders as a result of such
contest, (iv) Agent is satisfied that while such contest is pending, there is no
impairment of the enforceability, validity, or priority of any of the Agent’s
Liens on such Engines, and (v) there is no material risk of any adverse affect
on the ownership interest of Borrower in such Engines.
4.29 Air
Carrier. Borrower is a
Certificated Air Carrier. Borrower possesses all other necessary
certificates, franchises, air carrier and other licenses, permits, rights,
authorizations and concessions and consents which are material to the operation
of Aircraft operated by it and routes flown by it and the conduct of its
business and operations as currently conducted.
5. AFFIRMATIVE
COVENANTS.
Borrower
covenants and agrees that, until termination of all of the Commitments and
payment in full of the Obligations, Borrower shall comply with each of the
following:
5.1 Financial
Statements, Reports, Certificates. Deliver to Agent,
with copies to each Lender, each of the financial statements, reports, and other
items set forth on Schedule 5.1 no later
than the times specified therein. In addition, Borrower agrees to
maintain a system of accounting that enables Borrower to produce financial
statements in accordance with GAAP. Borrower shall also (a) keep a
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to its sales, and (b) maintain its billing
systems/practices as approved by Agent prior to the Closing Date and shall only
make material modifications thereto if such modifications comply with GAAP and
are not materially adverse to the interests of the Lenders or if such
modifications are required to comply with Accounting Changes or applicable law
(including the rules and regulations of the SEC).
5.2 Collateral
Reporting. Provide Agent
(and if so requested by Agent, with copies for each Lender) with each of the
reports set forth on Schedule 5.2 at the
times specified therein. In addition, Borrower agrees to use commercially
reasonable efforts in cooperation with Agent to facilitate and implement a
system of electronic collateral reporting in order to provide electronic
reporting of each of the items set forth on such Schedule.
5.3 Existence. Except as
otherwise permitted under Section 6.3 or Section 6.4, at all
times maintain and preserve in full force and effect its existence (including
being in good standing in its jurisdiction of organization) and all rights and
franchises, licenses and permits material to its business; provided, however, that
Borrower shall not be required to preserve any such right or franchise, licenses
or permits if Borrower’s Responsible Officers determine that the preservation
thereof is no longer desirable in the conduct of the business of Borrower and
that the loss thereof is not disadvantageous in any material respect to Borrower
or to the Lenders.
5.4 Maintenance
of Properties. Maintain and
preserve all of its assets that are necessary or useful in the proper conduct of
its business in good working order and condition, ordinary wear, tear, and
casualty excepted and Permitted Dispositions excepted, and comply with the
material provisions of all material leases to which it is a party as lessee, so
as to prevent the loss or forfeiture thereof, unless such provisions are the
subject of a Permitted Protest.
5.5 Taxes. Cause all
assessments and taxes imposed, levied, or assessed against Borrower or any of
its assets or in respect of any of its income, businesses, or franchises to be
paid in full, before delinquency or before the expiration of any extension
period, except to the extent (a) the validity of such assessment or tax shall be
the subject of a Permitted Protest or (b) such assessments or taxes do not
exceed $250,000 in the aggregate at any one time. Borrower
will make timely payment or deposit of all tax payments and withholding taxes
required of it and them by applicable laws, including those laws concerning
F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
taxes.
5.6 Insurance. At Borrower’s
expense, maintain insurance respecting Borrower’s assets wherever located,
covering loss or damage by fire, theft, explosion, and all other hazards and
risks as ordinarily are insured against by other Persons engaged in the same or
similar businesses (including all-risk ground coverage of Borrower’s Spare
Parts, Designated Engines, and Ground Service Equipment). Borrower
also shall maintain general liability, aircraft public liability insurance
(including (i) passenger legal liability, and (ii) if such insurance is then
generally carried by major United States air carriers, aircraft war risk and
allied perils insurance in accordance with London form AVN52E (as in effect on
the date hereof or in accordance with the FAA’s Chapter 443 Aviation Insurance
Policy as in effect on the date hereof) or its equivalent form), cargo liability
insurance, and war risk and allied perils hull (including confiscation,
expropriation, nationalization and seizure by a government other than the United
States), terrorist and hijacking insurance, product liability insurance,
director’s and officer’s liability insurance, fiduciary liability insurance, and
employment practices liability insurance, as well as insurance against larceny,
embezzlement, and criminal misappropriation. All such policies of
insurance shall be with creditworthy, responsible and reputable insurance
companies and in such amounts as is carried generally in accordance with sound
business practice by companies in similar businesses similarly situated and
located (it being understood that the insurance coverage reflected on the
certificates of insurance delivered to Agent on the Closing Date is acceptable
to Agent. All deductibles shall be in an amount reasonably
satisfactory to Agent (it being understood that the deductibles reflected on the
certificates of insurance delivered to Agent on the Closing Date are acceptable
to Agent). All property insurance policies covering the Collateral
are to be made payable to Agent for the benefit of Agent and the Lenders, as
their interests may appear, in case of loss, pursuant to a standard loss payable
endorsement with a standard non-contributory “lender” or “secured party” clause
and are to contain such other provisions as Agent may reasonably require to
fully protect the Lenders’ interest in the Collateral and to any payments to be
made under such policies; provided, however, that if
insurance proceeds are paid to Agent pursuant to such clauses or endorsements,
then (a) so long as at the time the proceeds are received (i) no Default or
Event of Default has occurred and is continuing and so long as no Overadvance
exists, and (ii) the Threshold Usage Amount does not exist, then such amounts
received by Agent shall be promptly remitted by Agent to Borrower, and (b)
otherwise, such amounts received by Agent shall be promptly applied by Agent to
the repayment of the Obligations in accordance with Section 2.4(b) (with
Borrower being relieved of any obligation to make payment of any Funding Losses
that may be incurred as a result of
such
repayment of the Obligations); provided further, however, that if, at
the time that a claim for such amounts is first made by Borrower under its
insurance policies, no Default or Event of Default has occurred and is
continuing, no Overadvance exists, and the Threshold Usage Amount does not
exist, Borrower may request that Agent notify Borrower’s insurance broker to
remit (or cause to be remitted) the applicable payment directly to Borrower
(instead of to Agent) and, if it receives such a request and if the requisite
conditions are satisfied, Agent shall promptly notify such broker to remit (or
cause to be remitted) the applicable payment directly to
Borrower. All certificates of property and general liability
insurance are to be delivered to Agent, with the loss payable (but only in
respect of Collateral) and additional insured endorsements in favor of Agent and
shall provide (except any policy of insurance placed with the FAA) for not less
than 30 days (10 days in the case of non-payment and 7 days in the case of war
risk and allied perils coverage if and to the extent available) prior written
notice to Agent of the exercise of any right of cancellation. If
Borrower fails to maintain such insurance, Agent may arrange for such insurance,
but at Borrower’s expense and without any responsibility on Agent’s part for
obtaining the insurance, the solvency of the insurance companies, the adequacy
of the coverage, or the collection of claims. Borrower shall give
Agent prompt notice of (i) any loss exceeding $5,000,000 covered by its casualty
insurance, and (ii) any cancellation of any policy of
insurance. Upon the occurrence and during the continuance of an Event
of Default and so long as the Threshold Usage Amount exists, Agent shall have
the sole right to file claims under any property and general liability insurance
policies in respect of the Collateral, to receive, receipt and give acquittance
for any payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.
5.7 Inspection. Permit Agent and
each of its duly authorized representatives or agents to visit any of its
properties and inspect any of its assets or books and records, to conduct
appraisals and valuations, to examine and make copies of its books and records,
and to discuss its affairs, finances, and accounts with, and to be advised as to
the same by, its officers and employees at such reasonable times and intervals
as Agent may designate and, so long as no Default or Event of Default exists,
with reasonable prior notice to Borrower; provided, however, that so long
as no Event of Default shall have occurred and be continuing, Borrower shall not
be obligated to reimburse Agent for more than 2 audits during any calendar year,
more than 1 appraisal of the Collateral during any calendar year, or more than 1
business valuation during any calendar year; provided further, however, if no
Advances have been made in any calendar year and no Event of Default shall have
occurred and be continuing, Borrower shall not be obligated to reimburse Agent
for more than 1 audit during any calendar year.
5.8 .Compliance
with Laws. Comply with the
requirements of all applicable laws, rules, regulations, and orders of any
Governmental Authority, other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Change.
5.9 Environmental.
(a) Keep
any property either owned or operated by Borrower free of any Environmental
Liens or post bonds or other financial assurances sufficient to satisfy the
obligations or liability evidenced by such Environmental Liens,
(b) Comply,
in all material respects, with Environmental Laws and provide to Agent
documentation of such compliance when and if Agent reasonably
requests,
(c) Promptly
notify Agent of any release of which a Responsible Officer of Borrower has
knowledge of a Hazardous Material in any reportable quantity from or onto
property owned
or
operated by Borrower and take any Remedial Actions required to abate said
release or otherwise to come into compliance, in all material respects, with
applicable Environmental Law, and
(d) Promptly,
but in any event within 5 Business Days of receipt thereof by a Responsible
Officer, provide Agent with written notice of any of the
following: (i) notice that an Environmental Lien has been filed
against any of the real or personal property of Borrower, (ii) commencement of
any Environmental Action or written notice that an Environmental Action will be
filed against Borrower, and (iii) written notice of a violation, citation, or
other administrative order from a Governmental Authority; provided that, in each
case, the event, individually or when added to all other such events, is
reasonably expected to involve $1,000,000 or more in remediation costs; provided, however, that
Borrower shall not be required to provide such written notice relative to
individual violations, citations, or other administrative orders that are
reasonably expected to involve, individually or as part of a series of related
events, less than $100,000 in remediation costs.
5.10 Disclosure
Updates. Promptly and in
no event later than 5 Business Days after a Responsible Officer obtains
knowledge thereof, notify Agent if any written information, exhibit, or report
furnished to Agent or the Lenders contained, at the time it was furnished, any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made. The foregoing to the contrary
notwithstanding, any notification pursuant to the foregoing provision will not
cure or remedy the effect of the prior untrue statement of a material fact or
omission of any material fact nor shall any such notification have the effect of
amending or modifying this Agreement or any of the Schedules
hereto.
5.11 [Intentionally
omitted].
5.12 Further
Assurances. At any time upon
the reasonable request of Agent, execute or deliver to Agent any and all
financing statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title (provided, however, that
certificates of title shall only be required to be endorsed to reflect Agent’s
security interest in the subject vehicles if Borrower elects so as to include
the vehicles in the Borrowing Base or if an Event of Default has occurred and is
continuing), and all other documents (collectively, the “Additional
Documents”) that Agent may reasonably request to create, perfect, and
continue perfected or to better perfect Agent’s Liens in the collateral
described in the Security Agreement or the Engine and Spare Parts Security
Agreement of Borrower (whether now owned or hereafter arising or acquired,
tangible or intangible) and in order to fully consummate all of the transactions
contemplated hereby and under the other Loan Documents. To the
maximum extent permitted by applicable law, if Borrower refuses or fails to
execute or deliver any reasonably requested Additional Documents within a
reasonable period of time following the request to do so, Borrower hereby
authorizes Agent to execute any such Additional Documents in Borrower’s name, as
applicable, and authorizes Agent to file such executed Additional Documents in
any appropriate filing office.
5.13 Lender
Meetings. Within 120 days after the close of each fiscal year
of Borrower, at the request of Agent or of the Required Lenders and upon
reasonable prior notice, hold a meeting (at a mutually agreeable location and
time or, at the option of Agent or Borrower, by conference call) with all
Lenders who choose to attend such meeting, at which meeting shall be reviewed
the financial results of the previous fiscal year and the financial condition of
Borrower and the projections presented for the current fiscal year of
Borrower.
5.14 Material
Contracts. Make available to
Agent (including by virtue of the filing thereof with the SEC),
contemporaneously with the filing thereof with the SEC, copies of (a) each
Material Contract entered into since the Closing Date or, after the Closing
Date, since the previous delivery pursuant to this Section, and (b) each
material amendment or modification of any Material Contract entered into since
the Closing Date or, after the Closing Date, since the previous delivery
pursuant to this Section.
5.15 [Intentionally
Omitted].
5.16 [Intentionally
Omitted].
5.17 Spare
Parts.
(a) Store
all Eligible Expendables and Eligible Replaceable Spare Parts only at the
locations set forth on Schedule 4.27 and not
permit any Eligible Expendables or Eligible Replaceable Spare Parts to be
located at the premises of or otherwise put into the possession or control of
any bailee, warehouseman, FAA repair station, servicer, mechanic, vendor,
supplier, or other Person); provided however, that
Borrower may amend Schedule 4.27 to add
additional locations so long as (i) such amendment occurs by written notice
received by Agent not less than 20 days prior to the date on which such Spare
Parts are moved to such new location, (ii) at least 5 Business Days prior to the
date on which such Spare Parts are moved to such new location, Borrower
executes, delivers, and records any amendment or supplement to the Engine and
Spare Parts Security Agreement that Agent reasonably requests in order to
reflect such new location as a permitted location and in order to perfect and
continue perfected Agent’s security interest in the Spare Parts to be located at
such new location, and (iii) such new location is within the United States
(exclusive of its territories and possessions); provided further,
however, that
so long as such transit is in the ordinary course of Borrower’s
business, (A) Borrower may move Eligible Expendables and Eligible
Replaceable Spare Parts to the location of Aircraft operated by Borrower or
Engines for the purpose of completing a Permitted Spare Parts Installation, and
(B) Borrower may move Eligible Expendables and Eligible Replaceable Spare Parts
from any location in the United States identified on Schedule 4.27 to any
other location in the United States identified on Schedule
4.27.
(b) Store
all Spare Parts of Borrower not designated as Eligible Expendables or Eligible
Replaceable Spare Parts only at the locations identified on Schedule 4.27 (and
not permit any Spare Parts to be located at the premises of or otherwise put
into the possession or control of any bailee, warehouseman, FAA repair station,
servicer, mechanic, vendor, supplier, or other Person); provided however, that (i) any
Spare Part that is not an Eligible Expendable or Eligible Replaceable Spare Part
may be transported to or from, or in the possession of or under the control of a
bailee, warehouseman, FAA repair station, overhaul or maintenance servicer,
mechanic, or similar Person for purposes of repair in the ordinary course of
Borrower’s business and any Spare Parts that are in the possession or control of
such Persons shall immediately cease to be Eligible Expendables or Eligible
Replaceable Spare Parts, as applicable, (ii) so long as such transit is in the
ordinary course of Borrower’s business, Borrower may move Spare Parts from
any location in the United States identified on Schedule 4.27 to any
other location in the United States identified on Schedule 4.27; (iii)
so long as (A) no Event of Default has occurred and is continuing or would
result therefrom, (B) such transit is in the ordinary course of Borrower’s
business, and (C) the aggregate value of all Spare Parts moved to all such
foreign locations, in the aggregate, does not exceed [***], Borrower may move
Spare Parts that are not Eligible Expendables or Eligible Replaceable Spare
Parts from any location in the United States identified on Schedule 4.27 to any
location outside the United States or to locations at territories or possessions
of the United States; (iv) so long as such transit is in the ordinary course of
Borrower’s business, Borrower may move Spare Parts that are not Eligible
Expendables or Eligible Replaceable Spare Parts from any location outside the
United States (including locations at territories or possessions of the United
States) to any other location outside the United States (including locations at
territories or possessions of the United States), and (v) so long as in the
ordinary course of Borrower’s business, Borrower may lend Spare Parts to, or
exchange Spare Parts with, other airlines.
(c) Maintain
in effect the Spare Parts Tracking System.
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
(d) Maintain,
with respect to Spare Parts, all records, logs, serviceability tags and other
documents and materials required by applicable law, including the FARs, or by
the Maintenance Program.
(e) Except
for Permitted Dispositions or Permitted Spare Parts Installations, not permit
any Spare Parts to be leased, sold, exchanged, disposed of, or affixed, attached
or installed to or on any Aircraft, Engine, or other Equipment.
5.18 Ground
Service Equipment and Engines.
(a) Unless
an item of Eligible Ground Service Equipment is out for repair, store the
Eligible Ground Service Equipment only at the locations set forth on Schedule 4.28(d);
provided, however that so long
as such transit is in the ordinary course of Borrower’s business, Eligible
Ground Service Equipment may be in transit between the locations on Schedule 4.28(d);
provided
further, however, that (i)
Borrower may amend Schedule 4.28(d) to
add additional locations so long as (A) such amendment occurs by written notice
received by Agent not less than 20 days prior to the date on which such Ground
Service Equipment is moved to such new location, and (B) such new location is
within the United States (exclusive of its territories and
possessions).
(b) Unless
a Designated Engine is attached to one of the Aircraft operated by Borrower as a
result of a Permitted Engine Installation, is the subject of a Permitted Lease,
or is out for repair, store the Designated Engines only at the locations
identified on Schedule
4.28(e); provided, however that so long
as such transit is in the ordinary course of Borrower’s business, such Engines
may be (i) in transit between the locations on Schedule 4.28(e), and
(ii) moved to the location of an Aircraft operated by Borrower for the purpose
of completing a Permitted Engine Installation; provided further,
however, that
(i) Borrower may amend Schedule 4.28(e) to
add additional locations so long as (A) such amendment occurs by written notice
received by Agent not less than 20 days prior to the date on which such
Designated Engines are moved to such new location, and (B) such new location is
within the United States (exclusive of its territories and
possessions).
(c) Except
for Permitted Dispositions, not permit any Eligible Ground Service Equipment to
be leased, sold, exchanged, or otherwise disposed of.
(d) Unless
a Designated Engine is attached to one of the Aircraft operated by Borrower as a
result of a Permitted Engine Installation, is the subject of a Permitted Lease,
or has been the subject of a Permitted Disposition, not permit any Designated
Engine to be leased, sold, exchanged, disposed of, or affixed, attached or
installed to or on any Aircraft.
5.19 Benefit
Plans.
(a) A
Responsible Officer of Borrower shall provide (or cause to be provided) to Agent
promptly and in any event within 5 Business Days (if the Threshold Usage Amount
exists) or within 20 Business Days (if the Threshold Usage Amount does not
exist) after (i) Borrower or any of its ERISA Affiliates knows or has reason to
know that, with respect to any Benefit Plan, any ERISA Event that could
reasonably be expected to result in liabilities in excess of [***] has occurred
or is likely to occur within the following 30 days or that any of the covenants
set forth in Section
5.19(b), (c), (d), or (e), below are untrue
or are likely to be untrue within the following 30 days, a statement of
Responsible Officer of Borrower setting forth the details of such occurrence or
the likelihood of such occurrence and the action, if any, which the Borrower or
ERISA Affiliate proposes to take with respect thereto, (ii) written request
from
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Agent,
copies of the most-recent annual report and all schedules and attachments
thereto filed with the Internal Revenue Service or the U.S. Department of Labor,
(iii) written request from Agent, copies of the most recently-prepared actuarial
reports in relation to the Benefit Plans and the Benefit Arrangements and such
other information concerning any Benefit Plan or Benefit Arrangement as may be
reasonably requested by Agent, and (iv) written request from Agent, a
certificate of a Responsible Officer certifying that each required contribution
with respect to a Benefit Plan was timely made,
(b) With
respect to years before the effective date of the Pension Act as it applies to
each Benefit Plan, no accumulated funding deficiency (as defined in ERISA
Section 302 and IRC Section 412), whether or not waived, exits with respect to
any Benefit Plan,
(c) The
minimum funding standards under the Pension Funding Rules with respect to each
Benefit Plan have been satisfied and will be satisfied at all
times.
(d) Neither
the Borrower nor any ERISA Affiliate will maintain, sponsor, contribute to,
administer, or have any liability with respect to any Foreign Pension Plan or
Multiemployer plan.
(e) No
liability to the PBGC has been incurred or will be incurred by the Borrower or
any ERISA Affiliate with respect to any Benefit Plan.
6. NEGATIVE
COVENANTS.
Borrower
covenants and agrees that, until termination of all of the Commitments and
payment in full of the Obligations, Borrower will not do any of the
following:
6.1 Indebtedness. Create, incur,
assume, suffer to exist, guarantee, or otherwise become or remain, directly or
indirectly, liable with respect to any Indebtedness, except for Permitted
Indebtedness.
6.2 Liens. Create, incur,
assume, or suffer to exist, directly or indirectly, any Lien on or with respect
to any of its assets, of any kind, whether now owned or hereafter acquired, or
any income or profits therefrom, except for Permitted Liens.
6.3 Restrictions
on Fundamental Changes.
(a) Other
than in order to consummate a Permitted Acquisition, enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its
Stock,
(b) Liquidate,
wind up, or dissolve itself (or suffer any liquidation or dissolution),
or
(c) Suspend
or go out of a substantial portion of its business, except in connection with
the transactions permitted pursuant to Section 6.4.
6.4 Disposal
of Assets. Other than
Permitted Dispositions, Permitted Investments, or transactions expressly
permitted by Sections
6.3 and 6.11, convey, sell,
lease, license, assign, transfer, or otherwise dispose of (or enter into an
agreement to convey, sell, lease, license, assign, transfer, or otherwise
dispose of) any of Borrower’s assets.
6.5 Change
Name. Change Borrower’s
name, organizational identification number, state of organization or
organizational identity; provided, however, that
Borrower may change its name upon at least 10 days prior written notice to Agent
of such change.
6.6 Nature of
Business. Make any change
in the nature of its business as described in Schedule 6.6 or
acquire any properties or assets that are not reasonably related to the conduct
of such business activities;
provided, however, that the
foregoing shall not prevent Borrower from engaging in any business that is
reasonably related or ancillary to its business.
6.7 Prepayments
and Amendments.
(a) Except
in connection with Refinancing Indebtedness permitted by Section
6.1,
(i) if
by doing so Borrower’s Liquidity would drop below that required by Section 7, optionally
prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of
Borrower, other than the Obligations in accordance with this
Agreement,
(ii) make
any payment on account of Indebtedness that has been contractually subordinated
in right of payment if such payment is not permitted at such time under the
subordination terms and conditions, or
(b) Directly
or indirectly, amend, modify, or change any of the terms or provisions
of
(i) any
agreement, instrument, document, indenture, or other writing
evidencing or concerning Permitted Indebtedness other than (A) the
Obligations in accordance with this Agreement, (B) [intentionally omitted], (C)
Indebtedness permitted under the definition of Permitted Indebtedness (other
than Indebtedness permitted under clauses (g) or (h) of the definition
of Permitted Indebtedness), and (D) Indebtedness permitted under clauses (g) or (h) of the definition
of Permitted Indebtedness so long as such amendment, modification, or change (x)
could not, individually or in the aggregate, reasonably be expected to be
materially adverse to the interests of the Lenders, and (y) would not otherwise
cause Borrower to breach any of the provisions of this Agreement,
(ii) any
Material Contract except to the extent that such amendment, modification, or
change could not, individually or in the aggregate, reasonably be expected to be
materially adverse to the interests of the Lenders, or
(iii) the
Governing Documents of Borrower if the effect thereof, either individually or in
the aggregate, could reasonably be expected to be materially adverse to the
interests of the Lenders.
6.8 Change of
Control. Cause, permit, or
suffer, directly or indirectly, any Change of Control.
6.9 Restricted
Junior Payments. Make any
Restricted Junior Payment; provided, however, that, so
long as it is permitted by law, and so long as no Default or Event of Default
shall have occurred and be continuing or would result therefrom,
(a) Borrower
may make distributions to former employees, officers, or directors of Borrower
(or any spouses, ex-spouses, or estates of any of the foregoing) on account of
redemptions of Stock of Group held by such Persons, provided, however, that the
aggregate amount of such redemptions made by Borrower during the term of this
Agreement plus the amount of Indebtedness outstanding under clause (l) of the
definition of Permitted Indebtedness, does not exceed [***] in the
aggregate,
(b) Borrower
may make distributions to former employees, officers, or directors of Borrower
(or any spouses, ex-spouses, or estates of any of the foregoing), solely in the
form of forgiveness of
Indebtedness of such Persons owing to Borrower on account of repurchases of the
Stock of Group held by such Persons; provided that such
Indebtedness was incurred by such Persons solely to acquire Stock of
Group,
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
(c) Borrower
may declare and pay dividends or make distributions to Group, the proceeds of
which shall be used by Group solely to pay (i) (y) franchise taxes (other than
income taxes) and other fees, taxes and expenses required to maintain its
corporate existence or arising as a result of its ownership of Borrower, and (z)
federal, state and local income taxes, to the extent such income taxes are
attributable to the income of Borrower; provided that the amount of such
payments in any fiscal year does not exceed the amount that Borrower would be
required to pay in respect of federal, state and local taxes for such fiscal
year were Borrower to pay such taxes separately from Group, and (ii) ordinary
course operating and corporate overhead expenses and administrative and similar
expenses related to its existence and ownership of Borrower, and
(d) Borrower
may declare and pay dividends or make distributions to Group so long as (i) no
Event of Default has occurred and is continuing or would result therefrom and
(i) Borrower has Liquidity of $600,000,000, or greater, before and immediately
after giving effect thereto.
6.10 Accounting
Methods. Modify or change
its fiscal year or its method of accounting (other than changes to its method of
accounting if such changes comply with GAAP and are not materially adverse to
the interests of the Lenders or if such changes are required to comply with
Accounting Changes or applicable law (including the rules and regulations of the
SEC)).
6.11 Investments;
Controlled Investments .
(a) Except
for Permitted Investments, directly or indirectly, make or acquire any
Investment or incur any liabilities (including contingent obligations) for or in
connection with any Investment.
(b) Establish
or maintain any Deposit Account in to which proceeds of Borrower’s Accounts that
constitute so-called “corporate receivables”, so-called “general traffic
receivables”, so-called “service sales receivables” or so-called “travel agent
receivables” or Interline Receivables or Mileage Plan Receivables are deposited
(or are expected to be deposited) (excluding, in each case, any Excluded
Accounts) unless Borrower and the applicable bank have entered into a Control
Agreement with Agent governing such Deposit Account in order to perfect (and
further establish) Agent’s Liens in such Deposit Accounts.
(c) Establish
or maintain any Deposit Account in to which proceeds of Borrower’s Accounts that
constitute so-called “corporate receivables”, so-called “general traffic
receivables”, so-called “service sales receivables” or so-called “travel agent
receivables” or Interline Receivables or Mileage Plan Receivables are deposited
(or are expected to be deposited) (excluding, in each case, any Excluded
Accounts) other than the Deposit Accounts that are identified on Schedule
4.15.
(d) Establish
or maintain any Securities Account in to which proceeds of Borrower’s Accounts
that constitute so-called “corporate receivables”, so-called “general traffic
receivables”, so-called “service sales receivables” or so-called “travel agent
receivables” or Interline Receivables or Mileage Plan Receivables are deposited
(or are expected to be deposited) (excluding, in each case, any Excluded
Accounts).
6.12 Transactions
with Affiliates. Directly or
indirectly enter into or permit to exist any material transaction with any
Affiliate of Borrower unless such transaction, taken as a whole, is
substantially as favorable to Borrower as would be obtainable by Borrower in a
comparable arm’s length transaction with a Person other than an Affiliate,
except for:
(a) so
long as it has been approved by Borrower’s board of directors (or comparable
governing body) in accordance with applicable law, any indemnity provided for
the benefit of directors (or comparable managers) of Borrower, and
(b) transactions
permitted by Section
6.3 or Section
6.9.
6.13 Use of
Proceeds. Use the proceeds
of the Advances for any purpose other than, consistent with the terms and
conditions hereof, for its lawful and permitted purposes (including that no part
of the proceeds of the loans made to Borrower will be used to purchase or carry
any such Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or for any purpose that violates
the provisions of Regulation T, U or X of the Board of Governors of the United
States Federal Reserve).
6.14 Limitation
on Issuance of Stock. Except for the issuance or sale of common stock or
Permitted Preferred Stock by Borrower, issue or sell or enter into any agreement
or arrangement for the issuance and sale of any of its Stock.
6.15 Equipment
with Bailees. Store the
Equipment of Borrower that constitutes a portion of the Collateral at any time
now or hereafter with a bailee, warehouseman, or similar party except as
expressly permitted pursuant to Section 5.17 or Section
5.18.
7. FINANCIAL
COVENANT. Borrower
covenants and agrees that, until termination of all of the Commitments and
payment in full of the Obligations, Borrower shall have Liquidity of at least
$500,000,000 at all times.
8. EVENTS OF
DEFAULT.
Any one
or more of the following events shall constitute an event of default (each, an
“Event of
Default”) under this Agreement:
8.1 If
Borrower fails to pay when due and payable, or when declared due and payable,
(a) all or any portion of the Obligations consisting of interest or scheduled
fees (including any portion thereof that accrues after the commencement of an
Insolvency Proceeding, regardless of whether allowed or allowable in whole or in
part as a claim in any such Insolvency Proceeding) and such failure continues
for a period of 3 Business Days after the date of Borrower’s receipt of written
notice thereof (which notice shall have been sent by Agent to the email
addresses for the individuals set forth on Schedule 2.6(d)
hereto), or (b) all or any portion of the Obligations consisting of unscheduled
fees or charges due the Lender Group, reimbursement of Lender Group Expenses, or
other amounts (other than any portion thereof constituting principal, interest,
or scheduled fees) constituting Obligations (including any portion thereof that
accrues after the commencement of an Insolvency Proceeding, regardless of
whether allowed or allowable in whole or in part as a claim in any such
Insolvency Proceeding) and such failure continues for a period of 30 days after
the date of Borrower’s receipt of written notice thereof (which notice shall
have been sent by Agent to the email addresses for the individuals set forth on
Schedule 2.6(d)
hereto), or (c) all or any portion of the principal of the
Obligations;
8.2 If
Borrower:
(a) fails
to perform or observe any covenant or other agreement contained in any of Sections 5.6 or 7 (any of which such
failures shall not be an Event of Default if no Threshold Usage Amount exists
unless such failures continue for a period of 1 Business Days after the earlier
of (i) the date on which such failure shall first become known to any
Responsible Officer of Borrower or (ii) the date on which written notice
thereof is given to Borrower by Agent);
(b) fails
to perform or observe any covenant or other agreement contained in any of (i)
Sections 5.1,
5.2, 5.3, 5.4, 5.5, 5.7, 5.8, 5.10, 5.12, 5.13, 5.14, 5.17, 5.18, or 5.19 of this
Agreement, (ii) Sections 6.1 through 6.15 of this
Agreement, (iii) Section 6 of the Security Agreement, or (iv) Section 4 of the
Engine and Spare Parts Security Agreement, and any such failure continues for a
period of 10 Business Days after the earlier of (i) the date on which such
failure shall first become known to any Responsible Officer of Borrower or
(ii) the date on which written notice thereof is given to Borrower by
Agent; or
(c) fails
to perform or observe any covenant or other agreement contained in this
Agreement, or in any of the other Loan Documents, in each case, other than any
such covenant or agreement that is the subject of another provision of this
Section 8 (in
which event such other provision of this Section 8 shall
govern), and such failure continues for a period of 30 days after the earlier of
(i) the date on which such failure shall first become known to any Responsible
Officer of Borrower or (ii) the date on which written notice thereof is given to
Borrower by Agent;
8.3 If
one or more judgments, orders, or awards for the payment of money involving an
aggregate amount of $30,000,000, or more (except to the extent fully covered
(other than to the extent of customary deductibles) by insurance pursuant to
which the insurer has not denied coverage) is entered or filed against Borrower
or any of its assets, and either (a) there is a period of 30 consecutive
days at any time after the entry of any such judgment, order, or
award during which (i) the same is not discharged, satisfied, vacated, or bonded
pending appeal, or (ii) a stay of enforcement thereof is not in effect, or (b)
enforcement proceedings are commenced upon such judgment, order, or
award;
8.4 If
an Insolvency Proceeding is commenced by Borrower;
8.5 If
an Insolvency Proceeding is commenced against Borrower and any of the following
events occur: (a) Borrower consents to the institution of such Insolvency
Proceeding against it, (b) the petition commencing the Insolvency Proceeding is
not timely controverted, (c) the petition commencing the Insolvency Proceeding
is not dismissed within 60 calendar days of the date of the filing thereof, (d)
an interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Borrower, or (e) an order for relief shall have been
issued or entered therein;
8.6 If
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of the business affairs of
Borrower;
8.7 If
there is a default in one or more agreements to which Borrower is a party with
one or more third Persons relative to Borrower’s Indebtedness involving an
aggregate amount of $30,000,000 or more, and such default (a) occurs at the
final maturity of the obligations thereunder, or (b) results in a right by such
third Person, irrespective of whether exercised, to accelerate the maturity of
Borrower’s obligations thereunder;
8.8 If
any warranty, representation, certificate, statement, or Record (each, a “Representation”) made
herein or in any other Loan Document or delivered in writing to Agent or any
Lender in connection with this Agreement or any other Loan Document proves to be
untrue in any material respect (except that such materiality qualifier shall not
be applicable to any Representations that already are qualified or modified by
materiality in the text thereof) as of the date of issuance or making or deemed
making thereof and if (a) at the
time when
issued, made, or deemed made, such untrue Representation was made with knowledge
that it was untrue or with reckless disregard of the truth, or (b) such
Representation is not capable of being cured, or (c) at the time when issued,
made, or deemed made, such Representation was not made with knowledge that it
was untrue or with reckless disregard of the truth, such Representation is
capable of being cured, and such Representation is not cured within 10 Business
Days after the earlier of (i) the date on which such untrue Representation first
became known to any Responsible Officer of Borrower or (ii) the date on which
written notice thereof is given to Borrower by Agent;
8.9 [Intentionally
Omitted];
8.10 If
the Security Agreement, the Engine and Spare Parts Security Agreement, or any
other Loan Document that purports to create a Lien, shall, for any reason, fail
or cease to create a valid and perfected and, except to the extent of Permitted
Liens which by operation of law or contract would have priority, first priority
Lien on the Collateral covered thereby, except (a) as a result of a disposition
of the applicable Collateral in a transaction permitted under this Agreement, or
(b) as the result of an action or failure to act on the part of
Agent;
8.11 The
validity or enforceability of any Loan Document shall at any time for any
reason (other than solely as the result of an action or failure to
act on the part of Agent) be declared to be null and void, or a proceeding shall
be commenced by Borrower seeking to establish the invalidity or unenforceability
thereof, or Borrower shall deny that Borrower has any liability or obligation
purported to be created under any Loan Document; or
8.12 If
any of the following events occur and such events continue in existence for a
period of 15 Business Days after the earlier of (i) the date on which such
failure shall first become known to any Responsible Officer of Borrower or (ii)
the date on which written notice thereof is given to Borrower by
Agent:
(a) If
Borrower or any of its ERISA Affiliates shall have made a complete or partial
withdrawal from a Multiemployer Plan, and, as a result of such complete or
partial withdrawal, any of them incurs a withdrawal liability in a total amount
that is or exceeds an amount that could reasonably be expected to result in a
Material Adverse Change; or if a Multiemployer Plan enters reorganization status
under Section 4241 of ERISA, and, as a result thereof, Borrower’s or any of its
ERISA Affiliate’s total contribution requirement with respect to such
Multiemployer Plan is or exceeds an amount that could reasonably be expected to
result in a Material Adverse Change; or
(b) One
or more ERISA Events has occurred with respect to a Benefit Plan that has
resulted or could reasonably be expected to result in liability of Borrower or
any of its ERISA Affiliates in an aggregate amount that could reasonably be
expected to result in a Material Adverse Change; or
(c) (i) There
shall exist an amount of Unfunded Benefit Liabilities, individually or in the
aggregate, in an amount that could reasonably be expected to result in a
Material Adverse Change, or (ii) the total projected benefit obligation of
Borrower and its ERISA Affiliates, determined as of the close of any fiscal year
of Borrower and in accordance with Financial Accounting Standards Board
Statement No. 106 (without regard to continuation coverage required under Part 6
of subtitle B of Title I of ERISA or Section 4980B of the IRC), for any
post-employment or retiree health benefits, life insurance coverage, or any
other welfare benefits could reasonably be expected to result in a Material
Adverse Change.
9. RIGHTS AND
REMEDIES.
9.1 Rights
and Remedies. Upon the
occurrence and during the continuation of an Event of Default, Agent may, and,
at the instruction of the Required Lenders, shall (in the case of clauses (a)
and (b), by written
notice to Borrower), in addition to any other rights or remedies provided for
hereunder or under any other Loan Document or by applicable law, do any one or
more of the following on behalf of the Lender Group:
(a) declare
the Obligations, whether evidenced by this Agreement or by any of the other Loan
Documents immediately due and payable, whereupon the same shall become and be
immediately due and payable and Borrower shall be obligated to repay all of such
Obligations in full, without presentment, demand, protest, or further notice or
other requirements of any kind, all of which are hereby expressly waived by
Borrower; and
(b) declare
the Commitments terminated, whereupon the Commitments shall immediately be
terminated together with (i) any obligation of any Lender hereunder to make
Advances, and (ii) the obligation of the Swing Lender to make Swing Loans;
and
(c) exercise
all other rights and remedies available to it or the Lenders under the Loan
Documents or under applicable law.
The
foregoing to the contrary notwithstanding, upon the occurrence of any Event of
Default described in Section 8.4 or Section 8.5, in
addition to the remedies set forth above, without any notice to Borrower or any
other Person or any act by the Lender Group, the Commitments shall automatically
terminate and the Obligations, inclusive of all accrued and unpaid interest
thereon and all fees and all other amounts owing under this Agreement or under
any of the other Loan Documents, shall automatically and immediately become due
and payable and Borrower shall be obligated to repay all of such Obligations in
full, without presentment, demand, protest, or notice of any kind, all of which
are expressly waived by Borrower.
9.2 Remedies
Cumulative. The rights and
remedies of the Lender Group under this Agreement, the other Loan Documents, and
all other agreements shall be cumulative. The Lender Group shall have
all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by the Lender Group of one
right or remedy shall be deemed an election, and no waiver by the Lender Group
of any Event of Default shall be deemed a continuing waiver. No delay
by the Lender Group shall constitute a waiver, election, or acquiescence by
it.
10. WAIVERS;
INDEMNIFICATION.
10.1 Demand;
Protest; etc. Borrower waives
demand, protest, notice of protest, notice of default or dishonor, notice of
payment and nonpayment, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of documents, instruments, chattel paper, and guarantees
at any time held by the Lender Group on which Borrower may in any way be
liable.
10.2 The
Lender Group’s Liability for Collateral. Borrower hereby
agrees that: (a) so long as Agent complies with its obligations,
if any, under the Code, the Lender Group shall not in any way or manner be
liable or responsible for: (i) the safekeeping of the Collateral,
(ii) any loss or damage thereto occurring or arising in any manner or fashion
from any cause, (iii) any diminution in the value thereof, or (iv) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
Person, and (b) all risk of loss, damage, or destruction of the Collateral shall
be borne by Borrower.
10.3 Indemnification. Borrower shall
pay, indemnify, defend, and hold the Agent-Related Persons, and the
Lender-Related Persons (each, an “Indemnified Person”)
harmless (to the fullest extent permitted by law) from and against any and all
claims, demands, suits, actions, investigations, proceedings, liabilities,
fines, costs, penalties, and damages, and all reasonable fees and disbursements
of attorneys, experts, or consultants and all other costs and expenses actually
incurred in connection therewith or in connection with the enforcement of this
indemnification (as and when they are incurred and irrespective of whether suit
is brought), at any time asserted against, imposed upon, or incurred by any of
them (a) in connection with or as a result of or related to the execution and
delivery (provided that Borrower shall not be liable for costs and
expenses
(including attorneys fees) of any Lender (other than WFCF) incurred in advising,
structuring, drafting, reviewing, administering or syndicating the Loan
Documents), enforcement, performance, or administration (including any
restructuring or workout with respect hereto) of this Agreement, any of the
other Loan Documents, or the transactions contemplated hereby or thereby or the
monitoring of Borrower’s compliance with the terms of the Loan Documents (provided, however, that the
indemnification in this clause (a) shall not extend to (i) disputes solely
between or among the Lenders or (ii) disputes solely between or among the
Lenders and their respective Affiliates; it being understood and agreed that the
indemnification in this clause (a) shall extend to disputes between or among
Agent on the one hand, and one or more Lenders, or one or more of their
Affiliates, on the other hand), (b) with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event,
or circumstance in any manner related thereto, and (c) in connection with
or arising out of any presence or release of Hazardous Materials at, on, under,
to or from any assets or properties owned, leased or operated by Borrower or any
Environmental Actions, Environmental Liabilities or Remedial Actions related in
any way to any such assets or properties of Borrower (each and all of the
foregoing, the “Indemnified
Liabilities”), in all cases, whether or not caused by or arising, in
whole or in part, out of the comparative or contributory negligence of the
Indemnified Person. The foregoing to the contrary notwithstanding,
Borrower shall have no obligation to any Indemnified Person under this Section 10.3 with
respect to any Indemnified Liability resulting from (1) the gross negligence or
willful misconduct of such Indemnified Person or its officers, directors,
employees, attorneys, or agents, or (2) the negligence of such Indemnified
Person or its officers, directors, employees, attorneys, or agents if such
negligence relates solely to the handling of funds of Borrower on deposit with
such Indemnified Person. This provision shall survive the termination
of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrower was required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrower
with respect thereto. EXCEPT AS EXPRESSLY STATED ABOVE, THE
FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
INDEMNIFIED LIABILITIES WHICH ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR
OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
11. NOTICES.
Unless
otherwise provided in this Agreement, all notices or demands relating to this
Agreement or any other Loan Document shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receipt requested),
overnight courier, electronic mail (at such email addresses as a party may
designate in accordance herewith), or facsimile. In the case of
notices or demands to Borrower or Agent, as the case may be, they shall be sent
to the respective address set forth below:
If
to Borrower:
|
ALASKA
AIRLINES, INC.
|
|
19300
International Blvd.
|
|
Seattle,
WA 98188
|
|
Attn:
Vice President Finance
|
|
Fax
No. [***]
|
|
|
with
copies to:
|
ALASKA
AIRLINES, INC.
|
|
19300
International Blvd.
|
|
Seattle,
WA 98188
|
|
Attn:
General Counsel
|
|
Fax
No. [***]
|
|
|
If
to Agent:
|
WELLS
FARGO CAPITAL FINANCE, LLC
|
|
2450
Colorado Avenue
Suite
3000 West
|
|
Santa
Monica, California 90404
|
|
Attn:
Business Finance Division Manager
|
|
Fax
No.: [***]
|
|
|
with
copies to:
|
PAUL,
HASTINGS, JANOFSKY & WALKER LLP
|
|
515
S. Flower Street
|
|
Twenty-fifth
Floor
|
|
Los
Angeles, California 90071
|
|
Attn: [***]
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Any party
hereto may change the address at which they are to receive notices hereunder, by
notice in writing in the foregoing manner given to the other
party. All notices or demands sent in accordance with this Section 11, shall be
deemed received on the earlier of the date of actual receipt or 3 Business Days
after the deposit thereof in the mail; provided, that (a)
notices sent by overnight courier service shall be deemed to have been given
when received, (b) notices by facsimile shall be deemed to have been given when
sent (except that, if not given during normal business hours for the recipient,
shall be deemed to have been given at the opening of business on the next
Business Day for the recipient) and (c) notices by electronic mail shall be
deemed received upon the sender's receipt of an acknowledgment from the intended
recipient (such as by the "return receipt requested" function, as available,
return email or other written acknowledgment).
12. CHOICE OF LAW AND
VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER
LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE
SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND EACH
MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
12(b).
(c) TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED
UPON
OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND
EACH MEMBER OF THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
13. ASSIGNMENTS AND
PARTICIPATIONS; SUCCESSORS.
13.1 Assignments
and Participations.
(a) With
the prior written consent of Agent, which consent of Agent shall not be
unreasonably withheld, delayed or conditioned, and shall not be required in
connection with an assignment to a Person that is a Lender or an Affiliate
(other than individuals) of a Lender, any Lender may assign and delegate to one
or more assignees (each, an “Assignee”; provided, however, that neither
Borrower nor an Affiliate of Borrower shall be permitted to become an Assignee)
all or any portion of the Obligations, the Commitments and the other rights and
obligations of such Lender hereunder and under the other Loan Documents, in a
minimum amount (unless waived by Agent) of $5,000,000 (except such minimum
amount shall not apply to (x) an assignment or delegation by any Lender to any
other Lender or an Affiliate of any Lender or (y) a group of new Lenders, each
of which is an Affiliate of each other or a Related Fund of such new Lender to
the extent that the aggregate amount to be assigned to all such new Lenders is
at least $5,000,000); provided, however, that
Borrower and Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written notice
of such assignment, together with payment instructions, addresses, and related
information with respect to the Assignee, have been given to Borrower and Agent
by such Lender and the Assignee, (ii) such Lender and its Assignee have
delivered to Borrower and Agent an Assignment and Acceptance and Agent has
notified the assigning Lender of its receipt thereof in accordance with Section 13.1(b), and
(iii) unless waived by Agent, the assigning Lender or Assignee has paid to Agent
for Agent’s separate account a processing fee in the amount of $3,500 (except
such processing fee shall not be payable in connection with an assignment or
delegation by any Lender to any of its Affiliates).
(b) From
and after the date that Agent notifies the assigning Lender (with a copy to
Borrower) that it has received an executed Assignment and Acceptance and, if
applicable, payment of the required processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall be a
“Lender” and shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assigning Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 10.3) and be
released from any future obligations under this Agreement (and in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender’s rights and obligations under this Agreement and the other Loan
Documents, such Lender shall cease to be a party hereto and thereto); provided, however, that nothing
contained herein shall release any assigning Lender from obligations that
survive the termination of this Agreement, including such assigning Lender’s
obligations under Section 15 and Section
17.8(a).
(c) By
executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document
furnished
pursuant hereto, (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under this Agreement or any other Loan Document furnished pursuant hereto, (iii)
such Assignee confirms that it has received a copy of this Agreement, together
with such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance, (iv) such Assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement, (v)
such Assignee appoints and authorizes Agent to take such actions and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to Agent, by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto, and (vi) such Assignee agrees that it will
perform all of the obligations which by the terms of this Agreement are required
to be performed by it as a Lender.
(d) Immediately
upon Agent’s receipt of the required processing fee, if applicable, and delivery
of notice to the assigning Lender pursuant to Section 13.1(b), this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Lender pro tanto.
(e) Any
Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons (a “Participant”)
participating interests in all or any portion of its Obligations, its
Commitment, and the other rights and interests of that Lender (the “Originating Lender”)
hereunder and under the other Loan Documents; provided, however, that (i) the
Originating Lender shall remain a “Lender” for all purposes of this Agreement
and the other Loan Documents and the Participant receiving the participating
interest in the Obligations, the Commitments, and the other rights and interests
of the Originating Lender hereunder shall not constitute a “Lender” hereunder or
under the other Loan Documents and the Originating Lender’s obligations under
this Agreement shall remain unchanged, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) Borrower,
Agent, and the Lenders shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender’s rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the
Obligations hereunder in which such Participant is participating,
(B) reduce the interest rate applicable to the Obligations hereunder in
which such Participant is participating, (C) release all or substantially
all of the Collateral or guaranties (except to the extent expressly provided
herein or in any of the Loan Documents) supporting the Obligations hereunder in
which such Participant is participating, (D) postpone the payment of, or reduce
the amount of, the interest or fees payable to such Participant through such
Lender (other than a waiver of default interest), or (E) change the amount or
due dates of scheduled principal repayments or prepayments or premiums, and (v)
all amounts payable by Borrower hereunder shall be determined as if such Lender
had not sold such participation, except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement. The rights of any Participant only shall be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any rights under this Agreement or
the other Loan Documents or any direct rights as to the other Lenders, Agent,
Borrower, the Collections of Borrower, the Collateral, or otherwise in respect
of the Obligations. No Participant shall have the right to
participate directly in the making of decisions by the Lenders among
themselves.
(f) In
connection with any such assignment or participation or proposed assignment or
participation or any grant of a security interest in, or pledge of, its rights
under and interest in this Agreement, a Lender may, subject to the provisions of
Section
17.8, disclose all documents and information which it now or
hereafter may have relating to Borrower and its business.
(g) Any
other provision in this Agreement notwithstanding, any Lender may at any time
create a security interest in, or pledge, all or any portion of its rights under
and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR §203.24, and such Federal Reserve Bank may enforce such pledge
or security interest in any manner permitted under applicable law.
13.2 Successors. This Agreement
shall bind and inure to the benefit of the respective successors and assigns of
each of the parties; provided, however, that
Borrower may not assign this Agreement or any rights or duties hereunder without
the Lenders’ prior written consent and any prohibited assignment shall be
absolutely void ab
initio. No consent to assignment by the Lenders shall release
Borrower from its Obligations. A Lender may assign this Agreement and
the other Loan Documents and its rights and duties hereunder and thereunder
pursuant to Section
13.1 and, except as expressly required pursuant to Section 13.1, no
consent or approval by Borrower is required in connection with any such
assignment.
14. AMENDMENTS;
WAIVERS.
14.1 Amendments
and Waivers.
(a) No
amendment, waiver or other modification of any provision of this Agreement or
any other Loan Document (other than the Fee Letter), and no consent with respect
to any departure by Borrower therefrom, shall be effective unless the same shall
be in writing and signed by the Required Lenders (or by Agent at the written
request of the Required Lenders) and Borrower that are party thereto and then
any such waiver or consent shall be effective, but only in the specific instance
and for the specific purpose for which given; provided, however, that no such
waiver, amendment, or consent shall, unless in writing and signed by all of the
Lenders directly affected thereby and Borrower, do any of the
following:
(i) increase
the amount of or extend the expiration date of any Commitment of any Lender or
amend, modify, or eliminate the last sentence of Section
2.4(c)(i),
(ii) postpone
or delay any date fixed by this Agreement or any other Loan Document for any
payment of principal, interest, fees, or other amounts due hereunder or under
any other Loan Document,
(iii) reduce
the principal of, or the rate of interest on, any loan or other extension of
credit hereunder, or reduce any fees or other amounts payable hereunder or under
any other Loan Document (except (y) in connection with the waiver of
applicability of Section 2.6(c) (which
waiver shall be effective with the written consent of the Required Lenders), and
(z) that any amendment or modification of defined terms used in the financial
covenants in this Agreement shall not constitute a reduction in the rate of
interest or a reduction of fees for purposes of this clause (iii)),
(iv) amend,
modify, or eliminate this Section or any provision of this Agreement providing
for consent or other action by all Lenders,
(v) other
than as permitted by Section 15.11,
release Agent’s Lien in and to any of the Collateral,
(vi) amend,
modify, or eliminate the definition of “Required Lenders” or “Pro Rata
Share”,
(vii) contractually
subordinate any of Agent’s Liens,
(viii) release
Borrower from any obligation for the payment of money or consent to the
assignment or transfer by Borrower of any of its rights or duties under this
Agreement or the other Loan Documents,
(ix) amend,
modify, or eliminate the definition of “Application Event” or any of the
provisions of Section
2.4(b)(i) or (ii),
(x) amend,
modify, or eliminate any of the provisions of Section 13.1(a) to
permit Borrower or an Affiliate of Borrower to be permitted to become an
Assignee,
(xi) amend,
modify, or eliminate any of the provisions of Section 14.3(c),
or
(xii) amend,
modify, or eliminate the definition of Borrowing Base or any of the defined
terms that are used in such definition to the extent that any such change
results in more credit being made available to Borrower based upon the Borrowing
Base, but not otherwise, or the definition of Maximum Revolver Amount, or change
Section
2.1(c).
(b) No
amendment, waiver, modification, elimination, or consent shall amend, modify, or
waive (i) the definition of, or any of the terms or provisions of, the Fee
Letter, without the written consent of Agent and Borrower (and shall not require
the written consent of any of the Lenders), and (ii) any provision of Section 15 pertaining
to Agent, or any other rights or duties of Agent under this Agreement or the
other Loan Documents, without the written consent of Agent, Borrower, and the
Required Lenders,
(c) [Intentionally
Omitted].
(d) No
amendment, waiver, modification, elimination, or consent shall amend, modify, or
waive any provision of this Agreement or the other Loan Documents pertaining to
Swing Lender, or any other rights or duties of Swing Lender under this Agreement
or the other Loan Documents, without the written consent of Swing Lender, Agent,
Borrower, and the Required Lenders,
(e) Anything
in this Section
14.1 to the contrary notwithstanding, (i) any amendment, modification,
elimination, waiver, consent, termination, or release of, or with respect to,
any provision of this Agreement or any other Loan Document that relates only to
the relationship of the Lender Group among themselves, and that does not affect
the rights or obligations of Borrower, shall not require consent by or the
agreement of Borrower, and (ii) any amendment, waiver, modification,
elimination, or consent of or with respect to any provision of this Agreement or
any other Loan Document may be entered into without the consent of, or over the
objection of, any Defaulting Lender.
14.2 Replacement
of Certain Lenders.
(a) If
(i) any action to be taken by the Lender Group or Agent hereunder requires the
consent, authorization, or agreement of all Lenders or all Lenders affected
thereby and if such action has received the consent, authorization, or agreement
of the Required Lenders but not of all Lenders or all Lenders affected thereby,
or (ii) any Lender makes a claim for compensation under Section 16, then
Borrower or Agent, upon at least 5 Business Days prior irrevocable notice, may
permanently replace any Lender that failed to give its consent, authorization,
or agreement (a “Holdout Lender”) or
any Lender that made a claim for compensation (a “Tax Lender”) with one
or more Replacement Lenders, and the Holdout Lender or Tax Lender, as
applicable, shall have no right to refuse to be replaced
hereunder. Such notice to replace the Holdout Lender or Tax Lender,
as applicable, shall specify an effective date for such replacement, which date
shall not be later than 15 Business Days after the date such notice is
given.
(b) Prior
to the effective date of such replacement, the Holdout Lender or Tax Lender, as
applicable, and each Replacement Lender shall execute and deliver an Assignment
and Acceptance, subject only to the Holdout Lender or Tax Lender, as applicable,
being repaid in full its share of the outstanding Obligations (without any
premium or penalty of any kind whatsoever, but including all interest, fees and
other amounts that may be due in payable in respect thereof). If the
Holdout Lender or Tax Lender, as applicable, shall refuse or fail to execute and
deliver any such Assignment and Acceptance prior to the effective date of such
replacement, Agent may, but shall not be required to, execute and deliver such
Assignment and Acceptance in the name or and on behalf of the Holdout Lender or
Tax Lender, as applicable, and irrespective of whether Agent executes and
delivers such Assignment and Acceptance, the Holdout Lender or Tax Lender, as
applicable, shall be deemed to have executed and delivered such Assignment and
Acceptance. The replacement of any Holdout Lender or Tax Lender, as
applicable, shall be made in accordance with the terms of Section
13.1. Until such time as one or more Replacement Lenders shall
have acquired all of the Obligations, the Commitments, and the other rights and
obligations of the Holdout Lender or Tax Lender, as applicable, hereunder and
under the other Loan Documents, the Holdout Lender or Tax Lender, as applicable,
shall remain obligated to make the Holdout Lender’s or Tax Lender’s, as
applicable, Pro Rata Share of Advances.
14.3 Removal
of Tax Lenders.
(a) Subject
to the condition specified in Section 14.3(d), if
any Tax Lender makes a claim for compensation under Section 16, then
Borrower, upon at least 5 Business Days prior irrevocable notice, may
permanently terminate the Commitments of such Lender and remove such Tax Lender
hereunder and the Tax Lender shall have no right to refuse to be removed
hereunder. Such notice to remove the Tax Lender, as applicable, shall
specify an effective date for such termination and removal, which date shall not
be later than 15 Business Days after the date such notice is given.
(b) Prior
to the effective date of such termination and removal, the Tax Lender and
Borrower shall execute and deliver a removal agreement in form and substance
reasonably satisfactory to Borrower, subject only to the Tax Lender being repaid
in full its share of the outstanding Obligations (without any premium or penalty
of any kind whatsoever, but including all interest, fees and
other amounts that may be due in payable in respect thereof) by
Borrower. If the Tax Lender shall refuse or fail to execute and
deliver any such removal agreement prior to the effective date of such removal,
the termination of the Commitments of such Tax Lender and the removal of such
Tax Lender shall nonetheless occur on the effective date originally specified by
Borrower.
(c) Anything
contained in this Agreement to the contrary notwithstanding, any payment made
under this Section
14.3 to a Tax Lender that is being removed need not be a pro-rata payment
to all Lenders and the Obligations due to the Tax Lender may be satisfied while
leaving remaining Obligations outstanding.
(d) Borrower
shall only be entitled to terminate the Commitments of a Tax Lender and remove
such Tax Lender if and only if no Event of Default has occurred and is
continuing.
(e) Once
a termination and removal of a Tax Lender is effectuated under this Section 14.3, the
term Maximum Revolver Amount shall automatically be deemed reduced by the amount
of the terminated Commitment of such removed Tax Lender and all of the
provisions of this Agreement (other than Section 10.3) and the
other Loan Documents, including the determination of Required Lenders and Pro
Rata Share, shall be interpreted and determined without regard to such
terminated Commitment and without regard to the removed Tax Lender.
(f) The
termination of the Commitment of a Tax Lender and the removal of such Tax Lender
pursuant to this Section 14.3 shall
not eliminate or affect such Tax Lender’s rights under Section 10.3, which
rights shall survive any such termination and removal.
14.4 No
Waivers; Cumulative Remedies. No failure by
Agent or any Lender to exercise any right, remedy, or option under this
Agreement or any other Loan Document, or delay by Agent or any Lender in
exercising the same, will operate as a waiver thereof. No waiver by
Agent or any Lender will be effective unless it is in writing, and then only to
the extent specifically stated. No waiver by Agent or any Lender on
any occasion shall affect or diminish Agent’s and each Lender’s rights
thereafter to require strict performance by Borrower of any provision of this
Agreement. Agent’s and each Lender’s rights under this Agreement and
the other Loan Documents will be cumulative and not exclusive of any other right
or remedy that Agent or any Lender may have.
15. AGENT; THE LENDER
GROUP.
15.1 Appointment
and Authorization of Agent. Each Lender
hereby designates and appoints WFCF as its agent under this Agreement and the
other Loan Documents and each Lender hereby irrevocably authorizes Agent to
execute and deliver each of the other Loan Documents on its behalf and to take
such other action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to Agent by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental
thereto. Agent agrees to act as agent for and on behalf of the
Lenders on the conditions contained in this Section
15. Any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document notwithstanding, Agent shall not have
any duties or responsibilities, except those expressly set forth herein or in
the other Loan Documents, nor shall Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against
Agent. Without limiting the generality of the foregoing, the use of
the term “agent” in this Agreement or the other Loan Documents with reference to
Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable
law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only a representative relationship between
independent contracting parties. Each Lender hereby further
authorizes Agent to act as the secured party under each of the Loan Documents
that create a Lien on any item of Collateral. Except as expressly
otherwise provided in this Agreement, Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions that Agent
expressly is entitled to take or assert under or pursuant to this Agreement and
the other Loan Documents. Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Agent, Lenders agree that Agent shall have the right to exercise
the following powers as long as this Agreement remains in effect: (a)
maintain, in accordance with its customary business practices, ledgers and
records reflecting the status of the Obligations, the Collateral, the
Collections of Borrower, and related matters, (b) execute or file any and all
financing or similar statements or notices, amendments, renewals, supplements,
documents, instruments, proofs of claim, notices and other written agreements
with respect to the Loan Documents, (c) make Advances, for itself or on behalf
of Lenders, as provided in the Loan Documents, (d) exclusively receive, apply,
and distribute the Collections of Borrower as provided in the Loan Documents,
(e) open and maintain such bank accounts and cash management arrangements as
Agent deems necessary and appropriate in accordance with the Loan Documents for
the foregoing purposes with respect to the Collateral and the Collections of
Borrower, (f) perform, exercise, and enforce any and all other rights and
remedies of the Lender Group with respect to Borrower, the Obligations, the
Collateral, the Collections of Borrower, or otherwise related to any of same as
provided in the Loan Documents, and (g) incur and pay such Lender Group Expenses
as Agent may deem necessary or appropriate for the performance and fulfillment
of its functions and powers pursuant to the Loan Documents.
15.2 Delegation
of Duties. Agent may execute
any of its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys in fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. Agent shall
not be responsible for the negligence or misconduct of any agent or attorney in
fact that it selects as long as such selection was made without gross negligence
or willful misconduct.
15.3 Liability
of Agent. None of the
Agent-Related Persons shall (a) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement or any other
Loan Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (b) be responsible in any manner to any of
the Lenders for any recital, statement, representation or warranty made by
Borrower or any of its Affiliates, or any officer or director thereof, contained
in this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to
any Lenders to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the books and records or properties of
Borrower.
15.4 Reliance
by Agent. Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile
or other electronic method of transmission, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless Agent shall
first receive such advice or concurrence of the Lenders as it deems appropriate
and until such instructions are received, Agent shall act, or refrain from
acting, as it deems advisable. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by the Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the requisite
Lenders and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Lenders.
15.5 Notice of
Default or Event of Default. Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default, except with respect to defaults in the payment of principal,
interest, fees, and expenses required to be paid to Agent for the account of the
Lenders and, except with respect to Events of Default of which Agent has actual
knowledge, unless Agent shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a “notice of default.” Agent
promptly will notify the Lenders of its receipt of any such notice or of any
Event of Default of which Agent has actual knowledge. If any Lender
obtains actual knowledge of any Event of Default, such Lender promptly shall
notify the other Lenders and Agent of such Event of Default. Each
Lender shall be solely responsible for giving any notices to its Participants,
if any. Subject to Section 15.4, Agent
shall take such action with respect to such Default or Event of Default as may
be requested by the Required Lenders in accordance with Section 9; provided, however, that unless
and until Agent has received any such request, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable.
15.6 Credit
Decision. Each Lender
acknowledges that none of the Agent-Related Persons has made any representation
or warranty to it, and that no act by Agent hereinafter taken, including any
review of the affairs of Borrower or its Affiliates, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender. Each Lender represents to Agent that it has, independently
and without reliance upon any Agent-Related Person and based on such due
diligence, documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower or any
other Person party to a Loan Document, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to Borrower. Each
Lender also represents and warrants that it will, independently and without
reliance upon any Agent-Related Person and based on
such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower or any other Person party to a Loan
Document. Except for notices, reports, and other documents expressly
herein required to be furnished to the Lenders by Agent, Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of Borrower or any other Person party to
a Loan Document that may come into the possession of any of the Agent-Related
Persons. Each Lender acknowledges that Agent does not have any duty
or responsibility, either initially or on a continuing basis (except to the
extent, if any, that is expressly specified herein) to provide such Lender with
any credit or other information with respect to Borrower, its Affiliates or any
of their respective business, legal, financial or other affairs, and
irrespective of whether such information came into Agent's or its Affiliates’ or
representatives’ possession before or after the date on which such Lender became
a party to this Agreement.
15.7 Costs and
Expenses; Indemnification. Agent may incur
and pay Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including court costs, attorneys
fees and expenses, fees and expenses of financial accountants, advisors,
consultants, and appraisers, costs of collection by outside collection agencies,
auctioneer fees and expenses, and costs of security guards or insurance premiums
paid to maintain the Collateral, whether or not Borrower is obligated to
reimburse Agent or Lenders for such expenses pursuant to this Agreement or
otherwise. Agent is authorized and directed to deduct and retain
sufficient amounts from the Collections of Borrower received by Agent to
reimburse Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. In the event Agent is not
reimbursed for such costs and expenses by Borrower, each Lender hereby agrees
that it is and shall be obligated to pay to Agent such Lender’s ratable
thereof. Whether or not the transactions contemplated hereby are
consummated, each of the Lenders, on a ratable basis, shall indemnify and defend
the Agent-Related Persons (to the extent not reimbursed by or on behalf of
Borrower and without limiting the obligation of Borrower to do so) from and
against any and all Indemnified Liabilities; provided, however, that no
Lender shall be liable for the payment to any Agent-Related Person of any
portion of such Indemnified Liabilities resulting solely from such Person’s
gross negligence or willful misconduct nor shall any Lender be liable for the
obligations of any Defaulting Lender in failing to make an Advance or other
extension of credit hereunder. Without limitation of the foregoing,
each Lender shall reimburse Agent upon demand for such Lender’s ratable share of
any costs or out of pocket expenses (including attorneys, accountants, advisors,
and consultants fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or any other Loan Document to the extent that Agent is not reimbursed for such
expenses by or on behalf of Borrower. The undertaking in this Section
shall survive the payment of all Obligations hereunder and the resignation or
replacement of Agent.
15.8 Agent in
Individual Capacity. WFCF and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, provide financial products or services, acquire equity interests
in, and generally engage in any kind of banking, trust, financial advisory,
underwriting, or other business with Borrower and its Affiliates and any other
Person party to any Loan Document as though WFCF were not Agent hereunder, and,
in each case, without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that,
pursuant to such activities, WFCF or its Affiliates may receive information
regarding Borrower or its Affiliates or any other Person party to any Loan
Documents that is subject to confidentiality obligations in favor of Borrower or
such other Person and that prohibit the disclosure of such information to the
Lenders, and the Lenders acknowledge that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver Agent will
use its reasonable best efforts to obtain), Agent shall not be under any
obligation to provide such information to them. The terms “Lender”
and “Lenders” include WFCF in its individual capacity.
15.9 Successor
Agent. Agent may resign
as Agent upon 30 days prior written notice to the Lenders (unless such notice is
waived by the Required Lenders) and Borrower (unless such notice is waived by
Borrower). If Agent resigns under this Agreement, the Required
Lenders shall be entitled, with (so long as no Event of Default has occurred and
is continuing) the consent of Borrower (such consent not to be unreasonably
withheld, delayed, or conditioned), appoint a successor Agent for the
Lenders. If, at the time that Agent’s resignation is effective, it is
acting as the Swing Lender, such resignation shall also operate to effectuate
its resignation as the Swing Lender, and it shall automatically be relieved of
any further obligation to make Swing Loans. If no successor Agent is
appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders and Borrower, a successor
Agent. If Agent has materially breached or failed to perform any
material provision of this Agreement or of applicable law, the Required Lenders
may agree in writing to remove and replace Agent with a successor Agent from
among the Lenders with (so long as no Event of Default has occurred and is
continuing) the consent of Borrower (such consent not to be unreasonably
withheld, delayed, or conditioned). In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers, and duties of the retiring Agent and
the term “Agent” shall mean such successor Agent and the retiring Agent’s
appointment, powers, and duties as Agent shall be terminated. After
any retiring Agent’s resignation hereunder as Agent, the provisions of this
Section 15
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. If no successor Agent has
accepted appointment as Agent by the date which is 30 days following a retiring
Agent’s notice of resignation, the retiring Agent’s resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Lenders appoint a
successor Agent as provided for above.
15.10 Lender in
Individual Capacity.
(a) Any
Lender and its respective Affiliates may make loans to, issue letters of credit
for the account of, accept deposits from, provide financial products or services
to, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting, or other business with Borrower and its
Affiliates and any other Person party to any Loan Documents as though such
Lender were not a Lender hereunder without notice to or consent of the other
members of the Lender Group. The other members of the Lender Group
acknowledge that, pursuant to such activities, such Lender and its respective
Affiliates may receive information regarding Borrower or its Affiliates or any
other Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender shall not be under any obligation to provide such
information to them.
(b) WFCF
and US Bank, in their respective capacities as “co-lead arrangers” and “joint
bookrunners”, and US Bank, in its capacity as “documentation agent”, shall not
have any right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to them in their capacities as Lenders or,
in the case of WFCF, in its capacity as Agent. Without limiting the
foregoing, WFCF and US Bank, in their respective capacities as “co-lead
arrangers” and “joint bookrunners”, and US Bank, in its capacity as
“documentation agent”, shall not have or be deemed to have any fiduciary
relationship with Borrower or with any Lender. Each Lender
acknowledges that it has not relied upon, and will not rely upon, WFCF or US
Bank in deciding to enter into this Agreement or in taking or not taking action
hereunder.
15.11 Collateral
Matters.
(a) The
Lenders hereby irrevocably authorize Agent to release any Lien on any Collateral
(i) upon the termination of the Commitments and payment and satisfaction in full
by Borrower of all of the Obligations, (ii) constituting property being sold,
leased, licensed, or otherwise disposed of, if a release is required or
desirable in connection therewith and if Borrower certifies to Agent that the
sale,
lease,
license, or other disposition is permitted under Section 6.4 (and
Agent may rely conclusively on any such certificate, without further inquiry),
(iii) constituting property which is the subject of a Permitted Spare Parts
Installation (exclusive of any installation of Spare Parts of Borrower into
other Spare Parts of Borrower, the installation of Spare Parts of Borrower into
the Designated Engines, or the installation of Spare Parts of Borrower into any
Ground Service Equipment of Borrower), (iv) so long as in the ordinary course of
Borrower’s business, the exchange of Spare Parts of Borrower with other
airlines, (v) constituting property in which Borrower owned no interest at the
time Agent’s Lien was granted nor at any time thereafter, or
(vi) constituting property leased to Borrower under a lease that has
expired or is terminated in a transaction permitted under this
Agreement. Borrower and the Lenders hereby irrevocably authorize
Agent, based upon the instruction of the Required Lenders, to credit bid and
purchase (either directly or through one or more acquisition vehicles) all or
any portion of the Collateral at any sale thereof conducted by Agent under the
provisions of the Code, including pursuant to Sections 9-610 or 9-620 of the
Code, at any sale thereof conducted under the provisions of the Bankruptcy Code,
including Section 363 of the Bankruptcy Code, or at any sale or foreclosure
conducted by Agent (whether by judicial action or otherwise) in accordance with
applicable law. Except as provided above, Agent will not execute and
deliver a release of any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or substantially all of the
Collateral, all of the Lenders, or (z) otherwise, the Required
Lenders. Upon request by Agent or Borrower at any time, the Lenders
will confirm in writing Agent’s authority to release any such Liens on
particular types or items of Collateral pursuant to this Section 15.11; provided, however, that (1)
Agent shall not be required to execute any document necessary to evidence such
release on terms that, in Agent’s opinion, would expose Agent to liability or
create any obligation or entail any consequence other than the release of such
Lien without recourse, representation, or warranty, and (2) such release shall
not in any manner discharge, affect, or impair the Obligations or any Liens
(other than those expressly being released) upon (or obligations of Borrower in
respect of) all interests retained by Borrower, including, the proceeds of any
sale, all of which shall continue to constitute part of the
Collateral. The Lenders further hereby irrevocably authorize Agent,
at its option and in its sole discretion, to subordinate any Lien granted to or
held by Agent under any Loan Document to the holder of any Permitted Lien on
such property if such Permitted Lien secures Permitted Purchase Money
Indebtedness.
(b) Agent
shall have no obligation whatsoever to any of the Lenders to assure that the
Collateral exists or is owned by Borrower or is cared for, protected, or insured
or has been encumbered, or that Agent’s Liens have been properly or sufficiently
or lawfully created, perfected, protected, or enforced or are entitled to any
particular priority, or that any particular items of Collateral meet the
eligibility criteria applicable in respect thereof or whether to impose,
maintain, reduce, or eliminate any particular reserve hereunder or whether the
amount of any such reserve is appropriate or not, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission, or event
related thereto, subject to the terms and conditions contained herein, Agent may
act in any manner it may deem appropriate, in its sole discretion given Agent’s
own interest in the Collateral in its capacity as one of the Lenders and that
Agent shall have no other duty or liability whatsoever to any Lender as to any
of the foregoing, except as otherwise provided herein.
15.12 Restrictions
on Actions by Lenders; Sharing of Payments.
(a) Each
of the Lenders agrees that it shall not, without the express written consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the written request of Agent, set off against the Obligations, any amounts owing
by such Lender to Borrower or any deposit accounts of Borrower now or hereafter
maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so in writing by Agent, take
or cause to be taken any action, including, the commencement of any legal or
equitable proceedings to enforce any Loan Document against
Borrower or to foreclose any Lien on, or otherwise enforce any security interest
in, any of the Collateral.
(b) If,
at any time or times any Lender shall receive (i) by payment, foreclosure,
setoff, or otherwise, any proceeds of Collateral or any payments with respect to
the Obligations, except for any such proceeds or payments received by such
Lender from Agent pursuant to the terms of this Agreement, or (ii) payments
from Agent in excess of such Lender’s Pro Rata Share of all such distributions
by Agent, such Lender promptly shall (A) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate the same to Agent, or
in immediately available funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the applicable
provisions of this Agreement, or (B) purchase, without recourse or warranty, an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as among
the Lenders in accordance with their Pro Rata Shares; provided, however, that to the
extent that such excess payment received by the purchasing party is thereafter
recovered from it, those purchases of participations shall be rescinded in whole
or in part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
15.13 Agency
for Perfection. Agent hereby
appoints each other Lender as its agent (and each Lender hereby accepts for the
purpose of perfecting Agent’s Liens in assets which, in accordance with Article
8 or Article 9, as applicable, of the Code can be perfected by possession or
control. Should any Lender obtain possession or control of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s
request therefor shall deliver possession or control of such Collateral to Agent
or in accordance with Agent’s instructions.
15.14 Payments
by Agent to the Lenders. All payments to
be made by Agent to the Lenders shall be made by bank wire transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to
Agent. Concurrently with each such payment, Agent shall identify
whether such payment (or any portion thereof) represents principal, premium,
fees, or interest of the Obligations.
15.15 Concerning
the Collateral and Related Loan Documents. Each member of
the Lender Group authorizes and directs Agent to enter into this Agreement and
the other Loan Documents. Each member of the Lender Group agrees that
any action taken by Agent in accordance with the terms of this Agreement or the
other Loan Documents relating to the Collateral and the exercise by Agent of its
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the
Lenders.
15.16 Audits
and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports
and Information. By becoming a
party to this Agreement, each Lender:
(a) is
deemed to have requested that Agent furnish such Lender, promptly after it
becomes available, a copy of each field audit or examination report respecting
Borrower and a copy of any
document Agent receives pursuant to Section
5.10 (each a “Report” and
collectively, “Reports”) prepared by
or at the request of Agent, and Agent shall so furnish each Lender with such
Reports,
(b) expressly
agrees and acknowledges that Agent does not (i) make any representation or
warranty as to the accuracy of any Report, and (ii) shall not be liable for any
information contained in any Report,
(c) expressly
agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that Agent or other party performing any audit or examination will
inspect only specific
information regarding Borrower and will rely significantly upon Borrower’s books
and records, as well as on representations of Borrower’s
personnel,
(d) agrees
to keep all Reports and other material, non-public information regarding
Borrower and its operations, assets, and existing and contemplated business
plans in a confidential manner in accordance with Section 17.8,
and
(e) without
limiting the generality of any other indemnification provision contained in this
Agreement, agrees: (i) to hold Agent and any other Lender preparing a
Report harmless from any action the indemnifying Lender may take or fail to take
or any conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to Borrower, or the indemnifying Lender’s
participation in, or the indemnifying Lender’s purchase of, a loan or loans of
Borrower, and (ii) to pay and protect, and indemnify, defend and hold Agent, and
any such other Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses, and other amounts (including,
attorneys fees and costs) incurred by Agent and any such other Lender preparing
a Report as the direct or indirect result of any third parties who might obtain
all or part of any Report through the indemnifying Lender.
In
addition to the foregoing: (x) any Lender may from time to time
request of Agent in writing that Agent provide to such Lender a copy of any
report or document provided by Borrower to Agent that has not been
contemporaneously provided by Borrower to such Lender, and, upon receipt of such
request, Agent promptly shall provide a copy of same to such Lender, (y) to the
extent that Agent is entitled, under any provision of the Loan Documents, to
request additional reports or information from Borrower, any Lender may, from
time to time, reasonably request Agent to exercise such right as specified in
such Lender’s notice to Agent, whereupon Agent promptly shall request of
Borrower the additional reports or information reasonably specified by such
Lender, and, upon receipt thereof from Borrower, Agent promptly shall provide a
copy of same to such Lender, and (z) any time that Agent renders to Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement
to each Lender.
15.17 Several
Obligations; No Liability. Notwithstanding
that certain of the Loan Documents now or hereafter may have been or will be
executed only by or in favor of Agent in its capacity as such, and not by or in
favor of the Lenders, any and all obligations on the part of Agent (if any) to
make any credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender
any interest in, or subject any Lender to any liability for, or in respect of,
the business, assets, profits, losses, or liabilities of any other
Lender. Each Lender shall be solely responsible for notifying its
Participants of any matters relating to the Loan Documents to the extent any
such notice may be required, and no Lender shall have any obligation, duty, or
liability to any Participant of any other Lender. Except as provided
in Section
15.7, no member of the Lender Group shall have any liability for the acts
of any other member of the Lender Group. No Lender shall be
responsible to Borrower or any other Person for any failure by any other Lender
to fulfill its obligations to make credit available hereunder, nor to advance
for such Lender or on its behalf, nor to take any other action on behalf of such
Lender hereunder or in connection with the financing contemplated
herein.
16. WITHHOLDING
TAXES.
(a) All
payments made by Borrower hereunder or under any note or other Loan Document
will be made without setoff, counterclaim, or other defense. In
addition, all such payments will be made free and clear of, and without
deduction or withholding for, any present or future Indemnified Taxes, and in
the event any deduction or withholding of Indemnified Taxes is required,
Borrower shall
comply
with the next sentence of this Section
16(a). If any Indemnified Taxes are so levied or imposed,
Borrower agrees to pay the full amount of such Indemnified Taxes and such
additional amounts as may be necessary so that every payment of all amounts due
under this Agreement, any note, or Loan Document, including any amount paid
pursuant to this Section 16(a) after
withholding or deduction for or on account of any Indemnified Taxes, will not be
less than the amount provided for herein; provided, however, that Borrower shall
not be required to increase any such amounts if the increase in such amount
payable results from Agent’s or such Lender’s own willful misconduct or gross
negligence (as finally determined by a court of competent
jurisdiction). Borrower will furnish to Agent as promptly as possible
after the date the payment of any Tax is due pursuant to applicable law,
certified copies of tax receipts evidencing such payment by
Borrower.
(b) Borrower
agrees to pay any present or future stamp, value added or documentary taxes or
any other excise or property taxes, charges, or similar levies that arise from
any payment made hereunder or from the execution, delivery, performance,
recordation, or filing of, or otherwise with respect to this Agreement or any
other Loan Document.
(c) If
a Lender or Participant is entitled to claim an exemption or reduction from
United States withholding tax, such Lender or Participant agrees with and in
favor of Agent, to deliver to Agent (or, in the case of a Participant, to the
Lender granting the participation only) one of the following before receiving
its first payment under this Agreement:
(i) if
such Lender or Participant is entitled to claim an exemption from United States
withholding tax pursuant to the portfolio interest exception, (A) a statement of
the Lender or Participant, signed under penalty of perjury, that it is not a (I)
a “bank” as described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder
of Borrower (within the meaning of Section 871(h)(3)(B) of the IRC), or (III) a
controlled foreign corporation related to Borrower within the meaning of Section
864(d)(4) of the IRC, and (B) a properly completed and executed IRS Form W-8BEN
or Form W-8IMY (with proper attachments);
(ii) if
such Lender or Participant is entitled to claim an exemption from, or a
reduction of, withholding tax under a United States tax treaty, a properly
completed and executed copy of IRS Form W-8BEN;
(iii) if
such Lender or Participant is entitled to claim that interest paid
under this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender, a
properly completed and executed copy of IRS Form W-8ECI;
(iv) if
such Lender or Participant is entitled to claim that interest paid under this
Agreement is exempt from United States withholding tax because such Lender or
Participant serves as an intermediary, a properly completed and executed copy of
IRS Form W-8IMY (with proper attachments); or
(v) a
properly completed and executed copy of any other form or forms, including IRS
Form W-9, as may be required under the IRC or other laws of the United States as
a condition to exemption from, or reduction of, United States withholding or
backup withholding tax.
Each
Lender or Participant shall provide new forms (or successor forms) upon the
expiration or obsolescence of any previously delivered forms and to promptly
notify Agent (or, in the case of a Participant, to the Lender granting the
participation only) of any change in circumstances which would modify or render
invalid any claimed exemption or reduction.
(d) If
a Lender or Participant claims an exemption from withholding tax in a
jurisdiction other than the United States, such Lender or such Participant
agrees with and in favor of Agent, to deliver to Agent (or, in the case of a
Participant, to the Lender granting the participation only) any such form or
forms, as may be required under the laws of such jurisdiction as a condition to
exemption from, or reduction of, foreign withholding or backup withholding tax
before receiving its first payment under this Agreement, but only if such Lender
or such Participant is legally able to deliver such forms, provided, however, that nothing
in this Section
16(d) shall require a Lender or Participant to disclose any information
that it deems to be confidential (including without limitation, its tax
returns). Each Lender and each Participant shall provide new forms
(or successor forms) upon the expiration or obsolescence of any previously
delivered forms and to promptly notify Agent (or, in the case of a Participant,
to the Lender granting the participation only) of any change in circumstances
which would modify or render invalid any claimed exemption or
reduction.
(e) If
a Lender or Participant claims exemption from, or reduction of, withholding tax
and such Lender or Participant sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of Borrower to such Lender or
Participant, such Lender or Participant agrees to notify Agent (or, in the case
of a sale of a participation interest, to the Lender granting the participation
only) of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender or
Participant. To the extent of such percentage amount, Agent will
treat such Lender’s or such Participant’s documentation provided pursuant to
Section 16(c)
or 16(d) as no
longer valid. With respect to such percentage amount, such
Participant or Assignee may provide new documentation, pursuant to Section 16(c) or
16(d), if
applicable. Borrower agrees that each Participant shall be entitled
to the benefits of this Section 16 with
respect to its participation in any portion of the Commitments and the
Obligations so long as such Participant complies with the obligations set forth
in this Section
16 with respect thereto.
(f) If
a Lender or a Participant is entitled to a reduction in the applicable
withholding tax, Agent (or, in the case of a Participant, to the Lender granting
the participation) may withhold from any interest payment to such Lender or such
Participant an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation
required by Section
16(c) or 16(d) are not
delivered to Agent (or, in the case of a Participant, to the Lender granting the
participation), then Agent (or, in the case of a Participant, to the Lender
granting the participation) may withhold from any interest payment to such
Lender or such Participant not providing such forms or other documentation an
amount equivalent to the applicable withholding tax.
(g) If
the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent (or, in the case of a Participant, to
the Lender granting the participation) or Borrower did not properly withhold tax
from amounts paid to or for the account of any Lender or any Participant due to
a failure on the part of the Lender or such Participant (because the wrong form
was delivered, the form was incorrectly filled out or executed, or because such
Lender failed to notify Agent (or such Participant failed to notify the Lender
granting the participation) of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective), such Lender shall
indemnify and hold Agent or Borrower harmless (or, in the case of a Participant,
such Participant shall indemnify and hold the Lender granting the participation
harmless) for all amounts paid, directly or indirectly, by Agent or Borrower
(or, in the case of a Participant, to the Lender granting the participation), as
tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to Agent or Borrower (or, in
the case of a Participant, to the Lender granting the participation only) under
this Section
16, together with all costs and expenses (including attorneys fees and
expenses). The obligation of the Lenders and the Participants under
this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.
(h) If
Agent or a Lender determines, in its reasonable discretion, that it has received
a refund or credit of any Indemnified Taxes as to which it has been indemnified
by Borrower or with
respect
to which Borrower has paid additional amounts pursuant to this Section 16, so long
as no Default or Event of Default has occurred and is continuing, it shall pay
over such refund or credit to Borrower (but only to the extent of payments made,
or additional amounts paid, by Borrower under this Section 16 with
respect to Indemnified Taxes giving rise to such a refund or credit), net of all
out-of-pocket expenses of Agent or such Lender and without interest (other than
any interest paid by the relevant Governmental Authority with respect to such a
refund or credit); provided, that
Borrower, upon the request of Agent or such Lender, agrees to repay the amount
paid over to Borrower (plus any penalties, interest or other charges, imposed by
the relevant Governmental Authority, other than such penalties, interest or
other charges imposed as a result of the willful misconduct or gross negligence
of Agent hereunder) to Agent or such Lender in the event Agent or such Lender is
required to repay such refund or credit to such Governmental
Authority. Notwithstanding anything in this Agreement to the
contrary, this Section
16 shall not be construed to require Agent or any Lender to make
available its tax returns (or any other information which it deems confidential)
to Borrower or any other Person.
(i) If
a change in circumstances requires a Borrower to pay Lender additional amounts
pursuant to this Section 16, such Lender shall use reasonable efforts
to designate a different one of its lending offices or assign
its rights and obligations hereunder to another of its offices or branches
if (i) such designation or assignment would reduce or eliminate the obligation
to pay additional amounts and (ii) would not, in the sole discretion of the
Lender, be materially disadvantageous to such Lender. Borrowers agree to
pay all reasonable out-of-pocket costs and expenses incurred by such Lender in
connection with such designation or assignment.
17. GENERAL
PROVISIONS.
17.1 Effectiveness. This Agreement
shall be binding and deemed effective when executed by Borrower, Agent, and each
Lender whose signature is provided for on the signature pages
hereof.
17.2 Section
Headings. Headings and
numbers have been set forth herein for convenience only. Unless the
contrary is compelled by the context, everything contained in each Section
applies equally to this entire Agreement.
17.3 Interpretation. Neither this
Agreement nor any uncertainty or ambiguity herein shall be construed against the
Lender Group or Borrower, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by all
parties and shall be construed and interpreted according to the ordinary meaning
of the words used so as to accomplish fairly the purposes and intentions of all
parties hereto.
17.4 Severability
of Provisions. Each provision of
this Agreement shall be severable from every other provision of this Agreement
for the purpose of determining the legal enforceability of any specific
provision.
17.5 Debtor-Creditor
Relationship. The relationship
between the Lenders and Agent, on the one hand, and Borrower, on the other hand,
is solely that of creditor and debtor. No member of the Lender Group
has (or shall be deemed to have) any fiduciary relationship or duty to Borrower
arising out of or in connection with the Loan Documents or the transactions
contemplated thereby, and there is no agency or joint venture relationship
between the members of the Lender Group, on the one hand, and Borrower, on the
other hand, by virtue of any Loan Document or any transaction contemplated
therein.
17.6 Counterparts;
Electronic Execution. This Agreement
may be executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed
counterpart of this Agreement by facsimile or other electronic method of
transmission shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by facsimile or other electronic method of
transmission also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original
executed counterpart shall not affect the validity, enforceability, and binding
effect of this Agreement. The foregoing shall apply to each other
Loan Document mutatis
mutandis.
17.7 Revival
and Reinstatement of Obligations. If the incurrence
or payment of the Obligations by Borrower or the transfer to the Lender Group of
any property should for any reason subsequently be asserted, or declared, to be
void or voidable under any state or federal law relating to creditors’ rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (each, a “Voidable Transfer”),
and if the Lender Group is required to repay or restore, in whole or in part,
any such Voidable Transfer, or elects to do so upon the reasonable advice of its
counsel, then, as to any such Voidable Transfer, or the amount thereof that the
Lender Group is required or elects to repay or restore, and as to all reasonable
costs, expenses, and attorneys fees of the Lender Group related thereto, the
liability of Borrower automatically shall be revived, reinstated, and restored
and shall exist as though such Voidable Transfer had never been
made.
17.8 Confidentiality.
(a) Agent
and Lenders each individually (and not jointly or jointly and severally) agree
that material, non-public information regarding Borrower and its operations,
assets, and existing and contemplated business plans (“Confidential
Information”) shall be treated by Agent and the Lenders in a confidential
manner, and shall not be disclosed by Agent and the Lenders to Persons who are
not parties to this Agreement, except: (i) to attorneys for and other
advisors, accountants, auditors, and consultants to any member of the Lender
Group (“Lender Group
Representatives”), (ii) to Subsidiaries and Affiliates of any member of
the Lender Group, provided that any such Subsidiary or Affiliate shall have
agreed to receive such information hereunder subject to the terms of this Section 17.8, (iii)
as may be required by regulatory authorities so long as such authorities are
informed of the confidential nature of such information, (iv) as may be required
by statute, decision, or judicial or administrative order, rule, or regulation;
provided that (x) prior to any disclosure under this clause (iv), the disclosing
party agrees to provide Borrower with prior notice thereof, to the extent that
it is practicable to do so and to the extent that the disclosing party is
permitted to provide such prior notice to Borrower pursuant to the terms of the
applicable statute, decision, or judicial or administrative order, rule, or
regulation and (y) any disclosure under this clause (iv) shall be limited to the
portion of the Confidential Information as may be required by such statute,
decision, or judicial or administrative order, rule, or regulation, (v) as may
be agreed to in advance by Borrower or as requested or required by any
Governmental Authority pursuant to any subpoena or other legal process,
provided, that, (x) prior to any disclosure under this clause (v) the disclosing
party agrees to provide Borrower with prior notice thereof, to the extent that
it is practicable to do so and to the extent that the disclosing party is
permitted to provide such prior notice to Borrower pursuant to the terms of the
subpoena or other legal process and (y) any disclosure under this clause (v)
shall be limited to the portion of the Confidential Information as may be
required by such governmental authority pursuant to such subpoena or other legal
process, (vi) as to any such information that is or becomes generally available
to the public (other than as a result of prohibited disclosure by Agent or the
Lenders or the Lender Group Representatives), (vii) in connection with any
assignment, participation or pledge of any Lender’s interest under
this Agreement, provided that any such assignee, participant, or pledgee shall
have agreed in writing to receive such information hereunder subject to the
terms of this Section, (viii) in connection with any litigation or other
adversary proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties under
this Agreement or the other Loan Documents; provided, that, prior to any
disclosure to any Person (other than Borrower, Agent, any Lender, any of their
respective Affiliates, or their respective counsel) under this clause (viii)
with respect to litigation involving any Person (other than Borrower, Agent, any
Lender, any of their respective Affiliates, or their respective counsel), the
disclosing party agrees to provide Borrower with prior notice thereof, and, if
Borrower is not a party to such litigation or other adversary proceeding, taking
such reasonable steps to limit disclosure as may be requested in writing by
Borrower (including seeking a protective order); provided, however, that the
disclosing party shall not be obligated to take such steps unless and until
Borrower agrees to indemnify and hold the disclosing party harmless from and
against any and all costs and expenses (including reasonable attorneys fees)
incurred by the disclosing party in seeking to limit disclosure in accordance
with the request of Borrower, and (ix) in connection with, and to the extent
reasonably necessary for, the exercise of any secured creditor remedy under this
Agreement or under any other Loan Document.
(b) Anything
in this Agreement to the contrary notwithstanding, Agent may provide information
concerning the terms and conditions of this Agreement and the other Loan
Documents to loan syndication and pricing reporting services.
17.9 Lender
Group Expenses. Borrower agrees
to pay any and all Lender Group Expenses (a) if no Event of Default has occurred
and is continuing, within 30 days of the date of Borrower’s receipt of written
notice thereof (which notice shall be sent by Agent to the email addresses for
the individuals set forth on Schedule 2.6(d)
hereto), and (b) if an Event of Default has occurred and is continuing,
immediately upon demand therefor and agrees that its obligations
contained in this Section 17.9 shall
survive payment or satisfaction in full of all other Obligations.
17.10 Survival. All
representations and warranties made by Borrower in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant
to this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any loans, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that Agent or any Lender may have had notice or knowledge of any Default or
Event of Default or incorrect representation or warranty at the time any credit
is extended hereunder, and shall continue in full force and effect as long as
the principal of or any accrued interest on any loan or any fee or any other
amount payable under this Agreement is outstanding and so long as the
Commitments have not expired or terminated.
17.11 USA
PATRIOT Act. Each
Lender that is subject to the requirements of the Patriot Act hereby notifies
Borrower that pursuant to the requirements of the Act, it is required to obtain,
verify and record information that identifies Borrower, which information
includes the name and address of Borrower and other information that will allow
such Lender to identify Borrower in accordance with the Patriot
Act.
17.12 Integration. This Agreement,
together with the other Loan Documents, reflects the entire understanding of the
parties with respect to the transactions contemplated hereby and shall not be
contradicted or qualified by any other agreement, oral or written, before the
date hereof.
[Signature
pages to follow.]
IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed and
delivered as of the date first above written.
|
ALASKA
AIRLINES, INC., an Alaska corporation, as
Borrower
|
|
|
|
|
|
By:
|
/s/ John F. Schaefer,
Jr.
|
|
Name:
|
John
F. Schaefer, Jr.
|
|
Title:
|
Vice
President Finance &
Treasurer_____
|
|
WELLS FARGO CAPITAL FINANCE,
LLC,
a
Delaware limited liability company,
as
Agent, as Co-Lead arranger, as Joint Bookrunner, and as a
Lender
|
|
|
|
|
|
By:
|
/s/ David R. Klages
|
|
Name:
|
David
R. Klages
|
|
Title:
|
Vice
President_____
|
|
U.S. BANK NATIONAL
ASSOCIATION,
as
Documentation Agent, as Co-Lead arranger, as Joint Bookrunner, and as a
Lender
|
|
|
|
|
|
By:
|
/s/ Jeffrey S. Gruender
|
|
Name:
|
Jeffrey
S. Gruender
|
|
Title:
|
Vice
President
|
|
BANK
SINOPAC, as a
Lender
|
|
|
|
|
|
By:
|
/s/ Alton Wang
|
|
Name:
|
Alton
Wang
|
|
Title:
|
First
Vice President, General Manager
|
EXHIBIT
A-1
FORM
OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
This
ASSIGNMENT AND ACCEPTANCE
AGREEMENT (“Assignment Agreement”) is entered into as of between (“Assignor”)
and
(“Assignee”). Reference is made to the Credit Agreement described in
Annex I hereto
(the “Credit Agreement”). Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Credit
Agreement.
I. In
accordance with the terms and conditions of Section 13 of the
Credit Agreement, the Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, that interest in and to
the Assignor's rights and obligations under the Loan Documents as of the date
hereof with respect to the Obligations owing to the Assignor, and Assignor’s
portion of the Commitments, all to the extent specified on Annex I.
II. The
Assignor (a) represents and warrants that (i) it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim and (ii) it has full power and authority,
and has taken all action necessary, to execute and deliver this Assignment
Agreement and to consummate the transactions contemplated hereby; (b) makes no
representation or warranty and assumes no responsibility with respect to (i) any
statements, representations or warranties made in or in connection with the Loan
Documents, or (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any other instrument
or document furnished pursuant thereto; (c) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under the Loan Documents or any other instrument or document furnished pursuant
thereto, and (d) represents and warrants that the amount set forth as the
Purchase Price on Annex I represents
the amount owed by Borrower to Assignor with respect to Assignor’s share of the
Advances assigned hereunder, as reflected on Assignor’s books and
records.
III. The
Assignee (a) confirms that it has received copies of the Credit Agreement and
the other Loan Documents, together with copies of the financial statements
referred to therein and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment Agreement; (b) agrees that it will, independently and without
reliance upon Agent, Assignor, or any other Lender, based upon such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under the Loan
Documents; (c) appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under the Loan Documents as are delegated to
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (d) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender; [and (e) attaches the forms
prescribed by the Internal Revenue Service of the United States certifying as to
the Assignee’s status for purposes of determining complete exemption from United
States withholding taxes with respect to all payments to be made to the Assignee
under the Credit Agreement (or if not a complete exemption, information
describing the nature of the withholding tax exemption or lack
thereof).]
IV. Following
the execution of this Assignment Agreement by the Assignor and Assignee, the
Assignor will deliver this Assignment Agreement to Agent for recording by
Agent. The effective date of this Assignment (the “Settlement Date”)
shall be the latest to occur of (a) the date of the execution and delivery
hereof by the Assignor and the Assignee, (b) the receipt by Agent for its sole
and separate account a processing fee in the amount of $3,500 (if required by
the Credit Agreement), (c) the receipt of any required consent of the Agent,
(d) the date Assignor and Assignee have delivered to Borrower
and
Agent an
executed copy of this Assignment Agreement and Agent has notified Assignor (with
a copy to Borrower) of its receipt thereof and, if applicable, payment of the
required processing fee, and (e) the date specified in Annex I.
V. As
of the Settlement Date (a) the Assignee shall be a party to the Credit Agreement
and, to the extent of the interest assigned pursuant to this Assignment
Agreement, have the rights and obligations of a Lender thereunder and under the
other Loan Documents, and (b) the Assignor shall, to the extent that rights and
obligations under the Credit Agreement and under the other Loan Documents have
been assigned by Assignor pursuant to this Assignment Agreement, relinquish its
rights (except with respect to Section 10.3 of the
Credit Agreement) and be released from any future obligations under the Credit
Agreement and the other Loan Documents (and if Assignor is assigning all or the
remaining portion of its rights and obligations under the Credit Agreement and
the other Loan Documents, Assignor shall cease to be a party to the Credit
Agreement and the other Loan Documents), provided, however, that nothing
contained herein shall release Assignor from obligations that survive the
termination of this Agreement, including such assigning Lender’s obligations
under Article
15 and Section
17.8(a) of the Credit Agreement.
VI. Upon
the Settlement Date, Assignee shall pay to Assignor the Purchase Price (as set
forth in Annex
I). From and after the Settlement Date, Agent shall make all
payments that are due and payable to the holder of the interest assigned
hereunder (including payments of principal, interest, fees and other amounts) to
Assignor for amounts which have accrued up to but excluding the Settlement Date
and to Assignee for amounts which have accrued from and after the Settlement
Date. On the Settlement Date, Assignor shall pay to Assignee an
amount equal to the portion of any interest, fee, or any other charge that was
paid to Assignor prior to the Settlement Date on account of the interest
assigned hereunder and that are due and payable to Assignee with respect
thereto, to the extent that such interest, fee or other charge relates to the
period of time from and after the Settlement Date.
VII. This
Assignment Agreement may be executed in counterparts and by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument. This Assignment Agreement may be executed and delivered
by facsimile or other electronic method of transmission all with the same force
and effect as if the same were a fully executed and delivered original manual
counterpart.
VIII. THE
VALIDITY OF THIS ASSIGNMENT AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL
MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
IN
WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement and
Annex I hereto to be executed by their respective officers, as of the first date
written above.
[NAME OF
ASSIGNOR]
as
Assignor
By
Name:
Title:
[NAME OF
ASSIGNEE]
as
Assignee
By:
Name:
Title:
[ACCEPTED
THIS ____ DAY OF
_______________
WELLS FARGO CAPITAL FINANCE,
LLC,
a
Delaware limited liability company, as Agent
By:
Name:
1 Include to the extent required
by Section 13.1(a) of the Credit Agreement.
ANNEX FOR
ASSIGNMENT AND ACCEPTANCE AGREEMENT
ANNEX
I
1.
|
Borrower: Alaska
Airlines, Inc., an Alaska
corporation
|
2.
|
Name
and Date of Credit Agreement:
|
Credit
Agreement, dated as of March 31, 2010, by and among Borrower, the lenders from time to time party thereto
(the “Lenders”), Wells Fargo Capital Finance, LLC, a Delaware limited liability
company, as agent for the Lenders, as co-lead arranger, and as joint bookrunner,
and U.S. Bank National Association, as documentation agent, as co-lead arranger,
and as joint bookrunner
3. Date
of Assignment
Agreement:
4. Amounts:
|
(i)
|
Assigned
Amount of Commitment
|
$
|
|
b. Assigned
Amount of
Advances $
5. Settlement
Date:
6. Purchase
Price $___________
7. Notice
and Payment Instructions, etc.
Assignee: Assignor:
EXHIBIT
B-1
FORM
OF BORROWING BASE CERTIFICATE
Wells
Fargo Capital Finance, LLC, as Agent
under the
below referenced Credit Agreement
2450
Colorado Avenue
Suite
3000 West
Santa
Monica, California 90404
Attn: Business
Finance Division Manager
The
undersigned, Alaska Airlines, Inc., an Alaska corporation (“Borrower”), pursuant
to Schedule 5.2
of that certain Credit Agreement dated as of March 31, 2010 (as amended,
restated, modified, supplemented, refinanced, renewed, or extended from time to
time, the “Credit Agreement”), entered into among Borrower, the lenders
identified on the signature pages thereof (such lenders, together with their
respective successors and permitted assigns, are referred to collectively as the
“Lenders”), Wells Fargo Capital Finance, LLC, a Delaware limited liability
company, as agent for the Lenders (in such capacity, together with its
successors and assigns, if any, in such capacity, “Agent”), as co-lead arranger,
and as joint bookrunner, and U.S. Bank National Association, as documentation
agent, as co-lead arranger, and as joint bookrunner, hereby certifies to Agent
that the following items, calculated in accordance with the terms and
definitions set forth in the Credit Agreement for such items are true and
correct, and that Borrower is in compliance with and, after giving effect to any
currently requested Advances, will be in compliance with, the terms, conditions,
and provisions of the Credit Agreement.
All
initially capitalized terms used in this Borrowing Base Certificate have the
meanings set forth in the Credit Agreement unless specifically defined
herein.
[Remainder
of page intentionally left blank.]
Effective
Date of
Calculation:
|
|
|
1.1 Borrowing Base Calculation
|
|
|
(a)Eligible
Accounts
|
|
|
(i)85% of Eligible
Accounts2
|
$
|
|
(ii)the amount, if any, of
the Dilution Reserve
|
$
|
|
(iii)Item 1.a.. minus Item
1.b.
|
|
$
|
|
|
|
(b)Eligible
Expendables
|
|
|
(i)$10,000,000
|
$
|
|
(ii)50% of the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Expendables3
|
$
|
|
(iii)85% times the most recently
determined Net Liquidation Percentage times the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Expendables
|
$
|
|
(iv)The lowest of Items
2.a., 2.b. and 2.c.
|
|
$
|
|
|
|
(c)Eligible Replaceable
Spare Parts
|
|
|
(i)$45,000,000
|
$
|
|
(ii)50% of the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Replaceable Spare Parts4
|
$
|
|
(iii)85% times the most recently
determined Net Liquidation Percentage times the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Replaceable Spare Parts
|
$
|
|
(iv)The lowest of Items
3.a., 3.b. and 3.c.
|
|
$
|
|
|
|
(d)Eligible
Engines
|
|
|
(i)$40,000,000
|
$
|
|
(ii)50% of the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Engines5
|
$
|
|
(iii)85% times the most recently
determined Net Liquidation Percentage times the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Engines
|
$
|
|
(iv)The lowest of Items
4.a., 4.b. and 4.c.
|
|
$
|
|
|
|
(e)Eligible Ground
Equipment
|
|
|
(i)$25,000,000
|
$
|
|
(ii)50% of the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Ground Service Equipment6
|
$
|
|
(iii)85% times the most recently
determined Net Liquidation Percentage times the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Ground Service Equipment
|
$
|
|
(iv)The lowest of Items
5.a., 5.b. and 5.c.
|
|
$
|
|
|
|
(f)a. 3
times the amount of credit availability
created
by Item
1.c.
|
$
|
|
b. Sum of Items 2.d., 3.d., 4.d.,
and 5.d.
|
$
|
|
c. The
lowest of Items 6.a. and 6.b.
|
|
$
|
|
|
|
(g)
Reserves
|
|
|
(i)the sum of the
aggregate amount of reserves, if any, established by Agent under Section 2.1(c) of the Credit
Agreement
|
$
|
|
|
|
|
(h)Borrowing Base (Sum of Items 1.c. and 6.c. minus Item
7.a.)
|
|
$
|
|
|
|
(i)Availability
Calculation
|
|
|
(i)(a)Maximum Revolver
Amount
|
$
|
|
(B)outstanding
Advances
|
$
|
|
(C)outstanding
Swing Loans
|
$
|
|
(D)Item 9.a.(i) minus Item
9.a.(ii) minus Item 9.a.(iii)
|
$
|
|
(ii)(b)Borrowing Base (Item
8)
|
$
|
|
(B)outstanding
Advances
|
$
|
|
(C)outstanding
Swing Loans
|
|
|
(D)Item 9.b.(i) minus Item
9.b.(ii) minus Item 9.b.(iii)
|
$
|
|
(iii)lesser of Item 9.a.
and 9.b.
|
|
$
|
Additionally,
the undersigned hereby certifies and represents and warrants to the Lender Group
on behalf of Borrower that (i) as of the date hereof, each representation or
warranty contained in or pursuant to any Loan Document, any agreement,
instrument, certificate, document or other writing furnished at any time under
or in connection with any Loan Document, and as of the effective date of any
advance, continuation or conversion requested above is true and correct in all
material respects (except to the extent that such representation or warranty
relates solely to an earlier date), (ii) each of the covenants and agreements
contained in any Loan Document have been performed (to the extent required to be
performed on or before the date hereof or each such effective date), (iii) no
Default or Event of Default has occurred and is continuing on the date hereof,
nor will any thereof occur after giving effect to the request above, and (iv)
all of the foregoing is true and correct as of the effective date of the
calculations set forth above and that such calculations have been made in
accordance with the requirements of the Credit Agreement.
ALASKA AIRLINES,
INC.,
an Alaska
corporation, as Borrower
By:
Name:
Title:
Annex A
Receivables
created by Borrower in the ordinary course of its business, that arise out
of Borrower’s rendition of services or the sale of mileage plan awards,
that comply with each of the representations and warranties respecting
Eligible Accounts made in the Loan Documents
|
|
$
|
Less (without
duplication)
|
|
|
Receivables
that the Account Debtor has failed to pay within 90 days of original
invoice date, that are more than 60 days past due, or have selling terms
of more than 45 days
|
$
|
|
Receivables
owed by an Account Debtor (or its Affiliates) where 50% or more of all
Receivables owed by that Account Debtor (or its Affiliates) are deemed
ineligible under the immediately preceding clause
|
$
|
|
Receivables
with respect to which the Account Debtor is an Affiliate of Borrower or an
employee or agent of Borrower or any Affiliate of Borrower
|
$
|
|
Receivables
that are Excluded Accounts
|
$
|
|
Receivables
arising in a transaction involving terms or conditions by reason of which
the payment by the Account Debtor may be conditional
|
$
|
|
Receivables
that are not payable in Dollars
|
$
|
|
Receivables
with respect to which the Account Debtor either (i) does not maintain its
chief executive office in the United States, or (ii) is not organized
under the laws of the United States or any state thereof, or (iii) is the
government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof,
unless (y) the Receivable is supported by an irrevocable letter of credit
satisfactory to Agent (as to form, substance, and issuer or domestic
confirming bank) that has been delivered to Agent and is directly drawable
by Agent, or (z) the Receivable is covered by credit insurance in
form, substance, and amount, and by an insurer, reasonably satisfactory to
Agent
|
$
|
|
Receivables
with respect to which the Account Debtor is either (i) the United
States or any department, agency, or instrumentality of the United States
(exclusive, however, of Receivables with respect to which Borrower has
complied, to the reasonable satisfaction of Agent, with the Assignment of
Claims Act, 31 USC § 3727), or (ii) any state of the United
States
|
$
|
|
Receivables
with respect to which the Account Debtor is a creditor of Borrower, has or
has asserted a right of setoff, or has disputed its obligation to pay all
or any portion of the Receivable, to the extent of such claim, right of
setoff, or dispute
|
$
|
|
(i) Receivables
owed by Bank of America, N.A. or its Affiliates to the extent of the
obligations owing by such Account Debtor in excess of 50% of all Eligible
Accounts (such percentage being subject to reduction by Agent in its
Permitted Discretion if the creditworthiness of such Account Debtor
deteriorates), and (ii) Receivables with respect to any other Account
Debtor whose total obligations owing to Borrower exceed 10% (such
percentage as applied to a particular Account Debtor being subject to
reduction by Agent in its Permitted Discretion if the creditworthiness of
such Account Debtor deteriorates) of all Eligible Accounts, to the extent
of the obligations owing by such Account Debtor in excess of such
percentage; provided, however, that, in each case, the amount of
Eligible Accounts that are excluded because they exceed the foregoing
percentage shall be determined by Agent based on all of the otherwise
Eligible Accounts prior to giving effect to any eliminations based upon
the foregoing concentration limit
|
$
|
|
Receivables
with respect to which the Account Debtor is subject to an Insolvency
Proceeding, is not Solvent, has gone out of business, or as to which
Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account
Debtor
|
$
|
|
Receivables,
the collection of which, Agent, in its Permitted Discretion, believes to
be doubtful by reason of the Account Debtor’s financial
condition
|
$
|
|
Receivables
that are not subject to a valid and perfected first priority Agent’s
Lien
|
$
|
|
Receivables
with respect to which (i) the mileage awards or miles giving rise to such
Receivable have not been transferred to and the Receivable billed to the
Account Debtor, or (ii) the services giving rise to such Receivable have
not been performed and billed to the Account Debtor
|
$
|
|
Receivables
with respect to which the Account Debtor is a Sanctioned Person or
Sanctioned Entity
|
$
|
|
Receivables
that represent the right to receive progress payments or other advance
billings that are due prior to the completion of performance by Borrower
of the subject contract
|
$
|
|
Other
|
$
|
|
Total
Excluded Receivables
|
|
$
|
Eligible
Accounts (Total Receivables less Total Excluded
Receivables):
|
|
$
|
Annex B
Expendables
of Borrower, maintained in conformity with the Maintenance Program, that
comply with each of the representations and warranties respecting Eligible
Expendables made in the Loan Documents (calculated at cost minus
accumulated depreciation that is calculated in accordance with
GAAP)
|
|
$
|
less (without
duplication)
|
|
|
Expendables
that Borrower does not have good, valid, and marketable title
to
|
$
|
|
Expendables
that are not located at one of the locations identified on Schedule 4.27 to the Credit
Agreement
|
$
|
|
Expendables
that are in the possession or control of a bailee, warehouseman, FAA
repair station, overhaul or maintenance servicer, mechanic, or other third
Person
|
$
|
|
Expendables
that are located at a location at which less than $100,000 of otherwise
Eligible Expendables, Eligible Ground Service Equipment, or Eligible
Replaceable Spare Parts are located
|
$
|
|
Expendables
that are located on Real Property leased by Borrower or in a contract
warehouse, in each case, (i) unless it is subject to a Collateral Access
Agreement executed by the lessor or warehouseman, as the case may be
(provided, however, that, (x) during the 90-day
period immediately following the Closing Date, such leased Real Property
or contract warehouse need not be subject to a Collateral Access
Agreement, and (y) during all times thereafter, either such leased Real
Property or contract warehouse must be subject to a Collateral Access
Agreement, or if such leased Real Property or contract warehouse is not
subject to a Collateral Access Agreement, the failure to have a Collateral
Access Agreement will not, in and of itself, render the Eligible
Expendables ineligible, but Agent may, at its election, establish a
reserve against the Borrowing Base and the Maximum Revolver Amount in an
aggregate amount equal to 3 months rent under the lease for each location
(or, if applicable, 3 months of storage fees under the warehouse agreement
for each contract warehouse) that is not subject to a Collateral Access
Agreement), and (ii) unless it is segregated or otherwise separately
identifiable from Spare Parts of others, if any, stored on the
premises
|
$
|
|
Expendables
that are not subject to a valid and perfected first priority Agent’s Lien
or are not free and clear of all Liens (other than a valid and perfected
first priority Agent’s Lien and Permitted Liens that are junior in
priority to Agent’s Lien)
|
$
|
|
Expendables
that are the subject of any warehouse receipt or other document of title,
unless such receipt or other document of title is delivered to Agent with
all necessary endorsements
|
$
|
|
Expendables
that are beyond economic repair, obsolete, or unserviceable, are not
unused, have not been maintained in accordance with the FARs or Borrower’s
Maintenance Program, or are not in a condition for immediate use by
Borrower in its Certificated Air Carrier operations in compliance with the
FARs or the Maintenance Program
|
$
|
|
Expendables
that do not have (i) all required FAA serviceability tags or records (or,
if applicable, full back-to-birth traceability), or (ii) all manuals,
documents, and records required by the FARs or the Maintenance
Program
|
$
|
|
Expendables
that have been installed on any Aircraft, Engine, other Spare Part, or any
other item of Equipment or otherwise become an accession, or are the
subject of a pooling, exchange, borrowing, leasing, consignment, or other
similar arrangement
|
$
|
|
Expendables
that do not conform in all material respects to all applicable
airworthiness directives or limits imposed by any Governmental Authority
which has regulatory authority over such Expendables or their
use
|
$
|
|
Other
|
$
|
|
Total
Excluded Expendables
|
|
$
|
Eligible
Expendables (Total Expendables less Total Excluded
Expendables):
|
|
$
|
Annex C
Replaceable
Spare Parts of Borrower, manufactured and refurbished, as the case may be,
in conformity with the Maintenance Program, in conformity with the
Maintenance Program, that comply with each of the representations and
warranties respecting Eligible Replaceable Spare Parts made in the Loan
Documents (calculated at cost minus accumulated depreciation that is
calculated in accordance with GAAP)
|
|
$
|
less (without
duplication)
|
|
|
Replaceable
Spare Parts that Borrower does not have good, valid, and marketable title
to
|
$
|
|
Replaceable
Spare Parts that are not located at one of the locations identified on
Schedule 4.27 to the Credit
Agreement
|
$
|
|
Replaceable
Spare Parts that are in the possession or control of a bailee,
warehouseman, FAA repair station, overhaul or maintenance servicer,
mechanic, or other third Person
|
$
|
|
Replaceable
Spare Parts that are located at a location at which less than $100,000 of
otherwise Eligible Expendables, Eligible Ground Service Equipment, or
Eligible Replaceable Spare Parts are located
|
$
|
|
Replaceable
Spare Parts that are located on Real Property leased by Borrower or in a
contract warehouse, in each case, (i) unless it is subject to a Collateral
Access Agreement executed by the lessor or warehouseman, as the case may
be (provided, however, that, (x) during the 90-day
period immediately following the Closing Date, such leased Real Property
or contract warehouse need not be subject to a Collateral Access
Agreement, and (y) during all times thereafter, either such leased Real
Property or contract warehouse must be subject to a Collateral Access
Agreement, or if such leased Real Property or contract warehouse is not
subject to a Collateral Access Agreement, the failure to have a Collateral
Access Agreement will not, in and of itself, render the Eligible
Replacement Spare Parts ineligible, but Agent may, at its election,
establish a reserve against the Borrowing Base and the Maximum Revolver
Amount in an aggregate amount equal to 3 months rent under the lease for
each location (or, if applicable, 3 months of storage fees under the
warehouse agreement for each contract warehouse) that is not subject to a
Collateral Access Agreement), and (ii) unless it is segregated or
otherwise separately identifiable from Spare Parts of others, if any,
stored on the premises
|
$
|
|
Replaceable
Spare Parts that are not subject to a valid and perfected first priority
Agent’s Lien or are not free and clear of all Liens (other than a valid
and perfected first priority Agent’s Lien and Permitted Liens that are
junior in priority to Agent’s Lien)
|
$
|
|
Replaceable
Spare Parts that are the subject of any warehouse receipt or other
document of title, unless such receipt or other document of title is
delivered to Agent with all necessary endorsements
|
$
|
|
Replaceable
Spare Parts that are beyond economic repair, obsolete, or unserviceable,
are not either unused or have not been rehabilitated to a fully
serviceable condition, have not been maintained in accordance with the
FARs or the Maintenance Program, or are not in a condition for immediate
use by Borrower in its Certificated Air Carrier operations in compliance
with the FARs or the Maintenance Program
|
$
|
|
Replaceable
Spare Parts that do not have (i) all required FAA serviceability tags or
records (or, if applicable, full back-to-birth traceability), or (ii) all
manuals, documents, and records required by the FARs or the Maintenance
Program
|
$
|
|
Replaceable
Spare Parts that are installed on any Aircraft, Engine, or other Spare
Part (other than an Eligible Replaceable Spare Part) or otherwise become
an accession, or are the subject of a pooling, exchange, borrowing,
leasing, consignment, or other similar arrangement
|
$
|
|
Replaceable
Spare Parts that do not conform in all material respects to all applicable
airworthiness directives or limits imposed by any Governmental Authority
which has regulatory authority over such Rotables or their use or by the
manufacturer of such Replaceable Spare Part or its use
|
$
|
|
Other
|
$
|
|
Total
Excluded Replaceable Spare Parts
|
|
$
|
Eligible
Replaceable Spare Parts (Total Replaceable Spare Parts less Total Excluded
Replaceable Spare Parts):
|
|
$
|
Annex D
Designated
Engines of Borrower so long as they have been maintained in conformity
with the Maintenance Program, and comply with each of the representations
and warranties respecting Eligible Engines made in the Loan Documents
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP)
|
|
$
|
less (without
duplication)
|
|
|
Engines
that are not Designated Engines
|
$
|
|
Engines
that Borrower does not have good, valid, and marketable title
to
|
$
|
|
Unless
such Engine is attached to one of the Aircraft operated by Borrower as a
result of a Permitted Engine Installation, or is the subject of a
Permitted Lease, or is out for customary repairs that are not expected to
take more than a normal service period to complete, Engines that are not
located at one of the locations identified on Schedule 4.28(e) to the Credit
Agreement
|
$
|
|
Unless
such Engine is out for repair for customary repairs that are not expected
to take more than a normal service period to complete, Engines that are in
the possession or control of a bailee, warehouseman, FAA repair station,
overhaul or maintenance servicer, mechanic, or other third
Person
|
$
|
|
Engines
that are located on Real Property leased by Borrower or in a contract
warehouse, in each case, (i) unless it is subject to a Collateral Access
Agreement executed by the lessor or warehouseman, as the case may be
(provided, however, that, (x) during the 90-day
period immediately following the Closing Date, such leased Real Property
or contract warehouse need not be subject to a Collateral Access
Agreement, and (y) during all times thereafter, either such leased Real
Property or contract warehouse must be subject to a Collateral Access
Agreement, or if such leased Real Property or contract warehouse is not
subject to a Collateral Access Agreement, the failure to have a Collateral
Access Agreement will not, in and of itself, render the Engine ineligible,
but Agent may, at its election, establish a reserve against the Borrowing
Base and the Maximum Revolver Amount in an aggregate amount equal to 3
months rent under the lease for each location (or, if applicable, 3 months
of storage fees under the warehouse agreement for each contract warehouse)
that is not subject to a Collateral Access Agreement), and (ii) unless it
is segregated or otherwise separately identifiable from Engines of others,
if any, stored on the premises
|
$
|
|
Engines
not subject to a valid and perfected first priority Agent’s Lien or is not
free and clear of all Liens (other than a valid and perfected first
priority Agent’s Lien and Permitted Liens that are junior in priority to
Agent’s Lien)
|
$
|
|
Engines
that are the subject of any warehouse receipt or other document of title,
unless such receipt or other document of title is delivered to Agent with
all necessary endorsements
|
$
|
|
Engines
that are beyond economic repair or obsolete, have not been maintained in
accordance with the FARs or the Maintenance Program
|
$
|
|
Engines
that are not either (i) of good and merchantable quality, free from
defects, in good operating condition and ready for immediate use or
operation in accordance with the Maintenance Program, or (ii) following
customary repairs that are not expected to take more than a normal service
period to complete, will be of good and merchantable quality, free from
defects, in good operating condition and ready for immediate use or
operation in accordance with the Maintenance Program
|
$
|
|
Engines
that do not have (i) all required FAA serviceability tags (if serviceable)
or record (or, if applicable, full back-to-birth traceability), or (ii)
all manuals, documents, and records required by the FARs or the
Maintenance Program
|
$
|
|
Unless
such Engine is attached to one of the Aircraft operated by Borrower as a
result of a Permitted Engine Installation, or is the subject of a
Permitted Lease, Engines that have been installed on any Aircraft or any
other item of Equipment or otherwise become an accession, or are the
subject of a pooling, exchange, borrowing, leasing, consignment, or other
similar arrangement
|
$
|
|
Other
|
$
|
|
Total
Excluded Engines
|
|
$
|
Eligible
Engines (Total Designated Engines less Total Excluded
Engines):
|
|
$
|
Annex E
Ground
Service Equipment (calculated at cost minus accumulated depreciation that
is calculated in accordance with GAAP)
|
|
$
|
less (without
duplication)
|
|
|
Ground
Service Equipment that Borrower does not have good, valid, and marketable
title to
|
$
|
|
Ground
Service Equipment that is not located at one of the locations identified
on Schedule 4.28(d) to the Credit
Agreement
|
$
|
|
Ground
Service Equipment that is in the possession or control of a bailee,
warehouseman, FAA repair station, overhaul or maintenance servicer,
mechanic, or other third Person
|
$
|
|
Ground
Service Equipment that is located at a location at which less than
$100,000 of otherwise Eligible Ground Service Equipment is
located
|
$
|
|
Ground
Service Equipment that is stored on Real Property leased by Borrower
unless such leased Real Property is subject to a Collateral Access
Agreement executed by the lessor (provided, however, that, (i) during the 90-day period
immediately following the Closing Date, such leased Real Property need not
be subject to a Collateral Access Agreement, and (ii) during all times
thereafter, either such leased Real Property must be subject to a
Collateral Access Agreement or, if such Real Property is not subject to a
Collateral Access Agreement, the failure to have a Collateral Access
Agreement will not, in and of itself, render the Eligible Ground Service
Equipment ineligible, but Agent may, at its election, establish a reserve
against the Borrowing Base and the Maximum Revolver Amount in an aggregate
amount equal to 3 months rent under the lease for each Real Property that
is not subject to a Collateral Access Agreement)
|
$
|
|
Ground
Service Equipment that is “subject to” (within the meaning of Section
9-311 of the Code) any certificate of title (or comparable)
statute
|
$
|
|
Ground
Service Equipment that is not subject to a valid and perfected first
priority Agent’s Lien or is not free and clear of all Liens (other than a
valid and perfected first priority Agent’s Lien and Permitted Liens that
are junior in priority to Agent’s Lien)
|
$
|
|
Other
|
$
|
|
Total
Excluded Ground Service Equipment
|
|
$
|
Eligible
Ground Service Equipment (Total Ground Service Equipment less Total Excluded
Ground Service Equipment):
|
|
$
|
EXHIBIT
C-1
FORM
OF COMPLIANCE CERTIFICATE
[on
Borrower’s letterhead]
To: Wells
Fargo Capital Finance, LLC, as Agent
under the
below referenced Credit Agreement
2450
Colorado Avenue
Suite
3000 West
Santa
Monica, California 90404
Attn: Business
Finance Division Manager
Re: Compliance
Certificate
dated
Ladies
and Gentlemen:
Reference
is made to that certain CREDIT
AGREEMENT (as amended, restated,
supplemented, or otherwise modified from time to time, the “Credit Agreement”) dated as of March 31, 2010, by and among the lenders
identified on the signature pages thereof (such lenders, together with their
respective successors and permitted assigns, are referred to hereinafter each
individually as a “Lender” and collectively as the “Lenders”), WELLS FARGO CAPITAL FINANCE,
LLC, a Delaware limited liability company,
as agent for the Lenders (in such capacity, together with its successors
and assigns, if any, in such capacity, “Agent”), as co-lead arranger, and as joint bookrunner,
U.S. BANK NATIONAL
ASSOCIATION, as documentation agent, as
co-lead arranger, and as joint bookrunner, and ALASKA AIRLINES, INC., an
Alaska corporation (“Borrower”). Capitalized
terms used in this Compliance Certificate have the meanings set forth in the
Credit Agreement unless specifically defined herein.
Pursuant
to Schedule 5.1
of the Credit Agreement, the undersigned officer of Borrower hereby certifies
that:
1. The
financial statements of Group and its Subsidiaries furnished in Schedule 1 attached
hereto, have been prepared in accordance with GAAP (except for year-end
adjustments and the lack of footnotes), and fairly present the financial
condition of Group and its Subsidiaries.
2. Such
officer has reviewed in reasonable detail, or caused to be reviewed under
his/her supervision, the transactions and condition of Borrower during the
accounting period covered by the financial statements delivered pursuant to
Schedule 5.1 of
the Credit Agreement.
3. On
and as of the date hereof, the undersigned does not have knowledge of the
existence of any event or condition that constitutes a Default or Event of
Default, except for such conditions or events listed on Schedule 2 attached
hereto, specifying the nature and period of existence thereof and what action
Borrower has taken, is taking, or proposes to take with respect
thereto.
4. The
representations and warranties of Borrower set forth in the Credit Agreement and
the other Loan Documents are true and correct in all material respects on and as
of the date hereof (except to the extent they relate to a specified date),
except as set forth on Schedule 3 attached
hereto.
5. Borrower
is in compliance with the applicable covenants contained in Section 7 of the
Credit Agreement as demonstrated on Schedule 4 attached
hereto.
IN
WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this
_____ day of _______________, ________.
ALASKA AIRLINES, INC., an
Alaska corporation
By:
Name:
Title:
SCHEDULE
1
Financial
Statements
SCHEDULE
2
Default
or Event of Default
SCHEDULE
3
Representations
and Warranties
SCHEDULE
4
Financial
Covenant
Minimum
Liquidity.
Borrower’s Liquidity as of
________________, ______ is $______________, which amount [is/is not] greater than or
equal to the amount set forth in Section 7 of the
Credit Agreement for the corresponding period.
EXHIBIT
L-1
FORM
OF LIBOR NOTICE
Wells
Fargo Capital Finance, LLC, as Agent
under the
below referenced Credit Agreement
2450
Colorado Avenue
Suite
3000 West
Santa
Monica, California 90404
Ladies
and Gentlemen:
Reference
hereby is made to that certain Credit Agreement, dated as of March 31, 2010 (the
“Credit
Agreement”), by and among Alaska Airlines, Inc., an Alaska corporation
(“Borrower”),
the lenders identified on the signature pages thereof (such lenders, together
with their respective successors and permitted assigns, are referred to
collectively as the “Lenders”), Wells
Fargo Capital Finance, LLC, a Delaware limited liability company, as agent for
the Lenders (“Agent”), as co-lead
arranger, and as joint bookrunner, and U.S. Bank National Association, as
documentation agent, as co-lead arranger, and as joint
bookrunner. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Credit
Agreement.
This
LIBOR Notice represents Borrower’s request to elect the LIBOR Option with
respect to all or a portion of the outstanding Advances in the amount of
$________ (the “LIBOR
Rate Advance”)[, and is a written confirmation of the telephonic notice
of such election given to Agent].
The LIBOR
Rate Advance will have an Interest Period of [1][2][3] month(s) commencing
on.
This
LIBOR Notice further confirms Borrower’s acceptance, for purposes of determining
the rate of interest based on the LIBOR Rate under the Credit Agreement, of the
LIBOR Rate as determined pursuant to the Credit Agreement.
Borrower
represents and warrants that no Default or Event of Default has occurred and is
continuing on the date hereof, nor will any thereof occur as a result of giving
effect to the request above.
Dated:
ALASKA AIRLINES, INC., an
Alaska corporation, as Borrower
By: Name:
Title:
Acknowledged
by:
WELLS
FARGO CAPITAL FINANCE, LLC,
a
Delaware limited liability company, as Agent
By:
Name:
Title:
Schedule
A-1
Agent’s
Account
An account at a bank in the United
States designated by Agent from time to time as the account into which Borrower
shall make all payments to Agent for the benefit of the Lender Group and into
which the Lender Group shall make all payments to Agent under this Agreement and
the other Loan Documents. Until Agent notifies Borrower and the
Lender Group to the contrary, Agent’s Account shall be that certain deposit
account bearing account number [***].
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
Schedule
A-2
Authorized
Persons
Glenn S.
Johnson
Executive
Vice President, Finance & Chief Financial Officer
19300
International Boulevard
Seattle,
Washington 98188
[***]
John F.
Schaefer, Jr.
Vice
President, Finance & Treasurer
19300
International Boulevard
Seattle,
Washington 98188
[***]
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Schedule
C-1
Commitments
Lender
|
Commitment
|
Total
Commitment
|
Wells
Fargo Capital Finance, LLC
|
[***]
|
[***]
|
U.S.
Bank National Association
|
[***]
|
[***]
|
Bank
SinoPac
|
[***]
|
[***]
|
All Lenders
|
$100,000,000
|
$100,000,000
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Schedule
D-1
Designated
Account
[***] of
Borrower maintained with Borrower’s Designated Account Bank, or such other
deposit account of Borrower (located within the United States) that has been
designated as such, in writing, by Borrower to Agent.
“Designated Account
Bank” means [***].
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Schedule
D-2
Designated
Engines
|
Serial Numbers
|
Model
CFM56-3C
|
856774
857962
856994
858683
858857
|
Model
CFM56-7B
|
874853
888192
890424
890919
896998
802109
896963
896275
|
Schedule
P-1
Permitted
Investments
None.
Schedule
P-2
Permitted
Liens
None.
Schedule
1.1
As used in the Agreement, the following
terms shall have the following definitions:
“Account” means an
account (as that term is defined in the Code).
“Account Debtor” means
any Person who is obligated on an Account, chattel paper, or a general
intangible (including a Mileage Plan Receivable).
"Accounting Changes"
means changes in accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting Standards Board
of the American Institute of Certified Public Accountants (or successor thereto
or any agency with similar functions).
“Acquisition” means
(a) the purchase or other acquisition by a Person of all or substantially
all of the assets of (or any division or business line of) any other Person, or
(b) the purchase or other acquisition (whether by
means of a merger, consolidation, or otherwise) by a Person of all or
substantially all of the Stock of any other Person.
“Additional Documents”
has the meaning specified therefor in Section 5.12 of the
Agreement.
“Advances” has the
meaning specified therefor in Section 2.1(a) of the
Agreement.
“Affected Lender” has
the meaning specified therefor in Section 2.13(b) of
the Agreement.
“Affiliate” means, as
applied to any Person, any other Person who controls, is controlled by, or is
under common control with, such Person. For purposes of this
definition, “control” means the possession, directly or indirectly through one
or more intermediaries, of the power to direct the management and policies of a
Person, whether through the ownership of Stock, by contract, or otherwise; provided, however, that, for
purposes of the definition of Eligible Accounts and Section 6.12 of the
Agreement: (a) any Person which owns directly or indirectly 10% or more of the
Stock having ordinary voting power for the election of directors or other
members of the governing body of a Person or 10% or more of the partnership or
other ownership interests of a Person (other than as a limited partner of such
Person) shall be deemed an Affiliate of such Person, (b) each director (or
comparable manager) of a Person shall be deemed to be an Affiliate of such
Person, and (c) each partnership in which a Person is a general partner shall be
deemed an Affiliate of such Person.
“Agent” has the
meaning specified therefor in the preamble to the Agreement.
“Agent-Related
Persons” means Agent, together with its Affiliates, officers, directors,
employees, attorneys, and agents.
“Agent’s Account”
means the Deposit Account of Agent identified on Schedule
A-1.
“Agent’s Liens” means
the Liens granted by Borrower to Agent under the Loan Documents.
“Agreement” means the
Credit Agreement to which this Schedule 1.1 is
attached.
“Aircraft” means any
“aircraft” as defined in Section 40102 of the Federal Aviation Act.
“Appliances” means any
“appliance” as defined in Section 40102 of the Federal Aviation
Act.
"Application Event"
means the occurrence of (a) a failure by Borrower to repay all of the
Obligations in full on the Maturity Date, or (b) an Event of Default and the
election by Agent or the Required Lenders to require that payments and proceeds
of Collateral be applied pursuant to Section 2.4(b)(ii) of
the Agreement.
“Assignee” has the
meaning specified therefor in Section 13.1(a) of
the Agreement.
“Assignment and
Acceptance” means an Assignment and Acceptance Agreement substantially in
the form of Exhibit
A-1.
“Authorized Person”
means any one of the individuals identified on Schedule A-2, as such
schedule is updated from time to time by written notice from Borrower to
Agent.
“Availability” means,
as of any date of determination, the amount that Borrower is entitled to borrow
as Advances under Section 2.1 of the
Agreement (after giving effect to all then outstanding
Obligations).
“Bank Facility” means
that certain $100,000,000 loan facility provided by a syndicate of lenders and
agented by Citibank, N.A.
“Bank Facility
Documents” means the loan and security documents related to the Bank
Facility or executed in connection therewith.
“Bankruptcy Code”
means title 11 of the United States Code, as in effect from time to
time.
“Base Rate” means the
greatest of (a) the Federal Funds Rate plus ½%, (b) the LIBOR Rate (which rate
shall be calculated based upon an Interest Period of 3 months and shall be
determined on a daily basis), plus 1 percentage point, and (c) the rate of
interest announced, from time to time, within Wells Fargo at its principal
office in San Francisco as its “prime rate”, with the understanding that the
“prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of
such rates) and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto and is evidenced by the
recording thereof after its announcement in such internal publications as Wells
Fargo may designate.
“Base Rate Loan” means
each portion of the Advances that bears interest at a rate determined by
reference to the Base Rate.
“Base Rate Margin”
means [***].
“Benefit Arrangement”
means in any jurisdiction the benefit schemes or arrangements in respect of any
employees or past employees operated, maintained or contributed to by Borrower
or any of its ERISA Affiliates, with respect to which any of them have any
liability and which provide benefits on retirement, ill-health, injury, death or
voluntary withdrawal from or termination of employment, including termination
indemnity payments and life assurance and post-retirement medical benefits,
other than Benefit Plans and Foreign Pension Plans.
“Benefit Plan” means a
“defined benefit plan” (as defined in Section 3(35) of ERISA) for which Borrower
or any of its ERISA Affiliates has been an “employer” (as defined in Section
3(5) of ERISA) within the past six years.
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
“Board of Directors”
means the board of directors (or comparable managers) of Group or any committee
thereof duly authorized to act on behalf of the board of directors (or
comparable managers).
“Borrower” has the
meaning specified therefor in the preamble to the Agreement.
“Borrowing” means a
borrowing consisting of Advances made on the same day by the Lenders (or Agent
on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by Agent
in the case of a Protective Advance.
“Borrowing Base”
means, as of any date of determination, the result of:
|
(a)
|
85% of the amount of Eligible
Accounts, less
the amount, if any, of the Dilution Reserve, plus
|
(b) the lesser of:
|
(i) 3 times
the amount of credit availability created by clause (a) above,
and
|
(ii) the sum of
(A) the
least of
(1) $10,000,000,
|
(2)
50% of the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Expendables,
and
|
(3)
85% times the most recently
determined Net Liquidation Percentage times the value (calculated
at cost minus accumulated depreciation that is calculated in accordance with
GAAP) of Eligible Expendables, plus
(B) the
least of
|
(2)
50% of the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Replaceable Spare Parts,
and
|
|
(3)
85% times the most recently
determined Net Liquidation Percentage times the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Replaceable Spare Parts, plus
|
(C) the
least of
|
(2)
50% of the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Engines,
and
|
|
(3)
85% times the most recently
determined Net Liquidation Percentage times the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Engines, plus
|
(D) the
least of
|
(2)
50% of the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Ground Service Equipment,
and
|
|
(3)
85% times the most recently
determined Net Liquidation Percentage times the value
(calculated at cost minus accumulated depreciation that is calculated in
accordance with GAAP) of Eligible Ground Service Equipment, minus
|
|
(c)
|
the
aggregate amount of reserves, if any, established by Agent under Section 2.1(c)
of the Agreement.
|
“Borrowing Base
Certificate” means a certificate in the form of Exhibit
B-1.
“Borrowing Base Excess
Amount” has the meaning set forth in Section
2.4(e)(i).
“Business Day” means
any day that is not a Saturday, Sunday, or other day on which banks are
authorized or required to close in the state of California, except that, if a
determination of a Business Day shall relate to a LIBOR Rate Loan, the term
“Business Day” also shall exclude any day on which banks are closed for dealings
in Dollar deposits in the London interbank market.
“Capitalized Lease
Obligation” means that portion of the obligations under a Capital Lease
that is required to be capitalized in accordance with GAAP.
“Capital Lease” means
a lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.
“Cash Equivalents” has
the meaning specified therefor under GAAP.
“Cash Management
Services” means any cash management or related services including
treasury, depository, return items, overdraft, controlled
disbursement, merchant store value cards, e-payables services,
electronic funds transfer, interstate depository network, automatic clearing
house transfer (including the Automated Clearing House processing of electronic
funds transfers through the direct Federal Reserve Fedline system) and other
cash management arrangements.
“Certificated Air
Carrier” means an “air carrier” as defined in Section 40102 of the
Federal Aviation Act that holds an air carrier operating certificate issued
pursuant to chapter 447 of the Federal Aviation Act for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo and is
certificated for scheduled passenger operations in interstate commerce using
commercial jet aircraft under Part 121 of the FARs.
“CFC” means a
controlled foreign corporation (as that term is defined in the
IRC).
“Change of Control”
means that (a) Group fails to own and control, directly or indirectly, all of
the Stock of Borrower having the right to vote for the election of members of
their respective board of directors, (b) any “person” or “group” (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of [***], or more, of the Stock of Group having the right to vote for the
election of members of the Board of Directors, or (c) a majority of the members
of the Board of Directors do not constitute Continuing Directors.
“Change in Tax Law”
means any change in law, rule, regulation, order or other decision by any
Governmental Authority that would result in the imposition of additional United
States federal withholding taxes relative to a Foreign Lender.
“Closing Date” means
the date of the making of the initial Advance (or other extension of credit)
hereunder or the date on which Agent notifies Borrower that each of the
conditions precedent set forth on Schedule 3.1 either
have been satisfied or have been waived.
“Code” means the
California Uniform Commercial Code, as in effect from time to time.
“Collateral” means all
assets and interests in assets and proceeds thereof now owned or hereafter
acquired by Borrower in or upon which a Lien is granted by Borrower in favor of
Agent or the Lenders under the Security Agreement, the Engine and Spare Parts
Security Agreement, or under any other agreement that constitutes a Loan
Document and pursuant to which a Lien is granted by Borrower in favor of Agent
or the Lenders.
“Collateral Access
Agreement” means a landlord waiver, bailee letter, or acknowledgement
agreement of any lessor, warehouseman, processor, consignee, or other Person in
possession of, having a Lien upon, or having rights or interests in Borrower’s
books and records or Equipment, in each case, in form and substance reasonably
satisfactory to Agent.
“Collections” means
all cash, checks,
notes, instruments, and other items of payment (including insurance proceeds,
cash proceeds of asset sales, rental proceeds, and tax refunds).
“Commitment” means,
with respect to each Lender, its Commitment, and, with respect to all Lenders,
their Commitments, in each case as such Dollar amounts are set forth beside such
Lender’s name under the applicable heading on Schedule C-1 or in
the Assignment and Acceptance pursuant to which such Lender became a Lender
under the Agreement, as such amounts may be reduced or increased from time to
time pursuant to assignments made in accordance with the provisions of Section 13.1 of the
Agreement.
“Compliance
Certificate” means a certificate substantially in the form of Exhibit C-1 delivered
by the chief financial officer or other Responsible Officer of Borrower to
Agent.
“Confidential
Information” has the meaning specified therefor in Section 17.8(a) of
the Agreement.
“Continuing Director”
means (a) any member of the Board of Directors who was a director (or comparable
manager) of Group on the Closing Date, and (b) any individual who becomes a
member of the Board of Directors after the Closing Date if such individual was
approved, appointed or nominated for election to the Board of Directors by a
majority of the Continuing Directors, but excluding any such
individual
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
originally
proposed for election in opposition to the Board of Directors in office at the
Closing Date in an actual or threatened election contest relating to the
election of the directors (or comparable managers) of Group and whose initial
assumption of office resulted from such contest or the settlement
thereof.
“Control Agreement”
means a control agreement, in form and substance reasonably satisfactory to
Agent, executed and delivered by Borrower, Agent, and the applicable securities
intermediary (with respect to a Securities Account) or bank (with respect to a
Deposit Account).
“Controlled Account
Agreement” has the meaning specified therefor in the Security
Agreement.
“Daily Balance” means,
as of any date of determination and with respect to any Obligation, the amount
of such Obligation owed at the end of such day.
“Default” means an
event, condition, or default that, with the giving of notice, the passage of
time, or both, would be an Event of Default.
“Defaulting Lender”
means any Lender that (a) has failed to fund any amounts required to be funded
by it under the Agreement (including the failure to make available to Agent
amounts required pursuant to a Settlement), (b) notified Borrower, Agent, or any
Lender in writing that it does not intend to comply with all or any portion of
its funding obligations under the Agreement, (c) has made a public statement to
the effect that it does not intend to comply with its funding obligations under
the Agreement or under other agreements generally (as reasonably determined by
Agent) under which it has committed to extend credit, (d) failed, within 1
Business Day after written request by Agent, to confirm that it will comply with
the terms of the Agreement relating to its obligations to fund any amounts
required to be funded by it under the Agreement, (e) otherwise failed to pay
over to Agent or any other Lender any other amount required to be paid by it
under the Agreement, or (f) (i) becomes or is insolvent or has a parent company
that has become or is insolvent, or (ii) becomes the subject of a bankruptcy or
insolvency proceeding, or has had a receiver, conservator, trustee, or custodian
or appointed for it, or has taken any action in furtherance of, or indicating
its consent to, approval of or acquiescence in any such proceeding or
appointment or has a parent company that has become the subject of a bankruptcy
or insolvency proceeding, or has had a receiver, conservator, trustee, or
custodian appointed for it, or has taken any action in furtherance of, or
indicating its consent to, approval of or acquiescence in any such proceeding or
appointment.
“Defaulting Lender
Rate” means (a) for the first 3 days from and after the date the relevant
payment is due, the Base Rate, and (b) thereafter, the interest rate then
applicable to Advances that are Base Rate Loans (inclusive of the Base Rate
Margin applicable thereto).
“Deposit Account”
means any deposit account (as that term is defined in the Code).
“Designated Account”
means the Deposit Account of Borrower identified on Schedule
D-1.
“Designated Account
Bank” has the meaning specified therefor in Schedule
D-1.
“Designated Engines”
means the Engines owned by Borrower that are identified on Schedule
D-2.
“Dilution” means, as
of any date of determination, a percentage, based upon the experience of the
immediately prior 90 consecutive days, that is the result of dividing the Dollar
amount of (a) bad debt write-downs, discounts, advertising allowances, credits,
or other dilutive items with respect to Borrower’s Accounts and Mileage Plan
Receivables (of the type that are eligible to be included as Eligible Accounts)
during such period, by (b) Borrower’s billings with respect to
Accounts and Mileage Plan Receivables (of the type that are eligible
to be included as Eligible Accounts) during such period.
“Dilution Reserve”
means, as of any date of determination, an amount sufficient to reduce the
advance rate against Eligible Accounts by 1 percentage point for each percentage
point by which Dilution is in excess of 5%.
“Dollars” or “$” means United
States dollars.
“Eligible Accounts”
means those Receivables created by Borrower in the ordinary course of its
business, that arise out of Borrower’s rendition of services or the sale of
mileage plan awards, that comply with each of the representations and warranties
respecting Eligible Accounts made in the Loan Documents, and that are not
excluded as ineligible by virtue of one or more of the excluding criteria set
forth below; provided, however, that such
criteria may be revised from time to time by Agent in Agent’s Permitted
Discretion to address the results of any audit performed by Agent from time to
time after the Closing Date. In determining the amount to be
included, Eligible Accounts shall be calculated net of customer deposits and
unapplied cash. Eligible Accounts shall not include the
following:
(a) (i)
Accounts (other than Interline Receivables or Mileage Plan Receivables) that the
Account Debtor has failed to pay within 90 days of original invoice date, that
are more than 60 days past due, or that have selling terms of more than 45 days
or (ii) Interline Receivables or Mileage Plan Receivables that the Account
Debtor has failed to pay within 45 days of original invoice date, that are more
than 30 days past due, or that have selling terms of more than 45
days,
(b) Receivables
owed by an Account Debtor (or its Affiliates) where 50% or more of all
Receivables owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above,
(c) Receivables
with respect to which the Account Debtor is an Affiliate of Borrower or an
employee or agent of Borrower or any Affiliate of Borrower,
(d) Receivables
that are Excluded Accounts,
(e) Receivables
arising in a transaction involving terms or conditions by reason of which the
payment by the Account Debtor may be conditional,
(f) Receivables
that are not payable in Dollars,
(g) Receivables
with respect to which the Account Debtor either (i) does not maintain its chief
executive office in the United States, or (ii) is not organized under the laws
of the United States or any state thereof, or (iii) is the government of any
foreign country or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (y) the Receivable is
supported by an irrevocable letter of credit reasonably satisfactory to Agent
(as to form, substance, and issuer or domestic confirming bank) that has been
delivered to Agent and is directly drawable by Agent, or (z) the Receivable is
covered by credit insurance in form, substance, and amount, and by an insurer,
reasonably satisfactory to Agent,
(h) Receivables
with respect to which the Account Debtor is either (i) the United States or any
department, agency, or instrumentality of the United States (exclusive, however,
of Receivables with respect to which Borrower has complied, to the reasonable
satisfaction of Agent, with the Assignment of Claims Act, 31 USC §3727), or (ii)
any state of the United States,
(i) Receivables
with respect to which the Account Debtor is a creditor of Borrower, has or has
asserted a right of setoff, or has disputed its obligation to pay all or any
portion of the Receivable, to the extent of such claim, right of setoff, or
dispute,
(j) (i)
Receivables owed by Bank of America, N.A. or its Affiliates to the extent of the
obligations owing by such Account Debtor in excess of 50% of all Eligible
Accounts (such percentage being subject to reduction by Agent in its Permitted
Discretion if the creditworthiness of such Account Debtor deteriorates), and
(ii) Receivables with respect to any other Account Debtor whose total
obligations owing to Borrower exceed 10% (such percentage as applied to a
particular Account Debtor being subject to reduction by Agent in its Permitted
Discretion if the creditworthiness of such Account Debtor deteriorates) of all
Eligible Accounts, to the extent of the obligations owing by such Account Debtor
in excess of such percentage; provided, however, that, in
each case, the amount of Eligible Accounts that are excluded because they exceed
the foregoing percentage shall be determined by Agent based on all of the
otherwise Eligible Accounts prior to giving effect to any eliminations based
upon the foregoing concentration limit,
(k) Receivables
with respect to which the Account Debtor is subject to an Insolvency Proceeding,
is not Solvent, has gone out of business, or as to which Borrower has received
notice of an imminent Insolvency Proceeding or a material impairment of the
financial condition of such Account Debtor,
(l) Receivables,
the collection of which, Agent, in its Permitted Discretion, believes to be
doubtful by reason of the Account Debtor’s financial condition,
(m) Receivables
that are not subject to a valid and perfected first priority Agent’s
Lien,
(n) Receivables
with respect to which (i) the miles or mileage awards giving rise to such
Receivable have not been transferred to and the Receivable billed to the Account
Debtor, or (ii) the services giving rise to such Receivable have not been
performed and billed to the Account Debtor,
(o) Receivables
with respect to which the Account Debtor is a Sanctioned Person or Sanctioned
Entity, or
(p) Receivables
that represent the right to receive progress payments or other advance billings
that are due prior to the completion of performance by Borrower of the subject
contract.
“Eligible Engines”
means the Designated Engines of Borrower so long as they have been maintained in
conformity with the Maintenance Program, comply with each of the representations
and warranties respecting Eligible Engines made in the Loan Documents, and are
not excluded as ineligible by virtue of one or more of the excluding criteria
set forth below; provided, however, that such
criteria may be revised from time to time by Agent in Agent’s Permitted
Discretion to address the results of any audit or appraisal performed by Agent
from time to time after the Closing Date. In determining the amount
to be so included, Engines shall be valued at the lower of cost or market on a
basis consistent with Borrower’s historical accounting practices. An
Engine shall not be included in Eligible Engines if:
(a) it
is not a Designated Engine,
(b) Borrower
does not have good, valid, and marketable title thereto,
(c) unless
such Engine is attached to one of the Aircraft operated by Borrower as a result
of a Permitted Engine Installation, or is the subject of a Permitted Lease, or
is out for customary repairs that are not expected to take more than a normal
service period to complete, it is not located at one of the locations identified
on Schedule
4.28(e),
(d) unless
such Engine is out for repair for customary repairs that are not expected to
take more than a normal service period to complete, it is in the possession or
control of a bailee, warehouseman, FAA repair station, overhaul or maintenance
servicer, mechanic, or other third Person,
(e) it
is located on Real Property leased by Borrower or in a contract warehouse, in
each case, (i) unless it is subject to a Collateral Access Agreement executed by
the lessor or warehouseman, as the case may be (provided, however, that, (x)
during the 90-day period immediately following the Closing Date, such leased
Real Property or contract warehouse need not be subject to a Collateral Access
Agreement, and (y) during all times thereafter, either such leased Real Property
or contract warehouse must be subject to a Collateral Access Agreement, or if
such leased Real Property or contract warehouse is not subject to a Collateral
Access Agreement, the failure to have a Collateral Access Agreement will not, in
and of itself, render the Engine ineligible, but Agent may, at its election,
establish a reserve against the Borrowing Base and the Maximum Revolver Amount
in an aggregate amount equal to 3 months rent under the lease for each location
(or, if applicable, 3 months of storage fees under the warehouse agreement for
each contract warehouse) that is not subject to a Collateral Access Agreement),
and (ii) unless it is segregated or otherwise separately identifiable from
Engines of others, if any, stored on the premises,
(f) is
not subject to a valid and perfected first priority Agent’s Lien or is not free
and clear of all Liens (other than a valid and perfected first priority Agent’s
Lien and Permitted Liens that are junior in priority to Agent’s
Lien),
(g) it
is the subject of any warehouse receipt or other document of title, unless such
receipt or other document of title is delivered to Agent with all necessary
endorsements,
(h) it
is beyond economic repair or obsolete, has not been maintained in accordance
with the FARs or the Maintenance Program,
(j) it
is either (i) not of good and merchantable quality, free from defects, in good
operating condition and ready for immediate use or operation in accordance with
the Maintenance Program, or (ii) following customary repairs that are not
expected to take more than a normal service period to complete, will not be of
good and merchantable quality, free from defects, in good operating condition
and ready for immediate use or operation in accordance with the Maintenance
Program,
(k) it
does not have (i) all required FAA serviceability tags (if serviceable) or
record (or, if applicable, full back-to-birth traceability), or (ii) all
manuals, documents, and records required by the FARs or the Maintenance Program,
or
(l) unless
such Engine is attached to one of the Aircraft operated by Borrower as a result
of a Permitted Engine Installation, or is the subject of a Permitted Lease, it
has been installed on any Aircraft or any other item of Equipment or otherwise
become an accession, or is the subject of a pooling, exchange, borrowing,
leasing, consignment, or other similar arrangement.
“Eligible Expendables”
means Expendables of Borrower, maintained in conformity with the Maintenance
Program, that comply with each of the representations and warranties respecting
Eligible Expendables made in the Loan Documents, and that are not excluded as
ineligible by virtue of one or more of the excluding criteria set forth below;
provided, however, that such
criteria may be revised from time to time by Agent in Agent’s Permitted
Discretion to address the results of any audit or appraisal performed by Agent
from time to time after the Closing Date. In determining the amount
to be so included, Expendables shall be valued at the lower of cost or market on
a basis consistent with Borrower’s historical accounting
practices. An Expendable shall not be included in Eligible
Expendables if:
(a) Borrower
does not have good, valid, and marketable title thereto,
(b) it
is not located at one of the locations identified on Schedule
4.27,
(c) it
is in the possession or control of a bailee, warehouseman, FAA repair station,
overhaul or maintenance servicer, mechanic, or other third Person,
(d) it
is located at a location at which less than [***] of otherwise Eligible
Expendables, Eligible Ground Service Equipment, or Eligible Replaceable Spare
Parts are located,
(e) it
is located on Real Property leased by Borrower or in a contract warehouse, in
each case, (i) unless it is subject to a Collateral Access Agreement executed by
the lessor or warehouseman, as the case may be (provided, however, that, (x)
during the 90-day period immediately following the Closing Date, such leased
Real Property or contract warehouse need not be subject to a Collateral Access
Agreement, and (y) during all times thereafter, either such leased Real Property
or contract warehouse must be subject to a Collateral Access Agreement, or if
such leased Real Property or contract warehouse is not subject to a Collateral
Access Agreement, the failure to have a Collateral Access Agreement will not, in
and of itself, render the Eligible Expendables ineligible, but Agent may, at its
election, establish a reserve against the Borrowing Base and the Maximum
Revolver Amount in an aggregate amount equal to 3 months rent under the lease
for each location (or, if applicable, 3 months of storage fees under the
warehouse agreement for each contract warehouse) that is not subject to a
Collateral Access Agreement), and (ii) unless it is segregated or otherwise
separately identifiable from Spare Parts of others, if any, stored on the
premises,
(f) it
is not subject to a valid and perfected first priority Agent’s Lien or is not
free and clear of all Liens (other than a valid and perfected first priority
Agent’s Lien and Permitted Liens that are junior in priority to Agent’s
Lien),
(g) it
is the subject of any warehouse receipt or other document of title, unless such
receipt or other document of title is delivered to Agent with all necessary
endorsements,
(h) it
is beyond economic repair, obsolete, or unserviceable, is not unused, has not
been maintained in accordance with the FARs or the Maintenance Program, or is
not in a condition for immediate use by Borrower in its Certificated Air Carrier
operations in compliance with the FARs or the Maintenance Program,
(i) it
does not have (i) all required FAA serviceability tags or records (or, if
applicable, full back-to-birth traceability), or (ii) all manuals, documents,
and records required by the FARs or the Maintenance Program,
(j) it
has been installed on any Aircraft, Engine, other Spare Part, or any other item
of Equipment or otherwise become an accession, or is the subject of a pooling,
exchange, borrowing, leasing, consignment, or other similar arrangement,
or
(k) such
Expendable does not conform in all material respects to all applicable
airworthiness directives or limits imposed by any Governmental Authority which
has regulatory authority over such Expendable or its use.
“Eligible Ground Service
Equipment” means Ground Service Equipment that is not excluded as
ineligible by virtue of one or more of the excluding criteria set forth below;
provided, however, that such
criteria may be revised from time to time by Agent in Agent’s Permitted
Discretion to address the results of any audit or appraisal performed by Agent
from time to time after the Closing Date. Ground Service Equipment
shall not be included in Eligible Ground Service Equipment if:
(a) Borrower
does not have good, valid, and marketable title thereto,
(b) it
is not located at one of the locations identified on Schedule
4.28(d),
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
(c) it
is in the possession or control of a bailee, warehouseman, FAA repair station,
overhaul or maintenance servicer, mechanic, or other third Person,
(d) it
is located at a location at which less than [***] of otherwise Eligible Ground
Service Equipment is located,
(e) it
is stored on Real Property leased by Borrower unless such leased Real Property
is subject to a Collateral Access Agreement executed by the lessor (provided, however, that, (i)
during the 90-day period immediately following the Closing Date, such leased
Real Property need not be subject to a Collateral Access Agreement, and (ii)
during all times thereafter, either such leased Real Property must be subject to
a Collateral Access Agreement or, if such Real Property is not subject to a
Collateral Access Agreement, the failure to have a Collateral Access Agreement
will not, in and of itself, render the Eligible Ground Service Equipment
ineligible, but Agent may, at its election, establish a reserve against the
Borrowing Base and the Maximum Revolver Amount in an aggregate amount equal to 3
months rent under the lease for each Real Property that is not subject to a
Collateral Access Agreement),
(f) it
is “subject to” (within the meaning of Section 9-311 of the Code) any
certificate of title (or comparable) statute, or
(g) it
is not subject to a valid and perfected first priority Agent’s Lien or is not
free and clear of all Liens (other than a valid and perfected first priority
Agent’s Lien and Permitted Liens that are junior in priority to Agent’s
Lien).
“Eligible Replaceable Spare
Parts” means Replaceable Spare Parts of Borrower, manufactured and
refurbished, as the case may be, in conformity with the Maintenance Program,
that comply with each of the representations and warranties respecting Eligible
Replaceable Spare Parts made in the Loan Documents, and that is not excluded as
ineligible by virtue of one or more of the excluding criteria set forth below;
provided, however, that such
criteria may be revised from time to time by Agent in Agent’s Permitted
Discretion to address the results of any audit or appraisal performed by Agent
from time to time after the Closing Date. In determining the amount
to be so included, Replaceable Spare Parts shall be valued at the lower of cost
or market on a basis consistent with Borrower’s historical accounting
practices. A Replaceable Spare Part shall not be included in Eligible
Replaceable Spare Parts if:
(a) Borrower
does not have good, valid, and marketable title thereto,
(b) it
is not located at one of the locations identified on Schedule
4.27,
(c) it
is in the possession or control of a bailee, warehouseman, FAA repair station,
overhaul or maintenance servicer, mechanic, or other third Person,
(d) it
is located at a location at which less than [***] of otherwise Eligible
Expendables, Eligible Ground Service Equipment, or Eligible Replaceable Spare
Parts are located,
(e) it
is located on Real Property leased by Borrower or in a contract warehouse, in
each case, (i) unless it is subject to a Collateral Access Agreement executed by
the lessor or warehouseman, as the case may be (provided, however, that, (x)
during the 90-day period immediately following the Closing Date, such leased
Real Property or contract warehouse need not be subject to a Collateral Access
Agreement, and (y)
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
during
all times thereafter, either such leased Real Property or contract warehouse
must be subject to a Collateral Access Agreement, or if such leased Real
Property or contract warehouse is not subject to a Collateral Access Agreement,
the failure to have a Collateral Access Agreement will not, in and of itself,
render the Eligible Replaceable Spare Parts ineligible, but Agent may, at its
election, establish a reserve against the Borrowing Base and the Maximum
Revolver Amount in an aggregate amount equal to 3 months rent under the lease
for each location (or, if applicable, 3 months of storage fees under the
warehouse agreement for each contract warehouse) that is not subject to a
Collateral Access Agreement), and (ii) unless it is segregated or otherwise
separately identifiable from Spare Parts of others, if any, stored on the
premises,
(f) is
not subject to a valid and perfected first priority Agent’s Lien or is not free
and clear of all Liens (other than a valid and perfected first priority Agent’s
Lien and Permitted Liens that are junior in priority to Agent’s
Lien),
(g) it
is the subject of any warehouse receipt or other document of title, unless such
receipt or other document of title is delivered to Agent with all necessary
endorsements,
(h) it
is beyond economic repair, obsolete, or unserviceable, is not either unused or
has not been rehabilitated to a fully serviceable condition, has not been
maintained in accordance with the FARs or the Maintenance Program, or is not in
a condition for immediate use by Borrower in its Certificated Air Carrier
operations in compliance with the FARs or the Maintenance Program,
(i) it
does not have (i) all required FAA serviceability tags or records (or, if
applicable, full back-to-birth traceability), or (ii) all manuals, documents,
and records required by the FARs or the Maintenance Program,
(j) it
is installed on any Aircraft, Engine, or other Spare Part (other than an
Eligible Replaceable Spare Part) or otherwise become an accession, or is the
subject of a pooling, exchange, borrowing, leasing, consignment, or other
similar arrangement, or
(k) such
Replaceable Spare Part does not conform in all material respects to all
applicable airworthiness directives or limits imposed by any Governmental
Authority which has regulatory authority over such Replaceable Spare Part or its
use.
“Engine” means an
“aircraft engine” as defined in Section 40102 of the Federal Aviation
Act.
“Engine and Spare Parts
Security Agreement” means an engine and spare parts security agreement
executed and delivered by Borrower in favor of Agent recorded with the FAA,
in form and substance reasonably satisfactory to
Agent.
“Environmental Action”
means any written complaint, summons, citation, notice, directive, order, claim,
litigation, investigation, judicial or administrative proceeding, judgment,
letter, or other written communication from any Governmental Authority, or any
third party involving violations of Environmental Laws or releases of Hazardous
Materials (a) from any assets, properties, or businesses of Borrower or any of
its predecessors in interest, (b) from adjoining properties or businesses,
or (c) from or onto any facilities which received Hazardous Materials generated
by Borrower or any of its predecessors in interest.
“Environmental Law”
means any applicable federal, state, provincial, foreign or local statute, law,
rule, regulation, ordinance, code, binding and enforceable guideline, binding
and enforceable written policy, or rule of common law now or hereafter in effect
and in each case as amended, or any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, in each case, to the extent binding on Borrower, relating to the
environment, the effect of the environment on employee health, or Hazardous
Materials, in each case as amended from time to time.
“Environmental
Liabilities” means all liabilities, monetary obligations, losses,
damages, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts, or consultants, and costs of investigation and
feasibility studies), fines, penalties, sanctions, and interest incurred as a
result of any claim or demand, or Remedial Action required, by any Governmental
Authority or any third party, and which relate to any Environmental
Action.
“Environmental Lien”
means any Lien in favor of any Governmental Authority for Environmental
Liabilities.
“Equipment” means
equipment (as that term is defined in the Code).
“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended, and any successor
statute thereto and the rules and regulations promulgated under such
statutes.
“ERISA Affiliate”
means (a) any Person subject to ERISA whose employees are treated as employed by
the same employer as the employees of Borrower under IRC Section 414(b), (b) any
trade or business subject to ERISA whose employees are treated as employed by
the same employer as the employees of Borrower under IRC Section 414(c), (c)
solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any
organization subject to ERISA that is a member of an affiliated service group of
which Borrower is a member under IRC Section 414(m), or (d) solely for purposes
of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA
that is a party to an arrangement with Borrower and whose employees are
aggregated with the employees of Borrower under IRC Section 414(o); or (e) any
Person that is under “common control” with Borrower within the meaning of
Section 4001(a)(14) of ERISA.
“ERISA Event” means
(a) the occurrence of a Reportable Event, (b) the withdrawal of Borrower or any
of its ERISA Affiliates from a Benefit Plan during a plan year in which it was a
“substantial employer” (as defined in Section 4001(a)(2) of ERISA), (c) the
providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or the appointment of a
trustee by the PBGC to administer any Benefit Plan, (e) any event or condition
that provides a basis under Section 4042(a)(1), (2), or (3) of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan,
(f) the providing of any security to any Benefit Plan under the IRC by Borrower
or any of its ERISA Affiliates, (g) failure to meet the minimum funding
standards under the Pension Funding Rules with respect to any Benefit Plan or
the application for a waiver or modification of the minimum funding standards
under the Pension Funding Rules or for the extension of any amortization period
under the IRC, (h) the requirements of Section 4043(b) of ERISA apply with
respect to a contributing sponsor (as defined in Section 4001(a)(13) of ERISA)
of any Benefit Plan, and an event described in paragraph (9), (10), (11), (12)
or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect
to such Benefit Plan within the following 30 days, (i) the assertion or threat
of a material claim, action, suit, proceeding, hearing, audit or investigation
(other than routine claims for benefits) against any Benefit Plan or the assets
thereof or against Borrower or any of its ERISA Affiliates in connection with
any Benefit Plan that could reasonably be expected to result in a liability in
excess of [***], (j) the receipt by Borrower or any of its ERISA Affiliates from
the United States Internal Revenue Service of notice of the failure of any
Benefit Plan (or any other employee benefit plan intended to be qualified under
Section 401(a) of the IRC) to qualify under Section 401(a) of the IRC, or the
failure of any trust forming part of any Benefit Plan or other employee benefit
plan to qualify for exemption from taxation under Section 501(a) of the IRC, (k)
the imposition of a Lien under the IRC or ERISA on the assets of Borrower or any
of its ERISA Affiliates, (l) the establishment or amendment by Borrower or any
of its ERISA Affiliates of any “employee benefit plan” within the meaning of
Section 3(3) of ERISA, including a Benefit Plan or a Benefit
Arrangement,
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
or the
existence of any facts with respect to any employee benefit plan or Benefit
Arrangement, individually or in the aggregate, that would reasonably be expected
to result in a Material Adverse Change.
“Event of Default” has
the meaning specified therefor in Section 8 of the
Agreement.
“Excess Availability”
means, as of any date of determination, the amount equal to Availability minus the aggregate amount,
if any, of all trade payables of Borrower aged in excess of historical levels
with respect thereto and all book overdrafts of Borrower in excess of historical
practices with respect thereto, in each case as determined by Agent in its
Permitted Discretion.
“Exchange Act” means
the Securities Exchange Act of 1934, as in effect from time to
time.
“Excluded Accounts”
means Accounts of Borrower that meet all of the following
criteria: (i) they are due from a credit card or debit card issuer,
(ii) they arise from the sale of goods or rendition of services by Borrower
directly to a consumer customer of Borrower for such customer’s personal,
family, or household purposes, (iii) they arise in the ordinary course of
Borrower’s business, and (iv) they arise from transactions involving the use of
credit cards or debit cards by Borrower’s consumer customers.
“Excluded Taxes” means
(i) any tax imposed on the net income or net profits of any Lender or any
Participant (including any branch profits taxes), in each case imposed by the
jurisdiction (or by any political subdivision or taxing authority thereof) in
which such Lender or such Participant is organized or the jurisdiction (or by
any political subdivision or taxing authority thereof) in which such Lender’s or
such Participant’s principal office is located in each case as a result of a
present or former connection between such Lender or such Participant and the
jurisdiction or taxing authority imposing the tax (other than any such
connection arising solely from such Lender or such Participant having executed,
delivered or performed its obligations or received payment under, or enforced
its rights or remedies under the Agreement or any other Loan Document); (ii)
taxes resulting from a Lender’s or a Participant’s failure to comply with the
requirements of Section 16(c) or
(d) of the
Agreement, and (iii) any withholding taxes that would be imposed on amounts
payable to a Foreign Lender based upon the applicable withholding rate in effect
at the time such Foreign Lender becomes a party to the Agreement (or designates
a new lending office) or that result from a Pending Change in Tax Law that
existed as of the date on which such Foreign Lender became a party to the
Agreement (or designated a new lending office), except that Taxes
shall include (A) any amount that such Foreign Lender (or its assignor, if any)
was previously entitled to receive pursuant to Section 16(a) of the
Agreement, if any, with respect to such withholding tax at the time such Foreign
Lender becomes a party to the Agreement (or designates a new lending office)
provided however, that a
Replacement Lender who becomes a party to the Agreement pursuant to Section 14.2
shall not be entitled to such amounts, and (B) additional United States federal
withholding taxes that may be imposed after the time such Foreign Lender becomes
a party to the Agreement (or designates a new lending office), as a result of a
Change in Tax Law (other than a Pending Change in Tax Law that existed as of the
date such Foreign Lender became a party to the Agreement (or designated a new
lending office).
“Expendables” means
those Spare Parts of Borrower for which no FAA or original equipment
manufacturer authorized refurbishment procedure exists or for which the cost of
repair or refurbishment would normally exceed that of replacement.
“FAA” shall mean the
Federal Aviation Administration of the United States Department of
Transportation and any subdivision or office thereof, and any successor or
replacement administrator, agency or other entity having the same or similar
authority and responsibilities.
“FARs” means the rules
and regulations of the FAA, including as set forth in Title 14 of the Code of
Federal Regulations.
“Federal Aviation Act”
shall mean Title 49 of the United States Code, as amended from time to time,
together with all rules, regulations, procedures, orders, handbooks, guidelines
and interpretations thereunder or related thereto.
“Fee Letter” means
that certain fee letter, dated as of even date with the Agreement, among
Borrower and Agent, in form and substance reasonably satisfactory to
Agent.
“Federal Funds Rate”
means, for any period, a fluctuating interest rate per annum equal to, for each
day during such period, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal funds brokers of recognized
standing selected by it.
“Foreign Lender” means
any Lender or Participant that is not a United States person within the meaning
of IRC section 7701(a)(30).
“Foreign Pension Plan”
means any plan, fund (including any superannuation fund) or other similar
program established or maintained outside the United States by Borrower or any
of its ERISA Affiliates primarily for the benefit of employees of such Person
residing outside the United States, which plan, fund or other similar program
provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the IRC.
“Funding Date” means
the date on which a Borrowing occurs.
“Funding Losses” has
the meaning specified therefor in Section 2.12(b)(ii)
of the Agreement.
“GAAP” means generally
accepted accounting principles as in effect from time to time in the United
States, consistently applied; provided, however, that all
calculations relative to liabilities shall be made without giving effect to
Statement of Financial Accounting Standards No. 159.
“Governing Documents”
means, with respect to any Person, the certificate or articles of incorporation,
by-laws, or other organizational documents of such Person.
“Governmental
Authority” means any federal, state, local, or other governmental or
administrative body, instrumentality, board, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.
“Ground Service
Equipment” means Equipment of Borrower consisting of vehicles, tractors,
de-icing Equipment, tug Equipment, air conditioning Equipment, man-lift
Equipment, floor sweepers, loading Equipment, ramp Equipment, communications
Equipment, and ground service Equipment (including baggage handling equipment,
catering equipment, and maintenance equipment), and all support Equipment
associated with any of the foregoing.
“Group” means Alaska
Air Group, Inc., a Delaware corporation.
“Hazardous Materials”
means (a) substances that are defined or listed in, or otherwise classified
pursuant to, any applicable laws or regulations as “hazardous substances,”
“hazardous materials,” “hazardous wastes,” “toxic substances,” or any other
formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or
petroleum derived substances, natural gas, natural gas liquids, synthetic gas,
drilling fluids, produced waters, and other wastes associated with the
exploration, development,
or
production of crude oil, natural gas, or geothermal resources, (c) any flammable
substances or explosives or any radioactive materials, and (d) asbestos in any
form or electrical equipment that contains any oil or dielectric fluid
containing levels of polychlorinated biphenyls in excess of 50 parts per
million.
“Hedge Agreement”
means a “swap agreement” as that term is defined in Section 101(53B)(A) of the
Bankruptcy Code.
“Holdout Lender” has
the meaning specified therefor in Section 14.2(a) of
the Agreement.
“Indebtedness” as to
any Person means (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations in respect of
letters of credit, bankers acceptances, or other financial products, (c) all
obligations of such Person as a lessee under Capital Leases, (d) all obligations
or liabilities of others secured by a Lien on any asset of such Person,
irrespective of whether such obligation or liability is assumed, (e) all
obligations of such Person to pay the deferred purchase price of assets (other
than trade payables incurred in the ordinary course of business and repayable in
accordance with customary trade practices), (f) all obligations of such Person
owing under Hedge Agreements (which amount shall be calculated based on the
amount that would be payable by such Person if the Hedge Agreement were
terminated on the date of determination), (g) any Prohibited Preferred Stock of
such Person, and (h) any obligation of such Person guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse) any obligation of any other Person that
constitutes Indebtedness under any of clauses (a) through (g)
above. For purposes of this definition, (i) the amount of any
Indebtedness represented by a guaranty or other similar instrument shall be the
lesser of the principal amount of the obligations guaranteed and still
outstanding and the maximum amount for which the guaranteeing Person may be
liable pursuant to the terms of the instrument embodying such Indebtedness, and
(ii) the amount of any Indebtedness described in clause (d) above shall be the
lower of the amount of the obligation and the fair market value of the assets of
such Person securing such obligation.
“Indemnified
Liabilities” has the meaning specified therefor in Section 10.3 of the
Agreement.
“Indemnified Person”
has the meaning specified therefor in Section 10.3 of the
Agreement.
“Indemnified Taxes”
means, any Taxes other than Excluded Taxes.
“Insolvency
Proceeding” means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar
relief.
“Interest Period”
means, with respect to each LIBOR Rate Loan, a period commencing on the date of
the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or
the conversion of a Base Rate Loan to a LIBOR Rate Loan) and ending 1, 2, or 3
months thereafter; provided, however, that (a)
interest shall accrue at the applicable rate based upon the LIBOR Rate from and
including the first day of each Interest Period to, but excluding, the day on
which any Interest Period expires, (b) any Interest Period that would end on a
day that is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day, (c) with respect
to an Interest Period that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period), the Interest Period shall end on the
last Business Day of the calendar month that is 1, 2, or 3 months after the date
on which the Interest Period began, as applicable, and (d) Borrower may not
elect an Interest Period which will end after the Maturity Date.
"Interline
Receivables" means any and all of Borrower’s rights to payment of a
monetary obligation, whether or not earned by performance, owing from airlines
(including any such rights to payment that are paid or payable by or through a
clearinghouse), including rights to payment of a monetary obligation relative to
(i) passenger flight tickets that were or will be issued by such airlines, (ii)
baggage handling services, (iii) freight transportation, (iv) transportation
related goods and services, such as maintenance, ground handling, catering, and
rentals, and (v) Universal Air Travel Plan transactions.
“Inventory” means
inventory (as that term is defined in the Code).
“Investment” means,
with respect to any Person, any investment by such Person in any other Person
(including Affiliates) in the form of loans, guarantees, advances, capital
contributions (excluding (a) commission, travel, and similar advances to
officers and employees of such Person made in the ordinary course of business,
and (b) bona fide
Accounts arising in the ordinary course of business), or acquisitions of
Indebtedness, Stock, or all or substantially all of the assets of such other
Person (or of any division or business line of such other Person), and any other
items that are or would be classified as investments on a balance sheet prepared
in accordance with GAAP.
“IRC” means the
Internal Revenue Code of 1986, as in effect from time to time.
“Lender” has the
meaning set forth in the preamble to the Agreement, shall include the Swing
Lender, and shall also include any other Person made a party to the Agreement
pursuant to the provisions of Section 13.1 of the
Agreement and “Lenders” means each
of the Lenders or any two or more of them.
“Lender Group” means
each of the Lenders and Agent, or any one or more of them.
“Lender Group
Expenses” means all [***].
“Lender Group
Representatives” has the meaning specified therefor in Section 17.8 of the
Agreement.
“Lender-Related
Person” means, with respect to any Lender, such Lender, together with
such Lender’s Affiliates, officers, directors, employees, attorneys, and
agents.
“LIBOR Deadline” has
the meaning specified therefor in Section 2.12(b)(i) of
the Agreement.
“LIBOR Notice” means a
written notice in the form of Exhibit
L-1.
“LIBOR Option” has the
meaning specified therefor in Section 2.12(a) of
the Agreement.
“LIBOR Rate” means the
rate per annum rate appearing on Bloomberg L.P.’s (the "Service") Page
BBAM1/(Official BBA USD Dollar Libor Fixings) (or on any successor or substitute
page of such Service, or any successor to or substitute for such Service) 2
Business Days prior to the commencement of the requested Interest Period, for a
term and in an amount comparable to the Interest Period and the amount of the
LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a
continuation of a LIBOR Rate Loan or as a conversion of a Base Rate Loan to a
LIBOR Rate Loan) by Borrower in accordance with the Agreement, which
determination shall be conclusive in the absence of manifest error.
“LIBOR Rate Loan”
means each portion of an Advance that bears interest at a rate determined by
reference to the LIBOR Rate.
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
“LIBOR Rate Margin”
means [***].
“Lien” means any
mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit
arrangement, encumbrance, easement, lien (statutory or other), security
interest, or other security arrangement and any other preference, priority, or
preferential arrangement of any kind or nature whatsoever, including any
conditional sale contract or other title retention agreement, the interest of a
lessor under a Capital Lease and any synthetic or other financing lease having
substantially the same economic effect as any of the foregoing.
“Liquidity” means, as
of any date of determination, the sum of, without duplication, (a) the amount on
deposit with Deposit Accounts as of such date, plus (b) the amount of
unrestricted cash and Cash Equivalents as of such date, plus (c) the amount of
unrestricted Marketable Securities as of such date, in each case excluding any
such amounts subject to a Lien permitted pursuant to clause (q) of the
definition of Permitted Liens.
“Loan Account” has the
meaning specified therefor in Section 2.9 of the
Agreement.
“Loan Documents” means
the Agreement, any Borrowing Base Certificate, the Controlled Account
Agreements, the Control Agreements, Engine and Spare Parts Security Agreement,
the Fee Letter, the Security Agreement, any note or notes executed by Borrower
in connection with the Agreement and payable to any member of the Lender Group,
and any other agreement entered into, now or in the future, by Borrower and any
member of the Lender Group in connection with the Agreement.
“Maintenance Program”
means an FAA approved maintenance program that covers Borrower’s Engines and
Spare Parts (which may be the FAA approved maintenance program of a lessee
during the term of a lease of a Designated Engine permitted by the
Agreement).
“Margin Stock” as
defined in Regulation U of the Board of Governors of the Federal Reserve System
as in effect from time to time.
“Marketable
Securities” means “available for sale securities” as determined in
accordance with GAAP.
“Material Adverse
Change” means (a) a material adverse change in the
business, operations, assets, liabilities or financial condition of
Borrower, (b) a material impairment of Borrower’s ability to perform its
obligations under the Loan Documents to which it is a party or of the Lender
Group’s ability to enforce the Obligations or realize upon the Collateral, or
(c) a material impairment of the enforceability or priority of Agent’s Liens
with respect to the Collateral as a result of an action or failure to act on the
part of Borrower.
“Material Contract”
means, with respect to any Person, each contract or agreement to which such
Person is a party and that such Person is required to file with the SEC under
Item 1.01 of Form 8-K of the SEC.
“Maturity Date” has
the meaning specified therefor in Section 3.3 of the
Agreement.
“Maximum Revolver
Amount” means $100,000,000, decreased by the amount of reductions in the
Commitments made in accordance with Section 2.4(c) of the
Agreement.
"Mileage Plan
Receivable" means any and all rights of Borrower to payment of a monetary
obligation, whether or not earned by performance, for the purchase of miles
(currently referred to as "Mileage Plan Miles") or credits.
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
“Multiemployer Plan”
means a “multiemployer plan” (as defined in Section 3(37) or 4001(a)(3) of
ERISA) to which Borrower or any of its ERISA Affiliates has contributed, or was
obligated to contribute, or with respect to which any of them had any liability
at any time.
“Net Liquidation
Percentage” means the percentage of the book value of Borrower’s
Inventory that is estimated to be recoverable in an orderly liquidation of such
Inventory net of all associated costs and expenses of such liquidation, such
percentage to be as determined from time to time by an appraisal company
selected by Agent.
“Obligations” means
all loans (including the Advances), debts, principal, interest (including any
interest that accrues after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in any
such Insolvency Proceeding), premiums, liabilities (including all amounts
charged to the Loan Account pursuant to the Agreement), obligations (including
indemnification obligations), fees (including the fees provided for in the Fee
Letter), Lender Group Expenses (including any fees or expenses that accrue after
the commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding),
guaranties, covenants, and duties of any kind and description owing by Borrower
pursuant to or evidenced by the Agreement or any of the other Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all interest not paid when due and all other expenses or other
amounts that Borrower is required to pay or reimburse by the Loan Documents or
by law or otherwise in connection with the Loan Documents. Any
reference in the Agreement or in the Loan Documents to the Obligations shall
include all or any portion thereof and any extensions, modifications, renewals,
or alterations thereof, both prior and subsequent to any Insolvency
Proceeding.
“OFAC” means The
Office of Foreign Assets Control of the U.S. Department of the
Treasury.
“Originating Lender”
has the meaning specified therefor in Section 13.1(e) of
the Agreement.
“Overadvance” has the
meaning specified therefor in Section 2.5 of the
Agreement.
“Participant” has the
meaning specified therefor in Section 13.1(e) of
the Agreement.
“Patriot Act” has the
meaning specified therefor in Section 4.18 of the
Agreement.
“Payoff Date” means
the first date on which all of the Obligations are paid in full and the
Commitments of the Lenders are terminated.
“PBGC” means the
Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title
IV of ERISA or any entity succeeding to any or all of its functions under
ERISA.
“PDP Facility” means a
loan facility provided to finance the making of advance purchase deposits to The
Boeing Company which is secured by Borrower’s contract rights in and to the
Aircraft to be purchased from The Boeing Company.
“PDP Facility
Documents” means the loan and security documents related to the PDP
Facility or executed in connection therewith.
“Pending Change in Tax
Law” means any Change in Tax Law (a) that is not in effect at the time a
Foreign Lender becomes a party to the Agreement (or designates a new lending
office) and (b) as to which a public announcement concerning the enactment of
such Change in Tax Law was made at least 5 Business
Days prior to the date on which such Foreign Lender becomes a party to the
Agreement (or designates a new lending office).
“Pension Act” means
the Pension Protection Act of 2006, as amended from time to time, and the rules
and regulations promulgated thereunder from time to time in effect.
“Pension Funding
Rules” means the rules of the IRC and ERISA regarding minimum required
contributions (including any installment payment thereof) to a Benefit Plan,
including those set forth in Section 412 of the IRC and Section 302 of ERISA in
effect before the Pension Act with respect to plan years ending before the
effective date of the Pension Act as it applies to such Benefit Plan, and with
respect to plan years ending after the effective date of the Pension Act to the
Benefit Plan, including those set forth in Sections 412 and 430 of the Code and
Sections 302 and 303 of ERISA.
“Permitted
Acquisition” means any Acquisition so long
as:
(a) no
Default or Event of Default shall have occurred and be continuing or would
result from the consummation of the proposed Acquisition and the proposed
Acquisition is consensual,
(b) if
prepared, Borrower has provided Agent with its due diligence package relative to
the proposed Acquisition,
(c) Borrower
shall have Availability plus Liquidity in an amount equal to or greater than
$600,000,000 immediately after giving effect to the consummation of the proposed
Acquisition,
(d) Borrower
has endeavored to provide Agent with written notice of the proposed Acquisition
at least 15 Business Days prior to the anticipated closing date of the proposed
Acquisition and, not later than 5 Business Days prior to the anticipated closing
date of the proposed Acquisition, copies of the acquisition agreement and other
material documents relative to the proposed Acquisition, but a non-willful
failure of Borrower to so notify Agent shall not prevent the subject transaction
from being a Permitted Acquisition, and
(e) the
assets being acquired (other than a de minimis amount of assets
in relation to Borrower’s total assets), or the Person whose Stock is being
acquired, are useful in or engaged in, as applicable, the business of Borrower
or a business reasonably related thereto.
“Permitted Discretion”
means a determination made in the exercise of reasonable (from the perspective
of a secured lender) business judgment.
“Permitted
Dispositions” means:
(a) sales,
abandonment, or other dispositions of Equipment (other than the Designated
Engines and other than any Eligible Ground Service Equipment or Eligible Spare
Parts that, in the case of Eligible Ground Service Equipment or Eligible Spare
Parts, was included in the Borrowing Base in the most recent Borrowing Base
Certificate) that is substantially worn, damaged, no longer useful to Borrower,
or obsolete, in each case, in the ordinary course of Borrower’s
business,
(b) sales
of Inventory to buyers in the ordinary course of business,
(c) so
long as in the ordinary course of Borrower’s business, the lending of Spare
Parts to, or exchange of Spare Parts with, other airlines,
(d) so
long as in the ordinary course of Borrower’s business, the sale, lease, or other
disposition of Engines that are not Designated Engines that Borrower determines
to be no longer useful to the conduct of Borrower’s business (including the
return of leased Engines),
(e) so
long as in the ordinary course of Borrower’s business, the sale, lease, or other
disposition of Aircraft owned or leased by Borrower that Borrower determines to
be no longer useful to the conduct of Borrower’s business (including the return
of leased Aircraft),
(f) the
making of Permitted Spare Parts Installations (exclusive of any installation of
Spare Parts of Borrower into other Spare Parts of Borrower, the installation of
Spare Parts of Borrower into the Designated Engines, or the installation of
Spare Parts of Borrower into any Ground Service Equipment of
Borrower),
(g) the
making of Permitted Exchanges,
(h) the
making of Permitted Leases,
(i) the
use or transfer of money or Cash Equivalents in a manner that is not prohibited
by the terms of the Agreement or the other Loan Documents,
(j) the
licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of Borrower’s
business,
(k) the
granting of Permitted Liens,
(l) the
sale or discount, in each case without recourse, of Accounts arising in the
ordinary course of business, but only in connection with the compromise or
collection thereof,
(m) any
involuntary loss, damage or destruction of property,
(n) any
involuntary condemnation, seizure or taking, by exercise of the power of eminent
domain or otherwise, or confiscation or requisition of use of
property,
(o) the
leasing or subleasing of assets of Borrower (other than the Designated Engines
and other than any Eligible Ground Service Equipment or Eligible Spare Parts
that, in the case of Eligible Ground Service Equipment or Eligible Spare Parts,
was included in the Borrowing Base in the most recent Borrowing Base
Certificate) in the ordinary course of business,
(p) the
sale or issuance of Stock (other than Prohibited Preferred Stock) of
Borrower,
(q) the
lapse of registered patents, trademarks and other intellectual property of
Borrower to the extent not economically desirable in the conduct of its
business,
(r) the
making of a Restricted Junior Payment that is expressly permitted to be made
pursuant to the Agreement,
(s) the
making of a Permitted Investment,
(t) so
long as no Event of Default has occurred and is continuing and so long as no
Overadvance exists either immediately before or immediately after giving effect
thereto, the sale of miles in exchange for a contemporaneous payment of the
purchase price therefor,
(u) so
long as, at the time of a particular disposition, the Threshold Usage Amount
does not exist, dispositions of assets (other than Accounts, Interline
Receivables, Mileage Plan Receivables, and miles) not otherwise permitted in
clauses (a)
through (s)
above, so long as such dispositions are made at fair market value and in the
ordinary course of Borrower’s business, and
(v) if,
at the time of a particular disposition, the Threshold Usage Amount does exist,
dispositions of assets (other than Accounts, Interline Receivables, Mileage Plan
Receivables, and miles) not otherwise permitted in clauses (a) through
(s) above, so
long as made at fair market value and so long as the aggregate fair market value
of all assets (other than real property and related improvements, which shall
not be subject to, nor be counted towards, the Dollar limitation) disposed of in
all such dispositions during any fiscal year (including the proposed
disposition) would not exceed [***]; provided, however, that if any
such disposition involves a Designated Engine, Eligible Expendables, Eligible
Ground Service Equipment, or Eligible Replaceable Spare Parts, then, as a
condition to consummating such disposition, Borrower must prepay the Obligations
by an amount sufficient to create borrowing availability of not less than the
greater of: (i) the amount of borrowing availability that had been created
immediately before giving effect to the proposed disposition by the inclusion of
the Designated Engine, Eligible Expendables, Eligible Ground Service Equipment,
or Eligible Replaceable Spare Parts in the Borrowing Base, or (ii) the amount of
borrowing availability that existed immediately before giving effect to the
proposed disposition.
“Permitted Engine
Installations” means, so long as in the ordinary course of Borrower’s
business and so long as no Lien of any Person (other than Agent) would attach to
such Engines as a result thereof, the installation of (but not the transfer of
ownership of) the Designated Engines to Aircraft operated by
Borrower.
“Permitted Exchange”
means an exchange (an “Exchange”) of a
Designated Engine (the “Exchanged Engine”)
for an Engine (the “Replaced Engine”)
that is attached to an Aircraft leased by Borrower, which lease will terminate
in less than 5 Business Days, which Exchange Borrower is proposing to make
because the Replaced Engine does not meet the return requirements specified in
the subject lease, if and so long as (a) at the time of the consummation of such
Exchange, no Event of Default has occurred and is continuing, (b) no Overadvance
exists either immediately before or immediately after giving effect to the
Exchange (calculated without regard to value, if any, in the Borrowing Base on
account of the Replacement Engine), (c) prior to the consummation of such
Exchange, Borrower executes and delivers to Agent, in recordable form, any
amendment or supplement to the Engine and Spare Parts Security Agreement that
Agent reasonably requests in order to grant Agent a first priority security
interest in the Replacement Engine, (d) prior to the consummation of such
Exchange, Borrower has given Agent not less than 5 Business Days prior written
notice concerning the prospective Exchange, including a reasonable amount of
detail regarding the value and condition of the Replacement Engine, and (e) if,
at the time of the consummation of the Exchange, the Revolver Usage is [***], or
greater, Borrower repays the Obligations by an amount sufficient to create
borrowing availability of not less than the greater of: (i) the amount of
borrowing availability that had been created immediately before giving effect to
the proposed Exchange by the inclusion of the Exchanged Engine in the Borrowing
Base, or (ii) the amount of borrowing availability that existed immediately
before giving effect to the proposed Exchange.
“Permitted
Indebtedness” means:
(a) Indebtedness
evidenced by the Agreement and the other Loan Documents,
(b) Indebtedness
set forth on Schedule
4.19 and any Refinancing Indebtedness in respect of such
Indebtedness,
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
(c) endorsement
of instruments or other payment items for deposit,
(d) Indebtedness
consisting of (i) unsecured guarantees incurred in the ordinary course of
business with respect to surety and appeal bonds, performance bonds, bid bonds,
completion guarantee and similar obligations; and (ii) unsecured guarantees
arising with respect to customary indemnification obligations to purchasers in
connection with Permitted Dispositions,
(e) Indebtedness
incurred in the ordinary course of business under performance, surety,
statutory, and appeal bonds,
(f) Indebtedness
incurred in respect of credit cards, credit card processing services, debit
cards, stored value cards, purchase cards (including so-called “procurement
cards” or “P-cards”), or Cash Management Services, in each case, incurred in the
ordinary course of business,
(g) Indebtedness
incurred under the Bank Facility in an aggregate outstanding principal amount
not to exceed $100,000,000 and any Refinancing Indebtedness in respect of any
such Indebtedness,
(h) Indebtedness
incurred under the PDP Facility Documents in an aggregate outstanding amount not
to exceed $250,000,000 and any Refinancing Indebtedness in respect of any such
Indebtedness,
(i) Indebtedness
owed to any Person providing property, casualty, liability, or other insurance
to Borrower, so long as the amount of such Indebtedness is not in excess of the
amount of the unpaid cost of, and shall be incurred only to defer the cost of,
such insurance for the year in which such Indebtedness is incurred and such
Indebtedness is outstanding only during such year,
(j) the
incurrence by Borrower of Indebtedness under Hedge Agreements that are incurred
for the bona fide purpose of hedging the interest rate, foreign currency or
commodity risk associated with Borrower’s operations and not for speculative
purposes,
(k) unsecured
Indebtedness incurred in respect of netting services, overdraft protection, and
other like services, in each case, incurred in the ordinary course of
business,
(l) unsecured
Indebtedness of Borrower owing to former employees, officers, or directors (or
any spouses, ex-spouses, or estates of any of the foregoing) incurred in
connection with the repurchase by Borrower of the Stock of Group that has been
issued to such Persons, so long as (i) no Event of Default has occurred and
is continuing or would result from the incurrence of such Indebtedness, (ii) the
aggregate amount of all such Indebtedness outstanding at any one time does not
exceed $1,000,000, and (iii) such Indebtedness is subordinated to the
Obligations on terms and conditions reasonably acceptable to Agent,
(m) unsecured
Indebtedness owing to sellers of assets or Stock to Borrower that is incurred by
Borrower in connection with the consummation of one or more Permitted
Acquisitions,
(n) Indebtedness
composing Permitted Investments,
(o) Indebtedness
incurred to finance Borrower’s purchase or ownership of Aircraft, Engines (other
than the Designated Engines), flight simulators, other flight Equipment (other
than Expendables, Spare Parts, and Ground Service Equipment), or real property
so long as such Indebtedness is underwritten based upon the value of the
Equipment or real property that is security for such Indebtedness,
(p) unsecured
Indebtedness of Borrower evidenced by bonds or debentures, so long as
(i) no Event of Default has occurred and is continuing or would result from
the incurrence of such Indebtedness, and (ii) the aggregate amount of all such
Indebtedness outstanding at any one time does not exceed
$200,000,000,
(q) Indebtedness
in respect of letters of credit obtained in the ordinary course of business,
and
(r) Indebtedness
incurred in the ordinary course of Borrower’s business.
“Permitted
Investments” means:
(a) Investments
in cash and Cash Equivalents,
(b) Investments
in negotiable instruments deposited or to be deposited for collection in the
ordinary course of business,
(c) advances
made in connection with purchases of goods or services in the ordinary course of
business,
(d) Investments
received in settlement of amounts due to Borrower effected in the ordinary
course of business or owing to Borrower as a result of Insolvency Proceedings
involving an Account Debtor or upon the foreclosure or enforcement of any Lien
in favor of Borrower,
(e) Investments
owned by Borrower on the Closing Date and set forth on Schedule
P-1,
(f) guarantees
permitted under the definition of Permitted Indebtedness,
(g) so
long as no Event of Default has occurred and is continuing or would result
therefrom, so long as Borrower has Liquidity of $600,000,000, or greater, before
and immediately after giving effect thereto, and so long as made in the ordinary
course of Borrower’s business, Investments in Affiliates of
Borrower,
(h) Stock
or other securities acquired in connection with the satisfaction or enforcement
of Indebtedness or claims due or owing to Borrower (in bankruptcy of customers
or suppliers or otherwise outside the ordinary course of business) or as
security for any such Indebtedness or claims,
(i) deposits
of cash made in the ordinary course of business to secure performance of
operating leases,
(j) non-cash
loans to employees, officers, and directors of Borrower for the purpose of
purchasing Stock in Group so long as the proceeds of such loans are used in
their entirety to purchase such stock in Group,
(k) Investments
resulting from entering into any agreement relative to financial products or
services (including Hedge Agreements) that is permitted under the
Agreement,
(l) Permitted
Acquisitions,
(m) Investments
resulting from loans made by Borrower to Group, the proceeds of which shall be
used by Group solely to pay (i) (y) franchise taxes (other than income taxes)
and other fees, taxes and expenses required to maintain its corporate existence
or arising as a result of its ownership of Borrower, and (z) federal, state and
local income taxes, to the extent such income taxes are attributable to the
income of Borrower; provided that the amount of such loans in any fiscal year
does not exceed the amount that Borrower would be required to pay in respect of
federal, state and local taxes for such fiscal year were Borrower to pay such
taxes separately from Group, and (ii) ordinary course operating and corporate
overhead expenses and administrative and similar expenses related to its
existence and ownership of Borrower, and
(n) so
long as no Event of Default has occurred and is continuing or would result
therefrom and so long as Borrower has Liquidity of $600,000,000, or greater,
before and immediately after giving effect thereto, any other Investments in an
aggregate amount not to exceed $250,000,000 during the term of the
Agreement.
“Permitted Lease”
means the lease of Designated Engines by Borrower to unaffiliated third Persons,
if and so long as (a) at the time of the execution and delivery of the subject
lease, no Event of Default has occurred and is continuing, (b) at the time of
the execution and delivery of the subject lease, the Threshold Usage Amount does
not exist, (c) the subject lease is for a term of not more than [***], (d) the
enforceability, perfection, or remedial rights (other than in respect of the
quiet enjoyment of the lessee) respecting Agent’s Lien on the subject Engines
are not impaired, in whole or in part, by the execution and delivery of the
subject lease nor by the use, or the permitted locations of use, that the
prospective lessee would enjoy under the terms of the prospective lease, (e)
Agent retains a perfected security interest in the rights to payment due to
Borrower under the subject lease, (f) Borrower has given Agent not less than 5
Business Days prior written notice concerning the prospective lease, including a
reasonable amount of detail concern the terms of such lease, (g) the lease rate
and other consideration payable by the lessee under the subject lease, in
Borrower’s reasonable opinion, represents fair market value for the subject
Engines, and (h) no more than [***] Engines are subject to such leases at any
one time.
“Permitted Liens”
means
(a) Liens
held by Agent to secure the Obligations,
(b) Liens
for unpaid taxes, assessments, or other governmental charges or levies that
either (i) are not yet delinquent, or (ii) do not have priority over Agent’s
Liens and the underlying taxes, assessments, or charges or levies are the
subject of Permitted Protests,
(c) judgment
Liens arising solely as a result of the existence of judgments, orders, or
awards that do not constitute an Event of Default under Section 8.3 of the
Agreement,
(d) Liens
set forth on Schedule
P-2; provided, however, that to
qualify as a Permitted Lien, any such Lien described on Schedule P-2 shall
only secure the Indebtedness that it secures on the Closing Date and any
Refinancing Indebtedness in respect thereof,
(e) the
interests of lessors under operating leases and non-exclusive licensors under
license agreements,
(f) [Intentionally
omitted],
(g) Liens
arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted
Protests,
(h) Liens
on amounts deposited to secure Borrower’s obligations in connection with
worker’s compensation or other unemployment insurance,
(i) Liens
on amounts deposited to secure Borrower’s obligations in connection with the
making or entering into of bids, tenders, or leases in the ordinary course of
business and not in connection with the
borrowing of money,
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
(j) Liens
on amounts deposited to secure Borrower’s reimbursement obligations with respect
to surety or appeal bonds obtained in the ordinary course of
business,
(k) with
respect to any Real Property, easements, rights of way, and zoning restrictions
that do not materially interfere with or impair the use or operation
thereof,
(l) non-exclusive
licenses of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of business,
(m) Liens
that are replacements of Permitted Liens to the extent that the original
Indebtedness is the subject of permitted Refinancing Indebtedness and so long as
the replacement Liens only encumber those assets that secured the original
Indebtedness,
(n) rights
of setoff or bankers’ liens upon deposits of cash in favor of banks or other
depository institutions, solely to the extent incurred in connection with the
maintenance of such deposit accounts in the ordinary course of
business,
(o) Liens
granted in the ordinary course of business on the unearned portion of insurance
premiums securing the financing of insurance premiums to the extent the
financing is permitted under the definition of Permitted
Indebtedness,
(p) Liens
in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of
goods,
(q) Liens
securing Indebtedness permitted pursuant to clause (g) of the definition of
Permitted Indebtedness; provided, however,
that such Liens shall only extend to pledges of cash by Borrower and the
collateral described in the security agreements entered into in connection with
the original closing of such facility (including any replacements or proceeds
thereof); provided further, however, that in no event shall any of the Liens
permitted by this clause (q) include Liens on any Collateral,
(r) Liens
on Borrower’s contract rights in and to the Aircraft to be purchased from The
Boeing Company securing Indebtedness permitted pursuant to clause (h) of the
definition of Permitted Indebtedness,
(s) Liens
on Borrower’s Aircraft, Engines (other than the Designated Engines), flight
simulators, other flight Equipment (other than Expendables, Spare Parts, and
Ground Service Equipment), or real property securing Indebtedness permitted
pursuant to clause (o) of the definition of Permitted Indebtedness,
(t) Liens
on amounts deposited to secure Borrower’s reimbursement obligations with respect
to letters of credit obtained pursuant to clause (q) of the definition of
Permitted Indebtedness, and
(u) other
Liens (which do not secure Indebtedness for borrowed money (including bonds or
debentures), letters of credit, or an item of Permitted Indebtedness that is
expressly identified as being unsecured) and as to which the aggregate amount of
the obligations secured thereby does not exceed $25,000,000 at any one
time.
“Permitted Preferred
Stock” means and refers to any Preferred Stock issued by Borrower that is
not Prohibited Preferred Stock.
“Permitted Protest”
means the right of Borrower to protest any Lien (other than any Lien that
secures the Obligations), taxes (other than payroll taxes or taxes that are the
subject of a United States federal tax lien), or rental payment, provided that
(a) a reserve with respect to such obligation is established on Borrower’s books
and records in such amount as is required under GAAP, (b) any such protest is
instituted promptly and prosecuted diligently by Borrower in good faith, and (c)
Agent is satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of Agent’s
Liens.
“Person” means natural
persons, corporations, limited liability companies, limited partnerships,
general partnerships, limited liability partnerships, joint ventures, trusts,
land trusts, business trusts, or other organizations, irrespective of whether
they are legal entities, and governments and agencies and political subdivisions
thereof.
“Permitted Spare Parts
Installations” means, so long as in the ordinary course of Borrower’s
business, the installation of Spare Parts of Borrower into Aircraft or Engines
operated by Borrower or into other Equipment of Borrower.
“Preferred Stock”
means, as applied to the Stock of any Person, the Stock of any class or classes
(however designated) that is preferred with respect to the payment of dividends,
or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over shares of Stock of any other
class of such Person.
“Prohibited Preferred
Stock” means any Preferred Stock that by its terms is mandatorily
redeemable or subject to any other payment obligation (including any obligation
to pay dividends, other than dividends of shares of Preferred Stock of the same
class and series payable in kind or dividends of shares of common stock) on or
before a date that is less than 1 year after the Maturity Date, or, on or before
the date that is less than 1 year after the Maturity Date, is redeemable at the
option of the holder thereof for cash or assets or securities (other than
distributions in kind of shares of Preferred Stock of the same class and series
or of shares of common stock).
“Projections” means
Borrower’s forecasted (a) profit and loss statements, and (b) cash flow
statements, all prepared on a basis consistent with Borrower’s historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
“Pro Rata Share”
means, as of any date of determination:
(a) with
respect to a Lender’s obligation to make Advances and right to receive payments
of principal, interest, fees, costs, and expenses with respect thereto, (i)
prior to the Commitments being terminated or reduced to zero, the percentage
obtained by dividing (y) such Lender’s Commitment, by (z) the aggregate
Commitments of all Lenders, and (ii) from and after the time that the
Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the outstanding principal amount of such Lender’s Advances by (z)
the outstanding principal amount of all Advances,
(b) [Intentionally
Omitted].
(c) with
respect to all other matters as to a particular Lender (including the
indemnification obligations arising under Section 15.7 of the
Agreement), (i) prior to the Commitments being terminated or reduced to zero,
the percentage obtained by dividing (y) such Lender’s Commitment, by (z) the
aggregate amount of Commitments of all Lenders, and (ii) from and after the time
that the Commitments have been terminated or reduced to zero, the percentage
obtained by dividing (y) the outstanding principal amount of such Lender’s
Advances, by (z) the outstanding principal amount of all Advances.
“Protective Advances”
has the meaning specified therefor in Section 2.3(d)(i) of
the Agreement.
“Qualified Cash”
means, as of any date of determination, the amount of unrestricted cash and Cash
Equivalents of Borrower that is in Deposit Accounts or in Securities Accounts,
or any combination thereof, and which such Deposit Account or Securities Account
is the subject of a Control Agreement and is maintained by a branch office of
the bank or securities intermediary located within the United
States.
“Receivables” means
(a) Accounts, (b) Interline Receivables, and (c) Mileage Plan
Receivables.
“Record” means
information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form.
“Refinancing
Indebtedness” means refinancings, renewals, or extensions of Indebtedness
so long as:
(a) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of the Indebtedness so refinanced, renewed, or extended, other
than by the amount of premiums paid thereon and the fees and expenses incurred
in connection therewith and by the amount of unfunded commitments with respect
thereto,
(b) such
refinancings, renewals, or extensions do not result in a shortening of the
average weighted maturity (measured as of the refinancing, renewal, or
extension) of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are or could reasonably be
expected to be materially adverse to the interests of the Lenders,
(c) if
the Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension must include subordination terms and
conditions that are at least as favorable to the Lender Group as those that were
applicable to the refinanced, renewed, or extended Indebtedness,
and
(d) the
Indebtedness that is refinanced, renewed, or extended is not recourse to any
Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended.
“Related Fund” means,
with respect to any Lender that is an investment fund, any other investment fund
that invests in commercial loans and that is managed or advised by the same
investment advisor as such Lender or by an Affiliate of such investment
advisor.
“Remedial Action”
means all actions taken to (a) clean up, remove, remediate, contain, treat,
monitor, assess, evaluate, or in any way address Hazardous Materials in the
indoor or outdoor environment, (b) prevent or minimize a release or threatened
release of Hazardous Materials so they do not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment, (c)
restore or reclaim natural resources or the environment, (d) perform any
pre-remedial studies, investigations, or post-remedial operation and maintenance
activities, or (e) conduct any other actions with respect to Hazardous Materials
required by Environmental Laws.
“Replacement Lender”
has the meaning specified therefor in Section 2.13(b) of
the Agreement.
“Report” has the
meaning specified therefor in Section 15.16 of the
Agreement.
“Replaceable Spare
Parts” means those Spare Parts that, in accordance with the FARs and the
Maintenance Program, are either (a) rotable Spare Parts (i.e., Spare Parts that
can be repeatedly restored to a serviceable condition) that are maintained by
Borrower by serial number, or (b) replaceable Spare Parts that
Borrower
does not maintain by serial number, that can be economically restored to a
serviceable condition over a period that (i) in the case of replaceable Spare
Parts, may have a life shorter than the life of the flight equipment to which
they are related, and (ii) in the case of rotable Spare Parts,
approximates or exceeds the life of the flight equipment to which they are
related and, in either case, are not treated by Borrower as
Expendables.
“Representation” has
the meaning specified therefor in Section 8.8 of the
Agreement.
“Reportable Event”
shall mean an event described in Section 4043(c) of ERISA with respect to a
Benefit Plan that is subject to Title IV of ERISA, other than those events as to
which the 30-day notice period is waived under subsection .22, .23, .25, .27 or
..28 of the PBGC Regulations under Section 4043.
“Required
Availability” means that the sum of (a) Excess Availability, plus (b) Liquidity of
Borrower exceeds $500,000,000.
“Required Lenders”
means, at any time, Lenders whose aggregate Pro Rata Shares (calculated under
clause (c) of the definition of Pro Rata Shares) exceed 50%; provided, however, that at any time there are 2 or more Lenders,
“Required Lenders” must include at least 2 Lenders.
“Reserve Percentage”
means, on any day, for any Lender, the maximum percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor Governmental
Authority) for determining the reserve requirements (including any basic,
supplemental, marginal, or emergency reserves) that are in effect on such date
with respect to eurocurrency funding (currently referred to as “eurocurrency
liabilities”) of that Lender, but so long as such Lender is not required or
directed under applicable regulations to maintain such reserves, the Reserve
Percentage shall be zero.
“Responsible Officer”
means any Executive Vice President, Finance & Chief Officer, and Vice
President, Finance & Treasurer of Borrower.
“Restricted Junior
Payment” means to (a) declare or pay any dividend or make any other
payment or distribution on account of Stock issued by Borrower (including any
payment in connection with any merger or consolidation involving Borrower) or to
the direct or indirect holders of Stock issued by Borrower in their capacity as
such (other than dividends or distributions payable in Stock (other than
Prohibited Preferred Stock) issued by Borrower, or (b) purchase, redeem, or
otherwise acquire or retire for value (including in connection with any merger
or consolidation involving Borrower) any Stock issued by Borrower.
“Revolver Usage”
means, as of any date of determination, the amount of outstanding
Advances.
“Sanctioned Entity”
means (a) a country or a government of a country, (b) an agency of the
government of a country, (c) an organization directly or indirectly controlled
by a country or its government, (d) a Person resident in or determined to be
resident in a country, in each case, that is subject to a country sanctions
program administered and enforced by OFAC.
“Sanctioned Person”
means a person named on the list of Specially Designated Nationals maintained by
OFAC.
“SEC” means the United
States Securities and Exchange Commission and any successor
thereto.
“Securities Account”
means a securities account (as that term is defined in the Code).
“Securities Act” means
the Securities Act of 1933, as amended from time to time, and any successor
statute.
“Security Agreement”
means a security agreement, dated as of even date with the Agreement, in form
and substance reasonably satisfactory to Agent, executed and delivered by
Borrower to Agent.
“Settlement” has the
meaning specified therefor in Section 2.3(e)(i) of
the Agreement.
“Settlement Date” has
the meaning specified therefor in Section 2.3(e)(i) of
the Agreement.
“Solvent” means, with
respect to any Person on a particular date, that, at fair valuations, the sum of
such Person’s assets is greater than all of such Person’s debts.
“Spare Parts” means
any “appliance” or “spare part” as defined in Section 40102 of the Federal
Aviation Act. Unless the context otherwise requires, the term “Spare
Parts” shall refer to Spare Parts owned by Borrower.
“Spare Parts Tracking
System” means the computerized spare parts inventory control and tracking
system operated by Borrower on the Closing Date as such system may be changed
after the Closing Date in a manner that is (a) required by the FAA, (b) deemed
desirable by Borrower so long as such changes do not affect the quality or
integrity of the data contained therein, or (c) acceptable to
Agent.
“Stock” means all
shares, options, warrants, interests, participations, or other equivalents
(regardless of how designated) of or in a Person, whether voting or nonvoting,
including common stock, preferred stock, or any other “equity security” (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the SEC under the Exchange Act).
“Subsidiary” of a
Person means a corporation, partnership, limited liability company, or other
entity in which that Person directly or indirectly owns or controls the shares
of Stock having ordinary voting power to elect a majority of the board of
directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity.
“Swing Lender” means
WFCF or any other Lender that, at the request of Borrower and with the consent
of Agent agrees, in such Lender’s sole discretion, to become the Swing Lender
under Section
2.3(b) of the Agreement.
“Swing Loan” has the
meaning specified therefor in Section 2.3(b) of the
Agreement.
“Taxes” means any
taxes, levies, imposts, duties, fees, assessments or other charges of whatever
nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
and all interest, penalties or similar liabilities with respect
thereto.
“Tax Lender” has the
meaning specified therefor in Section 14.2(a) of
the Agreement.
“Threshold Usage
Amount” means, as of any date of determination, that the Revolver Usage
exceeds $1,000,000.
“Unfunded Benefit
Liability” means (i) with respect to each Benefit Plan, the amount (if
any) by which the present value of all non-forfeitable benefits under each
Benefit Plan exceeds the current value of such Benefit Plan’s assets allocable
to such benefits, all determined in accordance with the respective most recent
valuations for such Benefit Plan using applicable PBGC plan termination
actuarial assumptions (the terms “present value” and “current value” shall have
the same meanings specified in Section 3 of ERISA) and
(ii) with
respect to each Foreign Pension Plan, the amount (if any) by which the present
value of all non-forfeitable benefits under each Foreign Pension Plan exceeds
the current value of such Foreign Pension Plan’s assets allocable to such
benefits, all determined in accordance with the respective most recent
valuations for such Foreign Pension Plan using the most recent actuarial
assumptions and methods being used by the Foreign Pension Plan’s actuaries for
financial reporting under applicable accounting and reporting
standards.
“United States” means
the United States of America.
“US Bank” has the
meaning specified therefor in the preamble to the Agreement.
“Voidable Transfer”
has the meaning specified therefor in Section 17.7 of the
Agreement.
“Wells Fargo” means
Wells Fargo Bank, National Association, a national banking
association.
“WFCF” means Wells
Fargo Capital Finance, LLC, a Delaware limited liability company.
Schedule
2.6(d)
Borrower
Representatives
[***]
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
Schedule
3.1
The obligation of each Lender to make
its initial extension of credit provided for in the Agreement is subject to the
fulfillment, to the satisfaction of each Lender (the making of such initial
extension of credit by any Lender being conclusively deemed to be its
satisfaction or waiver of the following), of each of the following conditions
precedent:
(a) the
Closing Date shall occur on or before April 7, 2010;
(b) Agent
shall have received a letter duly executed by Borrower authorizing Agent to file
appropriate financing statements in such office or offices as may be necessary
or, in the opinion of Agent, desirable to perfect the security interests to be
created by the Loan Documents;
(c) Agent
shall have received each of the following documents, in form and substance
satisfactory to Agent, duly executed, and each such document shall be in full
force and effect:
(i) the
Controlled Account Agreements;
(ii) the
Control Agreements;
(iii) the
Engine and Spare Parts Security Agreement, together with (A) evidence that the
International Interest (as defined in the Engine and Spare Parts Security
Agreement) in each Designated Engine has been registered with the International
Registry (as defined in the Engine and Spare Parts Security Agreement) and the
Engine and Spare Parts Security Agreement has been registered with the FAA, and
(B) an opinion from FAA counsel, in form and substance satisfactory to Agent, to
the effect required pursuant to Section 2.3 of the Engine and Spare Parts
Security Agreement;
(iv) the
Fee Letter; and
(v) the
Security Agreement;
(d) Agent
shall have received a certificate from the Corporate Secretary of Borrower
(i) attesting to the resolutions of Borrower’s Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party, (ii) authorizing
specific officers of Borrower to execute the same, (iii) attesting to the
incumbency and signatures of such specific officers of Borrower,
(iv) certifying as to the Governing Documents, as amended, modified, or
supplemented to the Closing Date of Borrower, and attaching certified copies of
such Governing Documents to the extent available, and (v) certifying as to
a certificate of status with respect to Borrower, dated within 10 days of the
Closing Date, such certificate to be issued by the appropriate officer of the
jurisdiction of incorporation of Borrower, which certificate shall indicate that
Borrower is in good standing in such jurisdiction;
(e) Agent
shall have received certificates of insurance, together with the endorsements
thereto, as are required by Section 5.6, the form
and substance of which shall be satisfactory to Agent;
(f) Agent
shall have received an opinion of Borrower’s counsel and an opinion of
Borrower’s FAA counsel, in each case in form and substance satisfactory to
Agent;
(g) Borrower
shall have Liquidity of at least $500,000,000 after giving effect to the initial
extensions of credit under the Agreement and the payment of all fees and
expenses required to be paid by Borrower on the Closing Date under the Agreement
or the other Loan Documents;
(h) Agent
shall have completed its business, legal, and collateral due diligence,
including, (i) a takeover audit and review of Borrower’s books and records and
verification of Borrower’s representations and warranties to Lender Group, (ii)
review of documentation with respect to Borrower’s existing credit facilities,
and (iii) lien search results (including UCC (certified where available), tax
lien, judgment, bankruptcy and FAA lien searches) with respect to Borrower from
all appropriate jurisdictions and filing offices, and. in the case of each of
(i), (ii), and (iii), the results of which shall be satisfactory to
Agent;
(i) Agent
shall have received copies of each Material Contract as filed with the
SEC;
(j) Agent
shall have received a certificate of Borrower executed by the chief financial
officer of Borrower certifying as to the solvency of Borrower immediately after
giving effect to the transactions contemplated by the Agreement;
(k) Agent
shall have received a duly executed Borrowing Base Certificate dated as of the
Closing Date;
(l) Agent
shall have completed (i) Patriot Act searches, OFAC/PEP searches and
customary individual background checks for Borrower and (ii) OFAC/PEP
searches and customer individual background searches for Borrower’s senior
management and key principals, in each case, the results of which shall be
satisfactory to Agent;
(m) Borrower
shall have paid all Lender Group Expenses incurred in connection with the
transactions evidenced by this Agreement;
(n) Borrower
shall have received all licenses, approvals or evidence of other actions
required by any Governmental Authority in connection with the execution and
delivery by Borrower of the Loan Documents or with the consummation of the
transactions contemplated thereby;
(o) Agent
shall have received evidence satisfactory to Agent that (i) the Credit
Agreement dated as of March 25, 2005 (“Existing Credit
Facility”), among Borrower, each lender party thereto, Citicorp USA,
Inc., as syndication agent, USBankCorp, as documentation agent, and Bank of
America, N.A., as administrative agent, has been terminated and any outstanding
obligations paid in full in cash and (ii) all of the Liens existing in
connection with the Existing Credit Facility in and to the properties and assets
of Borrower have been terminated; and
(p) all
other documents and legal matters in connection with the transactions
contemplated by this Agreement shall have been delivered, executed, or, if
applicable, recorded, and shall be in form and substance satisfactory to
Agent.
Schedule
4.6
States
of Organization, Chief Executive Offices,
Organizational
Identification Numbers
Corporate
Name: Alaska
Airlines, Inc.
Jurisdiction
of
Incorporation: Alaska
Chief
Executive
Offices: Alaska
Airlines, Inc.
19300 International
Boulevard
Seattle, Washington 98188
Organizational
Identification No./
Federal
Tax
ID: 92-0009235
Schedule
4.7(b)
Litigation
[***]
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
Schedule
4.11
Benefit
Plans
Qualified
Plans (PN represents Plan Number for 5500 filings)
Alaska
Air Group, Inc., Welfare Benefit Plan (PN 501)
|
Health
& welfare plan: includes medical (HMO, PPO, HSA PPO), dental, and
vision programs; Sec 125 plans, HSA, long/short term disability programs,
life and AD&D coverage, EE and/or ER paid.
|
Alaska
Air Group, Inc., Retirement Plan for Salaried Employees (PN
001)
|
Defined
benefit pension plan
|
Alaska
Airlines, Inc., Retirement Plan for Clerical, Office & Passenger
Service Employees (PN 008)
|
Defined
benefit pension plan
|
Alaska
Airlines, Inc., Retirement Plan for Mechanics & Related Crafts
Employees
(PN
002)
|
Defined
benefit pension plan
|
Alaska
Airlines, Inc., Fixed Income Retirement Plan for Pilots (PN
003)
|
Defined
benefit pension plan
|
Alaska
Air Group, Inc., Alaskasaver Plan
(PN
010)
|
Defined
contribution 401(k) plan
|
Alaska
Airlines, Inc., COPS, MRP & Dispatch 401(k) Plan
(013)
|
Defined
contribution 401(k) plan
|
Alaska
Airlines, Inc., Flight Attendant 401(k) Plan (PN 012)
|
Defined
contribution 401(k) plan
|
Alaska
Airlines, Inc., Pilots Investment & Savings Plan (PN
011)
|
Defined
contribution 401(k) plan
|
Nonqualified
Plans
Alaska
Air Group, Inc., Nonqualified Deferred Compensation Plan
|
Nonqualified,
DC-like benefit plan
|
Alaska
Air Group, Inc., 1995 Elected Officers Supplementary Retirement
Plan
|
Nonqualified,
DB-like benefit plan
|
Alaska
Airlines, Inc., and Alaska Air Group, Inc., Supplementary Retirement Plan
for
Elected
Officers (3 versions: 1981, 1977, 1976)
|
3
Nonqualified, DB-like benefit plans
|
Alaska
Airlines, Inc., Pilots Excess Disability Plan
|
Nonqualified
supplemental benefit plan for pilots (frozen to new entrants as of
1/1/2010)
|
Schedule
4.12
Environmental
Matters
LOCATION
|
ACCRUAL
BALANCE AS OF 12/31/09
|
DETAILS
|
Anchorage
|
[***]
|
Currently
monitoring contamination levels. No active plan currently
required.
|
Juneau
|
[***]
|
Cleanup
began in 2004. Project to continue for additional three – five
years
|
Fairbanks
|
[***]
|
Two
sites of contamination. Both locations required long-term
monitoring per Alaska Dept. of Environmental
Conservation.
|
Oakland
|
[***]
|
In
negotiations with the Port of Oakland to determine cleanup
requirements.
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Schedule
4.15
Deposit
Accounts and Securities Accounts
Credit
Facility Collateral Account
Alaska
Airlines, Inc.
[***]
Account
No. [***]
ABA
(Wire) [***]
ABA (ACH)
[***]
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Schedule
4.17
Material
Contracts
Credit
Agreement, dated October 19, 2005, among Alaska Airlines, Inc., as
borrower, HSH Nordbank AG New York Branch, as security agent, and other
loan participants (Filed as Exhibit 10.2 to Registrant’s Quarterly Report
on Form 10-Q for the period ended September 30, 2005, filed on
November 9, 2005).
|
|
First
Amendment to October 19, 2005 Credit Agreement, dated March 27, 2007
(Filed as Exhibit 10.2.1 to Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2007, filed on February 20,
2008).
|
|
Second
Amendment to October 19, 2005 Credit Agreement, dated November 26, 2007
(Filed as Exhibit 10.2.2 to Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2007, filed on February 20,
2008).
|
|
Third
Amendment to October 19, 2005 Credit Agreement, dated May 29, 2009 (Filed
as Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the
period ended September 30, 2009, filed on November 6,
2009).
|
|
Aircraft
General Terms Agreement, dated June 15, 2005, between the Boeing Company
and Alaska Airlines, Inc. (Filed as Exhibit 10.1 to Registrant’s Quarterly
Report on Form 10-Q for the period ended June 30, 2005, filed on
August 5, 2005).
|
|
Purchase
Agreement No. 2497, dated June 15, 2005, between the Boeing Company
and Alaska Airlines, Inc. (Filed as Exhibit 10.2 to Registrant’s Quarterly
Report on Form 10-Q for the period ended June 30, 2005, filed on
August 5, 2005).
|
|
Lease
Agreement, dated January 22, 1990, between International Lease Finance
Corporation and Alaska Airlines, Inc., summaries of 19 substantially
identical lease agreements and Letter Agreement #1, dated January 22, 1990
(Filed as Exhibit 10-14 to Registrant’s Annual Report on Form 10-K
for the year ended December 31, 1990, filed on April 11,
1991).
|
|
Alaska
Airlines, Inc. and Alaska Air Group, Inc. Supplementary Retirement Plan
for Elected Officers, as amended November 7, 1994 (Filed as Exhibit 10.15
to Registrant’s Annual Report on Form 10-K for the year ended
December 31, 1997, filed on February 10, 1998).
|
|
Separation
Agreement between Gregg Saretsky and Alaska Airlines, Inc. dated December
10, 2008 (Filed as Exhibit 10.1 to Registrant’s Current Report on
Form 8-K, filed on December 10,
2008).
|
Schedule
4.19
Permitted
Indebtedness
|
|
|
|
|
|
Int Rate
|
Maturity Date
|
Dollar Amount Outstanding as
of
12/31/2009 (in
thousands)
|
Alaska
Airlines Senior Secured Aircraft Debt
|
|
|
|
|
N302AS
|
|
|
|
|
[***]
|
3/31/2018
|
[***]
|
|
N303AS
|
|
|
|
|
[***]
|
7/27/2013
|
[***]
|
|
N305AS
|
|
|
|
|
[***]
|
5/15/2013
|
[***]
|
|
N306AS
|
|
|
|
|
[***]
|
12/29/2017
|
[***]
|
|
N307AS
|
|
|
|
|
[***]
|
12/29/2017
|
[***]
|
|
N309AS
|
|
|
|
|
[***]
|
8/27/2013
|
[***]
|
|
N315AS
|
|
|
|
|
[***]
|
1/28/2015
|
[***]
|
|
N317AS
|
|
|
|
|
[***]
|
4/4/2018
|
[***]
|
|
N318AS
|
|
|
|
|
[***]
|
9/29/2015
|
[***]
|
|
N319AS
|
|
|
|
|
[***]
|
1/5/2016
|
[***]
|
|
N320AS
|
|
|
|
|
[***]
|
3/20/2020
|
[***]
|
|
N323AS
|
|
|
|
|
[***]
|
6/29/2016
|
[***]
|
|
N551AS
|
|
|
|
|
[***]
|
2/9/2018
|
[***]
|
|
N552AS
|
|
|
|
|
[***]
|
3/28/2018
|
[***]
|
|
N553AS
|
|
|
|
|
[***]
|
5/12/2018
|
[***]
|
|
N556AS
|
|
|
|
|
[***]
|
7/28/2021
|
[***]
|
|
N558AS
|
|
|
|
|
[***]
|
9/22/2021
|
[***]
|
|
N557AS
|
|
|
|
|
[***]
|
10/4/2018
|
[***]
|
|
N560AS
|
|
|
|
|
[***]
|
10/18/2018
|
[***]
|
|
N559AS
|
|
|
|
|
[***]
|
11/2/2018
|
[***]
|
|
N563AS
|
|
|
|
|
[***]
|
11/22/2018
|
[***]
|
|
N566AS
|
|
|
|
|
[***]
|
1/30/2019
|
[***]
|
|
N568AS
|
|
|
|
|
[***]
|
1/31/2022
|
[***]
|
|
N569AS
|
|
|
|
|
[***]
|
3/22/2019
|
[***]
|
|
N570AS
|
|
|
|
|
[***]
|
3/28/2019
|
[***]
|
|
N577AS
|
|
|
|
|
[***]
|
3/30/2022
|
[***]
|
|
N581AS
|
|
|
|
|
[***]
|
5/29/2019
|
[***]
|
|
N586AS
|
|
|
|
|
[***]
|
2/28/2020
|
[***]
|
|
N588AS
|
|
|
|
|
[***]
|
2/28/2020
|
[***]
|
|
N590AS
|
|
|
|
|
[***]
|
3/26/2020
|
[***]
|
|
N594AS
|
|
|
|
|
[***]
|
5/29/2020
|
[***]
|
|
N583AS
|
|
|
|
|
[***]
|
6/27/2020
|
[***]
|
|
N584AS
|
|
|
|
|
[***]
|
5/29/2020
|
[***]
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
|
N585AS
|
|
|
|
|
[***]
|
8/22/2020
|
[***]
|
|
N587AS
|
|
|
|
|
[***]
|
9/25/2020
|
[***]
|
|
N589AS
|
|
|
|
|
[***]
|
8/22/2020
|
[***]
|
|
N596AS
|
|
|
|
|
[***]
|
7/30/2020
|
[***]
|
|
N597AS
|
|
|
|
|
[***]
|
7/30/2020
|
[***]
|
|
N508AS
|
|
|
|
|
[***]
|
7/31/2020
|
[***]
|
|
N517AS
|
|
|
|
|
[***]
|
3/30/2019
|
[***]
|
|
N524AS
|
|
|
|
|
[***]
|
5/1/2019
|
[***]
|
|
N525AS
|
|
|
|
|
[***]
|
5/1/2019
|
[***]
|
|
N518AS
|
|
|
|
|
[***]
|
6/22/2021
|
[***]
|
|
N519AS
|
|
|
|
|
[***]
|
7/23/2019
|
[***]
|
|
N520AS
|
|
|
|
|
[***]
|
10/6/2019
|
[***]
|
|
N607AS
|
|
|
|
|
[***]
|
11/30/2011
|
[***]
|
|
N609AS
|
|
|
|
|
[***]
|
11/23/2015
|
[***]
|
|
N611AS
|
|
|
|
|
[***]
|
11/24/2013
|
[***]
|
|
N612AS
|
|
|
|
|
[***]
|
11/24/2015
|
[***]
|
|
N613AS
|
|
|
|
|
[***]
|
12/3/2015
|
[***]
|
|
N614AS
|
|
|
|
|
[***]
|
8/2/2012
|
[***]
|
|
N615AS
|
|
|
|
|
[***]
|
8/2/2012
|
[***]
|
|
N618AS
|
|
|
|
|
[***]
|
8/25/2012
|
[***]
|
|
N619AS
|
|
|
|
|
[***]
|
8/25/2012
|
[***]
|
|
CP
Jr.
|
N617AS,
N622AS, N623AS - JR
|
[***]
|
11/15/2012
|
[***]
|
|
CP
Sr.
|
N617AS,
N622AS, N623AS - SR
|
[***]
|
11/15/2012
|
[***]
|
|
N624AS
|
|
|
|
|
[***]
|
12/19/2012
|
[***]
|
|
N625AS
|
|
|
|
|
[***]
|
2/22/2013
|
[***]
|
|
N626AS
|
|
|
|
|
[***]
|
5/20/2018
|
[***]
|
|
N627AS
|
|
|
|
|
[***]
|
6/25/2013
|
[***]
|
|
N644AS
|
|
|
|
|
[***]
|
6/27/2018
|
[***]
|
|
N708AS
|
|
|
|
|
[***]
|
11/23/2015
|
[***]
|
|
N709AS
|
|
|
|
|
[***]
|
11/19/2011
|
[***]
|
|
N713AS
|
|
|
|
|
[***]
|
11/30/2011
|
[***]
|
Alaska
Airlines Senior Secured Aircraft Debt
|
|
|
1,507,783
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Debt
|
|
|
|
|
|
|
1,507,783
|
|
|
|
|
|
|
|
|
|
Current
Portion of Long-Term Debt
|
|
|
|
(131,169)
|
|
|
|
|
|
|
|
|
|
Long-Term
Debt
|
|
|
|
|
|
1,376,613
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Schedule
4.24
Employee
and Labor Matters
None.
Schedule
4.27
Location
of Spare Parts
Adak
|
[***]
|
Anchorage
|
[***]
|
Atlanta
|
[***]
|
Austin
|
[***]
|
Barrow
|
[***]
|
Bellingham
|
[***]
|
Bethel
|
[***]
|
Boise
|
[***]
|
Boston
|
[***]
|
Burbank
|
[***]
|
Chicago
|
[***]
|
Cordova
|
[***]
|
Dallas
|
[***]
|
Denver
|
[***]
|
Dillingham
|
[***]
|
Fairbanks
|
[***]
|
Gustavus
|
[***]
|
Honolulu
|
[***]
|
Houston
|
[***]
|
Juneau
|
[***]
|
Ketchikan
|
[***]
|
King
Salmon
|
[***]
|
Kodiak
|
[***]
|
Kona
|
[***]
|
Kotzebue
|
[***]
|
Las
Vegas
|
[***]
|
Lihue
|
[***]
|
Long
Beach
|
[***]
|
Los
Angeles
|
[***]
|
Maui
|
[***]
|
Miami
|
[***]
|
Minneapolis
|
[***]
|
Newark
|
[***]
|
Nome
|
[***]
|
Oakland
|
[***]
|
Ontario
|
[***]
|
Orange
County
|
[***]
|
Orlando
|
[***]
|
Palm
Springs
|
[***]
|
Petersburg
|
[***]
|
Phoenix
|
[***]
|
Portland
|
[***]
|
Prudhoe
Bay
|
[***]
|
Sacramento
|
[***]
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
San
Diego
|
[***]
|
San
Francisco
|
[***]
|
San
Jose
|
[***]
|
Seattle
|
[***]
|
Sitka
|
[***]
|
Spokane
|
[***]
|
Tucson
|
[***]
|
Washington,
DC
|
[***]
|
Wrangell
|
[***]
|
Yakutat
|
[***]
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Schedule
4.28(d)
Location
of Ground Service Equipment
Adak
|
[***]
|
Anchorage
|
[***]
|
Atlanta
|
[***]
|
Austin
|
[***]
|
Barrow
|
[***]
|
Bellingham
|
[***]
|
Bethel
|
[***]
|
Boise
|
[***]
|
Boston
|
[***]
|
Burbank
|
[***]
|
Chicago
|
[***]
|
Cordova
|
[***]
|
Dallas
|
[***]
|
Denver
|
[***]
|
Dillingham
|
[***]
|
Fairbanks
|
[***]
|
Gustavus
|
[***]
|
Honolulu
|
[***]
|
Houston
|
[***]
|
Juneau
|
[***]
|
Ketchikan
|
[***]
|
King
Salmon
|
[***]
|
Kodiak
|
[***]
|
Kona
|
[***]
|
Kotzebue
|
[***]
|
Las
Vegas
|
[***]
|
Lihue
|
[***]
|
Long
Beach
|
[***]
|
Los
Angeles
|
[***]
|
Maui
|
[***]
|
Miami
|
[***]
|
Minneapolis
|
[***]
|
Newark
|
[***]
|
Nome
|
[***]
|
Oakland
|
[***]
|
Ontario
|
[***]
|
Orange
County
|
[***]
|
Orlando
|
[***]
|
Palm
Springs
|
[***]
|
Petersburg
|
[***]
|
Phoenix
|
[***]
|
Portland
|
[***]
|
Prudhoe
Bay
|
[***]
|
Sacramento
|
[***]
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
San
Diego
|
[***]
|
San
Francisco
|
[***]
|
San
Jose
|
[***]
|
Seattle
|
[***]
|
Sitka
|
[***]
|
Spokane
|
[***]
|
Tucson
|
[***]
|
Washington,
DC
|
[***]
|
Wrangell
|
[***]
|
Yakutat
|
[***]
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Schedule
4.28(e)
Location
of Designated Engines
Anchorage
|
[***]
|
Los
Angeles
|
[***]
|
Seattle
|
[***]
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
Schedule
5.1
Deliver to Agent, with copies to each
Lender, each of the financial statements, reports, or other items set forth
below at the following times in form reasonably satisfactory to
Agent:
as
soon as available, but in any event within 30 days (45 days in the case of
a month that is the end of one of Borrower’s fiscal quarters) after the
end of each month during each of Borrower’s fiscal years
|
|
(a)an
unaudited consolidated and consolidating balance sheet and income
statement and an unaudited consolidated statement of cash flow, in each
case covering Group’s operations during such period and during the period
commencing at the end of the immediately preceding fiscal year and ending
with the end of such month, together with a report comparing the figures
in the income statement with the figures in Borrower’s plan for the
corresponding periods and for the corresponding periods of the immediately
preceding fiscal year, and
(b)a Compliance
Certificate.
|
as
soon as available, but in any event within 120 days after the end of each
of Borrower’s fiscal years
|
|
(c)consolidated and
consolidating financial statements of Group for each such fiscal year and,
in the case of the consolidated financial statements of Group, audited by
independent certified public accountants without any qualifications
(including any (A) “going concern” or like qualification or exception, (B)
qualification or exception as to the scope of such audit, or (C)
qualification which relates to the treatment or classification of any item
and which, as a condition to the removal of such qualification, would
require an adjustment to such item, the effect of which would be to cause
any noncompliance with the provisions of Section 7), by such accountants to have
been prepared in accordance with GAAP (such audited financial statements
to include a balance sheet, income statement, and statement of cash flow
and, if prepared, such accountants’ letter to management),
and
(d)a Compliance
Certificate.
|
as
soon as available, but in any event no later than 30 days after the start
of Borrower’s fiscal years,
|
|
(e)[***].
|
if
and when filed or provided by Group or Borrower,
|
|
(f)any information that is
provided by Group or Borrower to its shareholders
generally.
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
promptly,
but in any event within 5 Business Days after a Responsible Officer of
Borrower has knowledge of any event or condition that constitutes a
Default or an Event of Default,
|
|
(g)notice of such event or
condition and a statement of the curative action that Borrower proposes to
take with respect thereto.
|
promptly
after the commencement thereof, but in any event within 10 days after the
service of process with respect thereto on Borrower (if
applicable),
|
|
(h)notice of all actions,
suits, or proceedings brought by or against Borrower before any
Governmental Authority which reasonably could be expected to result in a
Material Adverse Change, and
(i)notice of any labor
strike.
|
upon
the request of Agent,
|
|
(j)any other information
reasonably requested relating to the financial condition of
Borrower.
|
Schedule
5.2
Provide Agent (and if so requested by
Agent, with copies for each Lender) with each of the documents set forth below
at the following times and, with respect to the documents described in clauses
(b) – (i) and (k) below, in format substantially consistent with the format
provided to Agent during its October of 2009 field examination or as otherwise
mutually agreed by Borrower and Agent:
Monthly
((a) if Revolver Usage is in excess of the Threshold Amount as of the
first Business Day of any month, within 20 days after the end of such
month (or if such month is at the end of one of Borrower’s fiscal
quarters, within 30 days after the end of such month), and (b) if Revolver
Usage is less than or equal to the Threshold Usage Amount as of the first
Business Day of any month, within 30 days after the end of such month (or
if such month is at the end of one of Borrower’s fiscal quarters, within
45 days after the end of such month))
|
|
(a)
a Borrowing Base Certificate,
(b)
a detailed aging, by total, of Borrower’s Accounts, together with a
reconciliation and supporting documentation for any reconciling items
noted (delivered electronically in an acceptable format, if Borrower has
implemented electronic reporting),
(c)
a detailed calculation of those Accounts that are not eligible for the
Borrowing Base, if Borrower has not implemented electronic
reporting,
(d)
(i) a detailed aging and roll-forward, by total, of the Accounts of
Borrower, together with a reconciliation to the general ledger, and (ii) a
manual interline settlement sheet of the Accounts of
Borrower,
(e)
a monthly Account roll-forward tied to the beginning and ending Account
balances of Borrower’s general ledger,
(f)
a summary aging, by vendor, of Borrower’s accounts payable and any book
overdraft (delivered electronically in an acceptable format, if
Borrower has implemented electronic reporting) and an aging, by vendor, of
any held checks, together with a reconciliation to the general
ledger,
(g)
a detailed description by type and location of all of the Replaceable
Spare Parts, Engines, Expendables, and Ground Service Equipment owned by
Borrower located both in and outside the United States, together with a
reconciliation to the general ledger, and
(h)
a detailed calculation of Replaceable Spare Parts, Engines, Expendables,
and Ground Service Equipment that are not eligible for the Borrowing Base,
if Borrower has not implemented electronic reporting, and
(i)
a detailed report regarding any write down or obsolete adjustment of
Borrower’s Replaceable Spare Parts, Engines, Expendables, or Ground
Service Equipment.
|
Upon
request by Agent
|
|
(j)
such other reports as to the Collateral or the financial condition of
Borrower, as Agent may reasonably request in form reasonably acceptable to
Agent, and
(k)
a detailed report regarding Borrower’s cash and Cash Equivalents and
Marketable Securities.
|
Promptly,
but in any event within 5 Business Days after a Responsible Officer of
Borrower has knowledge thereof
|
|
(l)
notice that Borrower has pledged cash to secure the Indebtedness permitted
pursuant to clause (g) of the definition of Permitted Indebtedness and an
indication of the amount so
pledged.
|
Schedule
6.6
Nature
of Business
Alaska
Airlines, Inc. (“Alaska”) is a wholly-owned subsidiary of Alaska Air Group,
Inc., and is an Alaska corporation that was organized in 1932 and incorporated
in 1937. Alaska is a U.S. certificated commercial airline providing
passenger and freight services over selected city pairs in North America and
between North America and Hawaii, and engages in other air travel related
activity.
ex10-2.htm
FOIA
CONFIDENTIAL TREATMENT REQUESTED
Execution
Version
CREDIT
AGREEMENT
Dated as
of March 31, 2010
among
ALASKA
AIRLINES, INC.,
as
Borrower,
CITIBANK,
N.A.,
as
Administrative Agent,
BANK
OF AMERICA, N.A.,
as
Syndication Agent,
and
The Other
Lenders Party Hereto
CITIGROUP
GLOBAL MARKETS INC.,
BANC
OF AMERICA SECURITIES LLC,
as
Joint-Lead Arrangers and Joint-Book Managers
TABLE
OF CONTENTS
Section Page
ARTICLE
I.
|
DEFINITIONS
AND ACCOUNTING TERMS
|
1
|
1.01
|
Defined
Terms
|
1
|
1.02
|
Other
Interpretive Provisions
|
21
|
1.03
|
Accounting
Terms.
|
22
|
1.04
|
Rounding
|
22
|
1.05
|
Times
of Day
|
23
|
ARTICLE
II.
|
THE
COMMITMENTS AND CREDIT EXTENSIONS
|
23
|
2.01
|
Loans
|
23
|
2.02
|
Borrowings,
Conversions and Continuations of Loans.
|
23
|
2.03
|
Prepayments.
|
24
|
2.04
|
Termination
or Reduction of Commitments
|
25
|
2.05
|
Repayment
of Loans
|
26
|
2.06
|
Interest.
|
26
|
2.07
|
Fees.
|
26
|
2.08
|
Computation
of Interest and Fees
|
27
|
2.09
|
Evidence
of Debt
|
27
|
2.10
|
Payments
Generally; Agent’s Clawback.
|
28
|
2.11
|
Sharing
of Payments
|
29
|
2.12
|
Security
|
30
|
2.13
|
Defaulting
Lenders
|
30
|
ARTICLE
III.
|
TAXES,
YIELD PROTECTION AND ILLEGALITY
|
31
|
3.01
|
Taxes.
|
31
|
3.02
|
Illegality
|
33
|
3.03
|
Inability
to Determine Rates
|
34
|
3.04
|
Increased
Costs.
|
34
|
3.05
|
Compensation
for Losses
|
35
|
3.06
|
Mitigation
of Obligations; Replacement of Lenders
|
36
|
3.07
|
Survival
|
37
|
ARTICLE
IV.
|
CONDITIONS
PRECEDENT TO CREDIT EXTENSIONS
|
37
|
4.01
|
Conditions
to Effectiveness and Initial Borrowing:
|
37
|
4.02
|
Conditions
to all Borrowings
|
40
|
ARTICLE
V.
|
REPRESENTATIONS
AND WARRANTIES
|
41
|
5.01
|
Existence,
Qualification and Power; Compliance with Laws
|
41
|
5.02
|
Authorization;
No Contravention
|
41
|
5.03
|
Governmental
Authorization; Other Consents
|
41
|
5.04
|
Binding
Effect
|
42
|
5.05
|
Financial
Statements; No Material Adverse Effect.
|
42
|
5.06
|
Litigation
and Judgments
|
42
|
5.07
|
No
Default
|
42
|
5.08
|
Ownership
of Property; Liens
|
43
|
5.09
|
Environmental
Compliance
|
43
|
5.10
|
Insurance
|
43
|
5.11
|
Taxes
|
43
|
5.12
|
ERISA
Compliance.
|
43
|
5.13
|
Subsidiaries
|
44
|
5.14
|
Margin
Regulations; Investment Company Act.
|
44
|
5.15
|
Disclosure
|
44
|
5.16
|
Compliance
with Laws
|
45
|
5.17
|
Intellectual
Property; Licenses, Etc
|
45
|
5.18
|
Solvency
|
45
|
5.19
|
Collateral
and Security Documents.
|
45
|
5.20
|
Burdensome
Agreements
|
46
|
5.21
|
Compliance
with OFAC Rules and Regulations; Patriot Act.
|
46
|
ARTICLE
VI.
|
AFFIRMATIVE
COVENANTS
|
47
|
6.01
|
Financial
Statements
|
47
|
6.02
|
Certificates;
Other Information
|
48
|
6.03
|
Notices
|
49
|
6.04
|
Payment
of Obligations
|
50
|
6.05
|
Preservation
of Existence, Etc
|
50
|
6.06
|
Maintenance
of Properties
|
50
|
6.07
|
Maintenance
of Insurance.
|
50
|
6.08
|
Compliance
with Laws
|
51
|
6.09
|
Books
and Records
|
51
|
6.10
|
Inspection
Rights
|
52
|
6.11
|
Use
of Proceeds
|
52
|
6.12
|
Financial
Covenants; Maintenance of Unrestricted Cash
|
52
|
6.13
|
Collateral
Records
|
52
|
6.14
|
Security
Interests
|
52
|
6.15
|
Collateral.
|
52
|
6.16
|
State
of Incorporation
|
57
|
6.17
|
Further
Assurances
|
57
|
6.18
|
Patriot
Act
|
57
|
ARTICLE
VII.
|
NEGATIVE
COVENANTS
|
57
|
7.01
|
Liens
|
58
|
7.02
|
Fundamental
Changes
|
59
|
7.03
|
Dispositions
|
60
|
7.04
|
[Intentionally
Omitted]
|
60
|
7.05
|
Restricted
Junior Payments
|
60
|
7.06
|
ERISA
|
61
|
7.07
|
Air
Carrier
|
62
|
7.08
|
Change
in Nature of Business
|
62
|
7.09
|
Transactions
with Affiliates
|
62
|
7.10
|
Burdensome
Agreements
|
62
|
7.11
|
Loans
|
62
|
7.12
|
Use
of Proceeds
|
62
|
7.13
|
Invalidity
Event
|
62
|
7.14
|
Indebtedness
under the ABL Facility
|
62
|
7.15
|
Prepayments
and Amendments
|
63
|
ARTICLE
VIII.
|
EVENTS
OF DEFAULT AND REMEDIES
|
63
|
8.01
|
Events
of Default
|
63
|
8.02
|
Remedies
Upon Event of Default
|
65
|
8.03
|
Application
of Funds
|
66
|
ARTICLE
IX.
|
ADMINISTRATIVE
AGENT
|
66
|
9.01
|
Appointment
and Authorization of Administrative Agent
|
66
|
9.02
|
Rights
as a Lender
|
67
|
9.03
|
Exculpatory
Provisions
|
67
|
9.04
|
Reliance
by Administrative Agent
|
68
|
9.05
|
Delegation
of Duties
|
68
|
9.06
|
Resignation
of Agent
|
68
|
9.07
|
Non-Reliance
on Agent and Other Lenders
|
69
|
9.08
|
No
Other Duties, Etc
|
69
|
9.09
|
Administrative
Agent May File Proofs of Claim
|
69
|
9.10
|
Collateral
Matters.
|
70
|
9.11
|
Other
Agents; Arrangers and Managers
|
71
|
9.12
|
No
Advisory or Fiduciary Responsibility
|
71
|
ARTICLE
X.
|
MISCELLANEOUS
|
72
|
10.01
|
Amendments,
Etc
|
72
|
10.02
|
Notices;
Effectiveness; Electronic Communications.
|
73
|
10.03
|
No
Waiver; Cumulative Remedies; Enforcement
|
75
|
10.04
|
Expenses;
Indemnity; Damage Waiver.
|
76
|
10.05
|
Payments
Set Aside
|
78
|
10.06
|
Successors
and Assigns.
|
78
|
10.07
|
Treatment
of Certain Information; Confidentiality
|
82
|
10.08
|
Right
of Setoff
|
82
|
10.09
|
Interest
Rate Limitation
|
83
|
10.10
|
Counterparts;
Integration; Effectiveness
|
83
|
10.11
|
Survival
of Representations and Warranties
|
83
|
10.12
|
Severability
|
83
|
10.13
|
Replacement
of Lenders.
|
83
|
10.14
|
Governing
Law; Jurisdiction; Etc.
|
84
|
10.15
|
Waiver
of Right to Trial by Jury
|
85
|
10.16
|
USA
Patriot Act Notice
|
85
|
10.17
|
Time
of the Essence
|
85
|
10.18
|
Oral
Agreements Not Enforceable
|
86
|
SCHEDULES
1.01 Approved
Appraisers
2.01 Commitments
and Pro Rata Shares
5.09 Environmental
Matters
10.02 Administrative
Agent’s Office, Certain Addresses for Notices
10.06 Processing
and Recordation Fees
EXHIBITS
A Form
of Loan Notice
B Form
of Note
C Form
of Compliance Certificate
D Form
of Assignment and Assumption
E Form
of Security Agreement
F Form
of Cash Pledge Agreement
CREDIT
AGREEMENT
This
CREDIT AGREEMENT (this “Agreement”) is
entered into as of March 31, 2010 among ALASKA AIRLINES, INC., an Alaska
corporation (“Borrower”), each
lender from time to time party hereto (collectively, “Lenders” and
individually, a “Lender”), and
CITIBANK, N.A., as Administrative Agent.
RECITALS
A. Borrower,
certain lenders identified therein (the “Existing Lenders”),
and Bank of America, N.A., as administrative agent, are parties to that certain
Credit Agreement dated as of March 25, 2005 (as amended, the “Existing Credit
Agreement”), providing for the Existing Lenders to make revolving loans
to Borrower.
B. Borrower
has requested that Lenders provide a revolving credit facility to replace the
revolving credit facility established pursuant to the Existing Credit Agreement,
and Lenders are willing to do so on the terms and conditions set forth
herein.
C. In
consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:
ARTICLE
I.
DEFINITIONS
AND ACCOUNTING TERMS
1.01Defined Terms
. As used in this
Agreement, the following terms shall have the meanings set forth
below:
“ABL Facility” that
certain $100,000,000 loan facility provided by a syndicate of lenders, agented
by Wells Fargo Capital Finance, LLC.
“ABL Facility
Documents” means the loan and security documents related to the ABL
Facility or executed in connection therewith.
“Added Aircraft” has
the meaning set forth in Section
6.15(d) hereof.
“Added Engine” has the
meaning set forth in Section
6.15(c) hereof.
“Administrative Agent” or
“Agent” means Citibank in its capacity as administrative agent under any
of the Loan Documents, or any successor administrative agent.
“Administrative Agent’s
Office” means Agent’s address and, as appropriate, account as set forth
on Schedule 10.02,
or such other address or account as Agent may from time to time notify Borrower
and Lenders.
“Administrative
Questionnaire” means an Administrative Questionnaire in a form supplied
by Agent.
“Affiliate” means,
with respect to any Person, another Person that directly, or indirectly through
one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.
“Aircraft” means
(a) each of the Airframes together with the Engines, whether or not such
Engines are installed on the Airframes or any other airframes; (b) except
for Excluded Equipment, all appliances, equipment, instruments, and accessories
(including radio and radar) from time to time belonging to, installed in,
or appurtenant to such Airframes and Engines; and (c) any and all logs,
manuals and other records relating thereto.
“Aircraft Collateral”
means all of the Aircraft in which the Security Agreement creates, or purports
to create, a security interest.
“Airframe” means
(a) any aircraft as specified by United States Registration Number and
manufacturer’s serial number in the Security Agreement; (b) any replacement
airframe which may from time to time be substituted for such airframe; and
(c) in either case, any and all parts which are from time to time
incorporated or installed in or attached to such airframe or, so long as such
parts are subject to the Security Agreement covering such airframe, after
removal from such airframe.
“Agent Fee Letter” has
the meaning specified in Section
2.07(b).
“Aggregate
Commitments” means the Commitments of all Lenders.
“Agreed Value Amount”
means, with respect to any Event of Loss of any Pledged Aircraft, the amount
(which shall be no less than the Current Market Value of such Pledged Aircraft),
reflected on the then current insurance certificate as the amount that the
insurers have agreed with Borrower to pay to the Administrative Agent for the
benefit of the Lenders in the event that the Aircraft suffering an Event of Loss
suffered such Event of Loss.
“Agreement” means this
Credit Agreement.
“Applicable
Percentage” means with respect to any Lender at any time, (a) while
Commitments are outstanding, the percentage (carried out to the ninth decimal
place) of the Aggregate Commitments represented by such Lender’s Commitment
at such time and (b) at any other time, the percentage (carried out to the ninth
decimal place) of the aggregate amount of all outstanding Loans represented by
the Loans held by such Lender at such time. The initial Applicable
Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or
in the Assignment and Assumption pursuant to which such Lender becomes a party
hereto, as applicable.
“Applicable Rate”
means the following percentages per annum: (i) with respect to the Commitment
Fee, 0.75%; (ii) with respect to the Eurodollar Rate, 4.00%; and (iii) with
respect to the Base Rate, 3.00%.
“Approved Appraiser”
means any independent appraisal firm set forth on Schedule 1.01
hereto.
“Approved Fund” means
any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a
Lender or (c) an entity or an Affiliate of an entity that administers or manages
a Lender.
“Arrangement Fee
Letter” has the meaning specified in Section
2.07(c).
“Assignee Group” means
two or more Eligible Assignees that are Affiliates of one another or two or more
Approved Funds managed by the same investment advisor.
“Assignment and
Assumption” means an assignment and assumption entered into by a Lender
and an Eligible Assignee (with the consent of any party whose consent is
required by Section
10.06(b)), and accepted by Agent, in substantially the form of Exhibit D or any
other form approved by Agent.
“Attributable
Indebtedness” means, on any date, (a) in respect of any Capital
Lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation, the capitalized
amount of the remaining lease payments under the relevant lease that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP if such lease were accounted for as a Capital Lease.
“Audited Financial
Statements” means the audited consolidated balance sheet of Borrower and
its Subsidiaries for the fiscal year ended December 31, 2009, and the
related consolidated statements of income or operations, shareholders’ equity
and cash flows for such fiscal year of Borrower and its Subsidiaries, including
the notes thereto.
“Availability Period”
means the period from and including the Closing Date to the earliest of
(a) the Maturity Date, (b) the date of termination of the Aggregate
Commitments pursuant to Section 2.04,
and (c) the date of termination of the commitment of each Lender to make
Loans pursuant to Section 8.02.
“Bankruptcy Code”
means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et
seq.).
“Base Rate” means for
any day a fluctuating rate per annum equal to the highest of (a) the
Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for
such day as publicly announced from time to time by Citibank as its “prime rate”
and (c) the sum of Eurodollar Rate for each such day based on an Interest Period
of one month (but for the avoidance of doubt, not less than two percent (2.00%)
per annum) plus 1%. The “prime rate” is a rate set by Citibank based
upon various factors including Citibank’s costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced
rate. Any change in such rate announced by Citibank shall take effect
at the opening of business on the day specified in the public announcement of
such change, and any change in the Base Rate due to a change in Federal Funds
Rate or Eurodollar Rate shall be effective on the effective date of such change
in the Federal Funds Rate or Eurodollar Rate for an Interest Period of one
month.
“Base Rate Loan” means
a Loan that bears interest based on the Base Rate.
“Borrower” has the
meaning specified in the introductory paragraph hereto.
“Borrower Materials”
has the meaning specified in Section 6.02.
“Borrowing” means a
borrowing consisting of simultaneous Loans of the same Type and, in the case of
Eurodollar Rate Loans, having the same Interest Period made by each of the
Lenders pursuant to Section
2.01.
“Borrowing Base”
means, as applicable, as of any date of determination, an amount equal to the
sum of: (a) the lesser of (i) thirty percent (30%) of the Borrowing Base at such
time and (ii) sixty six and two thirds percent (66⅔%) of the Current Market
Value of the Boeing 737-400 type Aircraft Collateral at such time; (b) eighty
percent (80%) of the Current Market Value of the Boeing 737-700, 737-800 and
737-900 type Aircraft Collateral at such time; (c) one hundred percent (100%) of
the Citibank Cash Collateral at such time; and (d) a Designated Percentage of
Other Cash Collateral at such time.
“Business Day” means
(i) any day other than a Saturday, Sunday or other day on which commercial banks
are authorized to close under the Laws of, or are in fact closed in, the state
of Washington or New York; and (ii) if such day relates to any Eurodollar Rate
Loan, any such day on which dealings in Dollar deposits are conducted by and
between banks in the London interbank eurodollar market.
“Capital Lease” means,
with respect to any Person, a lease (or leases) for real or personal
property required to be capitalized under GAAP or which is treated as an
operating lease under regulations applicable to such Person but which otherwise
would be required to be capitalized under GAAP.
“Cash Collateral”
means the Citibank Cash Collateral and the Other Cash Collateral.
“Cash Pledge
Agreement” means a Cash Pledge Agreement made by the Borrower in favor of
the Administrative Agent in substantially the form of Exhibit
F.
“Change in Law” means
the occurrence, after the date of this 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 or application thereof by any
Governmental Authority or (c) the making or issuance of any request,
guideline or directive (whether or not having the force of law) by any
Governmental Authority.
“Change of Control”
means, with respect to Borrower, an event or series of events by
which:
(a) Parent
shall cease to own, directly or indirectly, 100% of the equity securities of
Borrower entitled to vote for members of the board of directors or equivalent
governing body of Borrower on a fully-diluted basis (and taking into account all
such securities that such person or group has the right to acquire pursuant to
any option right);
(b) during
any period of 18 consecutive months, a majority of the members of the board of
directors or other equivalent governing body of Borrower cease to be composed
of
individuals
(i) who were members of that board or equivalent governing body on the
first day of such period, (ii) whose election or nomination to that board
or equivalent governing body was approved by individuals referred to in clause
(i) above constituting at the time of such election or nomination at least
a majority of that board or equivalent governing body or (iii) whose
election or nomination to that board or other equivalent governing body was
approved by individuals referred to in clauses (i) and (ii) above
constituting at the time of such election or nomination at least a majority of
that board or equivalent governing body (excluding, in the case of both clause
(ii) and clause (iii), any individual whose initial nomination for, or
assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors); or
(c) other
than Parent, any individual(s) or entity(s) acting in concert shall
have acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation thereof, will result in its or their
acquisition of the power to exercise, directly or indirectly, a controlling
influence over the management or policies of Borrower, or control over the
equity securities of Borrower entitled to vote for members of the board of
directors or equivalent governing body of Borrower on a fully-diluted basis (and
taking into account all such securities that such individual(s) or
entity(s) or group has the right to acquire pursuant to any option
right) representing 49% or more of the combined voting power of such
securities.
“Citibank” means
Citibank, N.A. and its successors.
“Citibank Cash
Collateral” means cash deposits with Citibank, in its capacity as
Administrative Agent, that are pledged as Cash Collateral pursuant to and in
accordance with Section 6.15(b)(ii).
“Claim Collateral
Period” means, with respect to any Event of Loss of any Pledged Aircraft,
the period beginning on the date when such Event of Loss occurs and continuing
until the earliest of the date when (a) any proceeds from any insurance
claim arising from such Event of Loss have been paid to the Administrative Agent
for the benefit of Lenders; (b) any underwriter of the insurance policy
covering such Aircraft has denied coverage for such Event of Loss; (c) 60
days have elapsed after the Event of Loss and the Administrative Agent has not
received insurance proceeds in respect of such Event of Loss in at least the
Agreed Value Amount; (d) the lead insurance underwriter under such policy
has become insolvent; or (e) the lead insurance underwriter under such
policy has commenced, has had commenced against it, or has otherwise become
subject to, a bankruptcy, receivership or other insolvency
proceeding.
“Closing Date” means
the first date all the conditions precedent in Sections 4.01(a),
4.01(b) and
4.01(c) are
satisfied or waived in accordance with Section
10.01.
“Code” means the
Internal Revenue Code of 1986, as amended, and all regulations promulgated
thereunder.
“Collateral” shall
mean any and all assets and rights and interests in or to property of Borrower,
whether real or personal, tangible or intangible, in which a Lien is granted or
purported to be granted pursuant to the Collateral Documents.
“Collateral Documents”
means the Security Agreement, any Cash Pledge Agreement and any other
agreements, instruments and documents now or hereafter executed and delivered in
connection with this Agreement, pursuant to which Liens are granted or purported
to be granted to Agent to secure all or part of the Obligations, each in form
and substance satisfactory to Agent.
“Collateral Review
Date” has the meaning set forth in Section
6.15(a).
“Collateral Shortfall”
means any time when the amount of the Borrowing Base is less than
$50,000,000.
“Commitment” means, as
to each Lender, its obligation to make Loans to Borrower pursuant to Section 2.01, in an
aggregate principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender’s name on Schedule 2.01 or in
the Assignment and Assumption pursuant to which such Lender becomes a party
hereto, as applicable, as such amount may be adjusted from time to time in
accordance with this Agreement.
“Compliance
Certificate” means a certificate substantially in the form of Exhibit
C.
“Contractual
Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which
such Person is a party or by which it or any of its property is
bound.
“Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise. “Controlling” and
“Controlled”
have meanings correlative thereto.
“Current Market Value”
means the current market value of an Aircraft, as adjusted for maintenance, as
set forth in the applicable Qualified Appraisal; provided that the current
market value shall be deemed to be $0 for each Pledged Aircraft with respect to
which there has been a Failure of Security that has not been cured.
“CTT” 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, both signed in Cape Town, South Africa, on
November 16, 2001, together with the regulations for the International Registry,
the International Registry Procedures, and all other rules, amendments,
supplements, and revisions thereto from time to time.
“Debtor Relief Laws”
means the Bankruptcy Code, and all other liquidation, conservatorship,
bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief Laws of the
United States or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally.
“Default” means any
event or condition that constitutes an Event of Default or that, with the giving
of any notice, the passage of time, or both, would be an Event of
Default.
“Default Rate” means
an interest rate equal to (i) the Base Rate plus (ii) the Applicable
Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum;
provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate
shall be an interest rate equal to the interest rate (including any Applicable
Rate) otherwise applicable to such Loan plus 2% per annum.
“Defaulting Lender”
means, at any time, a Lender as to which the Administrative Agent has notified
the Borrower that (a) such Lender has failed for three Business Days or more to
comply with its obligations under this Agreement to make a Loan (a “funding obligation”),
or (b) such Lender has notified the Administrative Agent, or has stated
publicly, that it will not comply with any such funding obligation, or (c) a
Lender Insolvency Event has occurred and is continuing with respect to such
Lender. Any determination that a Lender is a Defaulting Lender under
clauses (a) through (c) above shall be made by the Administrative Agent in its
sole discretion acting in good faith. The Administrative Agent will
promptly send to all parties hereto a copy of any notice to the Borrower
referred to above.
“Designated
Percentage” means the percentage of the value of Other Cash Collateral
designated by Lenders for inclusion in the Borrowing Base.
“Disposition” or
“Dispose” means
the sale, transfer, license, lease or other disposition (including any sale and
leaseback transaction) of any property by any Person, including any sale,
assignment, transfer or other disposal, with or without recourse, of any notes
or accounts receivable or any rights and claims associated
therewith.
“Dollar” and “$” mean lawful money
of the United States.
“Eligible Assignee”
means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved
Fund; and (d) any other Person (other than a natural person) approved by
(i) Agent, and (ii) unless an Event of Default has occurred and is
continuing, Borrower (each such approval not to be unreasonably withheld or
delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall
not include Borrower or any of Borrower’s Affiliates or
Subsidiaries.
“Engine”
means: (a) any engine listed by manufacturer’s serial numbers in
the Security Agreement, whether or not from time to time installed on an
Airframe or any other airframe; (b) any replacement engine which from time
to time may be substituted for any Engine in accordance with this Agreement; and
(c) in either case, any and all parts which are from time to time
incorporated or installed in or attached to any such engine or, so long as such
parts are subject to the Security Agreement, after removal from any such
engine.
“Environmental Laws”
means any and all Federal, state, local, and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.
“Environmental
Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or
indemnities), of Borrower or any of its Subsidiaries directly or indirectly
resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials
into the environment or (e) any contract, agreement or other consensual
arrangement pursuant to which liability is assumed or imposed with respect to
any of the foregoing.
“Equity Interests”
means, with respect to any Person, all of the shares of capital stock of (or
other ownership or profit interests in) such Person, all of the warrants,
options or other rights for the purchase or acquisition from such Person of
shares of capital stock of (or other ownership or profit interests in) such
Person, all of the securities convertible into or exchangeable for shares of
capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of
determination.
“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended, and all regulations
promulgated thereunder.
“ERISA Affiliate”
means any trade or business (whether or not incorporated) under common
control with Borrower within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code).
“ERISA Event” means
(a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of
operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or
any ERISA Affiliate, (g) the failure to make any required contribution to any
Pension Plan or Multiemployer Plan when due; (h) the imposition of a lien under
Section 430(k) of the Code or Section 303(k) or 4068 of ERISA on any property
(or rights to property, whether real or personal) of any Borrower or ERISA
Affiliate; (i) the failure of a Pension Plan or any trust thereunder intended to
qualify for tax exempt status under Section 401 and 501 of the Code to qualify
thereunder; or (j) the failure to meet the minimum funding standards under the
Pension Funding Rules with respect to any Pension Plan or the application for a
waiver or modification of the minimum funding standards under the
Code.
“Eurodollar Base Rate”
has the meaning specified in the definition of Eurodollar Rate.
“Eurodollar Rate”
means for any Interest Period with respect to a Eurodollar Rate Loan, a rate per
annum equal to the higher of (a) 2.50% and (b) a rate per annum determined by
Agent pursuant to the following formula:
Eurodollar Rate
= Eurodollar
Base
Rate
1.00 – Eurodollar Reserve
Percentage
Where,
“Eurodollar Base Rate”
means, for such Interest Period the rate per annum equal to the British
Bankers Association LIBOR Rate (“BBA LIBOR”), as
published by Reuters (or other commercially available source providing
quotations of BBA LIBOR as designated by Agent from time to time) at
approximately 2:00 p.m., London time, two Business Days prior to the
commencement of such Interest Period, for Dollar deposits (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest
Period. If such rate is not available at such time for any reason,
then the “Eurodollar
Base Rate” for such Interest Period shall be the rate per annum
determined by Agent to be the rate at which deposits in Dollars for delivery on
the first day of such Interest Period in same day funds in the approximate
amount of the Eurodollar Rate Loan being made, continued or converted by
Citibank and with a term equivalent to such Interest Period would be offered by
Citibank’s London Branch to major banks in the London interbank eurodollar
market at their request at approximately 2:00 p.m. (London time) two
Business Days prior to the commencement of such Interest Period.
“Eurodollar Reserve
Percentage” means, for any day during any Interest Period, the reserve
percentage (expressed as a decimal, carried out to five decimal places) in
effect on such day, whether or not applicable to any Lender, under regulations
issued from time to time by the Board of Governors of the Federal Reserve System
of the United States for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as “Eurocurrency
liabilities”). The Eurodollar Rate for each outstanding
Eurodollar Rate Loan shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
“Eurodollar Rate Loan”
means a Loan that bears interest at a rate based on the Eurodollar
Rate.
“Event of Default” has
the meaning specified in Section
8.01.
“Event of Loss” has
the meaning set forth in the Security Agreement.
“Excluded Equipment”
means all appliances, equipment, instruments, and accessories the values of
which are not included in the determination of Current Market Value in any
Qualified Appraisal.
“Excluded Taxes”
means, with respect to Agent, any Lender or any other recipient of any payment
to be made by or on account of any obligation of Borrower hereunder,
(a) Taxes imposed on or measured by its overall net income (however
denominated and whether imposed by withholding or otherwise) or its gross
receipts, and doing business, value added and franchise taxes that are imposed
in lieu of a net income tax), by the United States government or any
jurisdiction (or any political subdivision thereof) under the laws of which
such recipient is organized or in which its principal office is located or in
which it conducts or is deemed to conduct business (other than solely as a
result of the transactions contemplated herein) or, in the case of any Lender,
in which its applicable Lending Office is located; (b) any Taxes caused by
activities of such Person unrelated to the transactions contemplated herein; (c)
any Taxes caused by such Person’s gross negligence or willful misconduct or any
breach of such Person’s obligations contained herein; (d) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which Borrower is located; and (e) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 10.13), any withholding tax that is imposed on amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a party hereto (or
designates a new Lending Office) or is attributable to such Foreign Lender’s
failure or inability (other than as a result of a Change in Law) to comply with
Section 3.01(e), except to the extent that such Foreign Lender is organized in
and a resident of the same country as the Assignor and the Assignor was
entitled, at the time of designation of a new Lending Office (or assignment), to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 3.01(a).
“Existing Credit
Agreement” has the meaning specified in Recital A hereto.
“Existing Lenders” has
the meaning specified in Recital A hereto.
“FAA Registry” has the
meaning set forth in Section
6.15(b)(ii)(B) hereof.
“Failure of Security”
means the occurrence of either of the following: any Collateral Document ceases
to be in full force and effect, or is declared by a court of competent
jurisdiction to be null and void, invalid or unenforceable in any respect; or
the Agent shall not have or shall cease to have a valid and perfected Lien of
first priority (other than Liens expressly permitted to be prior to such Lien
pursuant to Section 7.01) in
the Collateral purported to be covered thereby, in each case for any reason
other than (i) as provided in such Collateral Document, or (ii) the
agreement of all the Lenders or satisfaction in full of all the Obligations
secured by such Collateral Document.
“Federal Funds Rate”
means, for any day, the rate per annum equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business
Day, and
(b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate (rounded upward,
if necessary, to a whole multiple of 1/100 of 1%) charged to Citibank on
such day on such transactions as determined by Agent.
“Foreign Lender” means
any Lender that is organized under the laws of a jurisdiction other than that in
which the Borrower is resident for tax purposes. For purposes of this
definition, the United States, each State thereof and the District of Columbia
shall be deemed to constitute a single jurisdiction.
“FRB” means the Board
of Governors of the Federal Reserve System of the United States.
“Fund” means any
Person (other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of its business.
“Funded Debt” means
all Indebtedness that appears on the liability side of Borrower’s balance sheet
in accordance with GAAP.
“GAAP” means generally
accepted accounting principles in the United States set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or such other principles as may be approved
by a significant segment of the accounting profession in the United States, that
are applicable to the circumstances as of the date of determination,
consistently applied.
“Governmental
Authority” means the government of the United States or any other nation,
or of any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central
Bank).
“Granting Lender” has
the meaning specified in Section 10.06(h).
“Guarantee” means, as
to any Person, (a) any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing any Indebtedness or
other obligation payable or performable by another Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness
or other obligation, (ii) to purchase or lease property, securities or
services for the purpose of assuring the obligee in respect of such Indebtedness
or other obligation of the payment or performance of such Indebtedness or other
obligation, (iii) to maintain working capital, equity capital or any other
financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such Indebtedness
or other obligation, or (iv) entered into for the purpose of assuring in
any other manner the obligee in respect of such Indebtedness or other obligation
of the payment or performance thereof or to
protect
such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or
other obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent or otherwise, of
any holder of such Indebtedness to obtain any such Lien). The amount
of any Guarantee shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof, in
respect of which such Guarantee is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith, except that, in the case of Liens referred to
in clause (b), the amount of such Guarantee shall not exceed the greater of the
book value or the fair market value of the property subject to such Lien unless
such Person has assumed or is otherwise liable for the secured
obligation. The term “Guarantee” as a verb has a corresponding
meaning.
“Hazardous Materials”
means all explosive or radioactive substances or wastes and all hazardous or
toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other similar
substances or wastes of any nature regulated pursuant to any Environmental
Law.
“Horizon” means
Horizon Air Industries, Inc., a Washington corporation.
“Indebtedness” means,
as to any Person at a particular time, without duplication, all of the
following:
(a) all
obligations of such Person for borrowed money, and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar
instruments;
(b) all
direct or contingent obligations of such Person arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties,
surety bonds and similar instruments;
(c) net
obligations of such Person under any Swap Contract;
(d) all
obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of business
and, in each case, not past due for more than 60 days after the date on which
such trade account payable was created);
(e) indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under conditional
sales or other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse;
(f) Capital
Leases and Synthetic Lease Obligations;
(g) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any Equity Interest in such Person or any other
Person, valued,
in the
case of a redeemable preferred interest, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends;
and
(h) all
Guarantees of such Person in respect of any of the foregoing.
For all
purposes hereof, the Indebtedness of any Person shall include the Indebtedness
of any partnership or joint venture (other than a joint venture that is itself a
corporation or limited liability company) in which such Person is a general
partner or a joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person. The amount of any net obligation under
any Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date. If the Swap Termination Value with respect
to a Swap Contract represents an amount owing to such Person, such amount shall
not constitute a reduction in the amount of “Indebtedness” for purposes of this
definition but, in accordance with GAAP, may constitute an asset of such
Person. The amount of any Capital Lease or Synthetic Lease Obligation
as of any date shall be deemed to be the amount of Attributable Indebtedness in
respect thereof as of such date.
“Indemnified Taxes”
means Taxes other than Excluded Taxes.
“Indemnitees” has the
meaning specified in Section
10.04(b).
“Intangible Assets”
means assets that are considered to be intangible assets as determined in
accordance with GAAP, including customer lists, goodwill, computer software,
copyrights, trade names, trademarks, patents, franchises, licenses, unamortized
deferred charges, unamortized debt discount and capitalized research and
development costs less noncontributory and defined benefit pension amounts
included as intangible assets incurred after
December 31, 2009.
“Interest Payment
Date” means, (a) as to any Loan other than a Base Rate Loan, the
last day of each Interest Period applicable to such Loan and the Maturity Date;
provided, however, that if any Interest Period for a Eurodollar Rate Loan
exceeds three months, the respective dates that fall every three months after
the beginning of such Interest Period shall also be Interest Payment Dates; and
(b) as to any Base Rate Loan, the last Business Day of each month and the
Maturity Date.
“Interest Period”
means, as to each Eurodollar Rate Loan, the period commencing on the date such
Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar
Rate Loan and ending on the date one, two, three or six months thereafter, as
selected by Borrower in its Loan Notice; provided
that:
(i) any
Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the immediately succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the immediately preceding Business Day;
(ii) any
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the
calendar
month at
the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no
Interest Period shall extend beyond the Maturity Date.
“Internal Control
Event” means a material weakness in, or fraud that involves management or
other employees who have a significant role in, the Borrower’s internal controls
over financial reporting, in each case as described in the Securities
Laws.
“International
Registry” means the Cape Town International Registry established under
the CTT.
“Invalidity Event”
means: (i) any Loan Document or any provision thereof, at any time after its
execution and delivery and for any reason other than as expressly permitted
hereunder or thereunder or satisfaction in full of all the Obligations, ceases
to be in full force and effect; or (ii) Borrower or any other Person contests in
any manner the validity or enforceability of any Loan Document or any provision
thereof; or (iii) Borrower denies that it has any or further liability or
obligation under any Loan Document, or purports to revoke, terminate or rescind
any Loan Document or any provision thereof.
“IP Rights” has the
meaning specified in Section 5.17.
“IRS” means the United
States Internal Revenue Service.
“Laws” means,
collectively, all international, foreign, Federal, state and local statutes,
treaties, rules, guidelines, regulations, ordinances, codes and administrative
or judicial precedents or authorities, including the interpretation or
administration thereof by any Governmental Authority charged with the
enforcement, interpretation or administration thereof, and all applicable
administrative orders, directed duties, licenses, authorizations and permits of,
and agreements with, any Governmental Authority, in each case whether or not
having the force of law.
“Lender” has the
meaning specified in the introductory paragraph hereto.
“Lender Insolvency
Event” means that (i) a Lender or its Parent Company is insolvent or (ii)
an event of the kind referred to in clause (f) or clause (g) of Section 8.01
occurs with respect to such Lender or its Parent Company (as if the references
in such provisions to the Borrower or its Subsidiaries referred to such Lender
or Parent Company).
“Lending Office”
means, as to any Lender, the office or offices of such Lender described as such
in such Lender’s Administrative Questionnaire, or such other office or offices
as a Lender may from time to time notify Borrower and Agent.
“Lien” means any
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), charge, or preference, priority or other security
interest or preferential arrangement in the nature of a security interest of any
kind or nature whatsoever (including any conditional sale, equipment trust
agreement, or other title retention agreement,
any
easement, right of way or other encumbrance on title to real property, and any
financing lease having substantially the same economic effect as any of the
foregoing).
“Loan” means an
extension of credit by a Lender to Borrower under Article II.
“Loan Documents” means
this Agreement, each Note, the Agent Fee Letter, Arrangement Fee Letter, and
each Collateral Document.
“Loan Notice” means a
notice of (a) a Borrowing, (b) a conversion of Loans from one Type to
the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to
Section
2.02(a), which, if in writing, shall be substantially in the form of
Exhibit A.
“Material Adverse
Effect” means (a) a material adverse change
in, or a material adverse effect upon, the business, assets, properties,
liabilities (actual and contingent), operations or financial condition of
Borrower and its Subsidiaries, taken as a whole, (b) a material impairment of the ability of Borrower
to perform its obligations under any Loan Document or (c) a material adverse
effect on the rights and remedies of the Administrative Agent or the Lenders
under any Loan Document.
“Material Failure of
Security” means a Failure of Security with respect to Collateral whose
removal from the Borrowing Base, individually or in the aggregate, causes the
Borrowing Base to be less than $25,000,000.
“Maturity Date” means
March 29, 2013.
“Multiemployer Plan”
means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which Borrower or any ERISA Affiliate
makes or is obligated to make contributions, or during the preceding five plan
years, has made or been obligated to make contributions.
“Non-Defaulting
Lender” means, at any time, a Lender that is not a Defaulting
Lender.
“Note” means a
promissory note made by Borrower in favor of a Lender evidencing Loans made by
such Lender, substantially in the form of Exhibit
B.
“Obligations” means
all advances to, and debts, liabilities, obligations, covenants and duties of,
Borrower arising under any Loan Document or otherwise with respect to any Loan,
whether direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, now existing or hereafter arising and
including interest and fees that accrue after the commencement by or against
Borrower or any Subsidiary thereof of any proceeding under any Debtor Relief
Laws naming such Person as the debtor in such proceeding, regardless of whether
such interest and fees are allowed claims in such proceeding.
“Organization
Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or
articles of formation or organization and operating agreement; and (c) with
respect to any partnership, joint venture, trust or other form of business
entity, the partnership, joint
venture
or other applicable agreement of formation or organization and any agreement,
instrument, filing or notice with respect thereto filed in connection with its
formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization and, if applicable, any
certificate or articles of formation or organization of such
entity.
“Other Cash
Collateral” means U.S. government securities and other cash equivalents
(other than Citibank Cash Collateral) reasonably acceptable to
Lenders.
“Other Taxes” means
all present or future stamp, intangible or documentary taxes or any other excise
or property taxes, charges or similar levies arising from any payment made
hereunder or under any other Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement or any other Loan
Document; provided, however, that “Other Taxes” shall not include any Excluded
Taxes.
“Outstanding Amount”
means with respect to Loans on any date, the aggregate outstanding principal
amount thereof after giving effect to any borrowings and prepayments or
repayments of Loans occurring on such date.
“Over Advance” has the
meaning specified in Section
2.03(b).
“Parent” means Alaska
Air Group, Inc., a Delaware corporation.
“Parent Company”
means, with respect to a Lender, the bank holding company (as defined in Federal
Reserve Board Regulation Y), if any, of such Lender, or any Person owning,
beneficially or of record, directly or indirectly, a majority of the shares of
such Lender.
“Participant” has the
meaning specified in Section
10.06(d).
“Patriot Act” has the
meaning specified in Section
10.16.
“PBGC” means the
Pension Benefit Guaranty Corporation.
“Pension Act” means
the Pension Protection Act of 2006, as amended from time to time, and the rules
and regulations promulgated thereunder from time to time in effect.
“Pension Funding
Rules” means the rules regarding minimum funding standards for a Pension
Plan under Code Section 412 and ERISA Section 302, as in effect before the
Pension Act, applicable to the Pension Plan’s years ending before the effective
date of the Pension Act, and the rules under Code Sections 412 and 430 and ERISA
Sections 302 and 303, as in effect after the Pension Act, applicable to the
Pension Plan’s years ending after the effective date of the Pension
Act.
“Pension Plan” means
any “employee pension benefit plan” (as such term is defined in Section
3(2) of ERISA), other than a Multiemployer Plan, that is subject to
Title IV of ERISA and is sponsored or maintained by Borrower or any ERISA
Affiliate or to which Borrower or any ERISA Affiliate contributes or has an
obligation to contribute, or in the case of a multiple
employer
or other plan described in Section 4064(a) of ERISA, has made contributions
at any time during the immediately preceding five plan years.
“Permitted Asset
Adjustments” means the write-down in the book value of any flight and
non-flight equipment assets owned by Borrower or its Subsidiaries of up to
$50,000,000 in the aggregate occurring after
January 1, 2010; provided, however, that the maximum
amount of the write-down for non-flight assets included in calculating Permitted
Asset Adjustments will be $5,000,000, all determined in accordance with
GAAP.
“Permitted Progress Payment
Loans” means loans to Borrower from lenders (which may or may not be
Lenders hereunder) in an outstanding principal amount not to exceed at any one
time Two Hundred Fifty Million ($250,000,000) to finance Borrower’s progress
payments for aircraft purchases from The Boeing Company. Any such
progress payment loan shall constitute a “Permitted Progress Payment Loan” only
if it is due on or before the first day of the calendar month during which the
related aircraft is scheduled and available for delivery (provided that if the
aircraft is scheduled but not available for delivery, a delay in payment will
not cause such loans to cease to be Permitted Progress Payment Loans so long as
such delay is acceptable to the progress payment lenders).
“Person” means any
natural person, corporation, limited liability company, trust, joint venture,
association, company, partnership, Governmental Authority or other
entity.
“Plan” means any
“employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) established by Borrower or, with respect to any such plan that is
subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.
“Platform” has the
meaning specified in Section 6.02.
“Pledged Aircraft”
means each Aircraft in which the Security Agreement creates, or purports to
create, a security interest.
“Potential Defaulting
Lender” means, at any time, a Lender (i) as to which the Administrative
Agent has notified the Borrower that an event of the kind referred to in the
definition of “Lender Insolvency Event” has occurred and is continuing in
respect of any financial institution affiliate of such Lender, or (ii) as to
which the Administrative Agent has in good faith determined and notified the
Borrower that such Lender or its Parent Company or a Subsidiary thereof has
defaulted on its funding obligations under any other loan agreement or credit
agreement or other financing agreement or (iii) that has, or whose Parent
Company has, a non-investment grade rating from any nationally recognized rating
agency. Any determination that a Lender is a Potential Defaulting
Lender under any of clauses (i) through (iii) above shall be made by the
Administrative Agent in its sole discretion acting in good faith. The
Administrative Agent will promptly send to all parties hereto a copy of any
notice to the Borrower referred to above.
“Preferred Stock”
means, as applied to the Equity Interest of any Person, the Stock of any class
or classes (however designated) that is preferred with respect to the payment of
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over shares of Equity Interest of any
other class of such Person.
“Prohibited Preferred
Stock” means any Preferred Stock that by its terms is mandatorily
redeemable or subject to any other payment obligation (including any obligation
to pay dividends, other than dividends of shares of Preferred Stock of the same
class and series payable in kind or dividends of shares of common stock) on or
before a date that is less than 1 year after the Maturity Date, or, on or before
the date that is less than 1 year after the Maturity Date, is redeemable at the
option of the holder thereof for cash or assets or securities (other than
distributions in kind of shares of Preferred Stock of the same class and series
or of shares of common stock).
“Qualified Appraisal”
means a desk-top appraisal of the Aircraft Collateral addressed to the
Administrative Agent, Lenders and Borrower by an Approved
Appraiser. Each such appraisal shall be in a form that is reasonably
acceptable to the Administrative Agent and shall be accompanied by a letter
stating that the purpose of the appraisal is to provide a report, upon which the
Administrative Agent and Lenders may rely, of the value of the Pledged Aircraft
as Aircraft Collateral under the Security Agreement. Each such
appraisal shall set forth the current market value of each Pledged
Aircraft (including any Aircraft being added to the Aircraft Collateral and
excluding any Aircraft being removed from the Aircraft
Collateral) determined in accordance with the definition of “current market
value” promulgated by the International Society of Transport Aircraft Trading,
as of the date of such appraisal.
“Public Lender” has
the meaning specified in Section
6.02.
“Refinancing
Indebtedness” means refinancings, renewals, or extensions of Indebtedness
so long as:
(a) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of the Indebtedness so refinanced, renewed, or extended, other
than by the amount of premiums paid thereon and the fees and expenses incurred
in connection therewith and by the amount of unfunded commitments with respect
thereto,
(b) such
refinancings, renewals, or extensions do not result in a shortening of the
average weighted maturity (measured as of the refinancing, renewal, or
extension) of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are or could reasonably be
expected to be materially adverse to the interests of the Lenders,
(c) if
the Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension must include subordination terms and
conditions that are at least as favorable to the Lenders as those that were
applicable to the refinanced, renewed, or extended Indebtedness,
and
(d) the
Indebtedness that is refinanced, renewed, or extended is not recourse to any
Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended.
“Register” has the
meaning specified in Section
10.06(c).
“Registered Public Accounting
Firm” has the meaning specified in the Securities Laws and shall be
independent of the Borrower as prescribed by the Securities Laws.
“Related Parties”
means, with respect to any Person, such Person’s Affiliates and the partners,
directors, officers, employees, agents and advisors of such Person and of such
Person’s Affiliates.
“Removed Aircraft” has
the meaning set forth in Section
6.15(d) hereof.
“Reportable Event”
means any of the events set forth in Section 4043(c) of ERISA, other than
events for which the 30-day notice period has been waived.
“Required Lenders”
means, as of any date of determination, Lenders having more than 50% of the
Aggregate Commitments or, if the commitment of each Lender to make Loans has
been terminated, Lenders holding in the aggregate more than 50% of the
Outstanding Amount; provided that the
Commitment of, and the portion of the Outstanding Amount held or deemed held by,
any Defaulting Lender shall be excluded for purposes of making a determination
of Required Lenders.
“Responsible Officer”
means the chief executive officer, president, chief financial officer, vice
president of finance or treasurer of Borrower. Any document delivered
hereunder that is signed by a Responsible Officer of Borrower shall be
conclusively presumed to have been authorized by all necessary corporate and/or
other action on the part of Borrower and such Responsible Officer shall be
conclusively presumed to have acted on behalf of Borrower.
“Restricted Junior
Payment” means to (a) declare or pay any dividend or make any other
payment or distribution on account of Equity Interest issued by Borrower
(including any payment in connection with any merger or consolidation involving
Borrower) or to the direct or indirect holders of Equity Interest issued by
Borrower in their capacity as such (other than dividends or distributions
payable in Equity Interest (other than Prohibited Preferred Stock) issued by
Borrower, or (b) purchase, redeem, or otherwise acquire or retire for value
(including in connection with any merger or consolidation involving Borrower)
any Equity Interest issued by Borrower.
“Restricted Payment”
means any cash dividend or distribution with respect to any capital stock or
other Equity Interest of Borrower or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such capital stock or other Equity Interest
or on account of any return of capital to Borrower’s stockholders, partners or
members (or the equivalent Person thereof).
“Sarbanes-Oxley” means
the Sarbanes-Oxley Act of 2002.
“SEC” means the
Securities and Exchange Commission, or any Governmental Authority succeeding to
any of its principal functions.
“Securities Laws”
means the Securities Act of 1933, the Securities Exchange Act of 1934,
Sarbanes-Oxley and the applicable accounting and auditing principles, rules,
standards and
practices
promulgated, approved or incorporated by the SEC or the Public Company
Accounting Oversight Board, as each of the foregoing may be amended and in
effect on any applicable date hereunder.
“Security Agreement”
means that certain Aircraft Chattel Mortgage Security Agreement dated as of
March 31, 2010 made by Borrower in favor of the Administrative Agent in
substantially the form of Exhibit E, including
any Security Agreement Supplements.
“Security Agreement
Supplement” has the meaning specified in Section
6.15(b)(ii).
“Subordinated
Liabilities” means liabilities subordinated to the Obligations in a
manner acceptable to Agent in its reasonable discretion.
“SPC” has the meaning
specified in Section 10.06(h).
“Subsidiary” of a
Person means a corporation, partnership, joint venture, limited liability
company or other business entity of which a majority of the shares of securities
or other interests having ordinary voting power for the election of directors or
other governing body (other than securities or interests having such power only
by reason of the happening of a contingency) are at the time beneficially
owned, or the management of which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise specified, all references herein to a “Subsidiary” or to
“Subsidiaries”
shall refer to a Subsidiary or Subsidiaries of Borrower.
“Swap Contract” means
(a) any and all rate swap transactions, basis swaps, credit derivative
transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond or
bond price or bond index swaps or options or forward bond or forward bond price
or forward bond index transactions, interest rate options, forward foreign
exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions,
currency options, spot contracts, or any other similar transactions or any
combination of any of the foregoing (including any options to enter into any of
the foregoing), whether or not any such transaction is governed by or subject to
any master agreement, and (b) any and all transactions of any kind, and the
related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swaps
and Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master agreement, together
with any related schedules, a “Master Agreement”),
including any such obligations or liabilities under any Master
Agreement.
“Swap Termination
Value” means, in respect of any one or more Swap Contracts, after taking
into account the effect of any legally enforceable netting agreement relating to
such Swap Contracts, (a) for any date on or after the date such Swap
Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior
to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon
one or more mid-market or
other
readily available quotations provided by any recognized dealer in such Swap
Contracts (which may include a Lender or any Affiliate of a
Lender).
“Synthetic Lease
Obligation” means the monetary obligation of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations that do not
appear on the balance sheet of such Person but which, upon the insolvency or
bankruptcy of such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).
“Taxes” means all
present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any Governmental Authority,
including any interest, additions to tax or penalties applicable
thereto.
“Threshold Amount”
means $10,000,000.
“Total Liabilities”
means the sum of current liabilities plus long term liabilities.
“Type” means, with
respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate
Loan.
“UCC” has
the meaning set forth in the Security Agreement.
“United States” and
“U.S.” mean the
United States of America.
“U.S. Air Carrier”
means any United States air carrier engaged in scheduled air transportation and
in all material respects duly qualified and licensed under all applicable Laws
to carry on its business as a scheduled airline currently subject to regulation
by the Federal Aviation Administration and the Department of Transportation as
to which there is in force a certificate issued pursuant to Section 401 of
the Federal Aviation Act, 49 U.S.C. § 41101 et seq., and as to which
there is in force an air carrier operating certificate issued under
Part 121 of the Federal Aviation Regulations, or which may operate as an
air carrier by certificate or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
“Valuation Date”
means, with respect to any Qualified Appraisal, the date as of which the Current
Market Value of the Aircraft Collateral is determined according to such
appraisal.
1.02Other Interpretive
Provisions
. With reference to
this Agreement and each other Loan Document, unless otherwise specified herein
or in such other Loan Document:
(a) The
definitions of terms herein shall apply equally to the singular and plural forms
of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter
forms. The words “include,” “includes” and “including” shall be
deemed to be followed by the phrase “without
limitation.” The word “will” shall be
construed to have the same meaning and effect as the word “shall.” Unless
the context requires otherwise, (i) any definition of or reference to any
agreement, instrument or other document (including any Organization
Document) shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or
modifications
set forth herein or in any other Loan Document), (ii) any reference herein
to any Person shall be construed to include such Person’s successors and
assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words
of similar import when used in any Loan Document, shall be construed to refer to
such Loan Document in its entirety and not to any particular provision thereof,
(iv) all references in a Loan Document to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, the Loan Document in which such references appear,
(v) any reference to any law shall include all statutory and regulatory
provisions consolidating, amending, replacing or interpreting such law and any
reference to any law or regulation shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time,
and (vi) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
(b) In
the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including;”
the words “to”
and “until”
each mean “to but
excluding;” and the word “through” means “to and
including.”
(c) Section
headings herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any
other Loan Document.
1.03Accounting Terms.
(a) Generally. All
accounting terms not specifically or completely defined herein shall be
construed in conformity with, and all financial data (including financial ratios
and other financial calculations) required to be submitted pursuant to this
Agreement shall be prepared in conformity with, GAAP applied on a consistent
basis, as in effect from time to time, applied in a manner consistent with that
used in preparing the Audited Financial Statements, except as otherwise
specifically prescribed herein.
(b) Changes in
GAAP. If, at any time, any change in GAAP or in practices or
estimates which are in accordance with GAAP (each, a “Change”) would affect the
computation of any financial ratio or requirement set forth in any Loan
Document, and either Borrower or the Required Lenders shall so request, then
Agent, Lenders and Borrower shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such Change
(subject to the approval of the Required Lenders); provided that, until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP and such practices and estimates prior to such Change and
(ii) Borrower shall provide to Agent and Lenders financial statements and
other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such Change.
1.04Rounding
. Any financial
ratios required to be maintained by Borrower pursuant to this Agreement shall be
calculated by dividing the appropriate component by the other component,
carrying the result to one place more than the number of places by which such
ratio
is
expressed herein and rounding the result up or down to the nearest number (with
a rounding-up if there is no nearest number).
1.05Times of Day
. Unless otherwise
specified, all references herein to times of day shall be references to New York
City time (daylight or standard, as applicable).
ARTICLE
II.
THE
COMMITMENTS AND CREDIT EXTENSIONS
2.01Loans
. Subject to the
terms and conditions and relying upon the representations and warranties set
forth herein, each Lender, severally and not jointly, agrees to make loans (each
such loan, a “Loan”) to
Borrower from time to time, on any Business Day during the Availability Period,
in an aggregate amount not to exceed at any time outstanding the amount of such
Lender’s Commitment; provided, however, that after giving effect to any
Borrowing, (i) the Outstanding Amount shall not exceed the Aggregate
Commitments, (ii) the Outstanding Amount of the Loans of any Lender shall
not exceed such Lender’s Commitment, and (iii) the Outstanding Amount shall not
exceed the Borrowing Base. Within the limits of each Lender’s
Commitment, and subject to the other terms and conditions hereof, Borrower may
borrow under this Section 2.01, prepay
under Section
2.03, and reborrow under this Section
2.01. Loans may be Base Rate Loans or Eurodollar Rate Loans,
as further provided herein.
2.02Borrowings, Conversions and
Continuations of Loans.
(a) Each
Borrowing, each conversion of Loans from one Type to the other, and each
continuation of Eurodollar Rate Loans shall be made upon Borrower’s irrevocable
notice to Agent, which may be given by telephone. Each such notice
must be received by Agent not later than 1:00 p.m. (i) three Business Days
prior to the requested date of any Borrowing of, conversion to or continuation
of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base
Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate
Loans. Each telephonic notice by Borrower pursuant to this Section
2.02(a) must be confirmed promptly by delivery to Agent of a written
Loan Notice, appropriately completed and signed by a Responsible Officer of
Borrower. Each Borrowing of, conversion to or continuation of
Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof. Each Borrowing of or
conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a
whole multiple of $500,000 in excess thereof. Each Loan Notice
(whether telephonic or written) shall specify (i) whether Borrower is
requesting a Borrowing, a conversion of Loans from one Type to the other, or a
continuation of Eurodollar Rate Loans, (ii) the requested date of the
Borrowing, conversion or continuation, as the case may be (which shall be a
Business Day), (iii) the principal amount of Loans to be borrowed,
converted or continued, (iv) the Type of Loans to be borrowed or to which
existing Loans are to be converted, and (v) if applicable, the duration of
the Interest Period with respect thereto. If Borrower fails to
specify a Type of Loan in a Loan Notice or if Borrower fails to give a timely
notice requesting a conversion or continuation, then the applicable Loans shall
be made as, or converted to, Base Rate Loans. Any such automatic
conversion to Base Rate Loans shall be effective as of the last day of the
Interest Period then in effect with respect to the applicable Eurodollar Rate
Loans. If Borrower requests a Borrowing of, conversion to, or
continuation of
Eurodollar
Rate Loans in any such Loan Notice, but fails to specify an Interest Period, it
will be deemed to have specified an Interest Period of one month.
(b) Each
Loan Notice submitted by Borrower shall be deemed to be a representation and
warranty that (i) since the Closing Date no event or circumstance has had or
could be reasonably expected to have, either individually or in the aggregate, a
Material Adverse Effect; (ii) no Default or Collateral Shortfall exists or will
exist upon giving effect to the requested Borrowing, conversion or continuation,
and (iii) the conditions specified in Section 4.02(a) have
been satisfied, on and as of the date of the applicable Borrowing, conversion of
Loans from one Type to the other, or continuation of Eurodollar Rate
Loans.
(c) Following
receipt of a Loan Notice, Agent shall promptly notify each Lender of the amount
of its Applicable Percentage of the applicable Loans, and if no timely notice of
a conversion or continuation is provided by Borrower, Agent shall notify each
Lender of the details of any automatic conversion to Base Rate Loans described
in the preceding subsection. In the case of a Borrowing, each Lender
shall make the amount of its Loan available to Agent in immediately available
funds at Administrative Agent’s Office not later than 2:00 p.m. on the Business
Day specified in the applicable Loan Notice. Upon satisfaction of the
applicable conditions set forth in Section 4.02
(and, if such Borrowing is the initial Borrowing, Section 4.01), Agent
shall make all funds so received available to Borrower in like funds as received
by Agent either by (i) crediting the account of Borrower on the books of
Citibank with the amount of such funds or (ii) wire transfer of such funds,
in each case in accordance with instructions provided to (and reasonably
acceptable to) Agent by Borrower.
(d) Except
as otherwise provided herein, a Eurodollar Rate Loan may be continued or
converted only on the last day of an Interest Period for such Eurodollar Rate
Loan. During the existence of a Default, no Loans may be requested
as, converted to or continued as Eurodollar Rate Loans without the consent of
the Required Lenders. During the existence of an Event
of Default, if Agent declares all amounts owing under this Agreement
to be immediately due and payable pursuant to Section 8.02, then the Required
Lenders may also demand that any or all of the then outstanding Eurodollar Rate
Loans be converted immediately to Base Rate Loans and Borrower agrees to pay all
amounts due under Section 3.05 in
accordance with the terms thereof due to any such conversion.
(e) Agent shall promptly notify Borrower and Lenders of the
interest rate applicable to any Interest Period for Eurodollar Rate Loans upon
determination of such interest rate. At any time that Base
Rate Loans are outstanding, the Administrative Agent shall notify the Borrower
and the Lenders of any change in Citibank’s prime rate used in determining the
Base Rate promptly following the public announcement of such
change.
(f) After
giving effect to all Borrowings, all conversions of Loans from one Type to the
other, and all continuations of Loans as the same Type, there shall not be more
than 5 Interest Periods in effect at any one time with respect to
Loans.
2.03Prepayments.
(a) Borrower
may, upon notice to Agent, at any time or from time to time voluntarily prepay
Loans in whole or in part without premium or penalty; provided that
(i) such notice must be received by Agent not later than 1:00 p.m.
(A) three Business Days prior to any date of prepayment of Eurodollar Rate
Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any
prepayment of Eurodollar Rate Loans shall be in a principal amount of at least
$5,000,000 or a whole multiple of $1,000,000 in excess thereof; and
(iii) any prepayment of Base Rate Loans shall be in a principal amount of
at least $1,000,000 or a whole multiple of $500,000 in excess thereof or, in
each case, if less, the entire principal amount thereof then
outstanding. Each such notice shall specify the date and amount of
such prepayment and the Type(s) of Loans to be prepaid. Agent
will promptly notify each Lender of its receipt of each such notice, and of the
amount of such Lender’s Applicable Percentage of such prepayment. If
such notice is given by Borrower, Borrower shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein. Any prepayment of a Eurodollar Rate Loan shall be
accompanied by all accrued interest on the amount prepaid, together with any
additional amounts required pursuant to Section 3.05. Each such
prepayment shall be applied to the Loans of Lenders in accordance with their
respective Applicable Percentages.
(b) If
for any reason the Outstanding Amount at any time exceeds the Aggregate
Commitments then in effect, Borrower shall immediately prepay Loans in an
aggregate amount equal to such excess. If for any reason the
Outstanding Amount at any time exceeds the Borrowing Base (an “Over Advance”) then
in effect, Borrower shall either: (i) immediately prepay Loans in an
aggregate amount equal to such Over Advance or (ii) cure such Over Advance
by pledging additional Collateral in accordance with Section 6.15(b) within
five Business Days.
(c) Upon
the occurrence of a Change of Control, Borrower shall, on the date of occurrence
of such Change of Control, immediately repay all Loans, together with all
accrued but unpaid interest thereon, and all other obligations of the Borrower
hereunder, in full, and all Commitments shall be terminated in their entirety on
the date of occurrence of such Change of Control.
2.04Termination or Reduction of
Commitments
. Borrower may,
upon notice to Agent, terminate the Aggregate Commitments, or from time to time
permanently reduce the Aggregate Commitments; provided that
(i) any such notice shall be received by Agent not later than 1:00 p.m.
five Business Days prior to the date of termination or reduction, (ii) any
such partial reduction shall be in an aggregate amount of $5,000,000 or any
whole multiple of $1,000,000 in excess thereof, and (iii) Borrower shall
not terminate or reduce the Aggregate Commitments if, after giving effect
thereto and to any concurrent prepayments hereunder, the Outstanding Amount
would exceed the Aggregate Commitments. Agent will promptly notify
the Lenders of any such notice of termination or reduction of the Aggregate
Commitments. Any reduction of the Aggregate Commitments shall be
applied to the Commitment of each Lender according to its Applicable
Percentage. All fees accrued until the effective date of any
termination of the Aggregate Commitments shall be paid on the effective date of
such termination.
2.05 Repayment
of Loans
.
Borrower
shall repay to Lenders on the Maturity Date the aggregate principal amount of
Loans outstanding on such date.
2.06Interest.
(a) Subject
to the provisions of subsection (b) below, (i) each Eurodollar
Rate Loan shall bear interest on the outstanding principal amount thereof for
each Interest Period at a rate per annum equal to the Eurodollar Rate for such
Interest Period plus the Applicable Rate; and (ii) each Base Rate Loan
shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Base Rate plus the
Applicable Rate.
(b) (i) If
any amount of principal of any Loan is not paid when due (without regard to any
applicable grace periods), whether at stated maturity, by acceleration or
otherwise, such amount shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.
(ii) If
any amount (other than principal of any Loan) payable by Borrower under any
Loan Document is not paid when due (without regard to any applicable grace
periods), whether at stated maturity, by acceleration or otherwise, then upon
the request of the Required Lenders, such amount shall thereafter bear interest
at a fluctuating interest rate per annum at all times equal to the Default Rate
to the fullest extent permitted by applicable Laws.
(iii) Upon
the request of the Required Lenders (or automatically while any Event of Default
under clause (f) or clause (g) of Section 8.01
exists), while any Event of Default exists, Borrower shall pay interest on the
principal amount of all outstanding Obligations hereunder at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable Laws.
(iv) Accrued
and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.
(c) Interest
on each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified
herein. Interest hereunder shall be due and payable in accordance
with the terms hereof before and after judgment, and before and after the
commencement of any proceeding under any Debtor Relief Law.
2.07Fees.
(a) Commitment
Fee. Borrower shall pay to Agent for the account of each
Lender in accordance with its Applicable Percentage, a commitment fee equal to
[***]. The commitment fee shall accrue at all times during the
Availability Period, including at any time during which one or more of the
conditions in Article IV is
not met, and shall be due and payable quarterly in
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
arrears
on the last Business Day of each March, June, September and December, commencing
with the first such date to occur after the Closing Date, and on the Maturity
Date. The commitment fee shall be calculated quarterly in arrears,
and if there is any change in the Applicable Rate during any quarter, the actual
daily amount shall be computed and multiplied by the Applicable Rate separately
for each period during such quarter that such Applicable Rate was in
effect.
(b) Agent’s
Fees. Borrower shall pay to Agent for Agent’s own account,
fees in the amounts and at the times specified in the letter agreement, dated
February 19, 2010 (the “Agent Fee Letter”),
between Borrower and Agent. Such fees shall be fully earned when paid
and shall be nonrefundable for any reason whatsoever.
(c) Arrangement
Fees. Immediately upon the execution and delivery of this
Agreement, Borrower shall pay the arrangement fees set forth in, and in
accordance with, the letter agreement, dated February 19, 2010 (the “Arrangement Fee
Letter”), among Borrower, Citigroup Global Markets Inc. and Banc of
America Securities LLC. Such fees shall be fully earned when paid and
shall be nonrefundable for any reason whatsoever.
(d) Upfront
Fees. Immediately upon the execution and delivery of this
Agreement, Borrower shall pay to the Administrative Agent, for the account of
each Lender party to this Agreement on the Closing Date, an upfront fee in an
amount equal to [***] of each such Lender’s Commitment. Such fees
shall be fully earned when paid and shall be nonrefundable for any reason
whatsoever.
2.08Computation of Interest and
Fees
All
computations of interest for Base Rate Loans when the Base Rate is determined by
Citibank’s “prime rate” shall be made on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed. All other computations
of fees and interest shall be made on the basis of a 360-day year and actual
days elapsed (which results in more fees or interest, as applicable, being paid
than if computed on the basis of a 365-day year). Interest shall
accrue on each Loan for the day on which the Loan is made, and shall not accrue
on a Loan, or any portion thereof, for the day on which the Loan or such portion
is paid, provided that any Loan that is repaid on the same day on which it is
made shall, subject to Section 2.10(a),
bear interest for one day. Each determination by Agent of an interest
rate or fee hereunder shall be conclusive and binding for all purposes, absent
manifest error.
2.09Evidence of Debt
The
Borrowings made by each Lender shall be evidenced by one or more accounts or
records maintained by such Lender and by Agent in the ordinary course of
business. The accounts or records maintained by Agent and each Lender
shall be conclusive absent manifest error of the amount of the Borrowings made
by Lenders to Borrower and the interest and payments thereon. Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of Borrower hereunder to pay any amount owing
with respect to the Obligations. In the event of any conflict between
the accounts and records maintained by any Lender and the accounts and records
of Agent in respect of such
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
matters,
the accounts and records of Agent shall control in the absence of manifest
error. Upon the request of any Lender made through Agent, Borrower
shall execute and deliver to such Lender (through Agent) a Note, which
shall evidence such Lender’s Loans in addition to such accounts or
records. Each Lender may attach schedules to its Note and endorse
thereon the date, Type (if applicable), amount and maturity of its Loans and
payments with respect thereto.
2.10Payments Generally; Agent’s
Clawback.
(a) General. All
payments to be made by Borrower shall be made without condition or deduction for
any counterclaim, defense, recoupment or setoff. Except as otherwise
expressly provided herein, all payments by Borrower hereunder shall be made to
Agent, for the account of the respective Lenders to which such payment is owed,
at the Administrative Agent’s Office in Dollars and in immediately available
funds not later than 2:00 p.m. on the date specified herein. Agent
will promptly distribute to each Lender its Applicable Percentage (or other
applicable share as provided herein) of such payment in like funds as
received by wire transfer to such Lender’s Lending Office. All
payments received by Agent after 2.00 p.m. shall be deemed received on the next
succeeding Business Day and any applicable interest or fee shall continue to
accrue. If any payment to be made by Borrower shall come due on a day
other than a Business Day, payment shall be made on the next following Business
Day, and such extension of time shall be reflected in computing interest or
fees, as the case may be.
(b) (i) Funding by Lenders;
Presumption by Agent. Unless Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to Agent such Lender’s share of such Borrowing, Agent may
assume that such Lender has made such share available on such date in accordance
with Section 2.02 and
may, in reliance upon such assumption, make available to Borrower a
corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to Agent, then the applicable
Lender and Borrower severally agree to pay to Agent forthwith on demand such
corresponding amount in immediately available funds with interest thereon, for
each day from and including the date such amount is made available to Borrower
to but excluding the date of payment to Agent, at (A) in the case of a
payment to be made by such Lender, the greater of the Federal Funds Rate and a
rate determined by Agent in accordance with banking industry rules on interbank
compensation, plus any administrative, processing or similar fees customarily
charged by Agent in connection with the foregoing and (B) in the case of a
payment to be made by Borrower, the interest rate applicable to Base Rate
Loans. If Borrower and such Lender shall pay such interest to Agent
for the same or an overlapping period, Agent shall promptly remit to Borrower
the amount of such interest paid by Borrower for such period. If such
Lender pays its share of the applicable Borrowing to Agent, then the amount so
paid shall constitute such Lender’s Loan included in such
Borrowing. Any payment by Borrower shall be without prejudice to any
claim Borrower may have against a Lender that shall have failed to make such
payment to Agent.
(ii) Payments by Borrower;
Presumptions by Agent. Unless Agent shall have received notice
from Borrower prior to the date on which any payment is due to Agent for the
account of the Lenders that Borrower will not make such payment, Agent may
assume that Borrower has made such payment on such date in accordance herewith
and may, in reliance upon such assumption, distribute to Lenders the amount
due. In such event, if Borrower has not in fact
made such
payment, then each of Lenders severally agrees to repay to Agent forthwith on
demand the amount so distributed to such Lender, in immediately available funds
with interest thereon, for each day from and including the date such amount is
distributed to it but excluding the date of payment to Agent, at the greater of
the Federal Funds Rate and a rate determined by Agent in accordance with banking
industry rules on interbank compensation. A notice of Agent to any
Lender or Borrower with respect to any amount owing under this subsection
(b) shall be conclusive, absent manifest error.
(c) Failure to Satisfy
Conditions Precedent. If any Lender makes available to Agent
funds for any Loan to be made by such Lender as provided in the foregoing
provisions of this Article II, and
such funds are not made available to Borrower by Agent because the conditions to
the applicable Borrowing set forth in Article IV are
not satisfied or waived in accordance with the terms hereof, Agent shall return
such funds (in like funds as received from such Lender) to such Lender, and
Borrower shall pay to each Lender on demand interest on such funds that has
accrued until the date such funds are returned to such Lender at the interest
rate that would be applicable to such funds had those funds been made available
to Borrower.
(d) Obligations of Lenders
Several. The obligations of Lenders hereunder to make Loans
and to make payments under Section 10.04(c)
are several and not joint. The failure of any Lender to make any
Loan, to fund any such participation or to make any payment under Section 10.04(c)
on any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Loan, purchase
its participation or to make its payment under Section 10.04(c):
(e) Funding
Source. Nothing herein shall be deemed to obligate any Lender
to obtain the funds for any Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.
2.11Sharing of Payments
If any
Lender shall, by exercising any right of setoff or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of the Loans
made by it resulting in such Lender’s receiving payment of a proportion of the
aggregate amount of such Loans or participations and accrued interest thereon
greater than its pro rata share thereof as provided herein, then the Lender
receiving such greater proportion shall (a) notify Agent of such fact, and
(b) purchase (for cash at face value) participations in the Loans of
the other Lenders, or make such other adjustments as shall be equitable, so that
the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and other amounts owing them, provided
that:
(i) if
any such participations or subparticipations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and
(ii) the
provisions of this Section shall not be construed to apply to (x) any
payment made by Borrower pursuant to and in accordance with the express terms of
this Agreement or (y) any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or participant, other than to Borrower or any Subsidiary thereof (as to which
the provisions of this Section shall apply).
Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against Borrower rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of Borrower in the amount of such participation.
2.12Security
All
obligations of Borrower under this Agreement, the Notes and the other Loan
Documents shall be secured in accordance with the Collateral
Documents.
2.13Defaulting Lenders
(a) Payments. Any
amount paid by Borrower for the account of a Defaulting Lender under this
Agreement (whether on account of principal, interest, fees, indemnity payments
or other amounts) will not be paid or distributed to such Defaulting Lender, but
shall instead be retained by the Administrative Agent in a segregated
non-interest bearing escrow account until (subject to Section 2.13(d)) the
termination of the Aggregate Commitments and payment in full of all obligations
of the Borrower hereunder and will be applied by the Administrative Agent, to
the fullest extent permitted by law, to the making of payments from time to time
in the following order of priority: first to the payment
of any amounts owing by such Defaulting Lender to the Administrative Agent under
this Agreement, second to the payment
of post-default interest and then current interest due and payable to the
Non-Defaulting Lenders hereunder, ratably among them in accordance with the
amounts of such interest then due and payable to them, fourth to the payment
of fees then due and payable to the Non-Defaulting Lenders hereunder, ratably
among them in accordance with the amounts of such fees then due and payable to
them, fifth to
pay principal then due and payable to the Non-Defaulting Lenders hereunder
ratably in accordance with the amounts thereof then due and payable to them,
sixth to the
ratable payment of other amounts then due and payable to the Non-Defaulting
Lenders, and seventh after the
termination of the Aggregate Commitments and payment in full of all obligations
of the Borrower hereunder, to pay amounts owing under this Agreement to such
Defaulting Lender or as a court of competent jurisdiction may otherwise
direct.
(b) Fees. Anything
herein to the contrary notwithstanding, during such period as a Lender is a
Defaulting Lender, such Defaulting Lender shall not be entitled to any fees
accruing during such period pursuant to Section 2.07(a)
(without prejudice to the rights of the Non-Defaulting Lenders in respect of
such fees).
(c) Termination of Defaulting
Lender. The Borrower may terminate the unused amount of the
Commitment of any Lender that is a Defaulting Lender upon not less than 10
Business Days’ prior notice to the Administrative Agent (which shall promptly
notify the Lenders thereof), and in such event the provisions of Section 2.13(a) will
apply to all amounts
thereafter
paid by the Borrower for the account of such Defaulting Lender under this
Agreement (whether on account of principal, interest, fees, indemnity or other
amounts), provided that (i) no Event of Default shall have occurred and be
continuing and (ii) such termination shall not be deemed to be a waiver or
release of any claim the Borrower, the Administrative Agent or any Lender may
have against such Defaulting Lender.
(d) Cure. If
the Borrower and the Administrative Agent agree in writing that a Lender that is
a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the
Administrative Agent will so notify the parties hereto, whereupon as of the
effective date specified in such notice and subject to any conditions set forth
therein (which may include arrangements with respect to any amounts then held in
the segregated escrow account referred to in Section 2.13(a)),
such Lender shall purchase such portions outstanding Loans of the other Lenders,
and/or make such other adjustments, as the Administrative Agent may determine to
be necessary to cause the Lenders to hold Loans on a pro rata basis in
accordance with their respective Commitments, whereupon such Lender shall cease
to be a Defaulting Lender and will be a Non-Defaulting Lender; provided that no
adjustments shall be made retroactively with respect to fees accrued while such
Lender was a Defaulting Lender; and provided, further, that except to the extent
otherwise expressly agreed by the affected parties, no change hereunder from
Defaulting Lender to Non-Defaulting Lender shall constitute a waiver or release
of any claim of any party hereunder arising from such Lender’s having been a
Defaulting Lender.
(e) Waiver. Provided
that Borrower makes all payments required by this Agreement (other than the
Defaulting Lender’s share of fees as provided in Section 2.13(b)),
each Defaulting Lender waives its rights to seek compensation from Borrower for
any sums retained by Agent or distributed by Agent as provided in Section
2.13(a).
ARTICLE
III.
TAXES,
YIELD PROTECTION AND ILLEGALITY
3.01Taxes.
(a) Payments Free of
Taxes. Any and all payments by Borrower to or on account of
any obligation of Borrower hereunder or under any other Loan Document shall be
made free and clear of and without reduction or withholding for any Indemnified
Taxes, provided that if Borrower shall be required by any applicable law to
deduct any Indemnified Taxes from such payments, then, (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section),
Agent or Lender, as the case may be, receives an amount equal to the sum it
would have received had no such deductions been made, (ii) Borrower shall
make such deductions, and (iii) Borrower shall timely pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
(b) Payment of Other Taxes by
Borrower. Without limiting the provisions of subsection
(a) above, Borrower shall timely pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) Indemnification by
Borrower. Borrower shall indemnify Agent and each Lender,
within 30 days after demand therefor, for the full amount of any Indemnified
Taxes (including Indemnified Taxes imposed or asserted on or attributable to
amounts payable under this Section) paid or incurred by Agent or such
Lender, as the case may be, and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or
liability delivered to Borrower by a Lender (with a copy to Agent), or by Agent
on its own behalf or on behalf of a Lender, shall be conclusive absent manifest
error.
(d) Evidence of
Payments. As soon as practicable after any payment of
Indemnified Taxes by Borrower to a Governmental Authority, Borrower shall
deliver to Agent the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of the return reporting
such payment or other evidence of such payment reasonably satisfactory to
Agent.
(e) Status of
Lenders. Any Foreign
Lender that is entitled to an exemption from or reduction of withholding tax
under the law of the jurisdiction in which the Borrower is resident for tax
purposes, or any treaty to which such jurisdiction is a party, with respect to
payments hereunder or under any other Loan Document shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law or reasonably requested by the Borrower or the
Administrative Agent, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate of withholding. In addition, any
Lender, if requested by the Borrower or the Administrative Agent, shall deliver
such other documentation prescribed by applicable law or reasonably requested by
the Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements.
Without
limiting the generality of the foregoing, any Foreign Lender shall deliver to
the Borrower and the Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
request of the Borrower or the Administrative Agent, but only if such Foreign
Lender is legally entitled to do so), whichever of the following is
applicable:
(i) duly
completed copies of Internal Revenue Service Form W-8BEN claiming eligibility
for benefits of an income tax treaty to which the United States is a
party,
(ii) duly
completed copies of Internal Revenue Service Form W-8ECI,
(iii) in
the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not (A) a “bank” within the meaning of
section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower
within the meaning of section
881(c)(3)(B)
of the Code, or (C) a “controlled foreign corporation” described in section
881(c)(3)(C) of the Code or (D) is otherwise entitled to an exemption from U.S.
tax under Section 88(c) on the date it acquires its interest herein, and (y)
duly completed copies of Internal Revenue Service Form W-8BEN,
or
(iv) any
other form prescribed by applicable law as a basis for claiming exemption from
or a reduction in United States Federal withholding tax duly completed together
with such supplementary documentation as may be prescribed by applicable law to
permit the Borrower to determine the withholding or deduction required to be
made.
If the
IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Borrower did not properly withhold tax from
amounts paid to or for the account of any Foreign Lender due to a failure on the
part of the Foreign Lender (because the appropriate certification form was not
delivered, was not properly executed, or fails to establish an exemption from,
or reduction of, withholding tax with respect to a particular type of payment,
or because such Lender failed to notify Borrower or any other Person of a change
in circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason), such Foreign Lender shall indemnify
and hold Borrower harmless for all amounts paid, directly or indirectly, by
Borrower as tax or otherwise, as a result of such failure, including penalties
and interest, any taxes imposed by any jurisdiction on the amounts payable to
Borrower under this paragraph, and all related costs and expenses (including
attorneys fees and expenses). The obligation of the Foreign Lenders
under this paragraph shall survive the payment of all Obligations.
(f) Treatment of Certain
Refunds. If Agent or any Lender determines, in its sole
discretion, that it has received a refund of any Taxes as to which it has been
indemnified by Borrower or with respect to which Borrower has paid additional
amounts pursuant to this Section, it shall pay to Borrower an amount equal to
such refund (but only to the extent of indemnity payments made, or additional
amounts paid, by Borrower under this Section with respect to the Taxes giving
rise to such refund), net of all out-of-pocket expenses of Agent or such Lender,
as the case may be, and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund), provided that
Borrower, upon the request of Agent or such Lender, agrees to repay the amount
paid over to Borrower (plus any penalties, interest or other charges imposed by
the relevant Governmental Authority) to Agent or such Lender in the event
Agent or such Lender is required to repay such refund to such Governmental
Authority. This subsection shall not be construed to require Agent or
any Lender to make available its tax returns (or any other information relating
to its taxes that it deems confidential) to the Borrower or any other
Person.
3.02Illegality
If any
Lender determines that any Law has made it unlawful, or that any Governmental
Authority has asserted that it is unlawful, for any Lender or its applicable
Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine
or charge interest rates based upon the Eurodollar Rate, or any Governmental
Authority has imposed material restrictions on the authority of such Lender to
purchase or sell, or to take deposits of, Dollars in the London interbank
market, then, on notice thereof by such Lender to Borrower through Agent, any
obligation of such Lender to make or continue Eurodollar Rate Loans or to
convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such
Lender notifies
Agent and
Borrower that the circumstances giving rise to such determination no longer
exist. Upon receipt of such notice, Borrower shall, upon demand from
such Lender (with a copy to Agent), prepay or, if applicable, convert all
Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day
of the Interest Period therefor, if such Lender may lawfully continue to
maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender
may not lawfully continue to maintain such Eurodollar Rate
Loans. Upon any such prepayment or conversion, Borrower shall also
pay accrued interest on the amount so prepaid or converted and all amounts due
under Section
3.05 in accordance with the terms thereof due to such prepayment or
conversion.
3.03Inability to Determine
Rates
If the
Required Lenders determine, in connection with any request for a Eurodollar Rate
Loan or a conversion to or continuation thereof, that (a) Dollar deposits
are not being offered to banks in the London interbank eurodollar market for the
applicable amount and Interest Period of such Eurodollar Rate Loan,
(b) adequate and reasonable means do not exist for determining the
Eurodollar Base Rate for any requested Interest Period with respect to a
proposed Eurodollar Rate Loan, or (c) an unusual or extraordinary event or
circumstance occurs or exists affecting the applicable offshore Dollar market
such that the Eurodollar Base Rate for any requested Interest Period with
respect to a proposed Eurodollar Rate Loan does not adequately and fairly
reflect the cost to such Lenders of funding such Loan, Agent will promptly so
notify Borrower and each Lender. Thereafter, the obligation of
Lenders to make or maintain Eurodollar Rate Loans shall be suspended until Agent
(upon the instruction of the Required Lenders) revokes such
notice. Upon receipt of such notice, Borrower may revoke any pending
request for a Borrowing of, conversion to or continuation of Eurodollar Rate
Loans or, failing that, will be deemed to have converted such request into a
request for a Borrowing of Base Rate Loans in the amount specified
therein.
3.04Increased Costs.
(a) Increased Costs
Generally. If any Change in Law shall:
(i) impose,
modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by, any Lender (except any
reserve requirement reflected in the Eurodollar Rate); or
(ii) impose
on any Lender or the London interbank market any other condition, cost or
expense affecting this Agreement or Eurodollar Loans made by such Lender or
participation therein;
and the
result of any of the foregoing shall be to increase the cost to such Lender of
making or maintaining any Eurodollar Loan (or of maintaining its obligation to
make any such Loan), or to reduce the amount of any sum received or receivable
by such Lender (whether of principal, interest or any other amount) then,
upon request of such Lender, Borrower will pay to such Lender such additional
amount or amounts as will compensate such Lender for such additional costs
incurred or reduction suffered.
(b) Capital
Requirements. If any Lender reasonably determines that any
Change in Law affecting such Lender or any Lending Office of such Lender or such
Lender’s holding company, if any, regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s capital or on
the capital of such Lender’s holding company, if any, as a consequence of this
Agreement, the Commitment of such Lender or the Loans made by such Lender to a
level below that which such Lender or such Lender’s holding company could have
achieved but for such Change in Law (taking into consideration such Lender’s
policies and the policies of such Lender’s holding company with respect to
capital adequacy), then from time to time Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender or such Lender’s
holding company for any such reduction suffered.
(c) Certificates for
Reimbursement. A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as
the case may be, as specified in subsection (a) or (b) of this Section
and, in reasonable detail, the basis for such calculation and delivered to
Borrower shall be conclusive absent manifest error. Borrower shall
pay such Lender the amount shown as due on any such certificate within 10 days
after receipt thereof. Such certificate shall also include a statement to the
effect that such compensation for additional costs incurred or reduction
suffered reflects a good faith and non-discriminatory allocation to this
Agreement.
(d) Delay in
Requests. Failure or delay on the part of any Lender to demand
compensation pursuant to the foregoing provisions of this Section shall not
constitute a waiver of such Lender’s right to demand such compensation, provided that
Borrower shall not be required to compensate a Lender pursuant to the foregoing
provisions of this Section for any increased costs incurred or reductions
suffered more than 30 days prior to the date that such Lender notifies Borrower
of the Change in Law giving rise to such increased costs or reductions and of
such Lender’s intention to claim compensation therefor (except that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the 30-day period referred to above shall be extended to include the period
of retroactive effect thereof).
3.05Compensation for Losses
Upon
demand of any Lender (with a copy to Agent) from time to time, Borrower
shall promptly compensate such Lender for and hold such Lender harmless from any
loss, cost or expense incurred by it as a result of:
(a) any
continuation, conversion, payment or prepayment of any Loan other than a Base
Rate Loan on a day other than the last day of the Interest Period for such Loan
(whether voluntary, mandatory, automatic, by reason of acceleration, or
otherwise);
(b) any
failure by Borrower (for a reason other than the failure of such Lender to make
a Loan) to prepay, borrow, continue or convert any Loan other than a Base
Rate Loan on the date or in the amount notified by Borrower; or
(c) any
assignment of a Eurodollar Rate Loan on a day other than the last day of the
Interest Period thereof as a result of a request by the Borrower pursuant to
Section 10.13.
Borrower’s
compensation to any Lender under this Section 3.05 is intended to put such
Lender in the same financial position it would have been in had the event
referred to in clauses (a), (b) or
(c) not
occurred, including any loss of anticipated profits. Borrower’s
compensation to any such Lender will include any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such Loan or
from fees payable to terminate the deposits from which such funds were
obtained. Borrower shall also pay any customary administrative fees
charged by such Lender in connection with the foregoing. For purposes
of calculating amounts payable by Borrower to Lenders under this Section 3.05,
each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it
at the Eurodollar Base Rate used in determining the Eurodollar Rate for such
Loan by a matching deposit or other borrowing in the London interbank eurodollar
market for a comparable amount and for a comparable period, whether or not such
Eurodollar Rate Loan was in fact so funded.
3.06 Mitigation of Obligations; Replacement of
Lenders
(a) Designation of Different
Lending Office. If any Lender requests compensation under
Section 3.04, or
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01, or
if any Lender gives a notice pursuant to Section 3.02, then
such Lender shall use reasonable efforts to designate a different Lending Office
for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 3.01 or
3.04, as the
case may be, in the future, or eliminate the need for the notice pursuant to
Section 3.02, as
applicable, and (ii) in each case, would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender. Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or
assignment.
(b) Replacement of
Lenders. If any Lender requests compensation under Section
3.04, or if the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
3.01, the Borrower may replace such Lender in accordance with Section
10.13.
(c) Removal of Tax
Lenders.
(i) If
the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01
(such Lender being a “Tax Lender”), a
replacement Lender under clause (b) above is
not available and the last sentence of Section 10.13 does
not apply, then, subject to the condition specified in clause (iv) below,
Borrower, upon at least 5 Business Days prior irrevocable notice, may pay an
amount equal to the outstanding principal of such Tax Lender’s Loans, accrued
interest thereon, accrued fees and all other amounts payable to such Tax Lender
hereunder and under the other Loan Documents (including any amounts under
Section 3.05) and thereupon permanently terminate the Commitments of such Lender
and remove such Tax Lender hereunder. Such notice to remove the Tax
Lender, as applicable, shall specify an effective date for such termination and
removal, which date shall not be later than 15 Business Days after the date such
notice is given.
(ii)
Prior to the effective date of such termination and removal, the Tax Lender and
Borrower shall execute and deliver a mutually satisfactory removal agreement,
subject only to the Tax Lender being repaid in full as provided in the above
clause (i) by Borrower. If the Tax Lender shall refuse or fail to
execute and deliver any such removal agreement prior to the effective date of
such removal, the termination of the Commitments of such Tax Lender and the
removal of such Tax Lender shall nonetheless occur on the effective date
originally specified by Borrower upon payment by Borrower to such Tax Lender of
all of the amounts referred to in clause (i)
above.
(iii)
Anything contained in this Agreement to the contrary notwithstanding, including
any requirement that payments to Lenders be made on a pro-rata basis or that the
Commitments of Lenders be reduced on a pro-rata basis, Borrower may make
payments under this clause (c) to a
Tax Lender that is being removed, the Commitments of such Tax Lender may be
terminated under this clause (c) and the
Obligations due to such Tax Lender may be satisfied under this clause (c) while
leaving remaining Obligations outstanding.
(iv) Borrower
shall only be entitled to terminate the Commitments of a Tax Lender and remove
such Tax Lender under this clause (c) if and
only if no Event of Default has occurred and is continuing.
(v) Once
a termination and removal of a Tax Lender is effectuated under this clause (c), the
Aggregate Commitments shall automatically be deemed reduced by the amount of the
terminated Commitment of such removed Tax Lender and all of the provisions of
this Agreement (other than Section 10.04) and
the other Loan Documents, including the determination of Required Lenders and
Applicable Percentage, shall be interpreted and determined without regard to
such terminated Commitment and without regard to the removed Tax
Lender.
(vi) The
termination of the Commitment of a Tax Lender and the removal of such Tax Lender
pursuant to this clause (c) shall not
eliminate or affect such Tax Lender’s rights under Section 10.04, which
rights shall survive any such termination and removal.
3.07Survival
All of
Borrower’s obligations under this Article III shall
survive termination of the Aggregate Commitments and repayment of all other
Obligations hereunder.
ARTICLE
IV.
CONDITIONS
PRECEDENT TO CREDIT EXTENSIONS
4.01Conditions to Effectiveness and Initial
Borrowing:
The
effectiveness of this Agreement is subject to satisfaction of the conditions
precedent set forth in clauses (a), (b) and (c) below and, in addition to the
satisfaction of such conditions, the obligation of each Lender to make its
initial Loan hereunder is subject to satisfaction of the conditions precedent
set forth in clause (d) below :
(a) Agent’s
receipt of the following, each of which shall be originals or telecopies
(followed promptly by originals) unless otherwise specified, each properly
executed by a Responsible
Officer of the Borrower, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing
Date) and each in form and substance satisfactory to Agent and each of the
Lenders:
(i) executed
counterparts of this Agreement and all Collateral Documents, sufficient in
number for distribution to Agent, each Lender and Borrower;
(ii) a
Note executed by Borrower in favor of each Lender requesting a
Note;
(iii) such
certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of Borrower as Agent may require
evidencing the identity, authority and capacity of each Responsible Officer
thereof authorized to act as a Responsible Officer in connection with this
Agreement and the other Loan Documents;
(iv) such
documents and certifications as Agent may reasonably require to evidence that
Borrower is duly organized or formed, and that Borrower is validly existing, in
good standing and qualified to engage in business in each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification, except to the extent that failure to do so would
not reasonably be expected to have a Material Adverse Effect;
(v) a
favorable opinion(s) of counsel to Borrower acceptable to Agent addressed to
Agent and each Lender, as to the matters concerning Borrower, the Loan Documents
and the Collateral, including the enforceability of all Loan Documents,
compliance with all Laws, the perfection and priority of all security interests
purported to be granted and no conflicts with material agreements, in form and
substance satisfactory to Agent;
(vi) a
certificate of a Responsible Officer of Borrower either (A) attaching
copies of all consents, licenses and approvals required in connection with the
execution, delivery and performance by Borrower and the validity against
Borrower of the Loan Documents (other than certificates, consents and licenses
related to operating individual aircraft or its business as a common carrier),
and such consents, licenses and approvals shall be in full force and effect, or
(B) stating that no such consents, licenses or approvals are so
required;
(vii) a
certificate signed by a Responsible Officer of Borrower certifying (A) that
the conditions specified in Sections 4.02(a) and (b) have been
satisfied, and (B) that there has been no event or circumstance since the
date of the Audited Financial Statements that has had or would be reasonably
expected to have, either individually or in the aggregate, a Material Adverse
Effect;
(viii) evidence
that all insurance required to be maintained pursuant to the Loan Documents has
been obtained and is in effect and that Administrative Agent and Lenders have
been named as loss payees (subject to the last paragraph of Section 3.5(a) of the
Security Agreement) to the extent of their interest (the lower of (x) the
Current Market Value as reflected on the last Qualified Appraisal or (y) the
Obligations outstanding at the
time of
payment of insurance proceeds) and additional insured under all policies of
casualty insurance and as additional insured under all policies of liability
insurance, and certificates of insurance from nationally recognized independent
aviation insurance brokers certifying to such insurance coverage (including
insurance coverage over all Aircraft Collateral);
(ix) a
duly completed Compliance Certificate as of the last day of the fiscal quarter
of Borrower most recently ended prior to the Closing Date, signed by a
Responsible Officer of Borrower;
(x) acknowledgments
of all filings or recordations necessary to perfect its Liens in the Collateral
(other than filings and recordations with International Registry), as well as
UCC and FAA searches and other evidence satisfactory to Agent that (i) the
Security Agreement has created a valid and effective security interest in the
Aircraft Collateral, (ii) such security interests have been duly perfected,
and (iii) the Aircraft Collateral is free and clear of Liens or options
other than such security interests and any Liens permitted pursuant to Section
7.01. Without limiting the generality of the foregoing, the
Administrative Agent shall have received evidence that the Security Agreement
has been duly filed for record with the Aircraft Registry of United States
Department of Transportation, Federal Aviation Administration in Oklahoma City
and the UCC Financing Statement has been duly filed in the appropriate UCC
filing office in Alaska;
(xi) Qualified
Appraisals showing the Current Market Value of the Aircraft Collateral as
of the date no earlier than December 31, 2009;
(xii) evidence
that (i) any Collateral Documents (other than the Security Agreement) have
created a valid and effective security interest in any Collateral (other than
the Aircraft Collateral), (ii) such security interests have been duly
perfected, and (iii) any Collateral (other than the Aircraft Collateral) is
free and clear of Liens or options other than such security interests and any
Liens permitted pursuant to Section
7.01;
(xiii) the
Agent Fee Letter and Arrangement Fee Letter;
(xiv) conformed
copies of the Wells Fargo Credit Agreement, together with all agreements (other
than the related fee letter), instruments and other documents delivered in
connection therewith as the Administrative Agent shall reasonably
request;
(xv) evidence
that the Existing Credit Agreement has been, or concurrently with the Closing
Date is being, terminated and all Liens securing obligations under the Existing
Credit Agreement have been, or concurrently with the Closing Date are being,
released; and
(xvi) such
other assurances, certificates, documents, consents or opinions as Agent or the
Required Lenders reasonably may require, including all documentation and other
information that the Agent or such Lender requests in order to comply with its
ongoing obligations under applicable “know your customer” and anti-money
laundering rules and regulations, including the Patriot Act.
(b) Any
fees required to be paid on or before the Closing Date shall have been
paid.
(c) Unless
waived by Agent, Borrower shall have paid all fees, charges and disbursements of
counsel to Agent to the extent invoiced prior to or on the Closing
Date.
(d) Agent’s
receipt of:
(i) an
opinion from aviation counsel acceptable to Agent as to the FAA and CTT matters
relating to perfection and priority of the security interest created by the
Security Agreement;
(ii) acknowledgments
of all filings and recordations with International Registry and evidence that
the Security Agreement has been duly filed for record with the International
Registry and International Registry searches showing that (i) the Security
Agreement has created a valid and effective security interest in the Aircraft
Collateral, (ii) such security interests have been duly perfected, and
(iii) the Aircraft Collateral is free and clear of Liens or options other
than such security interests and any Liens permitted pursuant to Section
7.01;
Without
limiting the generality of the provisions of Section 9.04,
for purposes of determining compliance with the conditions specified in this
Section 4.01,
each Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection
thereto.
4.02Conditions to all
Borrowings
The
obligation of each Lender to honor any Loan Notice is subject to the following
conditions precedent:
(a) The
representations and warranties of Borrower contained in Article V or any
other Loan Document, or which are contained in any document furnished at any
time under or in connection herewith or therewith, shall be true and correct on
and as of the date of such Borrowing, except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct as of such earlier date, and except that for
purposes of this Section 4.02, the
representations and warranties contained in subsections (a) and (b) of
Section 5.05
shall be deemed to refer to the most recent statements furnished pursuant to
clauses (a) and (b), respectively, of Section 6.01.
(b) No
Change of Control, Invalidity Event or Material Failure of Security shall have
occurred and no Default, Collateral Shortfall or Over Advance shall exist or
would result from such proposed Borrowing or from the application of the
proceeds thereof.
(c) Agent
shall have received a Loan Notice in accordance with the requirements
hereof.
(d) Neither
the Administrative Agent nor any Lender shall have received from any Person any
notice that any Collateral Document will no longer secure on a first priority
basis (subject
to Liens permitted under the applicable Collateral Document) future
Borrowings under this Agreement.
(e) Agent
shall have received, in form and substance satisfactory to it: (i) such other
assurances, certificates, documents or consents related to the foregoing as
Agent or the Required Lenders reasonably may require; and (ii) any information
requested more than five Business Days prior to such Loan Notice by the Agent or
any Lender in accordance with Section 6.02(d).
Each Loan
Notice submitted by Borrower shall be deemed to be a representation and warranty
that the conditions specified in Sections 4.02(a) and
(b) have
been satisfied on and as of the date of the applicable Borrowing.
ARTICLE
V.
REPRESENTATIONS
AND WARRANTIES
Borrower
represents and warrants to Agent and the Lenders that:
5.01Existence, Qualification and Power;
Compliance with Laws
Borrower
and each Subsidiary thereof (a) is duly organized or formed, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority
and all requisite governmental licenses, authorizations, consents and approvals
to (i) own its assets and carry on its business and (ii) execute,
deliver and perform its obligations under the Loan Documents, (c) is duly
qualified and is licensed and in good standing under the Laws of each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification or license, and (d) is
in compliance with all Laws; except in each case referred to in clause (b)(i),
(c) or (d), to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect.
5.02Authorization; No
Contravention
The
execution, delivery and performance by Borrower of each Loan Document, have been
duly authorized by all necessary corporate or other organizational action, and
do not and will not (a) contravene the terms of Borrower’s Organization
Documents; (b) conflict with or result in any breach or contravention of,
or the creation of any Lien under, or require any payment to be made under
(i) any Contractual Obligation (other than the Loan Documents) to which
Borrower is a party or affecting Borrower or the properties of Borrower or any
of its Subsidiaries or (ii) any order, injunction, writ or decree of any
Governmental Authority or any arbitral award to which Borrower or its property
is subject; or (c) violate any Law. Borrower and each Subsidiary
thereof is in compliance with all Contractual Obligations referred to in clause
(b)(i), except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect.
5.03Governmental Authorization; Other
Consents
No
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, Borrower of this Agreement or any other Loan Document,
except for recordings or filings in connection with the Liens granted to the
Agent under the Collateral Documents or filing of a redacted copy of the Loan
Documents with the SEC.
5.04 Binding
Effect
This
Agreement has been, and each other Loan Document, when delivered hereunder, will
have been, duly executed and delivered by Borrower. This Agreement
constitutes, and each other Loan Document when so delivered will constitute, a
legal, valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms.
5.05Financial Statements; No Material
Adverse Effect.
(a) The
Audited Financial Statements (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; (ii) fairly present the financial condition of
Borrower as of the date thereof and its results of operations for the period
covered thereby in accordance with GAAP consistently applied throughout the
period covered thereby, except as otherwise expressly noted therein; and
(iii) show all material indebtedness and other liabilities, direct or
contingent, of Borrower as of the date thereof, including liabilities for taxes
and material commitments.
(b) The
unaudited consolidated balance sheet of Borrower and its Subsidiaries dated
September 30, 2009, and the related consolidated statements of income or
operations, shareholders’ equity and cash flows for the fiscal quarter ended on
that date (i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, and (ii) fairly present the financial condition of Borrower and
its Subsidiaries as of the date thereof and their results of operations for the
period covered thereby, subject, in the case of clauses (i) and (ii), to
the absence of footnotes and to normal year-end audit adjustments.
(c) Since
the Closing Date and since the date of the Audited Financial Statements, there
has been no event or circumstance, either individually or in the aggregate, that
has had or could reasonably be expected to have a Material Adverse
Effect.
(d) Since
the date of the Audited Financial Statements, no material Internal Control Event
has occurred to the knowledge of Borrower’s Chief Executive Officer, Chief
Financial Officer, Vice President-Finance, Treasurer or Controller.
5.06Litigation and Judgments
There are
no actions, suits, proceedings, claims or disputes pending or, to the knowledge
of Borrower after due and diligent investigation, threatened or contemplated, at
law, in equity, in arbitration or before any Governmental Authority, by or
against Borrower or any of its Subsidiaries or against any of their properties
or revenues that (a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby, or
(b) are reasonably likely to have a Material Adverse Effect. To
the knowledge of Borrower after due and diligent investigation, there is no
outstanding unsatisfied money judgment against Borrower or any of its
Subsidiaries in an amount in excess of the Threshold Amount, and there are no
outstanding unsatisfied money judgments against Borrower or any of its
Subsidiaries which individually or in the aggregate have or would have a
Material Adverse Effect.
5.07No Default
. Neither Borrower
nor any Subsidiary is in default under or with respect to any Contractual
Obligation that would, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. No Default has occurred
and is continuing or would result from the consummation of the transactions
contemplated by this Agreement or any other Loan Document.
5.08Ownership of Property;
Liens
Each of
Borrower and each Subsidiary has good record and marketable title in fee simple
to, or valid leasehold interests in, all real property necessary or used in the
ordinary conduct of its business, except for such defects in title as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The property of Borrower and its Subsidiaries is
subject to no Liens, other than Liens permitted by Section 7.01.
5.09Environmental Compliance
Borrower
and its Subsidiaries conduct in the ordinary course of business a review of the
effect of existing Environmental Laws and claims alleging potential liability or
responsibility for violation of any Environmental Law on their respective
businesses, operations and properties, and as a result thereof Borrower has
reasonably concluded that, except as specifically disclosed in Schedule 5.09,
such Environmental Laws and claims would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
5.10Insurance
The
properties and businesses of Borrower and its Subsidiaries are insured with
financially sound and reputable insurance companies (including Lloyds of London
syndicates) not Affiliates of Borrower (unless fully reinsured by financially
sound and reputable insurance companies), in such amounts (after giving effect
to any self-insurance, provided that any
self-insurance may not exceed $5,000,000 per occurrence), with such deductibles
and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where Borrower or
the applicable Subsidiary operates.
5.11Taxes
Borrower
and its Subsidiaries have filed all Federal, state and other material tax
returns and reports required to be filed, and have paid all Federal, state and
other material taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings diligently conducted and for which adequate reserves have been
provided in accordance with GAAP. To Borrower’s knowledge, there is
no proposed tax assessment against Borrower or any Subsidiary that would, if
made, have a Material Adverse Effect.
5.12ERISA Compliance.
(a) Each
Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or state Laws. Each Plan that is
intended to qualify under Section 401(a) of the Code has received a
favorable determination letter from the IRS or an application for such a letter
is currently being processed by the IRS with respect thereto and, to the best
knowledge of Borrower, nothing has occurred which would prevent, or cause the
loss of, such qualification. Borrower and each ERISA Affiliate have
made all required contributions to each Plan subject to the Pension Funding
Rules, and no application for a funding waiver or an extension of any
amortization period pursuant to the Pension Funding Rules has been made with
respect to any Plan.
(b) There
are no pending or, to the best knowledge of Borrower, threatened claims, actions
or lawsuits, or action by any Governmental Authority, with respect to any Plan
that would be reasonably be expected to have a Material Adverse
Effect. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan that has resulted or
would reasonably be expected to result in a Material Adverse
Effect.
(c) (i)
No ERISA Event has occurred or is reasonably expected to occur;
(ii) neither Borrower nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA), which would reasonably be expected to have a Material Adverse Effect;
(iii) neither Borrower nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such
liability) under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (iv) neither Borrower nor any ERISA Affiliate has
engaged in a transaction that could be subject to Sections 4069 or
4212(c) of ERISA.
5.13Subsidiaries
As of the
Closing Date, Borrower has no Subsidiaries. As of the Closing Date,
Parent has no operating Subsidiaries other than Borrower and
Horizon. All of the outstanding Equity Interests in Borrower have
been validly issued and are fully paid and nonassessable and are owned by Parent
free and clear of all Liens.
5.14Margin Regulations; Investment Company
Act.
(a) Borrower
is not engaged and will not engage, principally or as one of its important
activities, in the business of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the FRB), or extending credit for the purpose
of purchasing or carrying margin stock.
(b) None
of Borrower, any Person Controlling Borrower, or any Subsidiary is or is
required to be registered as an “investment company” under the Investment
Company Act of 1940.
5.15Disclosure
Borrower
has disclosed to Agent and Lenders all agreements, instruments and corporate or
other restrictions to which it or any of its Subsidiaries is subject, and all
other matters known to it, that, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect. No
report, financial statement, certificate or other information furnished (whether
in writing or orally) by or on behalf of Borrower to Agent or any Lender in
connection with the transactions contemplated hereby and the negotiation of this
Agreement or delivered hereunder or under any other Loan Document (in each case,
as modified or supplemented by other information so furnished) contains any
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; provided that, with respect to projected financial
information, Borrower represents only that such information was prepared in good
faith based upon assumptions believed to be reasonable at the time.
5.16 Compliance
with Laws
Each of Borrower and each Subsidiary
is in compliance in all material respects with the requirements of all Laws and
all orders, writs, injunctions and decrees applicable to it or to its
properties, except in such instances in which (a) such requirement of Law
or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply
therewith, either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
5.17Intellectual Property; Licenses,
Etc
Borrower
and its Subsidiaries own, or possess the right to use, all of the trademarks,
service marks, trade names, copyrights, patents, patent rights, franchises,
licenses and other intellectual property rights (“IP Rights”) that are
reasonably necessary for the operation of their respective businesses, without
conflict with the rights of any other Person. To the best knowledge
of Borrower, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by Borrower or any Subsidiary infringes upon any rights held by any
other Person. No claim or litigation regarding any of the foregoing
is pending or, to the best knowledge of Borrower, threatened, which, either
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
5.18Solvency
The
Borrower is Solvent and shall be Solvent immediately after the consummation of
the transactions contemplated by this Agreement. As used herein, a
Person is “Solvent” on a
particular date, if, on such date both (a) (i) the then fair saleable
value of the property of such Person on a going concern basis is
(A) greater than the total amount of liabilities (including contingent
liabilities) of such Person as they mature in the ordinary course and
(B) not less than the amount that will be required to pay the probable
liabilities on such Person’s then-existing debts as they become absolute and
matured considering all financing alternatives and potential asset sales
reasonably available to such Person; (ii) such Person’s capital is not
unreasonably small in relation to its business or any contemplated or undertaken
transaction; and (iii) such Person does not intend to incur, or
believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (b) such
Person is “solvent” within the meaning given that term and similar terms under
applicable laws relating to fraudulent transfers and conveyances. For
purposes of this definition, the debts and liabilities of a Person, contingent
or otherwise, shall include the amount of all debts and liabilities that are
relevant under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the “Fraudulent Transfer
Laws”), and the assets of a Person shall give effect to the value (as
determined under the applicable provisions of the Fraudulent Transfer
Laws) of any rights to subrogation, reimbursement, indemnification or
contribution of such Person pursuant to applicable Law or pursuant to the terms
of any agreement.
5.19Collateral and Security
Documents.
(a) Borrower
owns all right, title and interest in and to the Aircraft Collateral (and any
other Collateral) free and clear of all Liens other than (i) the security
interests in favor of the Administrative Agent securing the Obligations, or
(ii) Liens permitted by Section 7.01 that are
junior and subordinate to the security interests created by the Collateral
Documents, or (iii) Liens on the Aircraft Collateral permitted under
subsections (e) and (f) of Section
7.01.
(b) The
Security Agreement (and any of other Collateral Documents) create, in favor of
the Administrative Agent for the benefit of itself and the Lenders, a legal,
valid and enforceable security interest in all of Borrower’s right, title and
interest in all of the Aircraft Collateral (and any other Collateral), which
security interest has been duly perfected and has priority over any other Liens
on the Collateral (other than Liens on the Aircraft Collateral described in
subsections (e) and (f) of Section
7.01).
(c) Borrower
is a citizen of the United States for purposes of the U.S. Federal Aviation
Act.
(d) Borrower
is, and continuously during the five years immediately preceding the date of
this Agreement has been, an Alaska corporation. Borrower’s chief
executive office is, and continuously during the five years immediately
preceding the date of this Agreement has been, located in Seattle,
Washington.
(e) No
Aircraft, at the time Agent’s security interest in such Aircraft attaches, will
be subject to any interest, other than an interest held by Borrower, that is
recorded in the FAA Registry.
(f) The
Engines pledged pursuant to the Security Agreement as part of an applicable
Aircraft are of the same series, model and make, and the Engines, taken as a
group, have approximately the same aggregate value as the engines upon which the
determination of Current Market Value in each Qualified Appraisal was
based.
(g) The
representations and warranties in this Section 5.19
(other than Section 5.19(e)) are
made on and as of the date of this Agreement and, with respect to the
representations and warranties in subsections (a), (b) and (c) hereof,
on and as of each date thereafter.
5.20Burdensome Agreements
Neither
Borrower nor any Subsidiary has any Contractual Obligation (other than this
Agreement or any other Loan Document) that (a) limits the ability
(i) of any Subsidiary to make Restricted Payments to Borrower or to
otherwise transfer property to Borrower, (ii) of any Subsidiary to
Guarantee any obligations of Borrower under any of the Loan Documents or
(iii) of Borrower or any Subsidiary to create, incur, assume or suffer to
exist Liens on property of such Person (other than the negative pledge set forth
in the ABL Facility Documents as in effect on the Closing Date or as the same
may be amended, modified or changed thereafter in accordance with Section 7.15(b)(i)); provided, however, that this
clause (iii) shall not prohibit any negative pledge incurred or provided in
favor of any holder of Indebtedness permitted under this Agreement solely to the
extent any such negative pledge relates to the property financed by such
Indebtedness or the property subject to a Lien permitted under this Agreement
securing such Indebtedness.
5.21Compliance with OFAC Rules and
Regulations; Patriot Act.
(a) None
of Borrower, any Subsidiary of Borrower or any Affiliate of Borrower (a) is a
Sanctioned Person, (b) has more than 15% of its assets in Sanctioned Countries,
or (c) derives more than 15% of its operating income from investments in, or
transactions with, Sanctioned Persons or Sanctioned Countries. No
part of the proceeds of any extension of credit hereunder
will be
used directly or indirectly to fund any operations in, finance any investments
or activities in or make any payments to, a Sanctioned Person or a Sanctioned
Country. “OFAC” means the U.S. Department of the Treasury’s Office of
Foreign Asset Control. “Sanctioned Countries” means a country subject
to a sanctions program identified on the list maintained by OFAC and available
at http://www.treas.gov/offices/enforcement/ofac/sanctions/index.html, or
otherwise published from time to time. “Sanctioned Person” means (a)
a Person named on the list of “Specially Designated Nationals and Blocked
Persons” maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sanctions/index.html or otherwise
published from time to time, or (b)(i) an agency of the government of a
Sanctioned Country, (ii) an organization controlled by a Sanctioned Country, to
the extent subject to a sanctions program administered by OFAC.
(b) The
Borrower, any Subsidiary of Borrower or any Affiliate of Borrower are in
compliance in all material respects, to the extent applicable, with the Patriot
Act and other federal or state laws relating to “know your customer” and
anti-money laundering rules and regulations.
ARTICLE
VI.
AFFIRMATIVE
COVENANTS
So long
as any Lender shall have any Commitment hereunder, any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, Borrower shall, and shall (except
in the case of the covenants set forth in Sections 6.01,
6.02 and 6.03) cause each
Subsidiary to:
6.01Financial Statements
Deliver
to Agent a sufficient number of copies for delivery by Agent to each Lender, in
form and detail satisfactory to Agent and the Required Lenders:
(a) as soon as available, but in any event no later than the
earlier of five days after the deadline for filing imposed by the SEC or 95 days
after the end of each fiscal year of Borrower, a consolidated balance sheet of
Borrower and its Subsidiaries as at the end of such fiscal year, and the related
consolidated statements of income or operations, shareholders’ equity and cash
flows for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and prepared in
accordance with GAAP, audited and accompanied by: (i) a report and opinion of
a Registered Public Accounting Firm of nationally recognized standing not
reasonably objected to by the Required Lenders, which report and opinion shall
be prepared in accordance with generally accepted auditing standards and
applicable Securities Laws and shall not be subject to any “going concern” or
like qualification or exception or any qualification or exception as to the
scope of such audit and (ii) beginning with the report for December 31, 2010, a
report of such Registered Public Accounting Firm as to the Borrower’s internal
controls pursuant to Section 404 of Sarbanes-Oxley that: (A) expresses a
conclusion that would not reasonably be expected to have a Material Adverse
Effect and (B) identifies no issues related to Borrower’s or its Subsidiaries’
internal controls that would reasonably be expected to have a Material Adverse
Effect; and
(b) as
soon as available, but in any event within 50 days after the end of each of the
first three fiscal quarters of each fiscal year of Borrower, a consolidated
balance sheet of
Borrower
and its Subsidiaries as at the end of such fiscal quarter, and the related
consolidated statements of income or operations, shareholders’ equity and cash
flows for such fiscal quarter and for the portion of Borrower’s fiscal year then
ended, setting forth in each case in comparative form the figures for the
corresponding fiscal quarter of the previous fiscal year and the corresponding
portion of the previous fiscal year, all in reasonable detail, certified by a
Responsible Officer of Borrower as fairly presenting the financial condition,
results of operations, shareholders’ equity and cash flows of Borrower and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes.
6.02Certificates; Other
Information
Deliver
to Agent a sufficient number of copies for delivery by Agent to each Lender, in
form and detail satisfactory to Agent and the Required Lenders:
(a) concurrently
with the delivery of the financial statements referred to in Section 6.01(a),
a certificate of its independent certified public accountants certifying such
financial statements;
(b) concurrently
with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed
Compliance Certificate signed by a Responsible Officer of Borrower;
(c) within
five Business Days after the same are available, copies of each annual report,
proxy or financial statement or other report or communication sent to the
stockholders of Parent, and copies of all annual, regular, periodic and special
reports and registration statements which Parent may file or be required to file
with the Securities and Exchange Commission under Section 13 or
15(d) of the Securities Exchange Act of 1934, and not otherwise required to
be delivered to Agent pursuant hereto; and
(d) promptly, such additional information regarding the
business, financial or corporate affairs of Borrower or any Subsidiary, or
compliance with the terms of the Loan Documents, as Agent or any Lender
may from time to time reasonably request.
Documents
required to be delivered pursuant to Section 6.01(a) or
(b) or Section 6.02(c) (to
the extent any such documents are included in materials otherwise filed with the
SEC) may be delivered electronically and if so delivered, shall be deemed to
have been delivered on the date (i) on which the Borrower posts such documents,
or provides a link thereto on the Borrower’s website on the Internet at the
website address listed on Schedule 10.02; or
(ii) on which such documents are posted on the Borrower’s behalf on an Internet
or intranet website, if any, (or website maintained by the SEC) to which each
Lender and the Administrative Agent have access (whether a commercial,
third-party website or whether sponsored by the Administrative Agent); provided that: (i)
the Borrower shall deliver paper copies of such documents to the Administrative
Agent or any Lender that specifically requests the Borrower to deliver such
paper copies and (ii) the Borrower shall notify the Administrative Agent and
each Lender (by telecopier or electronic mail) of the posting of any such
documents and provide to the Administrative Agent by electronic mail electronic
versions (i.e.,
soft copies) of such documents. Notwithstanding anything contained
herein, in every instance the Borrower shall be required to provide paper copies
of the Compliance Certificates required by Section 6.02(b) to
the
Administrative
Agent. Except for such Compliance Certificates, the Administrative
Agent shall have no obligation to request the delivery or to maintain copies of
the documents referred to above, and in any event shall have no responsibility
to monitor compliance by the Borrower with any such request for delivery, and
each Lender shall be solely responsible for requesting delivery to it or
maintaining its copies of such documents.
Borrower
hereby acknowledges that (a) Agent will make available to Lenders materials
and/or information provided by or on behalf of Borrower hereunder (collectively,
“Borrower
Materials”) by posting Borrower Materials on Debtdomain or another
similar electronic system (the “Platform”) and
(b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that
do not wish to receive material non-public information with respect to Borrower
or its securities) (each, a “Public
Lender”). Borrower hereby agrees that (w) all Borrower
Materials that are to be made available to Public Lenders shall be clearly and
conspicuously marked “PUBLIC” which, at a
minimum, shall mean that the word “PUBLIC” shall appear
prominently on the first page thereof, provided, however, that no document
available on the website of the SEC need contain any legend; (x) by marking
Borrower Materials “PUBLIC,” Borrower shall be deemed to have authorized Agent
and the Lenders to treat such Borrower Materials as either publicly available
information or not material information (although it may be sensitive and
proprietary) with respect to Borrower or its securities for purposes of
United States Federal and state securities laws; (y) all Borrower Materials
marked “PUBLIC” are permitted to be made available through a portion of the
Platform designated “Public Investor;” and (z) Agent shall be entitled to
treat any Borrower Materials that are not marked “PUBLIC” (other than documents
available on the SEC website) as being suitable only for posting on a portion of
the Platform not designated “Public
Investor.”
6.03Notices
Not later
than five Business Days after Borrower obtains knowledge thereof, notify Agent
and each Lender:
(a) of
the occurrence of any Default to the knowledge of Borrower’s chief financial
officer or other Responsible Officer who is responsible for communicating with
Administrative Agent or Lenders regarding this Agreement or any of the matters
contemplated by this Agreement;
(b) of
any matter that has resulted or would reasonably be expected to result in a
Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a Contractual Obligation of Borrower or any Subsidiary;
(ii) any dispute, litigation, investigation, proceeding or suspension
between Borrower or any Subsidiary and any Governmental Authority; or
(iii) the commencement of, or any material development in, any litigation
or proceeding affecting Borrower or any Subsidiary, including pursuant to any
applicable Environmental Laws;
(c) of
the occurrence of (i) any ERISA Event, (ii) that Borrower or ERISA Affiliate has
filed or anticipates filing any request for a receipt of a minimum funding
waiver under Section 412 of the Code, (iii) any Multiemployer Plan has notified
the Borrower or ERISA Affiliate that it is or is expected to be in critical or
endangered status under Title IV of ERISA, or (iii) that any Pension Plan is or
is expected to be in at-risk status under Title IV of ERISA, setting forth the
full details as to such occurrence and the action, if any, that, Borrower or
such ERISA Affiliate is required or proposes to take, together with any notices
required or proposed
to be
given or filed by Borrower, the Plan administrator or such ERISA Affiliate to or
with the PBGC or any other Governmental Authority, or a Plan, or Multiemployer
Plan or participant and any notices received by Borrower or ERISA Affiliate from
the PBGC or any other Governmental Authority, or a Plan, Multiemployer Plan or
Plan participant with respect thereto; and
(d) of
any material change in accounting policies or financial reporting practices by
Borrower or any Subsidiary.
Each
notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of Borrower setting forth details of the occurrence referred
to therein and stating what action Borrower has taken and proposes to take with
respect thereto. Each notice pursuant to Section 6.03(a) shall
describe with particularity any and all provisions of this Agreement and any
other Loan Document that have been breached.
6.04Payment of Obligations
Pay and
discharge as the same shall become due and payable, all its obligations and
liabilities, including (a) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, unless the
same are being contested in good faith by appropriate proceedings diligently
conducted and adequate reserves in accordance with GAAP are being maintained by
Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would
by law become a Lien upon its property; and (c) all Indebtedness, as and
when due and payable, but subject to any subordination provisions contained in
any instrument or agreement evidencing such Indebtedness.
6.05Preservation of Existence,
Etc
(a) Preserve,
renew and maintain in full force and effect its legal existence and good
standing under the Laws of the jurisdiction of its organization except in a
transaction permitted by Section 7.02;
(b) take all reasonable action to maintain all rights, privileges, permits,
licenses and franchises necessary or desirable in the normal conduct of its
business, except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect; and (c) preserve or renew all
of its registered patents, trademarks, trade names and service marks, the
non-preservation of which would reasonably be expected to have a Material
Adverse Effect.
6.06Maintenance of Properties
(a) Maintain,
preserve and protect or replace all of its material properties and equipment
necessary in the operation of its business in good working order and condition,
ordinary wear and tear excepted; (b) make all necessary repairs thereto and
renewals and replacements thereof except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect; and (c) use not
less than the standard of care typical in the industry in the operation and
maintenance of its facilities.
6.07Maintenance of Insurance.
(a) In
addition to insurance requirements set forth in the Collateral Documents,
maintain with financially sound and reputable insurance companies (including
Lloyds of London syndicates) not Affiliates of Borrower (unless fully reinsured
by financially sound and reputable insurance companies), insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar
business
(operating similar aircraft in similar markets), of such types and in such
amounts (after giving effect to any self-insurance (that may not exceed
$5,000,000 per occurrence) and/or deductible compatible with the following
standards) as are customarily carried under similar circumstances by such
other Persons and providing for not less than 30 days’ prior notice to Agent of
termination or cancellation of such insurance. Without limiting the
generality of the foregoing, except as provided in paragraph (b) of this
Section 6.07,
Borrower will at all times carry or cause to be carried at its expense (or at
the expense of the lessee of such Aircraft), aircraft liability insurance
including passenger, third party, bodily injury and property damage, baggage,
cargo and mail liability and, subject to an aggregate limit, products legal
liability (exclusive of manufacturer’s product liability insurance) with respect
to each Aircraft owned by Borrower (A) for a combined single limit of at least
$600,000,000 per occurrence, (B) of the type and covering the risks as from
time to time determined by Borrower to be prudent, including insurance covering
war risk and allied perils and (C) which is maintained in effect with
insurers of recognized responsibility and reputation (or in the case of war risk
and allied perils cover, may be placed with an agency of the United States
Government). In the event that Borrower chooses to self-insure,
Borrower shall notify the Agent and Lenders of the amount of such self insurance
and relevant details, if any, concerning the interaction of the self-insurance
and the insurance in place. In addition, in the event of renewal or
replacement of any insurance policy providing for insurance coverage over the
Aircraft Collateral, Borrower shall reasonably promptly following such renewal
or replacement furnish to the Agent and Lenders certificates of insurance from
nationally recognized independent aviation insurance brokers certifying
insurance coverage over the Aircraft Collateral under the renewed or replacement
insurance policies.
(b) During
any period that an Aircraft is on the ground and not in operation, Borrower may
carry or cause to be carried, in lieu of the insurance required by Section 6.07(a)
above, insurance with respect to such Aircraft otherwise conforming with the
provisions of such Section 6.07(a)
except that (A) the amounts of coverage shall not be required to exceed the
amounts of public liability and property damage insurance from time to time
applicable to Aircraft owned or leased by Borrower of the same type as the
Aircraft which comprise Borrower’s fleet and which are on the same ground and
not in operation; and (B) the scope of the risks covered and the type of
insurance shall be the same as from time to time shall be applicable to Aircraft
owned or leased by Borrower of the same type which comprise Borrower’s fleet and
which are on the ground and not in operation; provided that if
Borrower then has no other similarly situated Aircraft, the terms of such
insurance during such period shall conform to prudent industry
standards.
6.08Compliance with Laws
Comply in
all material respects with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its business or property, except
in such instances in which (a) such requirement of Law or order, write,
injunction or decree is being contested in good faith by appropriate proceedings
diligently conducted; or (b) the failure to comply therewith would not
reasonably be expected to have a Material Adverse Effect.
6.09Books and Records
(a) Maintain
proper books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of Borrower or such
Subsidiary, as the case may be; and (b) maintain such books of record and
account in material
conformity
with all applicable requirements of any Governmental Authority having regulatory
jurisdiction over Borrower or such Subsidiary, as the case may be.
6.10Inspection Rights
Permit
representatives and independent contractors of Agent and each Lender to visit
and inspect any of its properties, to examine its corporate, financial and
operating records, and to discuss its affairs, finances and accounts with its
directors, officers, and independent public accountants, at such reasonable
times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to Borrower; provided, however, that when an
Event of Default exists Agent or any Lender (or any of their respective
representatives or independent contractors) may do any of the foregoing at
the expense of Borrower at any time during normal business hours.
6.11Use of Proceeds
Use the
proceeds of the Borrowings for capital expenditures, working capital and
other general corporate purposes not in contravention of any Law or of any Loan
Document.
6.12Financial Covenants; Maintenance of
Unrestricted Cash
Maintain
at all times total unrestricted cash and cash equivalents and marketable
securities (as determined in accordance with GAAP) of not less than Five Hundred
Million Dollars ($500,000,000.00).
6.13Collateral Records
To
execute and deliver promptly to Agent, from time to time, solely for Agent’s
convenience in maintaining a record of the Collateral, such written statements
and schedules as Agent may reasonably require designating, identifying or
describing the Collateral. The failure by Borrower, however, to
promptly give Agent such statements or schedules shall not affect, diminish,
modify or otherwise limit the Liens on the Collateral granted pursuant to the
Collateral Documents.
6.14Security Interests
To
(a) defend the Collateral against all claims and demands of all Persons at
any time claiming the same or any interest therein, (b) comply with the
requirements of all state and federal laws in order to grant to Agent and
Lenders valid and perfected first priority security interests in the Collateral,
with perfection, in the case of any investment property, deposit account or
letter of credit, being effected by giving Agent control of such investment
property or deposit account or letter of credit, rather than by the filing of a
Uniform Commercial Code (“UCC”) financing
statement with respect to such investment property, and (c) do whatever
Agent may reasonably request, from time to time, to effect the purposes of this
Agreement and the other Loan Documents, including filing notices of liens, UCC
financing statements, and amendments, renewals and continuations thereof;
cooperating with Agent’s representatives; keeping stock records; obtaining
waivers from landlords and mortgagees and from warehousemen and their landlords
and mortgages; and, paying claims which might, if unpaid, become a Lien on the
Collateral. Agent is hereby authorized by Borrower to file any UCC
financing statements covering the Collateral whether or not Borrower’s
signatures appear thereon, and Agent agrees to provide a copy thereof to
Borrower prior to any such filing.
6.15Collateral.
(a) Collateral Review
Date. On or before the last Business Day of each July and
January (each a “Collateral Review
Date”), Borrower shall provide to the Administrative Agent (which shall
provide to each Lender) a Qualified Appraisal showing the Current Market Value
of each Pledged Aircraft as of a Valuation Date that is no earlier than 30 days
prior to the applicable Collateral Review Date.
(b) Cure of Collateral Shortfall
or Over Advance. If a Collateral Shortfall exists or Borrower
elects to cure an Over Advance pursuant to Section 2.03(b) in whole or in part
by pledging addition Collateral, then Borrower shall cure such Collateral
Shortfall or Over Advance by, at Borrower’s option, either or any combination of
the following:
(i) within 15 Business Days after the date of such
Collateral Shortfall or five Business Days after the date of an Over Advance, executing and delivering to the
Administrative Agent a supplement to the Security Agreement in substantially the
form of Schedule I to the Security Agreement (a “Security Agreement
Supplement”) and providing the
Administrative Agent with evidence satisfactory to it that:
(A) the
Security Agreement, as supplemented by such Security Agreement Supplement, has
granted a security interest to the Administrative Agent in one or more Aircraft
owned by Borrower (the “Added Pledged
Aircraft”) that was not or were not already Pledged Aircraft as
security for the Obligations;
(B) such
security interest is a perfected first-priority security interest and each Added
Pledged Aircraft is free and clear of: (i) any Liens other than Liens
permitted by Section 7.01;
and (ii) any other interest that has been recorded in the records the
Aircraft Registry of United States Department of Transportation, Federal
Aviation Administration (the “FAA
Registry”);
(C) the
Current Market Value of the Added Pledged Aircraft is sufficient, in combination
with any Cash Collateral pledged in accordance with Section 6.15(b)(ii), to cure
the Collateral Shortfall or the Over Advance, as applicable;
(D) all
insurance policies required by this Agreement or the Security Agreement with
respect to the Added Pledged Aircraft have been duly issued and remain in force
in accordance therewith and that Administrative Agent and Lenders have been
named as loss payees (subject to the last paragraph of Section 3.5(a) of the
Security Agreement) to the extent of their interest (the lower of (x) the
Current Market Value as reflected on the last Qualified Appraisal or (y) the
Obligations outstanding at the time of payment of insurance proceeds) and
additional insured under all policies of casualty insurance and as additional
insured under all policies of liability insurance; and
(E) the
execution, delivery and performance of the Security Agreement Supplement have
been duly authorized by all necessary corporate
action of
Borrower and the Security Agreement, as amended by such supplement, constitutes
the legal, valid and binding obligation of Borrower; or
(ii) within
15 Business Days after such Collateral Shortfall or five Business Days after the
date of Over Advance, executing and delivering to the Administrative Agent, a
Cash Pledge Agreement or an amendment thereto pledging Cash Collateral that
qualifies in all respects for inclusion in the Borrowing Base. Such
additional Cash Collateral shall be in an amount sufficient, in combination with
any Aircraft Collateral pledged in accordance with Section 6.15(b)(i), to cure
the Collateral Shortfall or the Over Advance, as applicable.
If
Borrower elects to cure a Collateral Shortfall or an Over Advance pursuant to
clause (i) above, the Administrative Agent may also require that Borrower
provide a legal opinion issued by aviation counsel for Borrower acceptable to
the Administrative Agent covering some or all of the FAA and CTT matters covered
by the legal opinion delivered on the Closing Date.
(c) Substitution of
Engines. Provided that no Event of Default has occurred and is
continuing, Borrower may, from time to time, send the Administrative Agent a
written request (which shall be received by the Administrative Agent no later
than the fifth Business Day prior the Administrative Agent is to release its
security agreement described below) to substitute an Engine that is not covered
by the Security Agreement (an “Added
Engine”) for an Engine that is covered by the Security Agreement
which may include an Engine that has been subject to an Event of Loss (a “Removed
Engine”). The Administrative Agent shall release its security
interest in the Removed Engine within three Business Days after the date when
Borrower has executed and delivered to the Administrative Agent a Security
Agreement Supplement covering the Added Engine and provided the Administrative
Agent with evidence satisfactory to it that:
(i) the
Security Agreement, as supplemented by such Security Agreement Supplement, has
granted a security interest to the Administrative Agent in the Added Engine as
security for the Obligations;
(ii) such
security interest is a perfected first-priority security interest and the Added
Engine is free and clear of: (A) any Liens other than Liens
permitted by Section 7.01;
and (B) any other interest that has been recorded in the FAA Registry or
International Registry;
(iii) the
Added Engine is of the same or improved make and model and of at least the same
utility as the Removed Engine;
(iv) all
insurance policies and/or endorsements required by this Agreement or the
Security Agreement with respect to the Added Engine have been duly issued and
remain in force in accordance therewith and that Administrative Agent and
Lenders have been named as additional insured and under all policies of casualty
insurance and as additional insured under all policies of liability
insurance;
(v) if
requested by the Administrative Agent, the execution, delivery and performance
of the Security Agreement Supplement has been duly authorized by
all
necessary
corporate action of Borrower and the Security Agreement, as amended by such
supplement, constitutes the legal, valid and binding obligation of Borrower;
and
(vi) if
requested by the Administrative Agent, a legal opinion issued by counsel for
Borrower acceptable to the Administrative Agent covering some or all of the
matters covered by the legal opinions delivered on the Closing Date as they
apply to the Added Engine.
(d) Substitution of
Aircraft. Provided that no Event of Default has occurred and
is continuing, Borrower may, from time to time, send the Administrative Agent a
written request to substitute an Aircraft that is not covered by the Security
Agreement (an “Added
Aircraft”) for an Aircraft that is covered by the Security Agreement
which may include an Aircraft that has been subject to an Event of Loss (a
“Removed
Aircraft”). The Administrative Agent shall release its
security interest in the Removed Aircraft within five Business Days after the
Aircraft Substitution Request Date. “Aircraft Substitution
Request Date” means the date when Borrower has executed and delivered to
the Administrative Agent a Security Agreement Supplement covering the Added
Aircraft and provided the Administrative Agent with evidence satisfactory to it
of each of the following:
(i) the
Security Agreement, as supplemented by such Security Agreement Supplement, has
granted a security interest to the Administrative Agent in the Added Aircraft as
security for the Obligations;
(ii) such
security interest is a perfected first-priority security interest and the Added
Aircraft is free and clear of any Liens or option other than Liens permitted by
Section
7.01;
(iii) the
Current Market Value of the Added Aircraft is equal to or greater than the
Current Market Value of the Removed Aircraft, each as set forth in a Qualified
Appraisal with a Valuation Date no earlier than 30 days prior to the Aircraft
Substitution Request Date;
(iv) all
insurance policies and/or endorsements required by this Agreement or the
Security Agreement with respect to the Added Engine have been duly issued and
remain in force in accordance therewith and that Administrative Agent and
Lenders have been named as loss payees (subject to the last paragraph of Section 3.5(a) of the
Security Agreement) to the extent of their interest (the lower of (x) the
Current Market Value as reflected on the last Qualified Appraisal or (y) the
Obligations outstanding at the time of payment of insurance proceeds) and
additional insured under all policies of casualty insurance and as additional
insured under all policies of liability insurance;
(v) if
requested by the Administrative Agent, the execution, delivery and performance
of the Security Agreement Supplement has been duly authorized by all necessary
corporate action of Borrower and the Security Agreement, as amended by such
supplement, constitutes the legal, valid and binding obligation of
Borrower;
(vi) the
Added Aircraft is a Boeing 737 type Aircraft; and
(vii) if
requested by the Administrative Agent, a legal opinion issued by counsel for
Borrower acceptable to the Administrative Agent covering some or all of the
matters covered by the legal opinions delivered on the Closing Date as they
apply to the Added Aircraft.
(e) Release of
Collateral. If (i) Borrower reduces the Aggregate
Commitments in accordance with Section 2.04 or
has, through Qualified Appraisals, demonstrated that an Aircraft can be removed
from the Aircraft Collateral and still leave the Aircraft Collateral equal to or
greater than 150% of the Aggregate Commitments, (ii) Borrower provides to
the Administrative Agent a Qualified Appraisal with a Valuation Date no earlier
than 30 days prior to Borrower’s Release Request, and (iii) no Default
under Sections
8.01(a) or 8.01(f) and no
Event of Default has occurred and is continuing, then Borrower may send the
Administrative Agent a written request (a “Release
Request”) to release one or more Aircraft from the security interest
created by the Security Agreement. Each such Release Request shall
identify the specific Aircraft to be released and shall state the Current Market
Value of each Aircraft to be released and of the Aircraft Collateral after
giving effect to such release. If the Qualified Appraisal confirms
that, after giving effect to such release, the Current Market Value of the
Aircraft Collateral would be greater than or equal to 150% of the Aggregate
Commitments as so reduced, then the Administrative Agent will, within five
Business Days after its receipt of the Release Request, release the security
interest in such Aircraft and/or Engines.
(f) Substitution of Cash
Collateral. Borrower may request the release of the
Administrative Agent’s security interest in the Aircraft Collateral in exchange
for a security interest in Cash Collateral acceptable to the Administrative
Agent and Requisite Lenders or a release of Cash Collateral in exchange for a
security interest in Aircraft Collateral. Borrower’s right to obtain
such release, in the case of Aircraft Collateral, shall be subject to Borrower
executing and delivering to Administrative Agent a Cash Pledge Agreement
covering the Cash Collateral and Borrower, the Administrative Agent and
Requisite Lenders reaching agreement regarding (i) the perfection, priority and
valuation of the Cash Collateral; and (iii) the amendments to this
Agreement necessary or appropriate in light of such substitution of
collateral. Borrower’s right to obtain such release of Cash
Collateral shall be subject to Borrower executing and delivering to
Administrative Agent a Security Agreement Supplement covering additional
Aircraft Collateral that meets all the requirements of (b) above for curing any
Collateral Shortfall (assuming that the Agent has released the Cash Collateral
that Borrower has requested be released).
(g) Duration of
Valuation. Except as otherwise provided in Section 6.15(h),
the Current Market Value of a Pledged Aircraft as set forth in the Qualified
Appraisal associated with a Collateral Review Date or a substitution of Pledged
Aircraft shall remain in effect until the Qualified Appraisal associated with
the earlier of the next Collateral Review Date or the next request for a
substitution of Pledged Aircraft.
(h) Event of
Loss. Within ten (10) days after the occurrence of an
Event of Loss with respect to a Pledged Aircraft, Borrower shall notify the
Administrative Agent and Lenders in writing of such Event of Loss, which notice
shall state the Current Market Value of the affected Pledged Aircraft and
certify that Borrower has filed a casualty insurance claim with respect to such
Event of Loss. Immediately upon the occurrence of an Event of Loss
with respect to any
Pledged
Aircraft, the Current Market Value of the Aircraft Collateral shall immediately
be reduced by the Current Market Value of the Pledged Aircraft that was subject
to such Event of Loss. During the Claim Collateral Period, the
Current Market Value of the Aircraft Collateral shall be increased by the Agreed
Value Amount less the amount, if any, attributable to any underwriter of such
insurance that has become insolvent or that has commenced, had commenced against
it, or has otherwise become subject to, a bankruptcy, receivership or other
insolvency proceeding. Immediately at the end of such Claim
Collateral Period, the Current Market Value of the Aircraft Collateral shall no
longer include such Agreed Value Amount and any proceeds that exceed the Current
Market Value of the Aircraft received by the Agent shall either be used to
reduce the Outstanding Amount or remitted to Borrower (a) at the option
of Borrower if, at such time, no Default or Event of Default has
occurred and is continuing or would occur if such proceeds were remitted to
Borrower and Borrower would otherwise be entitled to re-borrow the amount of
such proceeds in accordance with the terms of this Agreement; and (b) otherwise,
at the option of the Agent.
6.16State of Incorporation
Borrower
shall give the Administrative Agent at least 30 days’ prior written notice
thereof before changing its state of incorporation or otherwise ceasing to be an
Alaska corporation.
6.17Further Assurances
Promptly
upon request by the Administrative Agent or the Required Lenders, do, execute,
acknowledge, authorize, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, aircraft mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments the
Administrative Agent or such Lenders, as the case may be, may reasonably require
from time to time in order (i) to carry out more effectively the purposes
of any Collateral Document, (ii) to subject to the Liens created by any of
the Collateral Documents any of the properties, rights or interests covered by
any of the Collateral Documents, (iii) to perfect and maintain the
validity, effectiveness and priority of any of the Collateral Documents and the
Liens intended to be created thereby, and (iv) to better assure, convey,
grant, assign, transfer, preserve, protect and confirm to the Agent and the
Lenders the rights granted or now or hereafter intended to be granted to the
Agent and/or the Lenders under the Collateral Documents or under any other
document, instrument or agreement from time to time executed by Borrower in
connection therewith.
6.18Patriot Act
Borrower
shall, promptly following a request by the Administrative Agent or any Lender,
provide all documentation and other information that the Administrative Agent or
such Lender requests in order to comply with its ongoing obligations under
applicable “know your customer” and anti-money laundering rules and regulations,
including the Patriot Act.
ARTICLE
VII.
NEGATIVE
COVENANTS
So long
as any Lender shall have any Commitment hereunder, any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, Borrower shall not, nor shall it
permit any Subsidiary to, directly or indirectly:
7.01 Liens
Create,
incur, assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than the
following:
(a) Liens
pursuant to any Collateral Document or any other Loan Document, if
any;
(b) Liens
on Collateral purported to be covered by a Collateral Document if and to the
extent permitted under such Collateral Document;
(c) Liens
on (i) aircraft and aircraft equipment, including airframes, engines,
appliances, equipment, instruments, and accessories from time to time belonging
to, installed in, or appurtenant to such airframes and engines; (ii) aircraft
spare parts; and (iii) logs, manuals and other records relating to
aircraft; provided, however, that in no event shall any of the Liens permitted
by this Section 7.01(c) include Liens on any Collateral;
(d) Liens
(other than (x) those permitted by Section 7.01(c) and (y) any Liens on other
property of Borrower or any Subsidiary (other than Aircraft Collateral) that
secure Indebtedness not exceeding $10,000,000 in the aggregate) existing on the
date hereof and listed on Schedule 7.01 and any
renewals or extensions thereof, provided that (i) the property covered
thereby is not changed, (ii) the amount secured or benefited thereby is not
increased, (iii) the direct or any contingent obligor with respect thereto
is not changed, and (iv) any renewal or extension of the obligations secured or
benefited thereby is permitted by this Agreement, provided, however, that in no
event shall any of the Liens permitted by this Section 7.01(d) include Liens on
any Collateral;
(e) Liens
for taxes not yet due or which are being contested in good faith and by
appropriate proceedings diligently conducted, if (i) adequate reserves with
respect thereto are maintained on the books of the applicable Person in
accordance with GAAP, and (ii) in the case of a Lien against any of the
Collateral, such contest proceedings operate to stay the sale of any portion of
the Collateral to satisfy such Taxes;
(f) carriers’,
warehousemen’s, mechanics’, material supplier’s, repairer’s or other like Liens
arising in the ordinary course of business for services or supplies, the payment
for which is not overdue for a period of more than 30 days or which are being
contested in good faith and by appropriate proceedings diligently conducted,
(i) if adequate reserves with respect thereto are maintained on the books
of the applicable Person in accordance with GAAP, and (ii) in the case of a
Lien against any of the Collateral, such contest proceedings operate to stay the
sale of any portion of the Collateral to satisfy such Liens;
(g) pledges
or deposits in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security legislation,
other than any Lien imposed by ERISA;
(h) deposits
to secure the performance of bids, trade contracts and leases (other than
Indebtedness), statutory obligations, surety bonds (other than bonds related to
judgments or litigation), performance bonds, payment bonds, standby letters of
credit, Swap Contracts and other obligations of a like nature, in each case,
incurred in the ordinary course of business; provided, however, that in no event
shall any of the Liens permitted by this Section 7.01(h) include Liens on any
Collateral;
(i) newly
created easements, rights-of-way, restrictions and other similar encumbrances
affecting real property which, in the aggregate, are not substantial in amount,
and which do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the applicable Person, or now existing easements, rights-of-way,
restrictions or other encumbrances;
(j) Liens
securing judgments for the payment of money not constituting an Event of Default
under Section 8.01(h) or
securing appeal or other surety bonds related to such judgments, provided,
however, that in no event shall any of the Liens permitted by this Section
7.01(j) include Liens on any Collateral;
(k) Liens
on Borrower’s rights under an aircraft purchase agreement with respect to an
aircraft securing any Permitted Progress Payment Loan made with respect to such
aircraft, provided, however, that in no event shall any of the Liens permitted
by this Section 7.01(k) include Liens on any Aircraft Collateral;
(l) Liens
securing Indebtedness permitted pursuant to Section 7.14; provided, however, that such
Liens shall only extend to pledges of cash and cash equivalents granted by
Borrower and the collateral described in the security agreements entered into in
connection with the original closing of such facility (including any
replacements or proceeds thereof); provided, further, however, that in no
event shall any of the Liens permitted by this Section 7.01(l)
include Liens on any Collateral;
(m) Liens
on Borrower’s real property to secure Indebtedness that is underwritten based
upon the value of the real property that is security for such
Indebtedness;
(n) Liens,
other than Liens permitted under clauses (a)-(m) of this Section 7.01, that do
not secure Indebtedness for borrowed money (including bonds or debentures),
letters of credit or an item of Indebtedness that expressly identified as being
unsecured so long as the aggregate amount of obligations secured by all such
Liens does not exceed $25,000,000 at any time; provided, however, that in no
event shall any of the Liens permitted by this Section 7.01(n)
include Liens on any Collateral.
7.02Fundamental Changes
Merge,
dissolve, liquidate, consolidate with or into another Person, or Dispose of
(whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter
acquired) to or in favor of any Person, except that, so long as no Default
exists or would result therefrom:
(a) any
Subsidiary may merge with (i) Borrower, provided that
Borrower shall be the continuing or surviving Person, or (ii) any one or
more other Subsidiaries, provided that when
any wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned
Subsidiary shall be the continuing or surviving Person; and
(b) any
Subsidiary may Dispose of all or substantially all of its assets (upon voluntary
liquidation or otherwise) to Borrower or to another Subsidiary; provided
that if the transferor in such a transaction is a wholly-owned Subsidiary, then
the transferee must either be Borrower or a wholly-owned
Subsidiary.
7.03 Dispositions
Make any
Disposition or enter into any agreement to make any Disposition,
except:
(a) Dispositions
of obsolete, no longer useful or worn out property (other than Collateral),
whether now owned or hereafter acquired, in the ordinary course of
business;
(b) Dispositions
of inventory in the ordinary course of business;
(c) Dispositions
of equipment (other than Collateral) or real property to the extent that
(i) such property is exchanged for credit against the purchase price of
similar replacement property, or (ii) the proceeds of such Disposition are
reasonably promptly applied to the purchase price of such replacement
property;
(d) Disposition
of equipment (other than Collateral) in an arms’ length transaction
for fair market value provided that: (i) such equipment is no longer
necessary for the successful operation of Borrower’s business or the generation
of revenue sufficient to service Borrower’s Obligations, and (ii) the aggregate
amount of Dispositions under this clause (d) from the date of this Agreement
through the Maturity Date does not exceed ten percent (10%) of the book value
net of depreciation of all Borrower’s equipment (other than Collateral) on the
date of this Agreement;
(e) Dispositions
of property by any Subsidiary to Borrower or to a wholly-owned Subsidiary;
and
(f) Non-exclusive
licenses of IP Rights in the ordinary course of business and substantially
consistent with past practice for terms not exceeding five years;
(g) Dispositions
permitted by Section 7.02;
(h) Dispositions
of Collateral expressly permitted under the Security Agreement;
(i) Dispositions
of aircraft and aircraft equipment that is not Collateral if such Dispositions
are of a type expressly permitted under the Security Agreement with respect to
Aircraft Collateral; and
(j) Dispositions
of aircraft or aircraft equipment that is not Collateral in sale-and-lease-back
transactions under which Borrower remains in possession and control of such
aircraft or aircraft equipment as the lessee thereof.
provided, however, that any
Disposition pursuant to clauses (a) through (e) and clauses (h)
through (j) shall be for fair market value.
7.04[Intentionally Omitted]
7.05Restricted Junior Payments
.Make any
Restricted Junior Payment; provided, however, that, so
long as it is permitted by law, and so long as no Default or Event of Default
shall have occurred and be continuing or would result therefrom,
(a) Borrower
may make distributions to former employees, officers, or directors of Borrower
(or any spouses, ex-spouses, or estates of any of the foregoing) on account of
redemptions of Equity Interest of Parent held by such Persons, provided, however, that the
aggregate amount of such redemptions made by Borrower during the term of this
Agreement plus the amount of unsecured Indebtedness of Borrower owing to former
employees, officers, or directors (or any spouses, ex-spouses, or estates of any
of the foregoing) incurred in connection with the repurchase by Borrower of the
Equity Interest of Parent that has been issued to such Persons, does not exceed
[***] in the aggregate,
(b) Borrower
may make distributions to former employees, officers, or directors of Borrower
(or any spouses, ex-spouses, or estates of any of the foregoing), solely in the
form of forgiveness of Indebtedness of such Persons owing to Borrower on account
of repurchases of the Equity Interest of Parent held by such Persons; provided that such
Indebtedness was incurred by such Persons solely to acquire Equity Interest of
Parent,
(c) Borrower
may declare and pay dividends or make distributions to Parent, the proceeds of
which shall be used by Parent solely to pay (i) (y) franchise taxes (other than
income taxes) and other fees, taxes and expenses required to maintain its
corporate existence or arising as a result of its ownership of Borrower, and (z)
federal, state and local income taxes, to the extent such income taxes are
attributable to the income of Borrower; provided that the amount of such
payments in any fiscal year does not exceed the amount that Borrower would be
required to pay in respect of federal, state and local taxes for such fiscal
year were Borrower to pay such taxes separately from Parent, and (ii) ordinary
course operating and corporate overhead expenses and administrative and similar
expenses related to its existence and ownership of Borrower, and
(d) Borrower
may declare and pay dividends or make distributions to Parent so long as (i) no
Event of Default has occurred and is continuing or would result therefrom and
(i) Borrower’s total unrestricted cash and cash equivalents and marketable
securities (as determined in accordance with GAAP) is equal to $600,000,000, or
greater, before and immediately after giving effect thereto.
7.06ERISA
At any
time (a) engage in a transaction which could be subject to Sections 4069 or
4212(c) of ERISA and would have a Material Adverse Effect, (b) permit any
Pension Plan to (i) engage in any non-exempt “prohibited transaction” (as
defined in Section 4975 of the Code) that would have a Material Adverse Effect;
(ii) fail to comply with ERISA or any other applicable Laws and the failure
would have a Material Adverse Effect; or (iii) incur any material “unpaid
minimum required contribution” (as defined in the Pension Rules), which would
have a Material Adverse Effect; (c) permit an ERISA Event to occur with
respect to a Pension Plan or Multiemployer Plan which has resulted or could
reasonably be expected to result in liability of Borrower under Title IV of
ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount
in excess of [***]; (d) permit no Multiemployer Plan to be in critical or
endangered status under Section 432 of the Code; or (e) fail to pay, or
permit any
* Indicates that certain information contained herein has been
omitted and filed separately with the Securities and Exchange Commission.
Confidential treatment has been requested with respect to the omitted
portions.
ERISA
Affiliate to fail to pay, when due, after the expiration of any applicable grace
period, any installment payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of [***].
7.07Air Carrier
Cease to
be a U.S. Air Carrier or receive notice that it will lose or have revoked
any license, certificate, qualification or other requirement to be a U.S. Air
Carrier.
7.08Change in Nature of
Business
Engage in
any material line of business substantially different from, and not in support
of, those lines of business conducted by Borrower and its Subsidiaries on the
date hereof or any business substantially related or incidental
thereto.
7.09Transactions with
Affiliates
Enter
into transactions of any kind with Affiliates of Borrower unless such
transactions, taken as a whole, are substantially as favorable to Borrower and
its Subsidiaries as would be obtainable by Borrower or its Subsidiaries in a
comparable arm’s length transaction with a Person other than an
Affiliate.
7.10Burdensome Agreements
Enter
into any material Contractual Obligation (other than this Agreement or any other
Loan Document) that (a) limits the ability (i) of any Subsidiary
to make Restricted Payments to Borrower or to otherwise transfer property to
Borrower, (ii) of any Subsidiary to Guarantee any of Borrower’s obligations
under any of the Loan Documents or (iii) of Borrower or any Subsidiary to
create, incur, assume or suffer to exist Liens on property of such Person (other
than the negative pledge set forth in the ABL Facility Documents as in effect on
the Closing Date or as the same may be amended, modified or changed thereafter
in accordance with Section 7.15(b)(i)); provided, however, that this
clause (iii) shall not prohibit any negative pledge incurred or provided in
favor of any holder of Indebtedness permitted under this Agreement solely
to the extent any such negative pledge relates to the property financed by or
the subject of such Indebtedness; or (b) requires the grant of a Lien to
secure an obligation of such Person if a Lien is granted to secure another
obligation of such Person.
7.11Loans
In the
case of Borrower, make any loans to its Subsidiaries or Affiliates in an
aggregate amount exceeding [***] or incur any obligations to Parent for borrowed
money that are not Subordinated Liabilities, and in the case of Borrower’s
Subsidiaries or Affiliates, make any loans to Borrower that are not Subordinated
Liabilities.
7.12Use of Proceeds
Use the
proceeds of any Borrowing, whether directly or indirectly, and whether
immediately, incidentally or ultimately, to purchase or carry margin stock
(within the meaning of Regulation U of the FRB) or to extend credit to
others for the purpose of purchasing or carrying margin stock or to refund
indebtedness originally incurred for such purpose.
7.13Invalidity Event
Cause,
permit, or suffer to exist, directly or indirectly, any Invalidity
Event.
7.14Indebtedness under the ABL
Facility
Create, incur, assume,
suffer to exist,
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted
portions.
guarantee,
or otherwise become or remain, directly or indirectly, liable with respect to
Indebtedness under the ABL Facility in an aggregate outstanding principal amount
that exceeds $100,000,000 or refinance, renew, or extend Indebtedness under the
ABL Facility other than Refinancing Indebtedness of such
Indebtedness.
7.15Prepayments and Amendments
(a) Except
in connection with Refinancing Indebtedness,
(i) if
by doing so Borrower’s total unrestricted cash and cash equivalents and
marketable securities (as determined in accordance with GAAP) would drop below
that required by Section 6.12,
optionally prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of Borrower, other than the Obligations in accordance with this
Agreement,
(ii) make
any payment on account of Indebtedness that has been contractually subordinated
in right of payment if such payment is not permitted at such time under the
subordination terms and conditions, or
(b) Directly
or indirectly, amend, modify, or change any of the terms or provisions
of
(i) the
ABL Facility Documents except so long as such amendment, modification, or change
(x) could not, individually or in the aggregate, reasonably be expected to be
materially adverse to the interests of the Lenders, and (y) would not otherwise
cause Borrower to breach any of the provisions of this Agreement,
or
(ii) the
Organization Documents of Borrower if the effect thereof, either individually or
in the aggregate, could reasonably be expected to be materially adverse to the
interests of the Lenders.
ARTICLE
VIII.
EVENTS
OF DEFAULT AND REMEDIES
8.01Events of Default
Any of
the following shall constitute an Event of Default:
(a) Non-Payment. Borrower
fails to pay (i) when and as required to be paid herein any amount of
principal of any Loan (including, without limitation, pursuant to Section
2.03(c)), or (ii) within five Business Days after the same becomes due, any
interest on any Loan, or any fee due hereunder, or (iii) within five
Business Days after the same becomes due, any other amount payable hereunder or
under any other Loan Document; or
(b) Specific
Covenants. Borrower fails to perform or observe (i) any term,
covenant or agreement contained in Section 7.13 of this Agreement and such
failure continues for five (5) Business Days after the occurrence of the
applicable event, (ii) any term, covenant or agreement contained in Section 7.14
or 7.15 of this Agreement and such failure continues for ten (10) Business Days
after the occurrence of the applicable event or (iii) any term, covenant or
agreement contained in this Agreement a (other than those covered by Section
8.01(a) and in the preceding
clause (i) or clause (ii)) and such failure continues for fifteen (15) Business
Days after the occurrence of the applicable event; or
(c) Other
Defaults. Borrower fails to perform or observe any other
covenant or agreement (not specified in subsection (a) or
(b) above) contained in any Loan Document on its part to be performed
or observed and such failure continues for 30 days or any Event of Default
occurs under any other Loan Document; or
(d) Representations and
Warranties. Any representation, warranty, certification or
statement of fact made or deemed made by or on behalf of Borrower herein, in any
other Loan Document, or in any document delivered in connection herewith or
therewith shall be incorrect or misleading when made or deemed made and, in the
case of a misrepresentation that is capable of being cured, such
misrepresentation shall not have been cured within 30 days after a Responsible
Officer of Borrower either has knowledge thereof or has received written notice
thereof from the Administrative Agent; or
(e) Cross-Default. (i) Borrower
or any Subsidiary: (A) fails to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise) in respect of any Indebtedness or Guarantee (other than
Indebtedness hereunder and Indebtedness under Swap Contracts) having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than the Threshold Amount for any such individual
agreement or $30,000,000 for any combination of such agreements, or
(B) fails to observe or perform any other agreement or condition relating
to any such Indebtedness or Guarantee or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event occurs,
the effect of which default or other event is to cause, or to permit the holder
or holders of such Indebtedness or the beneficiary or beneficiaries of such
Guarantee (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to be demanded or to become due or to be
repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an
offer to repurchase, prepay, defease or redeem such Indebtedness to be made,
prior to its stated maturity, or such Guarantee to become payable or cash
collateral in respect thereof to be demanded; or (ii) there occurs under
any Swap Contract an Early Termination Date (as defined in such Swap
Contract) resulting from (A) any event of default under such Swap
Contract as to which Borrower or any Subsidiary is the Defaulting Party (as
defined in such Swap Contract) or (B) any Termination Event (as so
defined) under such Swap Contract as to which Borrower or any Subsidiary is
an Affected Party (as so defined) and, in either event, the Swap
Termination Value owed by Borrower or such Subsidiary as a result thereof is
greater than the Threshold Amount for any such individual agreement or
$30,000,000 for any combination of such agreements; or
(f) Insolvency Proceedings,
Etc. Borrower, any Subsidiary or Parent institutes or consents
to the institution of any proceeding under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its
property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the application or consent
of such Person and
the
appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding under any Debtor Relief Law relating to any such Person or to all or
any material part of its property is instituted without the consent of such
Person and continues undismissed or unstayed for 60 calendar days, or an order
for relief is entered in any such proceeding; or
(g) Inability to Pay Debts;
Attachment. (i) Borrower, any Subsidiary or Parent
becomes unable or admits in writing its inability or fails generally to pay its
debts as they become due, or (ii) any writ or warrant of attachment or
execution or similar process is issued or levied against all or any material
part of the property having a value, in the aggregate, in excess of $5,000,000
of any such Person and is not released, vacated or fully bonded within 30 days
after its issue or levy; or
(h) Judgments. There
is entered against Borrower or any Subsidiary: (i) a final judgment or
order for the payment of money in an aggregate amount exceeding the Threshold
Amount (to the extent not covered by independent third-party insurance as to
which the insurer does not dispute coverage), or (ii) any one or more
non-monetary final judgments that have, or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and, in either case,
(A) enforcement proceedings are commenced by any creditor upon such
judgment or order, or (B) there is a period of 10 consecutive days during
which a stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, is not in effect; or
(i) ERISA. (i) An
ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which
has resulted or could reasonably be expected to result in liability (including
the imposition of a lien under Code Section 430(k) and/or ERISA Section 303(k))
of Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan
or the PBGC in an aggregate amount in excess of the Threshold Amount, or
(ii) Borrower or any ERISA Affiliate fails to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a
Multiemployer Plan in an aggregate amount in excess of the Threshold Amount;
and, in either case, such ERISA Event or failure to pay would reasonably be
expected to have a Material Adverse Effect; or
(j) Material Failure of
Security. A Material Failure of Security occurs and is not
cured within five (5) Business Days after its occurrence. Without
limiting other possible cure methods, Borrower may cure a Material Failure of
Security by pledging Cash Collateral so long as such cash collateral qualifies
in all respects to be included in the Borrowing Base and results in the
Borrowing Base being returned to the amount thereof immediately prior to the
occurrence of such Material Failure of Security.
8.02Remedies Upon Event of
Default
If any
Event of Default occurs and is continuing, Agent may, and shall at the request
of the Required Lenders, take any or all of the following actions:
(a) declare
the commitment of each Lender to make Loans to be terminated, whereupon such
commitments and obligation shall be terminated;
(b) declare
the unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any
other Loan Document to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by Borrower; and
(c) exercise
on behalf of itself and the Lenders all rights and remedies available to it and
the Lenders under the Loan Documents;
provided, however, that upon
the occurrence of an actual or deemed entry of an order for relief with respect
to Borrower under the Bankruptcy Code, the obligation of each Lender to make
Loans shall automatically terminate, and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, in each case without further act of Agent
or any Lender.
8.03Application of Funds
After the
exercise of remedies provided for in Section 8.02 (or
after the Loans have automatically become immediately due and payable as set
forth in the proviso to Section 8.02,
any amounts received on account of the Obligations shall be applied by Agent in
the following order:
First, to payment of
that portion of the Obligations constituting fees, indemnities, expenses and
other amounts (including fees, charges and disbursements of counsel to Agent and
amounts payable under Article III) payable
to Agent in its capacity as such;
Second, to payment of
that portion of the Obligations constituting fees, indemnities and other amounts
(other than principal and interest) payable to Lenders (including fees,
charges and disbursements of counsel to the respective Lenders and amounts
payable under Article III),
ratably among them in proportion to the amounts described in this clause Second
payable to them;
Third, to payment of
that portion of the Obligations constituting accrued and unpaid interest on the
Loans and other Obligations, ratably among Lenders in proportion to the
respective amounts described in this clause Third payable to them;
Fourth, to payment of
that portion of the Obligations constituting unpaid principal of the Loans,
ratably among Lenders in proportion to the respective amounts described in this
clause Fourth held by them; and
Last, the balance, if
any, after all of the Obligations have been indefeasibly paid in full, to
Borrower or as otherwise required by Law.
ARTICLE
IX.
ADMINISTRATIVE
AGENT
9.01Appointment and Authorization of
Administrative Agent
Each of
the Lenders hereby irrevocably appoints Citibank to act on its behalf as
Administrative Agent hereunder and under the other Loan Documents and authorizes
Agent to take such actions on its behalf and to exercise such powers as are
delegated to Agent by the terms hereof and thereof, together with such actions
and powers as are reasonably incidental thereto. The provisions
of
this
Article are solely for the benefit of Agent and the Lenders, and Borrower shall
not have rights as a third party beneficiary of any of such
provisions.
9.02Rights as a Lender
The
Person serving as Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not Agent and the term “Lender” or “Lenders” shall,
unless otherwise expressly indicated or unless the context otherwise requires,
include the Person serving as Agent hereunder in its individual
capacity. Such Person and its Affiliates may accept deposits from,
lend money to, act as the financial advisor or in any other advisory capacity
for and generally engage in any kind of business with the Borrower or any
Subsidiary or other Affiliate thereof as if such Person were not Agent hereunder
and without any duty to account therefor to Lenders.
9.03Exculpatory Provisions
Agent
shall not have any duties or obligations except those expressly set forth herein
and in the other Loan Documents. Without limiting the generality of
the foregoing, Agent:
(a) shall
not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;
(b) shall
not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or
by the other Loan Documents that Agent is required to exercise as directed in
writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be expressly provided for herein or in the other Loan
Documents), provided that Agent shall not be required to take any action that,
in its opinion or the opinion of its counsel, may expose Agent to liability or
that is contrary to any Loan Document or applicable Law; and
(c) shall
not, except as expressly set forth herein and in the other Loan Documents, have
any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to Borrower or any of its Affiliates that is communicated
to or obtained by the Person serving as Agent or any of its Affiliates in any
capacity.
(d) Agent
shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as Agent shall believe in
good faith shall be necessary, under the circumstances as provided in Sections 8.02
and 10.01 or
(ii) in the absence of its own gross negligence or willful
misconduct. Agent shall be deemed not to have knowledge of any
Default unless and until written notice describing such Default is given to
Agent by Borrower or a Lender. Agent shall not be responsible for or
have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or thereunder or in connection herewith or therewith,
(iii) the performance or observance of any of the covenants, agreements or
other terms or conditions set forth herein or therein or the occurrence of any
Default, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, or the creation, perfection or priority of any Lien purported to be
created by the Collateral Documents, (v) the value or the sufficiency of any
Collateral or (vi) the satisfaction of any condition set forth
in Article IV or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to Agent.
9.04Reliance by Administrative
Agent
Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing (including any electronic message, Internet or intranet website
posting or other distribution) believed by it to be genuine and to have
been signed, sent or otherwise authenticated by the proper
Person. Agent also may rely upon any statement made to it orally or
by telephone and believed by it to have been made by the proper Person, and
shall not incur any liability for relying thereon. In determining
compliance with any condition hereunder to the making of a Loan that by its
terms must be fulfilled to the satisfaction of a Lender, Agent may presume that
such condition is satisfactory to such Lender unless Agent shall have received
notice to the contrary from such Lender prior to the making of such
Loan. Agent may consult with legal counsel (who may be counsel for
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
9.05Delegation of Duties
Agent may
perform any and all of its duties and exercise its rights and powers hereunder
or under any other Loan Document by or through any one or more sub agents
appointed by Agent. Agent and any such sub agent may perform any and
all of its duties and exercise its rights and powers by or through their
respective Related Parties. The exculpatory provisions of this
Article shall apply to any such sub agent and to the Related Parties of Agent
and any such sub agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as
well as activities as Agent.
9.06Resignation of Agent
Agent may
at any time give notice of its resignation to Lenders and
Borrower. Upon receipt of any such notice of resignation, the
Required Lenders shall have the right, in consultation with Borrower, to appoint
a successor, which shall be a bank with an office in the United States, or an
Affiliate of any such bank with an office in the United States. If no
such successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Agent gives
notice of its resignation, then the retiring Agent may on behalf of Lenders,
appoint a successor Agent meeting the qualifications set forth above; provided
that if Agent shall notify the Borrower and the Lenders that no qualifying
Person has accepted such appointment, then such resignation shall nonetheless
become effective in accordance with such notice and (1) the retiring Agent
shall be discharged from its duties and obligations hereunder and under the
other Loan Documents (except that in the case of any collateral security held by
Agent on behalf of the Lenders under any of the Loan Documents, the
retiring Agent shall continue to hold such collateral security until
such time as a successor Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through Agent
shall instead be made by or to each Lender directly, until such time as the
Required Lenders appoint a successor Agent as provided for above in this
Section. Upon the acceptance of a successor’s appointment as Agent
hereunder, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent,
and the retiring Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already
discharged therefrom as provided above in this Section). The fees
payable by Borrower to a successor Agent shall be the same as those payable to
its predecessor unless otherwise agreed between
Borrower
and such successor. After the retiring Agent’s resignation hereunder
and under the other Loan Documents, the provisions of this Article and Section 10.04 shall
continue in effect for the benefit of such retiring Agent, its sub agents and
their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while the retiring Administrative Agent was acting as
Administrative Agent.
9.07Non-Reliance on Agent and Other
Lenders
Each
Lender acknowledges that it has, independently and without reliance upon Agent
or any other Lender or any of their Related Parties and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges
that it will, independently and without reliance upon Agent or any other Lender
or any of their Related Parties and based on such documents and information as
it shall from time to time deem appropriate, continue to make its own decisions
in taking or not taking action under or based upon this Agreement, any other
Loan Document or any related agreement or any document furnished hereunder or
thereunder.
9.08No Other Duties, Etc
Anything
herein to the contrary notwithstanding, none of the Bookrunners, Arrangers or
any Lender holding a title listed on the cover page hereof, shall have any
powers, duties or responsibilities under this Agreement or any of the other Loan
Documents, except in its capacity, as applicable, as Agent or a Lender
hereunder.
9.09Administrative Agent May File Proofs of
Claim
In case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to Borrower, Agent (irrespective of whether the principal of
any Loan shall then be due and payable as herein expressed or by declaration or
otherwise and irrespective of whether Agent shall have made any demand on
Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:
(a) to
file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans and all other Obligations that are owing and
unpaid and to file such other documents as may be necessary or advisable in
order to have the claims of Lenders and Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of Lenders and
Agent and their respective agents and counsel and all other amounts due to
Lenders and Agent under Sections 2.03(i) and
2.07 and 10.04 allowed in
such judicial proceeding; and
(b) to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Lender to make such payments to Agent and, in the event that Agent shall consent
to the making of such payments directly to Lenders, to pay to Agent any amount
due for the reasonable compensation, expenses, disbursements and advances of
Agent and its agents and counsel, and any other amounts due Agent under Sections 2.07
and 10.04. Nothing
contained herein shall be deemed to authorize Agent to authorize or consent to
or accept or adopt on behalf of any Lender any plan of reorganization,
arrangement, adjustment or composition affecting the Obligations or the rights
of
any
Lender or to authorize Agent to vote in respect of the claim of any Lender in
any such proceeding.
9.10Collateral Matters.
(a) Each
Lender hereby irrevocably authorizes and directs Agent to enter into the
Collateral Documents for the benefit of such Lender and to act as the agent of
such Lender for purposes of acquiring, holding and enforcing any and all Liens
on Collateral to secure any of the Obligations, together with such powers and
discretion as are reasonably incidental thereto. In this connection,
the Administrative Agent, as such “collateral agent” and any co-agents,
sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant
to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral
(or any portion thereof) granted under the Collateral Documents, or for
exercising any rights and remedies thereunder at the direction of the
Administrative Agent), shall be entitled to the benefits of all provisions of
this Article IX and Article X (including Section 10.04, as though such
co-agents, sub-agents and attorneys-in-fact were such “collateral agent” under
the Loan Documents) as if set forth in full herein with respect
thereto.. Each Lender hereby agrees, and each holder of any Note by
the acceptance thereof will be deemed to agree, that, except as otherwise set
forth in Section 10.01,
any action taken by the Required Lenders, in accordance with the provisions of
this Agreement or the Collateral Documents, and the exercise by the Required
Lenders of the powers set forth herein or therein, together with such other
powers as are reasonably incidental thereto, shall be authorized and binding
upon all of Lenders. Agent is hereby authorized (but not
obligated) on behalf of all of Lenders, without the necessity of any notice
to or further consent from any Lender from time to time prior to, an Event of
Default, to take any action with respect to any Collateral or Collateral
Documents which may be necessary to perfect and maintain perfected the Liens
upon the Collateral granted pursuant to the Collateral Documents.
(b) Each
Lender hereby irrevocably authorize Agent, at its option and in its
discretion,
(i) to
release any Lien on any property granted to or held by Agent under any Loan
Document (A) upon termination of the Aggregate Commitments and payment in
full of all Obligations (other than contingent indemnification obligations),
(B) that is sold or to be sold as part of or in connection with any sale
permitted hereunder or under any other Loan Document, (C) as permitted or
required hereunder or under any other Loan Document (including, without
limitation, as contemplated by Section 6.14), (D) subject to Section 10.01,
if approved, authorized or ratified in writing by the Required Lenders, or
(E) in connection with any foreclosure sale or other disposition of
Collateral after the occurrence of an Event of Default to which the Required
Lenders consent; and
(ii) to
subordinate any Lien on any property granted to or held by Agent under any Loan
Document to the holder of any Lien on such property that is permitted by this
Agreement or any other Loan Document.
Upon
request by Agent at any time, each Lender will confirm in writing Agent’s
authority to release or subordinate its interest in particular types or items of
Collateral pursuant to this Section 9.10.
(c) Subject
to (b) above, Agent shall (and is hereby irrevocably authorized by each
Lender to) execute such documents as may be necessary to evidence the release or
subordination of the Liens granted to Agent for the benefit of Agent and Lenders
herein or pursuant hereto upon the applicable Collateral; provided that
(i) Agent shall not be required to execute any such document on terms
which, in Agent’s opinion, would expose Agent to or create any liability or
entail any consequence other than the release or subordination of such Liens
without recourse or warranty and (ii) such release or subordination shall
not in any manner discharge, affect or impair the Obligations or any Liens upon
(or obligations of Borrower in respect of) all interests retained by
Borrower, including the proceeds of the sale, all of which shall continue to
constitute part of the Collateral. In the event of any sale or
transfer of Collateral, or any foreclosure with respect to any of the
Collateral, Agent shall be authorized to deduct all expenses reasonably incurred
by Agent from the proceeds of any such sale, transfer or
foreclosure.
(d) Agent
shall have no obligation whatsoever to any Lender or any other Person to assure
that the Collateral exists or is owned by Borrower or is cared for, protected or
insured or that the Liens granted to Agent herein or in any of the Collateral
Documents or pursuant hereto or thereto have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise or to continue exercising at all or in any
manner or under any duty of care, disclosure or fidelity any of the rights,
authorities and powers granted or available to Agent in this Section 9.10 or
in any of the Collateral Documents, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, Agent
may act in any manner it may deem appropriate, in its sole discretion, given
Agent’s own interest in the Collateral as one of the Lenders and that Agent
shall have no duty or liability whatsoever to Lenders.
(e) Each
Lender hereby appoints each other Lender as agent for the purpose of perfecting
Lenders’ security interest in assets which, in accordance with Article 9 of
the UCC can be perfected only by possession. Should any Lender (other
than Agent) obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver
such Collateral to Agent or in accordance with Agent’s
instructions.
9.11 Other Agents; Arrangers and Managers
None of
the Lenders or other Persons identified on the facing page or signature pages of
this Agreement as a “syndication agent,” “documentation agent,” “co-agent,”
“book manager,” “lead manager,” “arranger,” “lead arranger” or “co-arranger”
shall have any right, power, obligation, liability, responsibility or duty under
this Agreement other than, in the case of such Lenders, those applicable to all
Lenders as such. Without limiting the foregoing, none of the Lenders
or other Persons so identified shall have or be deemed to have any fiduciary
relationship with any Lender. Each Lender acknowledges that it has
not relied, and will not rely, on any of the Lenders or other Persons so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
9.12 No Advisory or Fiduciary Responsibility
In
connection with all aspects of each transaction contemplated hereby (including
in connection with any amendment, waiver or other modification hereof or of any
other Loan Document), the Borrower and each other Loan Party acknowledges and
agrees that and acknowledges its Affiliates understanding that: (i)
(A) the arranging and other services regarding this Agreement provided by the
Administrative Agent and the Joint-Lead Arrangers are arm’s-length commercial
transactions between the Borrower,
each
other Loan Party and their respective Affiliates, on the one hand, and the
Administrative Agent and the Joint-Lead Arrangers, on the other hand, (B) each
of the Borrower and the other Loan Parties has consulted its own legal,
accounting, regulatory and tax advisors to the extent it has deemed appropriate,
and (C) the Borrower and each other Loan Party is capable of evaluating, and
understands and accepts, the terms, risks and conditions of the transactions
contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative
Agent and each Joint-Lead Arranger is and has been acting solely as a principal
and, except as expressly agreed in writing by the relevant parties, has not
been, is not, and will not be acting as an advisor, agent or fiduciary for the
Borrower, any other Loan Party or any of their respective Affiliates, or any
other Person and (B) neither the Administrative Agent nor the Joint-Lead
Arrangers has any obligation to the Borrower, any other Loan Party or any of
their respective Affiliates with respect to the transactions contemplated hereby
except those obligations expressly set forth herein and in the other Loan
Documents; and (iii) the Administrative Agent and the Joint-Lead Arrangers and
their respective Affiliates may be engaged in a broad range of transactions that
involve interests that differ from those of the Borrower, the other Loan Parties
and their respective Affiliates, and neither the Administrative Agent nor the
Joint-Lead Arrangers has any obligation to disclose any of such interests to the
Borrower, any other Loan Party or any of their respective
Affiliates. To the fullest extent permitted by law, each of the
Borrower and the other Loan Parties hereby waives and releases any claims that
it may have against the Administrative Agent and the Joint-Lead Arrangers with
respect to any breach or alleged breach of agency or fiduciary duty in
connection with any aspect of any transaction contemplated hereby.
ARTICLE
X.
MISCELLANEOUS
10.01Amendments, Etc
No
amendment or waiver of any provision of this Agreement or any other Loan
Document, and no consent to any departure by Borrower therefrom, shall be
effective unless in writing signed by the Required Lenders and Borrower and
acknowledged by Agent, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided, however, that no such
amendment, waiver or consent shall:
(a) waive
any condition set forth in Section 4.01 or
Section
5.21(b) without the written consent of each Lender;
(b) extend
or increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 8.02) without
the written consent of such Lender;
(c) postpone
any date fixed by this Agreement or any other Loan Document for any payment
(excluding mandatory prepayments) of principal, interest, fees or other
amounts due to Lenders (or any of them) hereunder or under any other Loan
Document without the written consent of each Lender directly affected
thereby;
(d) reduce
the principal of, or the rate of interest specified herein on, any Loan, or
(subject to clause (iii) of the second proviso to this Section 10.01) any
fees or other amounts payable hereunder or under any other Loan Document,
without the written consent of each
Lender
directly affected thereby; provided, however, that only
the consent of the Required Lenders shall be necessary (i) to amend the
definition of “Default
Rate” or to waive any obligation of Borrower to pay interest at the
Default Rate or (ii) to amend any financial covenant hereunder (or any
defined term used therein) even if the effect of such amendment would be to
reduce the rate of interest on any Loan or to reduce any fee payable
hereunder;
(e) change
Section 2.11 or
Section 8.03 in
a manner that would alter the pro rata sharing of payments required thereby
without the written consent of each Lender; or
(f) change
any provision of this Section or the definition of “Required Lenders” or
any other provision hereof specifying the number or percentage of Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; or
(g) release
or subordinate the Agent’s security interest in all or substantially all of the
Collateral, without the written consent of each Lender; or
(h) reduce
the frequency with which Borrower must provide Qualified Appraisals, without the
written consent of each Lender; or
(i) change
to definition of “Borrowing Base” or of the components thereof, without the
written consent of each Lender.
and,
provided further, that
(i) no amendment, waiver or consent shall, unless in writing and signed by
Agent in addition to the Lenders required above, affect the rights or duties of
Agent under this Agreement or any other Loan Document; and (ii) Section
10.06(i) may not be amended, waived or otherwise modified without the consent of
each Granting Lender all or any part of whose Loans are being funded by an SPC
at the time of such amendment, waiver or other modification; and (iii) the Agent
Fee Letter and the Arrangement Fee Letter may be amended, or rights or
privileges thereunder waived, in a writing executed only by the parties
thereto. Anything herein to the contrary notwithstanding, during such
period as a Lender is a Defaulting Lender, to the fullest extent permitted by
applicable law such Lender shall not be entitled to vote in respect of
amendments and waivers hereunder and the Commitment and the outstanding Loans or
other extensions of credit of such Lender hereunder shall not be taken into
account in determining whether the Required Lenders or all of the Lenders, as
the case may be, have approved any such amendment or waiver; provided, that any
such amendment or waiver that would increase or extend the term of the
Commitment of such Defaulting Lender or alter the terms of this proviso shall
require the consent of such Defaulting Lender.
If any
Lender does not consent to a proposed amendment, waiver, consent or release with
respect to any Loan Document that requires the consent of each Lender and that
has been approved by the Required Lenders, the Borrower may replace such
non-consenting Lender in accordance with Section 11.13; provided that such
amendment, waiver, consent or release can be effected as a result of the
assignment contemplated by such Section (together with all other such
assignments required by the Borrower to be made pursuant to this
paragraph).
10.02Notices; Effectiveness; Electronic
Communications.
(a) Notices
Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
subsection (b) below), all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder
to be given by telephone shall be made to the applicable telephone number, as
follows:
(i) if
to Borrower or Agent, to the address, telecopier number, electronic mail address
or telephone number specified for such Person on Schedule 10.02;
and
(ii) if
to any other Lender, to the address, telecopier number, electronic mail address
or telephone number specified in its Administrative Questionnaire.
Notices
and other communications sent by hand or overnight courier service, or mailed by
certified or registered mail, shall be deemed to have been given when received;
notices and other communications sent by telecopier shall be deemed to have been
given when sent (except that, if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the
next business day for the recipient). Notices and other
communications delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).
(b) Electronic
Communications. Notices and other communications to Lenders
hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved
by Agent, provided that the foregoing shall not apply to notices to any Lender
pursuant to Article II if
such Lender has notified the Agent that it is incapable of receiving notices
under such Article by electronic communication. Agent or Borrower
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it,
provided that approval of such procedures may be limited to particular notices
or communications. Unless Agent otherwise prescribes,
(i) notices and other communications sent to an e-mail address shall be
deemed received upon the sender’s receipt of an acknowledgement from the
intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgement), provided that if
such notice or other communication is not sent during the normal business hours
of the recipient, such notice or communication shall be deemed to have been sent
at the opening of business on the next business day for the recipient, and
(ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient at
its e-mail address as described in the foregoing clause (i) of notification
that such notice or communication is available and identifying the website
address therefor.
(c) The
Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS
AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE
ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE
PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE
BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING ANY WARRANTY
OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT
PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In
no event shall the Administrative Agent or any of its Related Parties
(collectively, the “Agent Parties”) have any liability to the Borrower, any
Lender or any other Person for losses, claims, damages, liabilities or expenses
of any kind (whether in tort, contract or otherwise) arising out of the
Borrower’s or the Administrative Agent’s transmission of Borrower Materials
through the Internet, except to the extent that such losses, claims, damages,
liabilities or expenses are determined by a court of competent jurisdiction by a
final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Agent Party; provided, however, that in no event
shall any Agent Party have any liability to the Borrower, any Lender or any
other Person for indirect, special, incidental, consequential or punitive
damages (as opposed to direct or actual damages).
(d) Change of Address,
Etc. Each of the Borrower and
Agent may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the other parties
hereto. Each other Lender may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to
Borrower and Agent. In
addition, each Lender agrees to notify the Administrative Agent from time to
time to ensure that the Administrative Agent has on record (i) an effective
address, contact name, telephone number, telecopier number and electronic mail
address to which notices and other communications may be sent and (ii) accurate
wire instructions for such Lender. Furthermore, each Public Lender agrees to cause at least
one individual at or on behalf of such Public Lender to at all times have
selected the “Private Side Information” or similar designation on the content
declaration screen of the Platform in order to enable such Public Lender or its
delegate, in accordance with such Public Lender’s compliance procedures and
applicable Law, including United States Federal and state securities Laws, to
make reference to Borrower Materials that are not made available through the
“Public Side Information” portion of the Platform and that may contain material
non-public information with respect to the Borrower or its securities for
purposes of United States Federal or state securities laws.
(e) Reliance by Agent and
Lenders. Agent and Lenders shall be entitled to rely and act
upon any notices (including telephonic Loan Notices) purportedly given by
or on behalf of Borrower even if (i) such notices were not made in a manner
specified herein, were incomplete or were not preceded or followed by any other
form of notice specified herein, or (ii) the terms thereof, as understood
by the recipient, varied from any confirmation thereof. Borrower
shall indemnify Agent, each Lender and the Related Parties of each of them from
all losses, costs, expenses and liabilities resulting from the reliance by such
Person on each notice purportedly given by or on behalf of
Borrower. All telephonic notices to and other telephonic
communications with Agent may be recorded by Agent, and each of the parties
hereto hereby consents to such recording.
10.03No Waiver; Cumulative Remedies;
Enforcement
(a) No
failure by any Lender or Agent to exercise, and no delay by any such Person in
exercising, any right, remedy, power or privilege under any Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege
hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in any Loan Documents are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
(b) Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the
authority to enforce rights and remedies hereunder and under the other Loan
Documents against Borrower shall be vested exclusively in, and all actions and
proceedings at law in connection with such enforcement shall be instituted and
maintained exclusively by, the Administrative Agent in accordance with Section
8.02 for the benefit of all the Lenders; provided, however, that the foregoing
shall not prohibit (a) the Administrative Agent from exercising on its own
behalf the rights and remedies that inure to its benefit (solely in its capacity
as Administrative Agent) hereunder and under the other Loan Documents, (b) any
Lender from exercising setoff rights in accordance with Section 10.08 (subject
to the terms of Section 2.11), or (c) any Lender from filing proofs of claim or
appearing and filing pleadings on its own behalf during the pendency of a
proceeding relative to Borrower under any Debtor Relief Law; and provided,
further, that if at any time there is no Person acting as Administrative Agent
hereunder and under the other Loan Documents, then (i) the Required Lenders
shall have the rights otherwise ascribed to the Administrative Agent pursuant to
Section 8.02 and (ii) in addition to the matters set forth in clauses (b) and
(c) of the preceding proviso and subject to Section 2.11, any Lender may, with
the consent of the Required Lenders, enforce any rights and remedies available
to it and as authorized by the Required Lenders.
10.04Expenses; Indemnity; Damage
Waiver.
(a) Costs and
Expenses. Borrower shall pay (i) all reasonable out of
pocket expenses incurred by Agent and its Affiliates (including the reasonable
fees, charges and disbursements of counsel for Agent), in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated) and (ii) all out of pocket
expenses incurred by Agent or any Lender (including the fees, charges and
disbursements of any counsel for Agent or any Lender) in connection with the
enforcement or protection of its rights (A) in connection with this
Agreement and the other Loan Documents, including its rights under this Section,
or (B) in connection with the Loans made hereunder, including all such out
of pocket expenses incurred during any workout, restructuring or negotiations in
respect of such Loans.
(b) Indemnification by the
Borrower. Borrower shall indemnify Agent (and any sub-agent
thereof), each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an “Indemnitee”) against,
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses (including the fees, charges and disbursements
of any counsel for any Indemnitee), incurred by any Indemnitee or asserted
against any Indemnitee by any third party or by Borrower arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective
obligations hereunder or thereunder or the consummation of the
transactions
contemplated hereby or thereby, or, in the case of the Administrative Agent
(and any sub-agent thereof) and its Related Parties only, the administration of
this Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom,
(iii) any actual or alleged presence or release of Hazardous Materials on
or from any property owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to the Borrower
or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third
party or by the Borrower, and regardless of whether any Indemnitee is a party
thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses have resulted from the gross negligence or willful misconduct
of such Indemnitee.
(c) Reimbursement and Indemnity
by Lenders.
(i) To
the extent that Borrower for any reason fails to indefeasibly pay any amount
required under subsection (a) or
(b) of
this Section to be paid by it to Agent (or any sub-agent thereof) or any
Related Party of any of the foregoing, each Lender severally agrees to pay to
Agent (or any such sub-agent) or such Related Party, as the case may be,
such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount, provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against Agent (or any such sub-agent) or against any Related
Party of any of the foregoing acting for Agent (or any such
sub-agent). The obligations of the Lenders under this subsection
(c) are subject to the provisions of Section 2.10(d).
(ii) To
the extent required by any applicable law, Agent may withhold from any payment
to any Lender under a Loan Document an amount equal to any applicable
withholding tax. If the IRS or any other Governmental Authority
asserts a claim that Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate certification form was
not delivered, was not properly executed, or fails to establish an exemption
from, or reduction of, withholding tax with respect to a particular type of
payment, or because such Lender failed to notify Agent or any other Person of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason), or Agent reasonably
determines that it was required to withhold taxes from a prior payment but
failed to do so, such Lender shall promptly indemnify Agent fully for all
amounts paid, directly or indirectly, by such Agent as tax or otherwise,
including penalties and interest, and together with all expenses incurred by
Agent, including legal expenses, allocated internal costs and out-of-pocket
expenses. Agent may offset against any payment to any Lender under a
Loan Document, any applicable withholding tax that was required to be withheld
from any prior payment to such Lender but which was not so withheld, as well as
any other amounts for which Agent is entitled to indemnification from such
Lender under this cluase (ii) of this Section 10.04(c).
(d) Waiver of Consequential
Damages, Etc. To the fullest extent permitted by applicable
law, Borrower shall not assert, and hereby waives, any claim against any
Indemnitee,
on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby, the transactions contemplated
hereby or thereby, any Loan or the use of the proceeds thereof. No
Indemnitee referred to in subsection (b) above shall be liable for any
damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Loan Documents or the transactions contemplated hereby or
thereby.
(e) Payments. All
amounts due under this Section shall be payable not later than 30 Business Days
after demand therefor, provided that such demand is supported by a statement
showing. in reasonable detail, the basis for the amount demanded including the
method of calculating such amount, if applicable.
(f) Survival. The
agreements in this Section shall survive the resignation of Agent, the
replacement of any Lender, the termination of the Aggregate Commitments and the
repayment, satisfaction or discharge of all the other Obligations.
10.05Payments Set Aside
To the
extent that any payment by or on behalf of Borrower is made to Agent or any
Lender, or Agent or any Lender exercises its right of setoff, and such payment
or the proceeds of such setoff or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by Agent or such Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any proceeding under any Debtor Relief Law or otherwise, then
(a) to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such setoff had not occurred,
and (b) each Lender severally agrees to pay to Agent upon demand its
applicable share (without duplication) of any amount so recovered from or
repaid by Agent, plus interest thereon from the date of such demand to the date
such payment is made at a rate per annum equal to the Federal Funds Rate from
time to time in effect. The obligations of the Lenders under clause
(b) of the preceding sentence shall survive the payment in full of the
Obligations and the termination of this Agreement.
10.06Successors and Assigns.
(a) Successors and Assigns
Generally. The provisions of
this Agreement and each other Loan Document shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that Borrower may not assign or otherwise transfer any
of its rights or obligations hereunder without the prior written consent of
Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an Eligible Assignee in
accordance with the provisions of subsection (b) of this Section,
(ii) by way of participation in accordance with the provisions of
subsection (d) of this Section, or (iii) by way of pledge or
assignment of a security interest subject to the restrictions of subsection
(f) of this Section (and any other attempted assignment or transfer by any
party hereto shall be null and void); or (iv) to an SPC in
accordance with the provisions of subsection (h) of this Section. Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective
successors
and assigns permitted hereby, Participants to the extent provided in subsection
(d) of this Section and, to the extent expressly contemplated hereby, the
Related Parties of each of Agent and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
(b) Assignments by
Lenders. Any Lender may at any
time assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it); provided that (i) except in the case of an assignment of
the entire remaining amount of the assigning Lender’s Commitment and the Loans
at the time owing to it or in the case of an assignment to a Lender or an
Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this
purpose includes Loans outstanding thereunder) or, if the Commitment is not
then in effect, the principal outstanding balance of the Loans of the assigning
Lender subject to each such assignment, determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to Agent or, if
“Trade
Date” is specified in the Assignment and
Assumption, as of the Trade Date, shall not be less than $1,000,000 unless each
of Agent and, so long as no Event of Default has occurred and is continuing,
Borrower otherwise consents (each such consent not to be unreasonably withheld
or delayed); provided, however,
that concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single Eligible Assignee (or
to an Eligible Assignee and members of its Assignee Group) will be treated as a
single assignment for purposes of determining whether such minimum amount has
been met; (ii) each partial assignment shall
be made as an assignment of a proportionate part of all the assigning Lender’s
rights and obligations under this Agreement with respect to the Loans or the
Commitment assigned; (iii) any assignment of a Commitment must be approved
by Agent unless the Person that is the proposed assignee is itself a Lender, an
Affiliate of a Lender, or an Approved Fund
(whether or not the proposed assignee would otherwise qualify as an Eligible
Assignee); and (iv) the parties to each assignment shall execute and
deliver to Agent an Assignment and Assumption, together with a processing and
recordation fee in the amount, if any, required as set forth in Schedule
10.06, payable by the assigning Lender and the
Eligible Assignee, if it shall not be a Lender, shall deliver to Agent an
Administrative Questionnaire. Subject to acceptance and recording
thereof by Agent pursuant to subsection (c) of this Section, from and after
the effective date specified in each Assignment and Assumption, the Eligible
Assignee thereunder shall be a party to this Agreement and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto) but shall continue to be entitled to the benefits of
Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior
to the effective date of such assignment. Upon request, Borrower (at
its expense) shall execute and deliver a Note to the assignee
Lender. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this subsection shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with subsection (d) of this Section.
(c) Register. Agent,
acting solely for this purpose as an agent of Borrower, shall maintain at
Administrative Agent’s Office a copy of each Assignment and Assumption delivered
to it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts of the Loans owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”). The
entries in the Register shall be conclusive, and Borrower, Agent and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be
available for inspection by Borrower and any Lender (with respect to any entry
relating to such Lender) at any reasonable time and from time to time upon
reasonable prior notice.
(d) Participations. Any
Lender may at any time, without the consent of, or notice to, Borrower or Agent,
sell participations to any Person (other than a natural person or Borrower or
any of Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in
all or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans owing to it);
provided that (i) such Lender’s obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and
(iii) Borrower, Agent and the Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement;
provided that such agreement or instrument may provide that such Lender will
not, without the consent of the Participant, agree to any amendment, waiver or
other modification described in the first proviso to Section 10.01 that
affects such Participant. Subject to subsection (e) of this
Section, Borrower agrees that each Participant shall be entitled to the benefits
of Sections 3.01,
3.04 and 3.05 to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to subsection (b) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 10.08 as
though it were a Lender, provided such Participant agrees to be subject to Section 2.11 as
though it were a Lender.
(e) Limitations upon Participant
Rights. A Participant shall not
be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with Borrower’s prior
written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 3.01
unless the Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with
Section 3.01(e) as though it were a Lender.
(f) Certain
Pledges. Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.
(g) Electronic Execution of
Assignments. The words “execution,” “signed,” “signature,” and words
of like import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of
which shall be of the same legal effect, validity or enforceability as a
manually executed signature or the use of a paper-based recordkeeping system, as
the case may be, to the extent and as provided for in any applicable law,
including the Federal Electronic Signatures in Global and National Commerce Act,
the New York State Electronic Signatures and Records Act, or any other similar
state laws based on the Uniform Electronic Transactions Act.
(h) Deemed Consent of
Borrower. If the consent of Borrower to an assignment to an
Eligible Assignee is required hereunder (including a consent to an assignment
which does not meet the minimum assignment threshold specified in clause
(i) of the proviso to the first sentence of Section 10.06(b)),
Borrower shall be deemed to have given its consent ten Business Days after the
date notice thereof has been delivered to Borrower by the assigning Lender
(through Agent) unless such consent is expressly refused by Borrower prior
to such tenth Business Day.
(i) Special Purpose Funding
Vehicles. Notwithstanding anything to the contrary contained
herein, any Lender (a “Granting Lender”) may grant to a special purpose funding
vehicle identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the Borrower (an “SPC”) the option to provide
all or any part of any Committed Loan that such Granting Lender would otherwise
be obligated to make pursuant to this Agreement; provided that (i) nothing
herein shall constitute a commitment by any SPC to fund any Committed Loan, and
(ii) if an SPC elects not to exercise such option or otherwise fails to make all
or any part of such Committed Loan, the Granting Lender shall be obligated to
make such Committed Loan pursuant to the terms hereof or, if it fails to do so,
to make such payment to the Administrative Agent as is required under Section
2.12(b)(ii). Each party hereto hereby agrees that (i) neither the
grant to any SPC nor the exercise by any SPC of such option shall increase the
costs or expenses or otherwise increase or change the obligations of the
Borrower under this Agreement (including its obligations under Section 3.04),
(ii) no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement for which a Lender would be liable, and (iii) the Granting
Lender shall for all purposes, including the approval of any amendment, waiver
or other modification of any provision of any Loan Document, remain the lender
of record hereunder. The making of a Committed Loan by an SPC
hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Committed Loan were made by such Granting
Lender. In furtherance of the foregoing, each party hereto hereby
agrees (which agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in full of all
outstanding commercial paper or other senior debt of any SPC, it will not
institute against, or join any other Person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding
under the laws of the United States or any State
thereof. Notwithstanding anything to the contrary contained herein,
any SPC may (i) with notice to, but without prior consent of the Borrower and
the Administrative Agent and with the payment of a processing fee in the amount
of $2,500 (which processing fee may be waived by the Administrative Agent in its
sole discretion), assign all or any portion of its right to receive payment with
respect to any Committed Loan to the Granting Lender and (ii) disclose on a
confidential basis any non-public information relating to its funding of
Committed Loans to any rating agency, commercial paper dealer or provider of any
surety or guarantee or credit or liquidity enhancement to such SPC.
10.07 Treatment
of Certain Information; Confidentiality
Each of
Agent and Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its
Affiliates and to its and its Affiliates’ respective partners, directors,
officers, employees, agents, advisors and representatives (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority,
purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process (but in the case of a subpoena or similar legal process,
only to the extent responsive thereto), (d) to any other party
hereto, (e) in connection with the exercise of any remedies hereunder or
under any other Loan Document or any action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially
the same as those of this Section, to (i) any assignee of or Participant
in, or any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction
relating to Borrower and its obligations, (g) with the consent of Borrower
or (h) to the extent such Information (x) becomes publicly available
other than as a result of a breach of this Section or (y) becomes available
to Agent or any Lender or any of their respective Affiliates on a
nonconfidential basis from a source other than Borrower. For purposes
of this Section, “Information” means
all information received from Borrower or any Subsidiary relating to Borrower or
any Subsidiary or any of their respective businesses, other than any such
information that is available to Agent or any Lender on a nonconfidential basis
prior to disclosure by Borrower or any Subsidiary, provided that, in the case of
information received from Borrower or any Subsidiary after the date hereof, such
information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
10.08Right of Setoff
If an
Event of Default shall have occurred and be continuing, each Lender and each of
their respective Affiliates is hereby authorized at any time and from time to
time, to the fullest extent permitted by applicable law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final,
in whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender or any such Affiliate to or for
the credit or the account of Borrower against any and all of the obligations of
Borrower now or hereafter existing under this Agreement or any other Loan
Document to such Lender or any such Affiliate, irrespective of whether or not
such Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations of Borrower may be contingent or
unmatured or are owed to a branch or office of such Lender different from the
branch or office holding such deposit or obligated on such
indebtedness. The rights of each Lender and their respective
Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Lender or their respective
Affiliates may have. Each Lender agrees to notify Borrower and Agent
promptly after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such setoff and
application.
10.09 Interest
Rate Limitation
Notwithstanding
anything to the contrary contained in any Loan Document, the interest paid or
agreed to be paid under the Loan Documents shall not exceed the maximum rate of
non-usurious interest permitted by applicable Law (the “Maximum
Rate”). If Agent or any Lender shall receive interest in an
amount that exceeds the Maximum Rate, the excess interest shall be applied to
the principal of the Loans or, if it exceeds such unpaid principal, refunded to
Borrower. In determining whether the interest contracted for,
charged, or received by Agent or a Lender exceeds the Maximum Rate, such Person
may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the contemplated term of the Obligations
hereunder.
10.10Counterparts; Integration;
Effectiveness
This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This
Agreement and the other Loan Documents constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by Agent
and when Agent shall have received counterparts hereof that, when taken
together, bear the signatures of each of the other parties
hereto. Delivery of an executed counterpart of a signature page of
this Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.
10.11Survival of Representations and
Warranties
All
representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith or
therewith shall survive the execution and delivery hereof and
thereof. Such representations and warranties have been or will be
relied upon by Agent and each Lender, regardless of any investigation made by
Agent or any Lender or on their behalf and notwithstanding that Agent or any
Lender may have had notice or knowledge of any Default at the time of any
Borrowing, and shall continue in full force and effect as long as any Loan or
any other Obligation hereunder shall remain unpaid or unsatisfied.
10.12Severability
If any
provision of this Agreement or the other Loan Documents is held to be illegal,
invalid or unenforceable, (a) the legality, validity and enforceability of
the remaining provisions of this Agreement and the other Loan Documents shall
not be affected or impaired thereby and (b) the parties shall endeavor in
good faith negotiations to replace the illegal, invalid or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the illegal, invalid or unenforceable
provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10.13 Replacement of
Lenders.
If any Lender requests compensation under Section 3.04, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 3.01, if any Lender
is a Defaulting Lender or if any other circumstance exists hereunder that gives
the Borrower the right to replace a Lender as a party hereto, then the Borrower
may, at its sole expense and effort,
upon
notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in, and consents required by, Section 10.06), all of its
interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided
that:
(a) the
Borrower shall have paid to the Administrative Agent the assignment fee
specified in Section 10.06(b);
(b) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder and under the other Loan Documents (including
any amounts under Section 3.05) from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts);
(c) in
the case of any such assignment resulting from a claim for compensation under
Section 3.04 or payments required to be made pursuant to Section 3.01, such
assignment will result in a reduction in such compensation or payments
thereafter; and
(d) such
assignment does not conflict with applicable Laws.
A Lender
shall not be required to make any such assignment or delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to
apply.
10.14Governing Law; Jurisdiction;
Etc.
(a) GOVERNING
LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF WASHINGTON.
(b) SUBMISSION TO
JURISDICTION. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF WASHINGTON SITTING IN KING COUNTY AND OF THE UNITED
STATES DISTRICT COURT OF THE WESTERN DISTRICT OF WASHINGTON, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH WASHINGTON STATE COURT OR, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE 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 IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT AGENT OR ANY
LENDER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE
BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) WAIVER OF
VENUE. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT 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 APPLICABLE LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.
(d) SERVICE OF
PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
10.15Waiver of Right to Trial by
Jury
EACH
PARTY HERETO HEREBY IRREVOCABLY 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 ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON 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 AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
10.16USA Patriot Act Notice
Each
Lender that is subject to the Patriot Act (as hereinafter defined) and
Agent (for itself and not on behalf of any Lender) hereby notifies 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 “Patriot Act”), it is
required to obtain, verify and record information that identifies Borrower,
which information includes the name and address of Borrower and other
information that will allow such Lender or Agent, as applicable, to identify
Borrower in accordance with the Patriot Act.
10.17Time of the Essence
Time is
of the essence of the Loan Documents.
10.18 Oral
Agreements Not Enforceable
ORAL
AGREEMENTS AND ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR FORBEAR FROM
COLLECTION OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
|
ALASKA
AIRLINES, INC.
By:
/s/ John F.
Schaefer, Jr.
Name:
John F. Schaefer, Jr.
Title: Vice
President – Finance
and Treasurer
|
|
CITIBANK, N.A., as Administrative
Agent
By: /s/
Timothy P. Dilworth
Name: Timothy
P. Dilworth
Title: Vice
President
|
|
|
CITIBANK, N.A., as a
Lender
By: /s/
Timothy P. Dilworth
Name: Timothy
P. Dilworth
Title: Vice
President
|
|
|
|
BANK OF AMERICA, N.A.,
as a Lender
By: /s/
James J. Teichman
Name: James
J. Teichman
Title: Senior
Vice President
|
|
SOCIETE GENERALE, as a
Lender
By: /s/ A.
Drapeau
Name: A.
Drapeau
Title: Managing
Director
|
SCHEDULE
1.01
APPROVED
APPRAISERS
[***]
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
SCHEDULE
2.01
COMMITMENTS
AND APPLICABLE
PERCENTAGES
Lender
|
Commitment
|
Applicable
Percentage
|
Citibank,
N.A
|
[***]
|
[***]
|
Bank
of America, N.A.
|
[***]
|
[***]
|
Societe
Generale
|
[***]
|
[***]
|
Total
|
$100,000,000.00
|
100.000000000%
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
SCHEDULE
5.06
LITIGATION
[***]
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
SCHEDULE
5.09
ENVIRONMENTAL
MATTERS
LOCATION
|
ACCRUAL
BALANCE AS OF 12/31/09
|
DETAILS
|
1.
Anchorage
|
[***]
|
Currently
monitoring contamination levels. No active plan currently
required.
|
2.
Juneau
|
[***]
|
Cleanup
began in 2004. Project to continue for additional three – five
years
|
3.
Fairbanks
|
[***]
|
Two
sites of contamination. Both locations required long-term
monitoring per Alaska Dept. of Environmental
Conservation.
|
4.
Oakland
|
[***]
|
In
negotiations with the Port of Oakland to determine cleanup
requirements.
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
SCHEDULE
7.01
EXISTING
LIENS
None.
SCHEDULE
10.02
ADMINISTRATIVE
AGENT’S OFFICE,
CERTAIN
ADDRESSES FOR NOTICES
ALASKA
AIRLINES, INC.
19300
International Boulevard
Seattle,
WA 98188
Attention: Treasurer
Telephone: [***]
Telecopier: [***]
Electronic
Mail: [***]
Website
Address: www.alaskaair.com
ADMINISTRATIVE
AGENT:
(for
payments and Requests for Borrowings):
For
Borrower Inquiries:
Citibank,
N.A.
1615
Brett Road
Building
III
New
Castle, DE 19720
Attention:
[***]
Telephone:
[***]
Telecopier:
[***]
Electronic
Mail: [***]
Account
No.: [***]
Account
Name: [***]
Ref:
Alaska Airlines, Inc.
ABA#
[***]
For
Lender Inquiries:
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
Citibank,
N.A.
1615
Brett Road
Building
III
New
Castle, DE 19720
Attention: Investor
Relations Team
Telephone:
[***]
Telecopier:
[***]
Electronic
Mail: [***]
Other
Notices to Administrative Agent:
Citibank,
N.A.
388
Greenwich Street, 34th Floor
New York,
NY 10013
Attn:
[***]
Telephone
No.: [***]
Facsimile
No.: [***]
Electronic
Mail: [***]
and
Attn:
[***]
Telephone
No.: [***]
Facsimile
No.: [***]
Electronic
Mail: [***]
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
SCHEDULE
10.06
PROCESSING
AND RECORDATION FEES
The
Administrative Agent will charge a processing and recordation fee (an
“Assignment Fee”) in the amount of [***] for each assignment; provided, however,
that in the event two or more concurrent assignments to members of the same
Assignee Group (which may be effected by a suballocation of an assigned amount
among members of such Assignee Group) or two or more concurrent assignments by
members of the same Assignee Group to a single Eligible Assignee (or to an
Eligible Assignee and members of its Assignee Group), the Assignment Fee will be
[***] plus the amount set forth below:
Transaction
|
Assignment
Fee
|
First
four concurrent assignments or suballocations to members of an Assignee
Group (or from members of an Assignee Group, as
applicable)
|
[***]
|
Each
additional concurrent assignment or suballocation to a member of such
Assignee Group (or from a member of such Assignee Group, as
applicable)
|
[***]
|
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
EXHIBIT
A
FORM
OF LOAN NOTICE
Date: ___________,
_____
To: Citibank,
N.A., as Administrative Agent
Ladies
and Gentlemen:
Reference
is made to that certain Credit Agreement, dated as of [_____ ], 2010 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to
time, the “Agreement”; the terms
defined therein being used herein as therein defined), among Alaska Airlines,
Inc., an Alaska corporation, the Lenders from time to time party thereto, and
Citibank, N.A., as Administrative Agent.
The
undersigned hereby requests (select one):
A
Borrowing
Loans
A conversion or continuation of Loans
1. On
(a Business Day).
2. In
the amount of
$ .
3. Comprised
of .
[Type of Loan requested]
4. For
Eurodollar Rate Loans: with an Interest Period
of
months.
The
Borrowing, if any, requested herein complies with the provisos to the first
sentence of Section 2.01 of
the Agreement.
ALASKA
AIRLINES, INC.
By:
Name:
Title:
EXHIBIT
B
FORM
OF NOTE
$_______________________
FOR VALUE RECEIVED, the undersigned
(“Borrower”),
hereby promises to pay to _____________________ or registered assigns (“Lender”), in
accordance with the provisions of the Agreement (as hereinafter defined), the
principal amount of each Loan from time to time made by the Lender to Borrower
under that certain Credit Agreement, dated as of [_____ __], 2010 (as amended, restated,
extended, supplemented or otherwise modified in writing from time to time, the
“Agreement”;
the terms defined therein being used herein as therein defined), among Borrower,
the Lenders from time to time party thereto, and Citibank, N.A., as
Administrative Agent.
Borrower promises to pay interest on
the unpaid principal amount of each Loan from the date of such Loan until such
principal amount is paid in full, at such interest rates and at such times as
provided in the Agreement. All payments of principal and interest
shall be made to Administrative Agent for the account of the Lender in Dollars
in immediately available funds at the Administrative Agent’s
Office. If any amount is not paid in full when due hereunder, such
unpaid amount shall bear interest, to be paid upon demand, from the due date
thereof until the date of actual payment (and before as well as after
judgment) computed at the per annum rate set forth in the
Agreement.
This Note is one of the Notes referred
to in the Agreement, is entitled to the benefits thereof and may be prepaid in
whole or in part subject to the terms and conditions provided
therein. This Note is also secured by the Collateral. Upon
the occurrence and continuation of one or more of the Events of Default
specified in the Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided in
the Agreement. Loans made by the Lender shall be evidenced by one or
more loan accounts or records maintained by the Lender in the ordinary course of
business. The Lender may also attach schedules to this Note and
endorse thereon the date, amount and maturity of its Loans and payments with
respect thereto.
Borrower, for itself, its successors
and assigns, hereby waives diligence, presentment, protest and demand and notice
of protest, demand, dishonor and non-payment of this Note.
THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
WASHINGTON.
ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, TO EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
ALASKA
AIRLINES, INC.
By:
Name:
Title:
LOANS
AND PAYMENTS WITH RESPECT THERETO
Date
|
Type
of Loan Made
|
Amount
of Loan Made
|
End
of Interest Period
|
Amount
of Principal or Interest Paid This Date
|
Outstanding
Principal Balance This Date
|
Notation
Made By
|
|
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EXHIBIT
C
FORM
OF COMPLIANCE CERTIFICATE
FOR
THE PERIOD ENDING _____________, 20__
To:
|
Citibank,
N.A., as Administrative Agent
|
Reference
is made to that certain Credit Agreement dated as of [_____ __], 2010 between
Alaska Airlines, Inc., an Alaska corporation (“Borrower”), the
Lenders from time to time party thereto, and Citibank, N.A., as Administrative
Agent (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Agreement”; the terms
defined therein being used herein as therein defined).
The undersigned Responsible Officer
hereby certifies as of the date hereof that he is the
of Borrower, and that, as such,
he is authorized to execute and deliver this Compliance Certificate to
Administrative Agent on the behalf of Borrower, and that:
(A) The
attached financial statements of Borrower are complete and correct, and fairly
present the financial condition of Borrower as of [_____ __, 20__], and the
results of the operations of Borrower for the period ended [_____ __, 20__], all in
accordance with generally accepted accounting principles applied on a consistent
basis;
(B) Exhibit
A hereto is a correct calculation of the financial covenant contained in Section
6.12 of the Agreement; and
(C) No
event has occurred which constitutes an Event of Default as defined in the
Agreement or which, with giving of notice or lapse of time, or both, would
constitute an Event of Default.
IN WITNESS WHEREOF, the
undersigned has executed this Compliance Certificate as
of [_____ __, 20__].
ALASKA
AIRLINES, INC.
By:
Name:
Title:
EXHIBIT
A
|
|
Period
Ending
|
|
|
__/__/20__
|
|
|
|
(i)
|
Unrestricted Cash - 6.12
|
______
|
|
|
|
EXHIBIT
D
FORM
OF ASSIGNMENT AND ASSUMPTION
This
Assignment and Assumption (this “Assignment and
Assumption”) is dated as of the Effective Date set forth below (the
“Effective
Date”) and is entered into by and between [Insert name of Assignor] (the
“Assignor”) and
[Insert name of
Assignee] (the “Assignee”). Capitalized
terms used but not defined herein shall have the meanings given to them in the
Credit Agreement identified below (the “Credit Agreement”),
receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1
attached hereto are hereby agreed to and incorporated herein by reference and
made a part of this Assignment and Assumption as if set forth herein in
full.
For an
agreed consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to, and in accordance with, the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date (i) all of the
Assignor’s rights and obligations as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto to the extent related
to the amount and percentage interest identified below of all of such
outstanding rights and obligations of the Assignor under the respective
facilities identified below and (ii) to the extent permitted to be assigned
under applicable law, all claims, suits, causes of action and any other right of
the Assignor (in its capacity as a Lender) against any Person, whether
known or unknown, arising under or in connection with the Credit Agreement, any
other documents or instruments delivered pursuant thereto, or the loan
transactions governed thereby or in any way based on or related to any of the
foregoing, including, but not limited to, contract claims, tort claims,
malpractice claims, statutory claims and all other claims at law or in equity
related to the rights and obligations sold and assigned pursuant to clause
(i) above (the rights and obligations sold and assigned pursuant to clauses
(i) and (ii) above being referred to herein collectively as, the
“Assigned
Interest”). Such sale and assignment is without recourse to
the Assignor and, except as expressly provided in this Assignment and
Assumption, without representation or warranty by the Assignor.
1. Assignor: ______________________________
2. Assignee: ______________________________
[, an Affiliate of [identify
Lender]]
3. Borrower: Alaska
Airlines, Inc.
4. Administrative
Agent: Citibank, N. A., as Administrative Agent
5. Credit
Agreement: Credit
Agreement, dated as of [_____
__], 2010, among Borrower, the Lenders from time to time party thereto
and Administrative Agent
6. Assigned
Interest:
Facility
Assigned
|
Aggregate
Amount of Commitment/Loans for all Lenders
|
Amount
of Commitment/
Loans
Assigned
|
Percentage
Assigned of Commitment/
Loans
|
CUSIP
No.
|
|
$
|
$
|
|
|
|
$
|
$
|
|
|
|
$
|
$
|
|
|
Effective
Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]
The terms
set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR
[NAME
OF ASSIGNOR]
By:
_____________________________
Title :
ASSIGNEE
[NAME
OF ASSIGNEE]
By:
_____________________________
Title :
[Consented to and]
Accepted:
Citibank,
N. A., as
Administrative
Agent
By:
_________________________________
Title :
b. [Consented
to:]
By:
_________________________________
Title :
ANNEX
1 TO ASSIGNMENT AND ASSUMPTION
STANDARD
TERMS AND CONDITIONS FOR
ASSIGNMENT
AND ASSUMPTION
1. Representations and
Warranties.
1.1. Assignor. The
Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim, and
(iii) it has full power and authority, and has taken all action necessary,
to execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with
respect to (i) any statements, warranties or representations made in or in
connection with the Credit Agreement or any other Loan Document, (ii) the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Loan Documents or any collateral thereunder, (iii) the financial
condition of Borrower, any of its Subsidiaries or Affiliates or any other Person
obligated in respect of any Loan Document, or (iv) the performance or
observance by Borrower, any of its Subsidiaries or Affiliates or any other
Person or any of their respective obligations under any Loan
Document.
1.2. Assignee. The
Assignee (a) represents and warrants that (i) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment and Assumption and to consummate the transactions contemplated hereby
and to become a Lender under the Credit Agreement, (ii) it meets all
requirements of an Eligible Assignee under the Credit Agreement (subject to
receipt of such consents as may be required under the Credit Agreement),
(iii) from and after the Effective Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of
the Assigned Interest, shall have the obligations of a Lender thereunder, and
(iv) it has received a copy of the Credit Agreement, together with copies
of the most recent financial statements delivered pursuant to Section 6.01
thereof, and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on
Administrative Agent or any Lender; and (b) agrees that (i) it will,
independently and without reliance on Administrative Agent, the Assignor or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform, in
accordance with their terms, all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.
2. Payments. From
and after the Effective Date, Administrative Agent shall make all payments in
respect of the Assigned Interest (including payments of principal, interest,
fees and other amounts) to the Assignor for amounts which have accrued to
but excluding the Effective Date and to the Assignee for amounts which have
accrued from and after the Effective Date.
3. General
Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be
executed in any number of counterparts, which together
shall
constitute one instrument. Delivery of an executed counterpart of a
signature page of this Assignment and Assumption by telecopy shall be effective
as delivery of a manually executed counterpart of this Assignment and
Assumption. This Assignment and Assumption shall be governed by, and
construed in accordance with, the law of the State of Washington.
EXHIBIT
E
FORM
OF SECURITY AGREEMENT
[See
attached.]
AIRCRAFT
CHATTEL
MORTGAGE AND
SECURITY
AGREEMENT
Dated as
of March 31, 2010
Between
ALASKA
AIRLINES, INC.
Mortgagor
And
CITIBANK,
N.A., as Administrative Agent
Mortgagee
Concerning
Certain
Boeing 737-400 and 737-800 series aircraft
AIRCRAFT
CHATTEL
MORTGAGE
AND SECURITY AGREEMENT
This
AIRCRAFT CHATTEL MORTGAGE AND SECURITY AGREEMENT is entered into on March 31,
2010 (as amended from time to time, this “Security Agreement”),
between, ALASKA AIRLINES, INC., a corporation organized and existing under the
laws of the state of Alaska, having the address 19300 International Blvd.,
Seattle, WA 98188 (the “Mortgagor”), and
CITIBANK, N.A, a national banking association, having an office at 388 Greenwich
Street, 34th Floor, New York, NY 10013, as Administrative Agent (together with
its successors and assigns, the “Mortgagee”). Capitalized
terms used herein and not otherwise defined shall have the meaning given in the
Credit Agreement and shall be construed in accordance with the rules of
construction set forth therein.
RECITALS
(1) Mortgagor,
certain financial institutions (collectively, the “Lenders”), and
Mortgagee, as administrative agent, entered into that certain Credit Agreement
dated as of even date herewith (as supplemented, amended, amended and restated,
or otherwise modified from time to time, the “Credit Agreement”)
providing for the Lenders to make revolving loans to Mortgagor.
(2) This
Security Agreement secures amounts owing under the Credit Agreement and the Lien
of this Security Agreement shall continue to attach to the Mortgage Property
without release or interruption notwithstanding the modification of the
Obligations secured by this Security Agreement.
NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound and to secure the payment and performance of the
Obligations and the performance of the covenants contained in this Security
Agreement, the Mortgagor does hereby grant, convey and mortgage unto the
Mortgagee, its successors and assigns, and gives to the Mortgagee a first
priority security interest in the Flight Equipment and in all of the other
following described property (collectively, the “Mortgaged
Property”).
GRANTING
CLAUSE I
Each
Aircraft, consisting of an airframe listed by type, U.S. Registration Mark and
serial number (each, an “Airframe”), and two engines listed by type and
manufacturer’s serial number (each, an “Engine”), together with all Parts
thereto installed in or attached to such airframe or engine, listed in Schedule
I hereto (the “Flight
Equipment”), as such Schedule I may be changed from time to time by a
Security Agreement Supplement.
GRANTING CLAUSE
II
All
property which shall from time to time be subjected to the Lien of this Security
Agreement by a Security Agreement Supplement or by delivery or by a writing of
any kind.
GRANTING CLAUSE
III
All
right, title and interest of the Mortgagor in, to and under all warranties,
service contracts and product agreements, if any, of any manufacturer of the
Flight Equipment, all maintenance and overhaul agency agreements relating to the
Flight Equipment, and all agreements of any subcontractor, supplier or vendor of
any part of the Flight Equipment, to the extent assignable or enforceable, and
any and all other warranties, service contracts and product agreements in
respect of any of the Flight Equipment, whether now existing or hereafter
acquired.
GRANTING CLAUSE
IV
All
substitutions, replacements and renewals of all property subjected or required
to be subjected to the Lien of this Security Agreement and all property that
hereafter becomes physically attached to or incorporated in all property
subjected or required to be subjected to the Lien of this Security Agreement, in
each case to the extent the same is now owned by the Mortgagor or shall
hereafter be owned by it.
GRANTING CLAUSE
V
All
monies deposited from time to time with the Mortgagee pursuant to
Section 2.1 until released from the Lien of this Security
Agreement.
GRANTING CLAUSE
VI
All
certificates, registrations, records, manuals, books, logs and technical
information relating to the Flight Equipment now or hereafter in the control or
possession of the Mortgagor (the “Aircraft
Documentation”).
GRANTING CLAUSE
VII
All
Proceeds.
GRANTING
CLAUSE VIII
All
right, title and interest of the Mortgagor in, to and under any lease or
arrangement for the operation of all or any part of the Flight Equipment, and
the chattel paper of the lease or other arrangement, including the Mortgagor’s
right, title and interest in and to all monies due and to become due to
Mortgagor under any lease or other arrangement, the Mortgagor’s right to compel
performance of all of the lessee’s obligations under any lease and all of the
Mortgagor’s rights as lessor but excluding all of Mortgagor’s obligations under
any lease or other arrangement, and together with all general intangibles and
contract right, (including all rents, issues, insurance proceeds, other
proceeds, awards, revenues and other income) of the Flight Equipment and all the
estate, right, title and interest of every nature whatsoever of the Mortgagor,
at law or in equity, in and to such Flight Equipment and every part and parcel
thereof.
All
property mortgaged or intended to be mortgaged by these granting clauses and
which is hereafter acquired by the Mortgagor or to which it may at any time
hereafter be, in any manner, entitled, at law or in equity, and required to be
subjected hereto or intended so to be, shall vest in the Mortgagee, under the
terms and conditions of this Security Agreement, forthwith upon acquisition
thereof by the Mortgagor, and such property shall be as fully embraced within
the provisions of this Security Agreement and subject to the Lien of this
Security Agreement as if such property were now owned by the Mortgagor and were
specifically described in and mortgaged by this Security Agreement.
TO HAVE
AND TO HOLD, all and singular said property unto the Mortgagee, its successors
and assigns, as security as aforesaid.
All of
the Mortgaged Property shall secure all of the Obligations.
Notwithstanding
anything to the contrary in the Granting Clauses or the other preceding
paragraphs, the Mortgagee hereby acknowledges and confirms that unless an Event
of Default shall have occurred and then be continuing, the Mortgagor shall be
entitled to use and enjoy the Mortgaged Property, subject to the provisions of
this Security Agreement and the other Loan Documents.
IT IS
HEREBY COVENANTED AND DECLARED by and between the parties to this Security
Agreement and their respective successors and assigns that the terms upon which
the Mortgaged Property shall be held, used and operated are as
follows:
SECTION
1. DEFINITIONS;
INTERPRETATION
1.1 Definitions. The
following words and expressions shall have the following meanings:
“Aircraft” means the
Airframe and Engines.
“Aircraft
Documentation” means all certificates, registrations, records, manuals,
books, logs and technical information relating to the Flight Equipment now or
hereafter in the control or possession of the Mortgagor.
“Airframe” means each
Boeing 737 series airframe bearing the manufacturer’s serial number and United
States registration mark specified in a Schedule hereto.
“Authorized Maintenance
Performer” means Mortgagor or any authorized mechanic or any authorized
repair station having the authority pursuant to the Maintenance Program to
perform maintenance and repairs to aircraft of the same type as the Aircraft or
engines of the same type as the Engines that are authorized under the
Maintenance Program.
“Cape Town Treaty” has
the meaning provided in 49 U.S.C. §44113(1).
“CRAF” or “Civil Reserve Air Fleet
Program” means the Civil Reserve Air Fleet Program administered by the
United States Government or any substantially similar program.
“Engine” means each of
the CFM International, Inc. CFM56 series engines, bearing the manufacturer’s
serial numbers specified in Schedule I hereto, whether or not installed upon the
applicable Airframe and any substitutions or replacements for each such Engine
in accordance with this Security Agreement.
“Event of Default”
means any event listed as an “Event of Default” as provided in Section 4.1 of
this Security Agreement.
“Event of Loss” with
respect to an Airframe or any Engine shall mean any of the following events
(a) loss of the Airframe or Engine or loss of the use thereof due to
destruction or damage beyond repair or the rendering of the Airframe or Engine
permanently unfit for use in the normal course of the Mortgagor’s business for
any reason whatsoever; (b) any damage to the Airframe or Engine which
results in an insurance settlement with respect to the Airframe or Engine on the
basis of an actual, constructive or compromised total loss; (c) the theft
or disappearance of the Airframe or Engine for a period in excess of one hundred
twenty (120) consecutive days; (d) any taking, seizure, confiscation or
requisition of the title to such property by condemnation or otherwise that
continues unstayed, undismissed or unvacated for a period of 30 consecutive days
or more (or such shorter period provided for in any insurance insuring such
risks and, in this regard, Mortgagor shall use its reasonable efforts to have
insurance proceeds payable in such event in less than 30 days); (e) any
taking, seizure, confiscation or requisition of the use of such property, by
condemnation or otherwise, by any governmental body (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) for a period stated to be or in fact continuing
for a period of one hundred eighty (180) consecutive days (or such shorter
period provided for in any insurance insuring such risks and, in this regard,
Mortgagor shall use its reasonable efforts to have insurance proceeds payable in
such event in less than one hundred eighty (180) days); or (f) as a result
of any rule, regulation, order or other action by any governmental body having
jurisdiction or any court of competent jurisdiction, the prohibition of the use
of such property in the normal course of air transportation of individuals for a
period stated to be or in fact continuing for a period of twelve months, unless
Mortgagor, prior to the expiration of such twelve month period, shall have
undertaken and shall be diligently carrying forward all steps which are
necessary and desireable to permit the normal use of such property by Mortgagor,
but in any event if such use shall have been prohibited for a period of eighteen
months. An Event of Loss with respect to an Airframe
shall be
deemed to constitute an Event of Loss with respect to the Aircraft of which the
Airframe was a part.
“FAA” shall mean the
Federal Aviation Administration provided for in the Department of Transportation
Act of 1966 or any successor or substituted governmental authority that at the
time has jurisdiction over the Mortgaged Property.
“Federal Aviation Act”
shall mean Subtitle VII of Title 49 of the United States Code and the rules and
regulations promulgated thereunder.
“Flight Equipment”
means the Airframes and Engines as covered by Granting Clause I and any
replacement airframes and engines subjected to the lien of this Security
Agreement by a Security Agreement Supplement as provided in Granting
Clause II.
“IDERA” means an
Irrevocable De-Registration and Export Request Authorization as contemplated by
the Cape Town Treaty.
“International
Interest” shall have the meaning provided thereto in the Cape Town
Treaty.
“International
Registry” has the meaning provided in 49 U.S.C. §44113(3).
“Lease” shall mean any
lease permitted by the terms of Section 3.10 of this Security
Agreement.
“Lessee” shall mean
the lessee under a Lease.
“Credit Agreement” has
the meaning described in the Recitals.
“Maintenance Program”
means the FAA approved maintenance program of Mortgagor (or, during the term of
a Lease permitted by Section 3.10, the FAA approved maintenance program of
Lessee) for each type of Aircraft.
“Manufacturer” means
The Boeing Company in its capacity as manufacturer of the applicable Airframe,
and its successors and assigns.
“Mortgagor Order” and
“Mortgagor
Request” mean, respectively, a written order or request signed in the
name of the Mortgagor and delivered to the Mortgagee in accordance with the
terms of this Security Agreement.
“Mortgagor’s
Certificate” means a certificate signed by the Mortgagor and delivered to
the Mortgagee.
“Parts” means all
appliances, parts, instruments, avionics, appurtenances, accessories,
furnishings and other equipment or components, of whatever nature (excluding
Engines or engines installed on an Airframe or any replacement engines
substituted therefore), which are, from time to time, incorporated in the
Airframe or any Engine.
“Permitted Liens”
means:
(i) the
Lien of this Security Agreement; and
(ii) any
other lien on the Mortgaged Property which is permitted by subsection (e) or
(f) of Section 7.01 of the
Credit Agreement.
“Person” shall mean
and include any individual, corporation, partnership, firm, joint venture,
trust, unincorporated organization, association, or any organization or
association of which any of the foregoing is a member or
participant.
“Proceeds” shall mean
whatever is receivable or received when the Airframe or any Engine is sold,
exchanged, collected, leased (except pursuant to a Lease prior to an Event of
Default) or otherwise disposed of, including, without limitation, all amounts
payable or paid under insurance, requisition or other payments as the result of
any loss or damage to the Airframe or Engine.
“Security Agreement
Supplement” means a supplemental first priority security agreement in
substantially the form attached as Schedule II or such other form as is
reasonably acceptable to Mortgagee.
“UCC” means the
Uniform Commercial Code as adopted and in effect in the State of Washington and
codified in the Revised Code of Washington as Title RCW 62A (Article 9
of the UCC accordingly means Article 9 of the UCC as adopted and in effect
in the State of Washington and codified in the Revised Code of Washington as
Chapter RCW 62A.9A), provided that if perfection
or the effect of perfection or non-perfection or the priority of any security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of Washington, “UCC” means the
Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.
1.2 Interpretation.
(a) All
terms used in Article 9 of the UCC and not specifically defined in this
Security Agreement are used in this Security Agreement as defined in
Article 9 of the UCC.
(b) Unless
otherwise indicated, any law, statute, treaty or ordinance defined or referred
to in this Security Agreement is intended to mean or refer to such law, statute,
treaty or ordinance as amended from time to time, any successor or replacement
law, statute, treaty or ordinance as amended from time to time, and the rules
and regulations promulgated from time to time under such law, statute, treaty or
ordinance.
(c) Unless
otherwise indicated, any agreement defined or referred to in this Security
Agreement means or refers to such agreement as amended or supplemented from time
to time or as the terms of such agreement are waived or modified, in each case
in accordance with its terms.
(d) Terms
defined in this Security Agreement in the singular include the plural of such
terms, and terms defined in this Security Agreement in the plural include the
singular of such terms.
(e) The
term “including”, when used in this Security Agreement, means “including without
limitation” and “including but not limited to”.
(f) Unless
otherwise indicated, any reference to a specified “article,” “section”
“subsection,” “clause,” “granting clause”, “exhibit” or “schedule” shall refer
to such article, section, subsection, clause, exhibit or schedule of this
Security Agreement.
SECTION
2. CASH
COLLATERAL
2.1 Cash
Collateral. All monies received by the Mortgagee as proceeds
of insurance upon any part of the Mortgaged Property and all monies elsewhere
herein provided to be held and applied under this Section 2, so long as no
Event of Default shall have occurred and is continuing, and all monies, if any,
required to be paid to the Mortgagor hereunder, whose disposition is not
elsewhere herein otherwise specifically provided for (all such monies being
hereinafter called the “Cash Collateral”),
shall be held by the Mortgagee and applied by the Mortgagee from time to time as
provided in Section 4.2.6 hereof; provided, however, that any proceeds of
insurance on the Mortgaged Property not constituting an Event of Loss of the
Aircraft shall be applied as provided in Section 2.2. All Cash
Collateral shall be held by Mortgagee in an interest bearing account with
interest accruing for the benefit of the Mortgagor and the funds on deposit in
such account may be invested for the benefit of the Mortgagor in investments
that are mutually acceptable to the Mortgagor and Mortgagee.
2.2 Insurance Proceeds Used for
Repair. (a) Provided that an Event of
Default shall not have occurred and be continuing, to the extent that any Cash
Collateral is the proceeds of insurance upon any part of the Mortgaged Property,
the same may be withdrawn by the Mortgagor and shall be paid by the Mortgagee,
upon Mortgagor Order, to reimburse the Mortgagor for, and up to an amount not
exceeding, expenditures made to repair or restore the property damaged as
required hereunder, and with respect to an Event of Loss of any Engine
expenditures made to replace such Engine, but only upon receipt by the Mortgagee
of (1) a Mortgagor Request for the withdrawal and payment of specified
proceeds of insurance then included in the Cash Collateral, and (2) a
Mortgagor’s Certificate, dated not more than five (5) days prior to the
application for such withdrawal, stating that expenditures have been made by the
Mortgagor in a specified amount for one or more of the purposes aforesaid, which
shall be briefly described, and also stating that no part of such expenditures
has been or is then being used in any other previous or then pending
application, as the basis for the withdrawal of any Cash Collateral from the
Mortgagee hereunder. Each such Mortgagor’s Certificate shall have
attached thereto photocopies of any work-sheets, invoices, vouchers and/or
receipts with respect to the repair, restoration or replacement in
question. Notwithstanding the foregoing and provided, that an Event of
Default shall not have occurred and be continuing, if Mortgagor provides
Mortgagee with a written estimate (together with a Mortgagor’s Certificate
certifying such estimate is genuine and complete) of any repairs or restoration
to be made with respect to such property damaged, Mortgagor may direct that the
Cash Collateral be withdrawn and paid directly to the entity performing the
repairs and be applied towards payment for such repairs or
restoration.
(b) Provided an Event of Default
shall not have occurred and be continuing, Mortgagee shall, promptly upon
request of the Mortgagor, repay to the Mortgagor any insurance proceeds
previously paid to Mortgagee which shall exceed the amount actually spent by the
Mortgagor to effect repairs or to replace an Engine as required under
Section 2.2(a), or, in the case of an Event of Loss of an Aircraft, such
insurance proceeds which shall exceed the Current Market Value of the Aircraft
that suffered an Event of Loss, provided, that, in the case
of an Event of Loss with respect to any Engine, Mortgagor shall have performed
all obligations required of it under Section 3.4(c) hereof.
SECTION
3. REPRESENTATIONS,
WARRANTIES AND COVENANTS
The
Mortgagor covenants, agrees, represents and warrants in particular as
follows:
3.1 Warranty of
Title.
(a) At
the time of the execution and delivery of this Security Agreement, the Mortgagor
owns and has the right to possess the Flight Equipment subject to no Lien except
Permitted Liens, and has full power and authority to grant, bargain, sell,
transfer, convey and mortgage, and give a security interest in, the Flight
Equipment in the manner and form as set forth in this Security
Agreement.
(b) The
Mortgagor is and shall remain the legal and beneficial owner of the Flight
Equipment, free and clear of all Liens except for Permitted Liens.
(c) The
Mortgagor hereby does and will forever warrant and defend the title to and
possession of the Mortgaged Property against the claims and demands of all
persons whomsoever except claims and demands under the Permitted Liens, and at
all times keep the Lien granted herein with respect to the Mortgaged Property,
at the Mortgagor’s expense, a first priority Lien upon the Flight Equipment and
on all of the other Mortgaged Property as constituted from time to time,
superior to the rights of all third parties to the extent permitted by
applicable law, and shall obtain any authorization, approval, license, or
consent of any competent governmental or judicial authority (including
registration of the Aircraft with the FAA Registry and of International Interest
with the International Registry) which may be or become necessary in order to
obtain the full benefits of this Security Agreement and all rights and powers
granted or to be granted in this Security Agreement. The Mortgagee
will use commercially reasonable efforts to consent in a timely manner to any
such registrations by the Mortgagor, but the Mortgagee’s failure to do so shall
not relieve the Mortgagor of its obligation to effect such registration with the
Mortgagee’s subsequent timely consent. The Mortgagor will discharge
or cause to be discharged any International Interest or prospective
International Interest in or relating to the Aircraft (including the Airframe
and the Engine) not consented to in writing by the
Mortgagee. Notwithstanding the preceding sentence, in the case of
International Interest or prospective International Interest filed in the
International Registry without the Mortgagor’s consent, the Mortgagor need not
cause such registered interests to be discharged to the extent they are
automatically discharged within 36 hours (or such period as is then provided by
the International Registry for removal of interests to which no consent has been
given) of after initially being registered. Further, the Mortgagor
will not consent to any International Interest or prospective International
Interest in or relating to the Aircraft unless prior approval is obtained from
the Mortgagee in writing.
3.2 Recording. The
Mortgagor will bear all out-of-pocket expenses of the Mortgagee for, and be
responsible for, recording and re-recording, registering and re-registering and
filing and re-filing this Security Agreement and each and every Security
Agreement Supplement and such other instruments from time to time as may be
reasonably requested by the Mortgagee in all such jurisdictions and offices as
the Mortgagee shall from time to time reasonably require, in order that
(i) the Lien hereof as a first priority Lien on the Flight Equipment and on
all of the Mortgaged Property, (ii) the security for all of the
Obligations, and (iii) the rights and remedies of the Mortgagee, may be
established, confirmed, maintained and protected. The Mortgagor will
furnish to the Mortgagee evidence reasonably satisfactory to the Mortgagee of
every such recording, registering and filing which is not recorded, registered
and filed by Mortgagee.
3.3 Maintain Priority of Lien;
Pay Taxes. This Security Agreement will be kept always a first
priority Lien upon the Flight Equipment and on all the other Mortgaged Property
as from time to time constituted and the Mortgagor will obtain and maintain in
full force and effect any authorization, approval, license, or consent of any
governmental or judicial authority, (including registration of the Aircraft with
the FAA Registry) that may be or become necessary in order to obtain the full
benefits of this Security Agreement and all rights and remedies granted or to be
granted in this Security Agreement and will not create or suffer to exist any
Lien upon the Mortgaged Property or any part thereof or upon the income
therefrom, other than Permitted Liens. The Mortgagor shall from time
to time pay or cause to be paid as they become due and payable, all taxes,
assessments and governmental charges lawfully levied or assessed or imposed upon
the Lien of the Mortgagee so that the Lien created by this Security Agreement
shall at all times be wholly preserved at the cost of the Mortgagor and without
expense to the Mortgagee, and the Mortgagor will not suffer any other matter or
thing whatsoever whereby the Lien created by this Security Agreement will be
impaired.
3.4 Maintain Flight
Equipment.
(a) The
Mortgagor shall, at all such times, maintain, preserve and keep, at its own cost
and expense, the Flight Equipment in good order and repair in accordance with
the Maintenance Program or cause the Flight Equipment to be so maintained,
preserved and kept without cost or expense under this Security Agreement to the
Mortgagee, except when (i) the Flight Equipment is being temporarily stored
in accordance with the Maintenance Program, (ii) the Flight Equipment is
being serviced, repaired, maintained, overhauled, tested or modified as
permitted or required by the terms of this Security Agreement or the Credit
Agreement, (iii) all similar aircraft of comparable vintage and/or
configuration have been grounded by the FAA or under the applicable laws of any
other jurisdiction in which an Aircraft is registered, or (iv) laws or
regulations affecting airworthiness are being contested in good faith and by
appropriate proceedings so long as such proceedings could not adversely affect
the Mortgagee or its interest in the affected Aircraft. Subject to
the forgoing exceptions, Mortgagor shall:
(i) service,
repair, maintain, overhaul, test, or cause the same to be done to the Aircraft
so as to keep the Aircraft in as good operating condition as when this Security
Agreement was executed, ordinary wear and tear excepted, in accordance with the
Maintenance Program and as may be necessary to enable the United States
airworthiness certification of the Aircraft to be maintained in good standing at
all times under FAA regulations and the applicable laws of the United States
Government;
(ii) perform
all routine and non-routine services, checks, inspections, including any
structural inspection required by the Maintenance Program or the
FAA;
(iii) maintain
all records, logs, and other materials required by applicable law of any
governmental entity to be maintained in respect to the Aircraft, including, but
not limited to, serviceable component tags required by the FAA;
(iv) upon
request, for so long as any part of the Flight Equipment is subject to the Lien
of this Security Agreement, provide Mortgagee with such information as it shall
reasonably request with respect to the scheduled commencement date of each
annual check (if applicable) or “C” check (or the equivalent) to be performed on
the Aircraft and the location where such checks will be performed;
(v) comply
with all applicable airworthiness directives issued by the FAA;
(vi) incorporate
in the Aircraft corrosion prevention and control and correct any discrepancies
in accordance with the Maintenance Program;
(vii) properly
document all repairs, modifications and alterations and the addition, removal or
replacement of equipment, systems or components in accordance with the rules and
regulations of the FAA and reflect such items in the Aircraft
Documentation.
All
maintenance of the Aircraft and Engines shall be performed by an Authorized
Maintenance Performer.
(b) For
so long as any part of the Flight Equipment is subject to the Lien of this
Security Agreement, the Mortgager shall maintain or cause the Flight Equipment
to be maintained in accordance with the Maintenance Program.
(c) The
Mortgagor shall promptly notify the Mortgagee or cause the Mortgagee to be
notified of any Engine becoming expropriated, worn out, lost, destroyed or
rendered unfit for use or of any other maintenance or repair of the Flight
Equipment having a projected replacement or repair cost of more than Five
Million Dollars ($5,000,000), and the Mortgagor shall furnish or cause to be
furnished to the Mortgagee a report describing in reasonable detail such items
and the items replaced by such work. In the case of an Event of Loss
to an Engine not involving an Event of Loss to the Aircraft, the Mortgagor
shall, within ninety (90) days following the occurrence of the Event of Loss to
such Engine, cause the Engine to be replaced and subjected to the Lien of this
Security Agreement. Any such replacement Engine shall be owned by the
Mortgagor free and clear of any liens and shall be of the same make and model
and have the same value and utility as the replaced Engine, assuming that such
replaced Engine was maintained in the condition required by this Security
Agreement.
(d) All
Parts at any time removed from the Aircraft, Airframe or any Engine shall remain
subject to the Lien hereof, no matter where located, until such time as such
Parts shall be replaced by Parts which have been incorporated in the Aircraft,
Airframe or Engine which are owned by Mortgagor. All replacement
Parts shall be free and clear of all Liens (except for Permitted Liens) and
shall have a value and utility at least equal to the Parts
replaced,
assuming
such replaced Parts were in the condition and repair required to be maintained
by the terms hereof. Notwithstanding the foregoing, the Mortgagor or
any Lessee may use temporary parts or pooled parts on the Aircraft as temporary
replacements for Parts, provided, that the Mortgagor
or Lessee, at its expense, as promptly thereafter as practicable, either
(1) causes such pooled or replacement part to become the property of the
Mortgagor free and clear of all Liens other than Permitted Liens, or
(2) replaces such replacement part with a further replacement part owned by
the Mortgagor or Lessee which meets the requirements of this Section 3.4,
free and clear of all Liens other than Permitted Liens. Immediately
upon any replacement Part becoming incorporated in the Aircraft, Airframe or
such Engine as above provided, without further act, (i) such replacement
Part shall become subject to the Lien hereof, and the replaced Part shall no
longer be subject to the Lien hereof, and (ii) such replacement Part shall
be deemed part of the Aircraft, Airframe or such Engine for all purposes hereof
to the same extent as the Parts originally incorporated in such Aircraft,
Airframe or Engine. The Mortgagor (or any Lessee), at its own
expense, may from time to time make such alterations’ and modifications in and
additions to the Airframe or any Engine as the Mortgagor (or any Lessee) may
deem desirable in the proper conduct of its business, including removal of Parts
which the Mortgagor (or any Lessee) deems to be obsolete or no longer suitable
or appropriate for use on the Airframe or Engine (such removed Parts are
hereinafter referred to as “Obsolete Parts”);
provided, that no such
alteration, modification, removal or addition impairs the condition or
airworthiness of the Airframe or Engine, or diminishes the value and utility of
the Airframe or Engine below the value or utility thereof immediately prior to
such alteration, modification, removal or addition, assuming the Airframe or
Engine was then in the condition required to be maintained by the terms of this
Security Agreement absent such alteration, modification, removal or addition,
except that the value (but not the utility) of the Airframe or any Engine may be
reduced by the value of Obsolete Parts which shall have been removed so long as
the aggregate original value of all Obsolete Parts which shall have been removed
and not replaced shall not exceed $400,000; provided, further, that no such removal
shall be permitted if an Event of Default shall have occurred and be
continuing.
(e) Notwithstanding
any other provision of this Security Agreement, the Mortgagor may install or
permit to be installed in any Aircraft audio-visual, entertainment, telephonic
or other equipment owned by third parties (or owned jointly by the Mortgagor and
others) and leased or otherwise furnished to the Mortgagor in the ordinary
course of business, and the Lien of this Security Agreement shall not attach
thereto and the rights of the owners therein shall not constitute a default
hereunder or under the Credit Agreement.
(f) In
the case of an Event of Loss of an Airframe, the rights and obligations of the
parties hereto shall be governed by Section 6.15 of the Credit
Agreement. Following Mortgagee’s release of a Removed Aircraft
pursuant to Section 6.15(d) of the Credit Agreement, and provided, that no Default or
Event of Default has occurred and is continuing, Mortgagee shall promptly
transfer to Mortgagor all proceeds which the Mortgagee had received from the
Mortgagor’s insurers pursuant to Section 3.5 herein and any investment
earnings thereon.
(g) The
Mortgagor shall not, when in possession of any portion of the Flight Equipment,
use or permit such portion of the Flight Equipment to be operated except by
pilots currently certified by the FAA to use and operate the Flight
Equipment.
(h) Any
part or item of property may be removed from the Flight Equipment in order that
the same may be inspected, repaired, reconditioned or otherwise serviced without
affecting or impairing the lien hereof with respect to such part or item of
property, provided,
that whenever any such part or item is in the possession of the Mortgagor, any
such part or item shall be at all such times covered by insurance against such
risks and in such amounts as is reasonably satisfactory to Mortgagor and provided, that, other than in
the case of Obsolete Parts, any such part or item shall be replaced promptly
after its removal by that same or an equivalent part in as good working order as
the part or item removed, assuming such part or item was maintained and used as
required by the provisions hereof and shall be subject to the lien and security
interest created pursuant to this Security Agreement.
3.5 Insurance.
(a) The
Mortgagor shall carry and maintain in effect, at its own expense, with
financially sound and reputable insurers, the following insurance which will
name as an additional insured party the Mortgagee:
(i) Comprehensive Airline
Liability Insurance. Comprehensive airline liability insurance
(including, without limitation, contractual liability, passenger legal liability
and liability for property damage), in amounts per occurrence of not less than
Six Hundred Million Dollars ($600,000,000.00), or such greater amounts as the
Mortgagor may carry. Each and any policy of insurance carried in accordance with
this subclause (i), and each and any policy obtained in substitution or
replacement for any of such policies, (1) shall designate the Mortgagee as
an additional insured (but without any obligation imposed upon the additional
insured, including, without limitation, the liability to pay any premiums for
any such policies, but the Mortgagee shall have the right to pay such premiums
if it shall so elect), (2) shall expressly provide that, in respect of the
interest of the Mortgagee (or any holder from time to time of a Note) in such
policies, the insurance shall not be invalidated by any action or inaction of
any Person (other than the Mortgagee for their respective interests), and shall
insure, regardless of any breach or violation by Mortgagor or any other Person
(other than the Mortgagee) of any warranty, declaration or condition contained
in such policies, (3) shall provide that if such insurance is canceled for
any reason whatsoever, or is adversely changed in any way with respect to the
interest of the Mortgagee (or any holder from time to time of a Note) or if such
insurance is allowed to lapse for nonpayment of premium, such cancellation,
change or lapse shall not be effective as to the Mortgagee (or any holder from
time to time of a Note) for thirty (30) days (or such lesser time which may be
standard in the insurance industry and ten (10) days in the event of nonpayment
of premium), in each instance after receipt by the Mortgagee (or any holder from
time to time of a Note) of written notice by such insurer or insurers sent to
the Mortgagee (or any holder from time to time of a Note) of such prospective
cancellation, change or lapse, (4) shall include coverage for any country
in which the Flight Equipment is located, and (5) shall provide that, as
against the Mortgagee (or any holder from time to time of a Note), the insurer
shall waive any rights of set-off, counterclaim or any other deduction, whether
by attachment or otherwise, and waives any rights it may have to be subrogated
to any right of any insured against the Mortgagee (or any holder from time to
time of a Note) with respect to the Flight Equipment. Each liability policy
shall be primary without right of contribution from any other insurance which
may be carried by the Mortgagee (or any holder from time to time of a Note) and
shall expressly provide that all of the provisions thereof (except the limits of
liability)
shall
operate in the same manner as if there were a separate policy covering each
insured. No liability policy shall permit any deductible or self-insurance
provision in excess of Five Million Dollars ($5,000,000). Such policy may be
subject to the standard terms and conditions contained in comprehensive airline
liability policies.
(ii) Aircraft Hull War Risks and
Allied Perils Insurance. Hull war risk and allied perils
insurance on the Flight Equipment (which shall include, but not be limited to,
coverage for hijacking, declared or undeclared war, insurrections, strikes,
riots, civil commotions or labor disturbances, malicious acts or acts of
sabotage, unlawful seizure or wrongful exercise of control of the Flight
Equipment in flight by a person on board such Flight Equipment acting without
the consent of the Mortgagor) in an amount not less than the Current Market
Value of the Aircraft in question, or such greater amounts as the Mortgagor may
carry.
(iii) All Risks Hull
Insurance. “All risks” ground and flight aircraft hull
insurance covering the Flight Equipment, and fire, transit, extended coverage,
spares and all risks insurance with respect to the Engines and Parts while not
installed on the Aircraft. At all times while any part of the Flight
Equipment is subject to the Lien of Security Agreement, such insurance shall be
for an amount not less than the Current Market Value of the Aircraft in
question.
Notwithstanding
anything above, each and any policy of insurance obtained and maintained
pursuant to subclause (ii) and this subclause (iii), and each and any
policy obtained in substitution or replacement for any such policies,
(1) shall designate the Mortgagee as additional insured and as sole loss
payee (subject to clauses (7) and (8) below) up to the Current Market Value of
the Aircraft in question (but without imposing upon the Mortgagee any obligation
imposed upon the insured, including, without limitation, the liability to pay
any premiums for any such policies, but the Mortgagee shall have the right to
pay such premiums if it shall so elect), (2) shall expressly provide that,
in respect of the interests of the Mortgagee in such policies, the insurance
shall not be invalidated by any action or inaction of the Mortgagor or any other
Person (other than the Mortgagee for its interest), shall insure the Mortgagee,
regardless of any breach or violation of any warranty, declaration of condition
contained in such policies by the Mortgagor or any other Person (other than the
Mortgagee for its interest), (3) shall provide that if such insurance is
canceled for any reason whatsoever, or is adversely changed in any way with
respect to the interest of the Mortgagee, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation change or lapse shall not be
effective as to the Mortgagee, for thirty (30) days (or such lesser time which
may be standard in the insurance industry and ten (10) days in the event of
nonpayment of premium) after receipt by the Mortgagee of written notice (or in
the case of War Risk insurance, seven (7) days or such lesser time which may be
standard in the war risk insurance market after delivery of written notice) by
such insurer or insurers to the Mortgagee, as the case may be, of such
prospective cancellation, change or lapse, (4) shall include coverage for
the territorial limits or any country in which the Flight Equipment may at any
time be located, but may include geographic exclusions, (5) shall provide
that, as against the Mortgagee, the insurer shall waive any rights of set-off,
counterclaim or any other deduction, whether by attachment or otherwise, and
waive any rights it may have to be subrogated to any right of any insured
against the Mortgagee, with respect to the Flight Equipment, (6) shall provide
that in the event of any damage or loss which is an Event of Loss hereunder and
which results in a payment, such payment of up to the Current Market Value
of
the
Flight Equipment suffering the Event of Loss shall be payable solely and
directly to the Mortgagee for the account of all interests, (7) shall provide
that in the event of any damage or loss which is not an Event of Loss hereunder
and which results in a payment for any one occurrence in excess of Five Million
Dollars ($5,000,000), such payment shall be payable solely and directly to the
Mortgagee for the account of all interests, and (8) shall provide that payments
for any one occurrence not in excess of Five Million Dollars ($5,000,000) shall
be payable directly to the Mortgagor provided there exists no
Event of Default. Except during a period when an Event of Default has occurred
and is continuing, all losses will be adjusted with the insurers by the
Mortgagor (giving due regard to the interests of the Mortgagee and the
Lenders).
(b) The
Mortgagor shall have the right to carry insurance in excess of the amounts
required hereunder and the proceeds of such excess insurance shall be payable to
the Mortgagor. Similarly, the Mortgagee shall have the right to carry
additional and separate insurance for its own benefit at its own expense,
without, however, thereby limiting the Mortgagor’s obligations under this
Section 3.5.
(c) The
Mortgagor may maintain self-insurance and standard industry deductibles in its
“all risks” hull insurance policies, provided that no such self-insurance is for
more than Five Million Dollars ($5,000,000), and Mortgagor notifies Agent and
Lenders of the amount of any such self-insurance when Mortgagor elects to have a
deductible.
(d) The
Mortgagor shall promptly notify the Mortgagee of, to the knowledge of the
Mortgagor, any material adverse change in the insurance coverage required by
this Section 3.5.
(e) Prior
to the date of this Security Agreement, the Mortgagor shall furnish, or cause to
be furnished, to the Mortgagee from nationally recognized independent aviation
insurance brokers, certificates of insurance certifying to such insurance
coverage, indicating the underwriters that are part of the insurance, and
providing the portion of the cover that each underwriter has
undertaken.
All
proceeds of insurance paid to the Mortgagee in accordance with this
Section 3.5 shall be held and paid over or applied by the Mortgagee as
provided in Section 2.1 or 2.2.
3.6 Inspection by Mortgagee;
Information.
The Mortgagor shall, at all such times,
maintain and store, or cause to be maintained and stored, records in accordance
with the FAA regulations and adequate to identify such Flight Equipment and to
disclose its location, use and maintenance, and upon reasonable notice and
request of the Mortgagee, permit the Mortgagee, its representatives and agents
(or cause the Mortgagee, its representatives and agents to be permitted if the
following items are not in the possession or control of Mortgagor) to inspect
such Flight Equipment (including all logs, maintenance cards, manuals and
records with respect thereto) and, at the expense of Mortgagee, to take copies
and extracts therefrom, and shall afford and procure a reasonable opportunity to
make any such inspection, and the Mortgagor shall furnish or cause to be
furnished to the Mortgagee any and all such other information and, at the
expense of Mortgagee, copies of documents and print-outs of data stored on any
electronic or data processing medium, as are reasonably available to the
Mortgagor and the Mortgagee may reasonably request, with respect
to any
Mortgaged Property, provided, that any such
inspection shall be upon reasonable notice, shall be limited, in the absence of
the continuation of an Event of Default, to once a year at a mutually agreed
time, and by a group consisting of no more than two individuals.
3.7 Registration. For
so long as any part of the Flight Equipment is subject to the Lien of this
Security Agreement, the Mortgagor shall cause the Aircraft to be registered at
all times with (i) the FAA and (ii) the International Registry, in its name as
owner thereof. The Mortgagor shall not provide an IDERA in favor of
any Person with respect to any of the Aircraft.
3.8 Insignia. The
Mortgagor will plainly, distinctly and conspicuously place or cause to be placed
and leave in the cockpit of the Aircraft and upon such other places as may
reasonably be designated by the Mortgagee from time to time, an insignia or
other identification bearing words which indicate Mortgagee’s interest in the
Aircraft, in letters of a size reasonable under the circumstances and acceptable
to the Mortgagee.
3.9 Operation and
Location. Mortgagor agrees that (a) it will not fly the
Aircraft or suffer the Aircraft to be flown in violation of any provision of any
insurance policy in effect with respect to the Aircraft or in violation of any
law, rule, regulation or order of the United States or any agency,
instrumentality or state or political subdivision thereof (including agencies
and instrumentalities of such state or political subdivision) or of any other
nation having jurisdiction over the use and operation of the Aircraft, except
(1) unanticipated minor violations not involving any material risk of the
sale, forfeiture or loss of an Aircraft, an Airframe, any Engine, or the
Mortgagee’s interest therein, if such violation ceases promptly after discovery
thereof by the Mortgagor, or only requires the Mortgagor’s payment of a fine
levied only against the Mortgagor, and (2) the Mortgagor or any Lessee may
contest in good faith the validity or application of any such law, rule,
regulation, treaty, order, certificate, license or registration, so long as
there is no material risk of the sale, forfeiture or loss of an Aircraft, an
Airframe or any Engine, or the Mortgagee’s interest therein, (b) it shall not
knowingly use or allow the Aircraft to be used for the carriage of drugs or
other illegal goods or any other goods for which the Mortgagor or operator of
the Aircraft is not licensed to transport; and (c) it will not operate the
Aircraft, or permit any Lessee to operate the Aircraft: (i) in or to any
area excluded from coverage by any insurance required to be maintained by the
terms of Section 3.5 hereof; (ii) in countries with which the United
States does not maintain full diplomatic relations other than the Republic of
China (Taiwan); and (iii) in or to any areas of actual or threatened armed
hostilities, provided,
that the failure of Mortgagor to comply with the provisions of this sentence
shall not give rise to an Event of Default where such failure is an isolated
extraordinary occurrence attributable to a hijacking, medical emergency,
equipment malfunction, weather condition, or navigational error. The
Mortgagor shall also have the right to operate any Aircraft without having on
board the original registration certificate or airworthiness certificate in the
event that either or both such certificates disappear from the Aircraft, but
only to the extent permitted by Exemption No. 5318 of the Federal Aviation
Act or other similar exemption.
3.10 Possession and
Leases. The Mortgagor will not, without the prior written
consent of the Mortgagee, lease or otherwise in any manner deliver, transfer or
relinquish possession of the Airframe or any Engine or install or permit any
Engine to be installed on any airframe other than the Airframe; provided that so long as no
Event of Default shall have occurred and be continuing at the time of such
Lease, delivery, transfer or relinquishment of
possession
or installation and the Mortgagor and/or any Lessee shall continue to comply
with the provisions of Section 3.3 and Section 3.4, the Mortgagor
may, without the prior written consent of the Mortgagee:
(a) subject
the Engine(s) or engines to normal interchange agreements or any Engine to
normal pooling or similar arrangements, in each case customary in the airline
industry and entered into by the Mortgagor (or any Lessee) in the ordinary
course of its business with a U.S. Air Carrier or any other air carrier approved
in writing by the Mortgagee (which approval will not be unreasonably withheld or
delayed); provided,
that (i) no such agreement or arrangement contemplates or requires the
transfer of title to any Engine and
(ii) if the Mortgagor’s title to any Engine shall be divested under any
such agreement or arrangement, such divestiture shall be deemed to be an Event
of Loss with respect to such Engine and the Mortgagor shall (or shall cause any
Lessee to) comply with Section 3.4 (c) hereof in respect
thereof;
(b) deliver
possession of the Airframe or any Engine to the Airframe manufacturer or the
Engine manufacturer, or to any Person for testing, service, repair, maintenance
or overhaul work on the Airframe or any Engine or for alterations or
modifications in or additions to the Airframe or Engine(s) to the extent
required or otherwise not prohibited by the terms hereof or of the Credit
Agreement;
(c) install
an Engine on an airframe owned by the Mortgagor (or any Lessee), leased to the
Mortgagor (or any Lessee), or owned or purchased by the Mortgagor (or any
Lessee) subject to a conditional sale or other security agreement, provided, that (A) such
airframe is free and clear of all Liens, except (i) in the case of
airframes leased to the Mortgagor (or any Lessee) or owned or purchased by the
Mortgagor (or any Lessee) subject to a conditional sale or other security
agreement, the rights of the parties to the Lease or conditional sale agreement
or other security agreement covering such airframe, or their assignee,
(ii) Permitted Liens, and (iii) the rights of other air carriers under
normal interchange agreements which are customary in the airline industry and do
not contemplate, permit or require the transfer of title to the airframe or
engines installed thereon, and (B) any such lease, conditional sale or
other security agreement provides that such Engine shall not become subject to
the lien of such lease, conditional sale or other security agreement,
notwithstanding the installation thereof on such airframe, and the inclusion in
such agreement of a provision similar to Section 3.10(i) shall satisfy such
requirement;
(d) install
an Engine on an airframe owned by the Mortgagor (or any Lessee), leased to the
Mortgagor (or any Lessee) or purchased by the Mortgagor (or any Lessee) subject
to a conditional sale or other security agreement under circumstances where
Section 3.10(c) above is inapplicable, provided, that such
installation shall be deemed an Event of Loss with respect to such Engine and
the Mortgagor shall (or shall cause any Lessee to) comply with
Section 3.4(c) hereof in respect thereof, the Mortgagee not intending
hereby to waive any right or interest it may have to or in such Engine under
applicable law until compliance by the Mortgagor with such
Section 3.4(c);
(e) transfer
(or permit any Lessee to transfer) possession of the Airframe or any Engine to
the United States of America or any instrumentality or agency thereof pursuant
to
CRAF so
long as the Mortgagor (or such Lessee) shall promptly notify the Mortgagee upon
transferring possession of the Airframe or any Engine to the United States of
America or any agency or instrumentality thereof pursuant to such program and
provide the Mortgagee with the name and address of the Contracting Office
Representative for the Military Aircraft Command of the United States Air Force
to whom notice must be given in the event the Mortgagee desires to give notice
as provided in Section 4.2 hereof;
(f) provided that no Event of
Default has occurred and is continuing, enter into a lease
with: (A) any certificated U.S. Air Carrier not then subject to
bankruptcy, reorganization or insolvency proceedings; (B) any other
non-U.S. air carrier if at the time of such lease the United States of America
maintains normal diplomatic relations with the country in which such air carrier
is based and the Mortgagee shall have received (A) evidence
that: (1) all necessary governmental approvals required for the
leased equipment, the Airframe or any Engine, as the case may be, to be imported
and, if requested by the Mortgagee (and such request is reasonable in light of
the circumstances) and if and to the extent obtainable with reasonable effort
and if it is otherwise customary to obtain the same in such jurisdiction,
exported from the applicable country of domicile upon repossession of such
leased equipment by the Mortgagee (and the Mortgagor as lessor) shall have been
obtained prior to commencement of any such lease; and (2) the insurance
requirements of Section 3.5 are satisfied and that War Risk Insurance shall be
carried and maintained of such scope and coverage, and subject to such
exclusions and exceptions, as is standard for air carriers flying similar
equipment on routes comparable to those flown by the Aircraft and (B) an
opinion of counsel (which counsel and opinion are reasonably satisfactory to the
Mortgagee) that: (1) it is not necessary for the Mortgagee to register or
qualify to do business in such jurisdiction solely as a result of the proposed
lease, unless the only result of such registration or qualification is a Tax or
cost that the Mortgagor is indemnifying such party against; (2) that the
Mortgagee’s Lien on the leased equipment will be recognized; (3) the laws
of such jurisdiction of domicile require fair compensation by the government of
such jurisdiction payable in a currency freely convertible into Dollars for the
loss of the title to the leased equipment in the event of the requisition by
such government of title (unless the Mortgagor shall provide insurance covering
the risk of requisition of title to the leased equipment by the government of
such jurisdiction so long as the leased equipment is subject to such lease);
(4) the required agreement of such non-U.S. air carrier that its rights
under the Lease are subject and subordinate to all of the terms of this Security
Agreement is enforceable against such non-U.S. air carrier under applicable law
(subject only to customary exceptions to enforceability); (5) there exist
no possessory rights in favor of such Lessee under the laws of such jurisdiction
which would, upon bankruptcy of the Mortgagor or other default by the Mortgagor
or Lessee and assuming that at such time such Lessee is not insolvent or
bankrupt, prevent the return of the Aircraft to the Mortgagor or the Mortgagee
in accordance with and when permitted by the terms of Section 4.2 hereof upon
the exercise by the Mortgagee of remedies under Section 4.2 hereof; and
(6) the terms (including, without limitation, the governing-law and
jurisdictional-submission provisions hereof) of this Security Agreement are
legal, valid, binding and enforceable in such jurisdiction against third parties
to substantially the same extent as in the United States; or (C) any Person
approved in writing by the Mortgagee, which approval shall not be unreasonably
withheld. The currency of payments under such Lease must be freely
convertible into Dollars.
(g) The
rights of any Lessee or other transferee who receives possession by reason of a
transfer permitted by this Section 3.10 (other than the transfer of an
Engine deemed
an Event
of Loss) shall be subject and subordinate to, and any Lease permitted by this
Section 3.10, shall expressly provide that it is subject and subordinate
to, all the terms of this Security Agreement; provided, that in the case of
the use of the Aircraft in CRAF the subject and subordinate requirements herein
shall be subject to the notice specified in Section 4.2 and other requirements
of the CRAF program. In the case of any Lease, the Mortgagor shall
remain primarily liable hereunder for the performance of all of the terms of
this Security Agreement, and the terms of any such Lease shall not permit any
Lessee to take any action not permitted to be taken by the Mortgagor hereunder
with respect to the Aircraft and may permit the Mortgagor to cure any default by
Lessee and to terminate the Lease upon such default; provided, however, that the Mortgagor
may procure such performance from any Lessee pursuant to the relevant Lease, and
the Mortgagee hereby agrees to accept such performance by such Lessee in
satisfaction of the Mortgagor’s obligations hereunder; and provided, further, that all rights
accruing hereunder to the Mortgagor shall likewise accrue to such Lessee to the
extent Mortgagor so permits. Subject to the Mortgagor’s obligations
in this paragraph (g) above, the Mortgagor shall promptly notify the
Mortgagee after entering into any Lease.
(h) Any
Wet Lease or similar arrangement under which the Mortgagor maintains operational
control of the Aircraft shall not constitute a delivery, transfer or
relinquishment of possession for purposes of this
Section 3.10. Any consolidation or merger of the Mortgagor or
conveyance, transfer or lease of all or substantially all of the Mortgagor’s
assets permitted by the Credit Agreement shall not be prohibited by this
Section 3.10. As used herein, “Wet Lease” shall mean any
arrangement whereby the Mortgagor or a Lessee agrees to furnish the Airframe and
Engines or engines installed thereon to a third party pursuant to which the
Airframe and Engines or engines (i) shall be operated solely by regular
employees of the Mortgagor, or Lessee possessing all current certificates and
licenses required under the Federal Aviation Act, and (ii) shall be
maintained by the Mortgagor or Lessee in accordance with the Maintenance Program
or an FAA approved maintenance program.
(i) The
Mortgagee agrees, for the benefit of the Mortgagor (and any Lessee) and for the
benefit of any mortgagee or other holder of a security interest in any engine
owned by the Mortgagor (or any Lessee), any lessor of any engine leased to the
Mortgagor (or any Lessee) and any conditional vendor of any engine purchased by
the Mortgagor (or any Lessee) subject to a conditional sale agreement or any
other security agreement, that no interest shall be created hereunder in any
engine so owned, leased or purchased and that neither the Mortgagee nor its
successors or assigns will acquire or claim hereunder, as against the Mortgagor
(or any Lessee) or any such mortgagee, lessor or conditional vendor or other
holder of a security interest or interest in such engine as the result of such
engine being installed on the Airframe; provided, however, that such agreement
of the Mortgagee shall not be for the benefit of any lessor or secured party of
any airframe leased to the Mortgagor (or any Lessee) or purchased by the
Mortgagor (or any Lessee) subject to a conditional sale or other security
agreement or for the benefit of any mortgagee of or any other holder of a
security interest in an airframe owned by the Mortgagor (or any Lessee), unless
such lessor, conditional vendor, other secured party or mortgagee has agreed
(which agreement may be contained in such lease, conditional sale or other
security agreement or mortgage and may consist of a paragraph similar to this
paragraph) that neither it nor its successors or assigns will acquire, as
against the Mortgagee, any right, title or interest in an Engine as a result of
such Engine being installed on such airframe.
3.11. Substitution of
Engines. So long as no Event of Default shall have occurred
and be continuing, Mortgagor shall have the right at its option at any time in
accordance with Section 6.15(c) of the Credit Agreement, to terminate the
Lien of this Security Agreement with respect to any Engine. Subject
to Section 6.15(c) of the Credit Agreement, at the time of any such
termination, Mortgagor shall replace such engine hereunder by complying with the
terms of Section 3.4(c) hereof to the same extent as if an Event of Loss had
occurred with respect to such Engine (other than the time periods allowed for
such replacement), and the Mortgagee shall release the replaced Engine from the
Lien of this Security Agreement by entering into a Security Agreement Supplement
in the form of Schedule II and by promptly consenting to the request from the
Mortgagor to the release of the International Interest in such Engine at the
International Registry.
3.12 Section 1110 of the
Bankruptcy Code. With respect to the Aircraft and Engines that
constitute Collateral first placed into service after October 22, 1994,
Mortgagee is entitled to the benefits of Section 1110 of the Bankruptcy Code in
connection with the exercise of its remedies under this Security Agreement in
respect of each Aircraft and each Engine. Except as specifically
designated in Schedule I or in any Security Agreement Supplement, each Aircraft
and Engine that constitute Collateral was first placed in service after October
22, 1994.
3.13 Cape Town Treaty. Mortgagor is a
“transacting user entity” for purposes of the Cape Town Treaty and is “situated”
for purposes of the Cape Town Treaty in the United States of
America.
SECTION
4.
EVENTS OF DEFAULT AND REMEDIES
4.1. Events of
Default.
(a) Each
Event of Default set forth in Section 8.01 of the Credit Agreement is
incorporated herein as if fully set forth as a separate Event of Default in this
Section 4.1.
(b) The
Mortgagor shall fail to procure and maintain (or cause to be procured and
maintained), with respect to the Aircraft, insurance required to be maintained
in accordance with the provisions of Section 3.5 hereof or such insurance shall
lapse or be canceled, provided, that no such lapse
or cancellation shall constitute an Event of Default until the earlier of
thirty (30) days (or if 30 days is unavailable pursuant to Section 3.5
hereof, such shorter period as is available pursuant to such Section) after
receipt by the Mortgagor of written notice of such lapse or cancellation (or
seven (7) days or such shorter time as may be standard in the industry with
respect to War Risk Insurance provided, that if the
Aircraft is grounded or if War Risk Insurance or indemnification is provided by
the FAA, no such failure to carry War Risk Insurance shall be an Event of
Default) or the date that such lapse or cancellation is effective as to
Mortgagee; or
(c) The
Mortgagor shall have failed to perform or observe, or caused to be performed and
observed, any other covenant or agreement contained in this Security Agreement,
and such failure shall continue unremedied for a period of thirty (30) days
after the Mortgagor’s receipt of written notice thereof from the Mortgagee;
provided, however, that if such failure
is curable, and if the Mortgagor shall have undertaken to cure any such failure
and, notwithstanding
the
reasonable diligence of the Mortgagor in attempting to cure such failure, such
failure is not cured within said thirty (30) day period but is curable with
future due diligence, there shall exist no Event of Default under this Section
4.1 for such further time not to exceed 180 days as may reasonably be required
to effect such cure, so long as the Mortgagor is proceeding with due
diligence to cure such failure.
4.2. Remedies. Upon
the occurrence of an Event of Default, the Mortgagee may accelerate the entire
balance then due and owing under the Credit Agreement and this Security
Agreement, whereupon all such sums shall become immediately due and payable, and
thereafter the Mortgagee may, at its option, do one, several or all of the
following as the Mortgagee in its sole discretion shall then elect:
(a)
exercise all the rights and remedies granted to secured parties by: (i) the
provisions of the UCC, (ii) the Cape Town Treaty not inconsistent with
applicable law or (iii) under the provisions of any applicable law;
(b)
personally, or by agents or attorneys, take possession of all or any part of the
Mortgaged Property, and demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for, or
make any compromise or settlement deemed desirable with respect to, any of the
Mortgaged Property or any sum payable in connection therewith;
(c)
personally, or by agents or attorneys, take possession of any part or all of the
Mortgaged Property without being responsible for loss or damage caused thereby,
and sell or dispose of all or any part of the same, free from any and all claims
of the Mortgagor or of any other party claiming by, through or under the
Mortgagor, at law or in equity, at one or more public or private sales on such
commercially reasonable terms as the Mortgagee may in good faith fix, with or
without any previous demand or notice to the Mortgagor or advertisement of any
such sale or other disposal except as is commercially reasonable under the
circumstances, and any notice or demand and right of equity or redemption
otherwise required by or available to the Mortgagor under applicable law is
hereby waived by the Mortgagor to the fullest extent permitted by applicable
law;
(d)
institute legal proceedings for the sale or otherwise for the enforcement of any
right, under the judgment of any court of competent jurisdiction, of or
concerning any of the Mortgaged Property;
(e)
institute legal proceedings to foreclose upon and against the security interest
granted in and by this Security Agreement or to recover judgment for the amounts
then due from Mortgagee under this Security Agreement or under the Credit
Agreement.
(f)
institute legal proceedings for the specific performance of any covenant or
agreement contained in this Security Agreement or in aid of the execution of any
power granted in this Security Agreement, and the Mortgagee shall be entitled as
of right to the appointment of a receiver of all or any part of the Mortgaged
Property; and
(g)
exercise all of the rights and remedies of the Mortgagee against the Mortgagor
under the Credit Agreement.
provided that during any period the
Aircraft is activated under CRAF in accordance with the provisions of Section
3.10 hereof and in the possession of the government of the United States of
America or an instrumentality or agency thereof, the Mortgagee shall not, on
account of any Event of Default, be entitled to do any of the foregoing or
require Mortgagor to do anything as permitted in Section 4 in such manner as to
limit the Mortgagor’s control under this Security Agreement of any Airframe or
any Engines installed thereon, unless at least sixty (60) days’ (or such lesser
period as may then be applicable under the Military Airlift Command program of
the government of the United States of America) prior written notice of default
hereunder shall have been given by the Mortgagee by registered or certified mail
to the Mortgagor with a copy addressed to the Contracting Office Representative
for the Military Airlift Command of the United States Air Force under the
contract with the Mortgagor relating to any Airframe.
4.2.1. Multiple
Sales. The power of sale under this Security Agreement shall
not be exhausted by one or more sales, and the Mortgagee may from time to time
adjourn any sale to be made pursuant to this Security Agreement. The
Mortgaged Property need not be present at the time and place of
sale.
4.2.2. Delivery of Mortgaged
Property. If the Mortgagee shall demand possession of the
Mortgaged Property or any part thereof pursuant to this Security Agreement, the
Mortgagor shall, at its own expense, forthwith cause such Mortgaged Property or
any part thereof designated by the Mortgagee to be assembled and made available
and delivered to the Mortgagee at any place reasonably designated by the
Mortgagee.
4.2.3. Mandatory
Notices. In addition to any other notices required by
applicable law, the Mortgagee shall give to the Mortgagor at least 15 days prior
written notice of each public sale or any date after which a private sale or
other intended disposition hereunder shall occur, and the Mortgagor hereby
covenants and agrees that a notice which shall be given, in accordance with the
provisions of Section 6.1 below, at least 15 calendar days before the date
of any such act shall be deemed to be reasonable notice for such act and
specifically, reasonable notification of the time and place of any public sale
hereunder and of reasonable notification of the time after which any private
sale or other intended disposition of the Mortgaged Property (or any part
thereof) to be made hereunder is to be made.
4.2.4. Mortgagee Repairing
Mortgaged Property. Upon every such taking of possession until
the Mortgaged Property is foreclosed upon, the Mortgagee may, but shall have no
obligation to, from time to time at the expense of the Mortgagor, make all such
repairs, replacements, alterations, modifications, additions and improvements to
and of the Mortgaged Property as the Mortgagee may reasonably determine to be
commercially reasonable. In each such case, the Mortgagee shall have
the right to manage and control the Mortgaged Property and to exercise all
rights and powers of the Mortgagor in respect thereof as the Mortgagee shall
deem best, including the right to enter into any and all such agreements with
respect to the leasing or operation of the Mortgaged Property or any part
thereof as the Mortgagee may see fit. The Mortgagee shall be entitled
to collect and receive all rents, issues, profits, revenues and other income of
the same and every part of the Mortgaged Property. Such rents,
issues, profits, revenues and other income shall be applied to pay the expenses
of holding and operating the Mortgaged Property, and of all maintenance,
repairs, replacements, alterations, additions and improvements, and to make all
payments which the Mortgagee may be required or may elect to
make, if
any, for taxes, assessments, insurance and other charges upon the Mortgaged
Property or any part thereof, and all other payments which the Mortgagee may be
required or authorized to make under any provision of this Security
Agreement. The remainder of such rents, issues, profits, revenues and
other income shall be applied only in accordance with
Section 4.2.6.
4.2.5. Delivery to
Purchaser. Upon the completion of any sale under this
Section 4, the Mortgagor shall deliver or; cause to be delivered all of the
property, sold to the purchaser or purchasers at such sale on the date of sale,
or within a reasonable time thereafter if it shall be impractical to make
immediate delivery, but in any event full title and right of possession to such
property shall pass to such purchaser or purchasers forthwith upon the
completion of such sale. Nevertheless, if so requested by the
Mortgagee or by any purchaser, the Mortgagor shall confirm any such sale or
transfer by executing and delivering to such purchaser all proper instruments of
conveyance and transfer and releases as may be designated in any such
request. Every such sale shall operate to divest all right, title,
interest, claim and demand whatsoever of the Mortgagor in and to the property so
sold, and shall be a perpetual bar, both at law and in equity, against the
Mortgagor and all persons claiming the property sold, or any part thereof,
through the Mortgagor and its successors or assigns.
4.2.6. Application of
Proceeds. The proceeds of any sale of the Mortgaged Property,
or any part thereof, under this Section 4, together with any other sums
then held by the Mortgagee as part of the Mortgaged Property, shall be applied
as follows:
(a) first,
to the payment of the cost and expenses of such sale, including brokers’ fees or
sales commissions, a reasonable compensation to the Mortgagee’s agents,
attorneys and counsel, all charges, expenses, liabilities and advances incurred
or made by the Mortgagee, and the payment of all taxes, assessments or liens, if
any, prior to the lien of this Security Agreement, except any taxes, assessments
or liens subject to which such sale shall have been made;
(b) second,
to the payment of all amounts owing in respect of the Obligations;
and
(c) third,
the surplus, if any, shall be paid to the Mortgagor or to anyone entitled to
payment thereof by operation of law or pursuant to an order of a court of
competent jurisdiction.
4.2.7. Mortgagee May
Purchase. At any sale under this Section 4, to the extent
permitted by applicable law, the Mortgagee may bid for and purchase the property
offered for sale and, upon compliance with the terms of sale, may bid, retain
and dispose of such property without further accountability
therefor. The Mortgagee may apply against the purchase price for the
Mortgaged Property or any part thereof the amount then due under the Credit
Agreement secured hereby. The Mortgagee need not be present at such
sale.
4.2.8. Right to
Possession. In the event Mortgagor becomes subject to the
jurisdiction of any United States Bankruptcy Court in a proceeding for the
reorganization of Mortgagor, the Mortgagor hereby waives, to the fullest extent
permitted by applicable law, any right to contest any motion, petition or
application filed by the Mortgagee with such bankruptcy
court
having jurisdiction over the Mortgagor, whereby Mortgagee seeks to enforce any
of its remedies under this Security Agreement or the Credit Agreement
(including, in connection with the enforcement of such remedies, any motion or
application made by Mortgagee for relief from any stay to which Mortgagee is
subject).
4.2.9. Remedies
Cumulative. Each right, power and remedy specifically given to
the Mortgagee in this Security Agreement or otherwise existing shall be
cumulative and shall be in addition to every other right, power and remedy
specifically given in this Security Agreement, in any other Loan Documents, or
now or hereafter existing at law, in equity or otherwise. Each such
right, power and remedy, whether specifically given in the Credit Agreement or
otherwise existing, may be exercised from time to time and as often and in such
order as may be deemed expedient by the Mortgagee. The exercise of
any such right, power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Mortgagee in the exercise of any
right or power, or in the pursuance of any remedy, shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of the
Mortgagor or to be an a quiescence therein. No waiver by the
Mortgagee of any breach, Default or Event of Default by the Mortgagor shall be
deemed a waiver of any other previous breach, Default or Event of Default or any
thereafter occurring. The invalidity of any remedy in any
jurisdiction shall not invalidate such remedy in any other
jurisdiction. The invalidity or unenforceability of any of the
remedies herein provided in any jurisdiction shall not in any way affect the
right to the enforcement in such jurisdiction or elsewhere of any of the other
remedies herein provided.
4.2.10. Except
as otherwise provided in this Security Agreement, the Mortgagor hereby waives,
to the extent permitted by applicable law, notice and judicial hearing in
connection with the Mortgagee’s taking possession or the Mortgagee’s disposition
of the aircraft, including, without limitation any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which the
Mortgagor would otherwise have under the constitution or any statute of the
United States or of any state, and the Mortgagor hereby further waives, to the
extent permitted by applicable law:
(a) all
damages occasioned by such taking of possession except any damages which are the
direct result of the Mortgagee’s gross negligence or willful
misconduct;
(b) all
other requirements as to the time, place and terms of sale or other requirements
with respect to the enforcement of the Mortgagee’ s rights hereunder;
and
(c) all
rights of redemption, appraisement, valuation, stay, extension or moratorium now
or hereafter in force under any applicable law in order to prevent or delay the
enforcement of this Security Agreement or the absolute sale of the Aircraft or
any part thereof, and the Mortgagor for itself and all who may claim under it,
insofar as it or they now or hereafter lawfully may, hereby waives the benefit
of all such laws.
Any sale
of or the grant of options to purchase, or any other realization upon the
Aircraft or any part thereof shall operate to divest all right, title, interest,
claim and demand, either at law or in equity, of the Mortgagor therein and
thereto, and shall be a perpetual bar both at law and in equity against the
Mortgagor and against any and all Persons claiming or attempting to claim
the
Aircraft
so sold, optioned or realized upon, or any part thereof, from, through and under
the Mortgagor.
4.2.11. Right to Perform and Incur
Expenses.
(a) At
any time and from time to time after an Event of Default, if the Mortgagor fails
to perform or fulfill any of its undertakings or obligations contained herein,
Mortgagee shall have the right, but shall not be obligated, (i) to effect such
performance or compliance, and (ii) to incur such reasonable expenses relative
to such performance or compliance, to the enforcement of Mortgagee’s rights or
to the preservation, protection, reconditioning, storage or sale of the
Mortgaged Property, including such sums as are specified in Section 4.2.4.
and 4.2.6(a). The amount of any such expenses and other reasonable
costs shall become payable by the Mortgagor to the Mortgagee as of the date on
which Mortgagee shall pay the same, together with interest thereon from said
date of payment up to and including the date of actual payment by the Mortgagor
at an interest rate equal, to the default rate of interest set forth in the
Credit Agreement (but in no event higher than the highest rate permitted by
applicable law).
(b) All
such costs and expenses incurred shall become part of the Mortgagor’s
Obligations and shall become part of the indebtedness secured by this Security
Agreement. The Mortgagee shall have the right (but shall not be
obligated) to use and apply any Cash Collateral at any time held by it for the
repayment of all such advances, costs or expenses. However, no such
use of any Cash Collateral, nor the making by Mortgagee of any advance in
payment of any such expense, shall relieve the Mortgagor from any Event of
Default.
4.2.12. Power of
Attorney.
THE MORTGAGOR HEREBY CONSTITUTES AND
APPOINTS THE MORTGAGEE ITS TRUE AND LAWFUL ATTORNEY, IRREVOCABLY, WITH FULL
POWER AFTER THE OCCURRENCE OF AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT
(IN THE NAME OF THE MORTGAGOR OR OTHERWISE) TO ACT, REQUIRE, DEMAND, RECEIVE,
COMPOUND AND GIVE ACQUITTANCE FOR ANY AND ALL MONIES AND CLAIMS FOR MONIES DUE
OR TO BECOME DUE TO THE MORTGAGOR UNDER OR ARISING OUT OF THE COLLATERAL, TO
ENDORSE ANY CHECKS OR OTHER INSTRUMENTS OR ORDERS IN CONNECTION THEREWITH AND TO
FILE ANY CLAIMS OR TAKE ANY ACTION OR INSTITUTE ANY PROCEEDINGS WITH THE
MORTGAGEE MAY DEEM TO BE NECESSARY OR ADVISABLE IN THE PREMISES, WHICH
APPOINTMENT AS ATTORNEY IS COUPLED WITH AN INTEREST.
SECTION
5. DEFEASANCE
If the
Mortgagor shall pay and discharge all of its respective Obligations, then upon
Mortgagor Request this Security Agreement and the lien, rights and interests
granted by this Security Agreement shall cease, terminate and become null and
void and, at the expense of the Mortgagor, the Mortgagee shall execute and
deliver to the Mortgagor satisfaction and discharge of this Security Agreement
by such instruments of satisfaction as may be necessary, including promptly
consenting to the termination of all International Interests in favor of
the
Mortgagee
at the International Registry and pay and deliver upon Mortgagor Order all
monies and other personal property then held by the Mortgagee under this
Security Agreement.
SECTION
6. MISCELLANEOUS
PROVISIONS
6.1. Notices. Except
as otherwise specifically provided to the contrary in this Security
Agreement:
(a) Every
notice or demand under this Security Agreement shall be in writing and may be
given or made by telefax or by nationally recognized overnight courier
service.
(b) Every
notice or demand shall be sent, in the case of overnight courier, to the
Mortgagor or Mortgagee at their respective addresses and, in the case of a
telefax message, to their respective facsimile numbers as follows:
(i) To
Mortgagor:
Alaska
Airlines, Inc.
19300
International Blvd.
Seattle,
WA 98188
Attn:
Vice President Finance & Treasurer
Telephone
No.: [***]
Facsimile
No.: [***]
and
(ii) To
Mortgagee:
Citibank,
N.A.
388
Greenwich Street, 34th Floor
New York,
NY 10013
Attn:
[***]
Telephone
No.: [***]
Facsimile
No.: [***]
and
Attn:
[***]
Telephone
No.: [***]
Facsimile
No.: [***]
(c) Every
notice or demand shall be deemed to have been received, in the case of a notice
sent by nationally recognized overnight courier, when actually delivered to
Mortgagee or the Mortgagor at their respective address as provided in
Section 6.1(b) or on the date on which receipt of such notice is refused or
the courier advises that such notice is not deliverable at the address provided
in Section 6.1 (b) and, in the case of a telefax, at the time of actual
receipt thereof.
*
Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
(d) Subject
to the terms hereof, Mortgagee or the Mortgagor may change its address or
telefax number or the address or party to whom copies of notices shall be sent
by giving notice in accordance with this Section 6.1.
6.2. Counterparts. This
Security Agreement may be executed in any number of counterparts, and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute one and the same Security
Agreement.
6.3. Governing
Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON.
6.4. Waiver of Jury
Trial. THE MORTGAGOR AND THE MORTGAGEE EACH IRREVOCABLY WAIVE
THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY
PROVISION OF THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT IN WHICH THEY
ARE PARTIES.
6.5. Expenses. The
Mortgagor agrees to pay the reasonable ongoing fees and expenses of the
Mortgagee for the services rendered by it in capacity as mortgagee
hereunder.
6.6. Consent to
Jurisdiction. Mortgagor and Mortgagee consent and submit to
the non-exclusive jurisdiction and venue shall be in the State of Washington in
the State courts for the county of King, or the United States District Court for
the Western District of Washington and agree that venue is proper in those
courts and waive any right to object based upon jurisdiction (either personal or
subject matter) or venue or inconvenient forum therein in connection with any
action arising out of, or connected in any way with, this Security
Agreement. Mortgagor further agrees that service of process or any
other papers upon it by registered air mail at its address set forth herein
shall be deemed good, proper and effective service upon it. Mortgagor
further agrees that the service of process or any other papers upon the agent
designated by Mortgagor in the immediately preceding sentence shall be deemed
good, proper and effective service upon it. Nothing set forth herein
shall be deemed to preclude the service of process or any other papers upon
Mortgagor by any other method permitted by applicable law. The
Mortgagee and the Mortgagor agree that such state and Federal courts of and
within the State of Washington have non-exclusive jurisdiction in respect of any
claims brought under the Cape Town Treaty relating to the Aircraft.
6.7. Delivery. This
Security Agreement is intended to and shall be deemed to be delivered by the
Mortgagor to the Mortgagee and accepted by the Mortgagee in Washington
State.
SECTION
7 THE
MORTGAGEE
The
Mortgagee may execute any of its duties or powers hereunder by or through agents
or employees, and shall be entitled to retain counsel and the advice of such
counsel concerning all matters pertaining to the performance of its functions
hereunder. The Mortgagor agrees to reimburse the Mortgagee for all
reasonable out-of-pocket expenses incurred by the Mortgagee and the counsel,
attorneys, agents and the employees of the Mortgagee in acting hereunder,
including any reasonable counsel fees and compensation paid for services
rendered to the
Mortgagee
in connection with the performance of its functions hereunder if and to the
extent reasonably engaged by Mortgagee. The Mortgagor agrees to
indemnify and save harmless the Mortgagee against and from any liability or
damages which the Mortgagee may incur or sustain in the exercise and performance
of any of the Mortgagee’s powers and duties hereunder, not including, however,
the Mortgagee’s gross negligence or willful misconduct. For such
reimbursement and indemnity, the Mortgagee shall be secured under this Security
Agreement and, to effect such reimbursement and indemnity, the Mortgagee shall
have the right to use and apply any cash constituting Mortgaged Property at any
time held by it. The Mortgagee shall give notice to the Mortgagor of
any actions or claims to be brought against the Mortgagor under this
Section 7; provided, however, that any failure by
the Mortgagee to provide such notice shall not limit the obligations of the
Mortgagor hereunder, except to the extent that the Mortgagor is prejudiced by
the Mortgagee’s failure to deliver such notice. Neither the Mortgagee
nor any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them hereunder except for its or
their own gross negligence or willful misconduct.
* * *
IN
WITNESS WHEREOF, Mortgagor and Mortgagee have caused this Aircraft Chattel
Mortgage and Security Agreement to be duly executed as of the day and year first
above written.
Mortgagor:
ALASKA
AIRLINES, INC.
By:
Name:
John F. Schaefer, Jr.
Title: Vice
President – Finance
and Treasurer
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[Signature
Page to Aircraft Chattel Mortgage and Security Agreement]
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Mortgagee:
CITIBANK, N.A., as
Administrative Agent
By:
____________________________
Name:
__________________________
Its: ____________________________
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[Signature
Page to Aircraft Chattel Mortgage and Security Agreement]
SCHEDULE
I—FLIGHT EQUIPMENT
1. Boeing
737-4Q8 Aircraft bearing U.S. Registration Mark N762AS and manufacturer’s serial
number 25099, equipped with two CFM International, Inc. CFM56-3C engines bearing
manufacturer’s serial numbers 856271 and 856288, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower. Such Aircraft, including engines, was placed in service
prior to October 22, 1994.
2. Boeing
737-4Q8 Aircraft bearing U.S. Registration Mark N763AS and manufacturer’s serial
number 25100, equipped with two CFM International, Inc. CFM56-3C engines bearing
manufacturer’s serial numbers 857280 and 857282, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower. Such Aircraft, including engines, was placed in service
prior to October 22, 1994.
3. Boeing
737-4Q8 Aircraft bearing U.S. Registration Mark N764AS and manufacturer’s serial
number 25101, equipped with two CFM International, Inc. CFM56-3C engines bearing
manufacturer’s serial numbers 856303 and 856304, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower. Such Aircraft, including engines, was placed in service
prior to October 22, 1994.
4. Boeing
737-490 Aircraft bearing U.S. Registration Mark N767AS and manufacturer’s serial
number 27081, equipped with two CFM International, Inc. CFM56-3C engines bearing
manufacturer’s serial numbers 856337 and 856338, which engines each
have 550 or more rated take-off horsepower, or the equivalent of such
horsepower. Such Aircraft, including engines, was placed in service
prior to October 22, 1994.
5. Boeing 737-890
Aircraft bearing U.S. Registration Mark N546AS and manufacturer’s serial number
30022, equipped with two CFM International, Inc. CFM56-7B engines bearing
manufacturer’s serial numbers 892251 and 892252, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower.
6. Boeing
737-890 Aircraft bearing U.S. Registration Mark N565AS and manufacturer’s serial
number 35181, equipped with two CFM International, Inc. CFM56-7B engines bearing
manufacturer’s serial numbers 894361 and 894362, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower.
7. Boeing
737-890 Aircraft bearing U.S. Registration Mark N579AS and manufacturer’s serial
number 35187, equipped with two CFM International, Inc. CFM56-7B engines bearing
manufacturer’s serial numbers 894547 and 894549, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower.
8. Boeing 737-490 Aircraft bearing U.S. Registration Mark
N768AS and manufacturer’s serial number 27082, equipped with two CFM
International, Inc. CFM56-3C engines bearing manufacturer’s serial numbers
856333 and 856336, which engines each have 550 or more rated take-off
horsepower, or the equivalent of such horsepower. Such
Aircraft, including engines, was placed in service prior to October 22,
1994.
SCHEDULE II—SECURITY AGREEMENT
SUPPLEMENT
This
SUPPLEMENTAL FIRST PRIORITY SECURITY AGREEMENT, dated the day
of____________, 200_ (this “Supplement”), is from Alaska Airlines, Inc., a
corporation organized and existing under the laws of the state of Alaska, having
the address 19300 International Blvd., Seattle, WA 98188 (the
“Mortgagor”), and CITIBANK, N.A, a national banking association, having an
office at 388 Greenwich Street, 34th Floor, New York, NY 10013, as
Administrative Agent (the “Mortgagee”).
RECITALS
A. Mortgagor
has heretofore executed and delivered an Aircraft Chattel Mortgage and Security
Agreement, dated as of March 31, 2010 (as heretofore supplemented or amended,
the “Security Agreement”), to cover certain Flight Equipment of the Mortgagor to
secure Mortgagor’s obligations to Mortgagee under a Credit Agreement, dated as
of March 31, 2010 (as heretofore amended, the “Credit Agreement”), which Flight
Equipment was identified in Schedule I—Security Agreement (“Schedule
I”).
B. The
Security Agreement, with Schedule I attached, was recorded by the FAA on _____
and assigned Conveyance Number ________.
C. Mortgagor
is the legal and beneficial owner, free and clear of all mortgages, security
interests, liens, charges and encumbrances, other than liens and encumbrances
permitted by the Security Agreement, of the flight equipment herein below
described which the parties intend to be added as additional Collateral, and
desires to execute and deliver this Security Agreement Supplement to Mortgagee
in return for which Mortgagee agrees to release from the Lien of the Security
Agreement the flight equipment listed below which is to be
released.
NOW,
THEREFORE, THIS SUPPLEMENT WITNESSETH, that to secure the payment of all of the
Obligations, as at any time amended or supplemented, and for the purpose of
specifically subjecting such property to and of confirming the lien of the
Security Agreement, the Mortgagor does hereby grant, bargain, sell, transfer,
convey and mortgage unto the Mortgagee, its successors and assigns, and gives to
the Mortgagee a security interest in, the property (the “Collateral”) described in sections 1 and 2 of Attachment 1
hereto. Attachment 1 consists of three parts. The first
section lists the property currently subject to the Aircraft Chattel Mortgage
and Security Agreement dated March 31, 2010, which is to remain Collateral
subject to the Security Agreement. The second section lists property
not heretofore subject to the Security Agreement that is added to the
Collateral. The third section lists property that was Collateral and
is now being released and will no longer be subject to the Security
Agreement.
The Collateral listed in sections 1 and 2 of Attachment
1, together with all substitutions, replacements and renewals of the
Collateral and all property that hereafter becomes physically attached to or
incorporated in the Collateral, whether the same are now owned by the Mortgagor
or shall hereafter be acquired by it.
Together
with all rents, issues, profits, proceeds (including insurance proceeds),
revenues and other income of the Collateral and all of the estate, right, title
and interest of every nature
whatsoever
of the Mortgagor, at law or in equity, in and to the Collateral and every part
and parcel thereof.
TO HAVE
AND TO HOLD all and singular the Collateral unto the Mortgagee, its successors
and assigns, as security as aforesaid and for the uses and purposes and subject
to the covenants, agreements, provisions and conditions set forth in the
Security Agreement.
This
Supplement shall be construed as supplemental to the Security Agreement and
shall form a part thereof, and the Security Agreement and each Security
Agreement Supplement heretofore executed and delivered are, by this reference,
incorporated in this Supplement and ratified, approved and
confirmed.
This
Supplement may be simultaneously executed in several counterparts, each of which
shall be deemed to be an original, and all such counterparts shall together
constitute but one and the same agreement.
THIS
SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF WASHINGTON APPLICABLE TO CONTRACTS ENTERED INTO IN AND BY RESIDENTS OF
THE STATE OF WASHINGTON AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF
WASHINGTON.
IN
WITNESS WHEREOF, the Mortgagor and Mortgagee have caused this Security Agreement
Supplement to be duly executed as of the date first written above.
Mortgagor:
Alaska
Airlines, Inc
By:
Its:
__________________________________
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Mortgagee:
Citibank,
N.A., as Administrative Agent
By:
Its:
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[Signature
Page to Aircraft Chattel Mortgage and Security Agreement
Supplement]
ATTACHMENT
1 TO SCHEDULE II—SECURITY AGREEMENT SUPPLEMENT
Section
1. The following property consists of Collateral already
pledged under the Security Agreement that is to remain as
Collateral.
Section
2. Boeing 737-__ Aircraft bearing U.S. Registration Mark
N AS and manufacturer’s serial
number , equipped with two CFM International,
Inc. CFM56- engines bearing manufacturer’s serial
numbers and ,
which engines each have 550 or more rated take-off horsepower, or the equivalent
of such horsepower, are hereby added as additional Collateral (Mortgaged
Property) to the Security Agreement and such aircraft and each such engine shall
be subject to the Lien of the Security Agreement as an Aircraft or an Engine, as
applicable, for all purposes .
Section
3. Boeing
737- Aircraft bearing U.S. Registration Mark
N AS and manufacturer’s serial
number , equipped with two CFM International,
Inc. CFM56- engines bearing manufacturer’s serial
numbers and ,
which engines each have 550 or more rated take-off horsepower, or the equivalent
of such horsepower, are hereby removed and released from the Lien of the
Security Agreement and each such aircraft and each such engine shall cease to be
an Aircraft or an Engine, as applicable, thereunder.
EXHIBIT
F
FORM
OF CASH PLEDGE AGREEMENT
THIS CASH
PLEDGE AGREEMENT (“Agreement”) is made
as of [_____ __], 2010
by ALASKA AIRLINES, INC., an Alaska corporation (“Debtor”), in favor of
CITIBANK, N.A., a national banking association, as Administrative Agent
(including its successors and assigns, “Agent”).
RECITALS
A. Debtor
and Agent are parties to that certain Credit Agreement dated as of [_____ __], 2010 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to
time, the “Credit
Agreement”).
B. It
is contemplated in the Credit Agreement that, from time to time, Debtor may
request Agent to release its security interest in certain pledged Collateral in
exchange for the grant of a security interest in Cash Collateral and/or Other
Cash Collateral. It is a condition precedent to such release that
Debtor enter into this Agreement in favor of Agent.
NOW,
THEREFORE, in consideration of the foregoing, Debtor agrees for the benefit of
Agent as follows:
AGREEMENT
1. Defined
Terms. Capitalized terms not otherwise defined herein shall
have the meanings given in the Credit Agreement.
2. Grant of Security
Interest. As security for the payment or performance, as the
case may be, in full of the Obligations (defined below), Debtor hereby pledges
and assigns, and hereby grants to Agent a security interest in, all of Debtor’s
right, title and interest in and to the following (collectively, the “New
Collateral”):
(a) Certificate
of Deposit Account Number [_____] and any replacement or
other account numbers (collectively, the “Account”) maintained
by Debtor at [Agent]
together with
(i) all
interest now or hereafter accruing on the Account,
(ii) all
additional deposits hereafter made to the Account,
(iii) any
and all proceeds from the Account,
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(iv)
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all
renewals, replacements and substitutions for any of the foregoing,
and
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(v)
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any
and all general intangibles and choses in action arising from or related
to any of the foregoing; and
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(b) Other
Cash Collateral (including any and all proceeds thereof) as set forth on Schedule
2(b).
As used
herein, “Obligations” means,
collectively, all liabilities, obligations, covenants and duties of Borrower
arising under the Credit Agreement or any other Loan Document, in each case
whether direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, now existing or hereafter
arising.
3. Financing
Statements, Etc.
(a) Financing
Statement. Debtor
hereby irrevocably authorizes Agent, at any time and from time to time, to file
in any relevant jurisdiction any initial financing statements and amendments
thereto that contain the information required by Article 9 of the UCC of each
applicable jurisdiction for the filing of any financing statement or amendment
in order to perfect and protect the security interest of Agent in the New
Collateral.
(b) Continuing Security
Interest. Debtor
acknowledges and agrees that the security of Agent in the New Collateral
constitutes continuing collateral security for all of the Obligations which
shall remain in effect until all of the Obligations have been finally and
indefeasibly paid in full, subject to the Collateral release and substitution
provisions in Section 6.15 of the Credit Agreement.
4. Representations and
Warranties. Debtor represents and promises to Agent and the
Lenders that: (a) Debtor is the lawful owner of the New Collateral free and
clear of all Liens except as disclosed to Agent in writing prior to the date
hereof; (b) Debtor has not previously granted a security interest in the
New Collateral to any other person; (c) there are no defaults relating to
the New Collateral, and there are no offsets or counterclaims to same; (d)
Debtor has delivered or otherwise caused the transfer to Agent, as applicable,
all certificates, instruments and other writings representing, evidencing or
constituting the Other Cash Collateral as set forth on Schedule 2(b); (e)
the Other Cash Collateral identified on Schedule 2(b) is not
and shall not be represented or evidenced by any certificates, instruments or
other writing other than those delivered pursuant to this Agreement; and
(f) this Agreement creates a valid security interest in favor of Agent in
all of the New Collateral, is binding upon Debtor and Debtor’s successors and
assigns and is legally enforceable in accordance with its terms.
5. Agreements of
Debtor. Debtor agrees with Agent that: (a) Debtor shall
not sell, assign, encumber, or otherwise dispose of any of Debtor’s rights in
the New Collateral; (b) Debtor shall not withdraw funds from the Account
without Agent’s prior written consent; (c) Debtor shall strictly and
promptly do everything required of Debtor under the terms, conditions, promises,
and agreements contained in or relating to the New Collateral; (d) Debtor shall
deliver to Agent, upon Agent’s request, all certificates, instruments or other
writings representing or evidencing the Other Cash Collateral as set forth on
Schedule 2(b);
and (e) any and all replacement or renewal certificates, instruments, or other
benefits or proceeds related to the New Collateral that are received by Debtor
shall be held by Debtor in trust for Agent and immediately shall be delivered by
Debtor to Agent to be held as part of the New Collateral. In
addition, Debtor agrees, at its own expense, to execute, acknowledge, deliver
and cause to be duly filed all such further instruments and documents and take
all such actions as Agent may from time to time request to better assure,
preserve, protect and perfect the security interest of Agent in the New
Collateral and the rights and remedies of Agent hereunder.
6. Possession of New
Collateral. While this Agreement is in effect, Agent may
retain the rights to possession of the New Collateral, together with any and all
evidence of the New Collateral, such as certificates and
passbooks. Agent shall use ordinary reasonable care in the physical
preservation and custody of any such evidence of the New Collateral, but shall
have no other obligation to protect the New Collateral or its
value.
7. Events of
Default. Each of the following shall constitute an Event of
Default under this Agreement: (a) an “Event of Default” shall
have occurred under the Credit Agreement or any other Loan Document;
(b) commencement of foreclosure or forfeiture proceedings, whether by
judicial proceeding, self-help, repossession or any other method, by any
creditor of Debtor or by any governmental agency against the New Collateral,
including, without limitation, a garnishment of any of Debtor’s accounts with
[Agent]; or (c) any
involuntary Lien (other than a lien permitted by subsection (e) of Section 7.01
of the Credit Agreement) attaches to any New Collateral.
8. Remedies;
Set-Off. If an Event of Default shall occur, or Debtor shall
otherwise default in the full and timely payment or performance any of the
Obligations secured hereby, Agent shall have, and may exercise, any or all the
rights and remedies of a secured creditor under the provisions of the UCC as in effect in the State of Washington at law,
in equity, or otherwise. Agent shall have all the rights of a secured
party under the UCC, even if, for example, the Account is not otherwise subject
to the UCC concerning security interests, and the parties to this Agreement
agree that the provisions of the UCC giving rights to a secured party shall
nonetheless be a part of this Agreement. Without limited the
generality of the foregoing, Debtor agrees that Agent may, subject to the
requirements of Laws including, without limitation, those affecting the offering
and sale of securities, sell, resell, assign, transfer, or otherwise dispose of
any or all of the Other Cash Collateral set forth on Schedule
2(b). Debtor expressly authorizes Agent, at any time and from
time to time, without prior notice to Debtor, any such notice being waived by
Debtor to the fullest extent permitted by law, to set-off and apply any and all
deposits (including, without limitation, the Account) at any time held by Agent
against the Obligations, irrespective of whether or not Agent shall have made
demand therefor.
9. Release of New
Collateral. Upon the payment in full in cash of all the
Obligations and termination of this Agreement, the Credit Agreement, and each
other Loan Document, Agent shall, upon request of Debtor, promptly release the
Account from the lien, pledge and security interest created under this
Agreement. Release of such lien, pledge and security interest shall
also be subject to the Collateral release and substitution provisions in Section
6.15 of the Credit Agreement.
EXECUTED
AND DELIVERED by the duly authorized officers of the parties as of the date
first above written.
DEBTOR:
ALASKA
AIRLINES, INC.
By:
Its:
SCHEDULE
2(b)
to
Cash
Pledge Agreement
Other Cash
Collateral
[None]
ex31-1.htm
EXHIBIT
31.1
CERTIFICATIONS
I, William S. Ayer, certify
that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Alaska Air Group, Inc.
for the period ended March 31,
2010;
|
2.
|
Based
on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
|
d)
Disclosed in this report any change in the registrant’s internal control
over financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
|
a)
all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
|
b) any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
May
5, 2010
|
By
/s/
William S.
Ayer ‘
William
S. Ayer
Chairman,
President & Chief Executive
Officer
|
ex31-2.htm
EXHIBIT
31.2
CERTIFICATIONS
I, Glenn S. Johnson, certify
that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Alaska Air Group, Inc.
for the period ended March 31,
2010;
|
2.
|
Based
on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
|
d)
Disclosed in this report any change in the registrant’s internal control
over financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
|
a)
all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
|
b) any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
May 5,
2010
|
By
/s/
Glenn S. Johnson ‘
Glenn
S. Johnson
Chief
Financial Officer
|
ex32-1.htm
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of Alaska Air Group, Inc. (the "Company")
on Form 10-Q for the period ended March 31, 2010 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, William S. Ayer,
Chairman, President & Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge,
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
By /s/William S. Ayer
William
S. Ayer
Chairman,
President & Chief Executive Officer
May 5,
2010
ex32-2.htm
EXHIBIT
32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of Alaska Air Group, Inc. (the "Company")
on Form 10-Q for the period ended March 31, 2010 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Glenn S. Johnson,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to my knowledge,
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
By /s/Glenn S. Johnson
Glenn S.
Johnson
Chief
Financial Officer
May 5,
2010